April 10, 2010

Friday, April 10, 1931: Dow 168.77 -0.77 (0.5%)

Assorted historical stuff:

House Speaker Nicholas Longworth (R, Ohio) dead at 61. Mr. Longworth had been a Representative since 1903 and Speaker since 1925; was "one of the best loved political figures of the capital" and "made fast personal friends of his bitter political enemies." He is survived by his wife Alice Roosevelt Longworth, daughter of the President. Death may put control of Congress in doubt; vacancy will be filled by special election, and the district is not overwhelmingly Republican.

Washington report: Current Federal short-term debt is $2.7B and increasing. This is considered too large; while Treasury is now easily able to borrow short-term at low rates, this may become problematic if borrowing increases and rates rise. Treasury is likely to attempt refinancing to longer-term debt, though it's understood no definite plan has been made. J. Raskob, Dem. chair., has “old-line politicians” in the party “near panic” by his desire for clear party positions on controversial issues including Prohibition, antitrust law, and tax reform. This ruins old method of securing “a wet label in the wet territory while assuring the drys in the dry territory that nothing will really be done.” Editorial facetiously "awarding" R. Lucas, Republican Nat'l Committee director, prize for Republican doing most to advance the Democratic party. Mr. Lucas attacked Raskob for advocating "repealing the federal antitrust laws," for his moderate proposal enabling the FTC to review proposed business actions and grant immunity against criminal prosection (also favored by some Republicans). Mr. Lucas must know his distortion won't benefit his own party, and will in fact weaken it in the "trans-Missouri" states; he could only have been motivated by "a generous impluse to raise the fallen foe."

Editorial by T. Woodlock contrasting “civic pride” of New England with indifference of NY City. New England is fighting to keep control of its railroads; this could work as long as they give up the “national religion” of competition and consolidate the rails into one system. Meanwhile, NY City faces severe threats from Boston, Philadelphia, and Baltimore asking the ICC to cut transport rates to their cities; this will require expert argument before the ICC, but requests for funds to defend NY City's interests have produced “a sound that much resembles 'Oh! Yeah?'”

Norway lockout now effective in steel, mining , textile, construction, and other industries, affecting 43,000 workers. Employers give notice of lockout in other trades Apr. 15 to affect additional 23,000.

German Chancellor Breuning and Foreign Min. Curtius to visit Britain June 5-9, spending two days as guests of British PM MacDonald.

Growth of radio has been phenomenal. As of 1931 the National Broadcasting Co., founded 1926, maintains 74 stations, requires 34,500 miles of program wire-lines, employs 1,226 excluding artists and musicians (twice the number in1929), and received 2M fan letters (6 times the number in 1926). "These letters provide valuable mailing lists for dealers in radio supplies."

Cunard Steamship plans construction of second $30M transatlantic liner; to be 1,018 feet long, about 73,000 gross tons; contract to be given to John Brown & Co., already building the sister ship.

Boeing awarded contract to build 135 cruising planes for War Dept. at cost of $1.541M.

Frigidaire division of GM has been chosen to equip the new Empire State Building and Waldorf-Astoria Hotel.

"The Tobacco Research Institute of Forcheim Germany, recently announced that tobacco can be grown free of nicotine." Institute has been investigating 150,000 tobacco plants from all over the world; it was found that in 4,000 of the plants nicotine content could be increased or decreased as desired simply by cultivation process; close planting and regulated waterings eliminated nicotine completely.

Melting pot of crops: main US agricultural products have diverse origins: corn - Mexico; wheat and rye - Siberia; potato - S. America; tobacco - Mexico and S. America; coffee - Arabia; sugarcane - China; peach - Persia; lettuce - Holland; rice - Ethiopia; beans - "East Indies" (Southeast Asia).

Henry C. Folger, greatest Shakespeare collector of our time, recently died, leaving his wonderful collection to the US people. Congress has ordered construction of a building next to the Library of Congress in Washington to house the collection, which contains over 30,000 volumes.

Hammerstein Theatre at 53 St. and Broadway sold for $1.250M at foreclosure sale to satisfy judgement against Arthur Hammerstein.

Market commentary:

Market wrap: Leading industrials worked slowly higher in the morning. However, rails, which were weak throughout the day, broke sharply in the afternoon, with the Dow rail average ending at 92.02, a low for 1931 and less than half a point above the extreme bear market low of 91.65 from last Dec. 16. Weakness in major rails eventually spread to industrials and across the list, and market was unsettled in final dealings. Bond trading more active, prices improved; US govts. firm; foreign strong as Brazilian issues continued rally; corp. high-grade firm, speculative rallied, rail issues a weak spot. Commodities firm; grains generally somewhat higher pending Agriculture Dept. release of winter wheat estimate; cotton moderately higher. Copper offerings at 9 1/2 cents withdrawn; lowest price available now 9 3/4. Silver rallied 5/8 cents to 28 1/8; sentiment more favorable.

Conservative observers discouraged by inability of market to hold even a decent technical recovery after prolonged decline; repeat advice against trying for rally.

GM pushed into higher ground on increasingly favorable auto industry reports; recent events have confirmed judgement of Raskob and du Pont interests who accumulated shares under 40 earlier in the year on anticipated pent-up demand for cars. Auto accessory shares also firmed, particularly Briggs Mfg. Strong conditions in the car industry and in structural steel orders indicate downturn in steel production will be temporary.

Cigarette shares strong on anticipation retail price increase may lead to price hike by manufacturers, although it may only reflect end of an existing retail price war. However, traders may be hoping for a repeat of the price hike by manufacturers in Oct. 1929, when their shares rose 25%-30% in one day.

A number of bull pools have reportedly postponed planned operations due to bears' ability in recent sessions to force stocks lower with little difficulty. Market observers are watching for resistance to short-selling, believing that if it develops the market could turn quickly due to its largely professional character. Short interest seems somewhat smaller based on borrowing demand for stocks. Recent bear rumor regarding price war by US Steel was one of the most detailed and widely circulated in a long time; many were inclined to believe it, but the best steel authorities have said it was baseless.

One NYSE broker points out that 338 companies omitted dividends in the first quarter and 203 reduced them; among these were a number of majors popular with the public. This has reduced buying power of many people.

Gold mining shares have been attracting more interest recently, including some public buying. It's generally known "that gold enjoys a fundamental economic advantage during periods of general business depression."

France seen possibly losing gold as franc weakened against dollar and pound.

Results from the marketing of the large March bond issues have been good; demand for municipals has been particularly strong. Buying has come largely from institutions such as savings banks, though some dealers report increasing public interest, concentrated on higher-grade bonds.

Broad Street Gossip: Steel ingot production capacity expanded last year by 3.8M tons to 66.9M tons. On basis of current consumption, the country needs little more than half of that, but it will all be needed in years to come. Capacity was called excessive when it was 20M tons, and that remark will still be heard when capacity is 100M tons. By that time, developing countries in S. America and elsewhere may need 10 times the current amount. A broker points out that plant expansion and advances in productivity have caused capacity to temporarily outgrow consumption in copper, steel, rubber, oil, and many other industries. In this situation, cooperation is needed to stabilize the industry and assure a fair return to investors and fair wages, but any attempt in that direction runs into antitrust problems. These industries will therefore suffer until consumption catches up or something is done to bolster prices. Many old traders agree recent action indicates a sold-out market, though they also agree the bears are still in a selling mood. On the other hand, certain traders who keep in touch with operations of the big bears say many of them have covered and most of the recent short selling has been by "amateur bears."

Economic news and individual company reports:

Bank of US trial continued with questioning of two discount clerks regarding the bank's financial dealings with affiliates.

Evidence seen that automotive steel orders may increase over next few weeks after slowdown in past two weeks. Feb. auto exports reversed downtrend, rising to $17.2M vs. $15.5M in Jan. but still down from $32.8M in 1930.

Fed. Reserve reports money in circulation Apr. 8 down $6M to $4.614B, total Reserve Bank credit outstanding down $14M to $929M. Member banks in NY City report brokers' loans down $53M to $1.822B; loans on securities to non-brokers down $3M to $1.789B. Treasury offering of $275M in 8-month 1 7/8% certificates oversubscribed on first day.

Two US companies withdraw from $30M Berlin Electric loan [mentioned 3/21 as hopeful sign]; Harris, Forbes is seeking US interests to replace them.

Dow average of 8 iron and steel products was unchanged at $44.23, low for 1931.

Standard Oil of Indiana cut retail price of gasoline 1 cent in Chicago territory, to 14 cents/gallon.

US Tobacco Journal reports independent cigarette retailers across US will follow price hike of United Cigar and Schulte chains from 13 cents/package (2 for 25) to 15 cents (2 for 27).

Committee from 10 oil producing states appears before Federal Oil Conservation Board and outlines plan for stabilizing oil industry. Oil states would enact interstate compact with approval of Congress to restrict production to consumption and allocate allowed production among states; committee also urged that imports be curtailed accordingly. Interior Sec. Wilbur said program had the Board's approval, though it had no legal authority. Contracts for sale of East Texas crude oil made as low as 20 cents/barrel.

Agriculture Dept. estimates winter wheat crop at 644M bushels, higher than 619M expert consensus, vs. 1930 production of 604M, and 1925-29 avg. of 547M.

German unemployed Mar. 31 were 4.772M, down 200,000 from Feb. 28.

Representatives at international sugar conference in Paris discussing compromise that may lead to completion of Chadbourne plan for rehabilitation of the industry.

Kreuger & Toll annual report: important permanent holdings in 21 industrial, banking, and real estate businesses; of these, 16 showed increased earnings in 1930; good showing attributed to Sweden having thus far been less affected by worldwide crisis; however immediate outlook for trading operations not favorable.

Auburn Automobile reported sharply higher earnings for quarter ended Feb. 28; net was $1.06/share vs. $.55 in 1930. Gillette earnings in first quarter were somewhat better than expected, as integration of Autostrop purchase is proceeding well; benefit expected from new, improved razor that prevents use of blades other than Gillette's. Radio Corp. doing worse than expected in Q1.

Companies reporting decent earnings: Auburn Auto., Crown Cork & Seal, National Breweries, Novadel-Agene (products for bleaching wheat and flour), Cream of Wheat Corp.


The Wiser They Are - "Saucy entertainment" starring Ruth Gordon and Osgood Perkins, at the Plymouth. Bruce Ingram tires of womanizing and impulsively decides to marry his god-daughter Trixie, a chronic flirt who "has been more discreet in her practices than Bruce, but even more lavish in her promises." Embarking on an ocean-voyage honeymoon, their respective pasts turn up on the ship to "sadly and absurdly" complicate matters. Mr. Perkins is competent if a bit too caustic, but Miss Gordon makes the play, doing "extraordinary things with her hands, her face, her voice, and her personality ... she does most amusingly the sort of thing she has done beautifully in more ambitious plays. Unusual fun ... a brisk addition to the limited list of smart comedies for sophisticated audiences."

The Great Man - romantic comedy staring Walter Woolf at the Ritz. Pirate "Captain O'Malley, terror of the Carribees, captures a Central American seaport" and carries off, much to their delight, the "entirely promiscuous" wife and virginal daughter of the govenor, who become rivals for his favor. Play is unfortunate choice for the "impressive" Walter Woolf; attempt at "free boisterous deep-chested comedy ... is loose instead of free, dirty instead of earthy and watery instead of salty."


"Hyde - Were you lucky at the races yesterday? Wyde - I should just think I was. I found a quarter after the last race, so I didn't have to walk home."

Old farmer to Sears: "Please send me one of them gasoline engines which you advertise on Page 785 and if it is any good I'll send you a check for it." Reply from Sears: "Send us the check and if it is any good we will send you the engine."

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