April 13, 2010

Monday, April 13, 1931: Dow 168.03 -0.69 (0.4%)

Interview with the publisher:

H. Bancroft, Dow Jones pres. [WSJ publishers], comments on the economy in interview with Chicago Daily News. “In regard to business, it is very clear that we are close to the bottom of the U.” In major depressions, stocks go down in “a jagged V,” but business takes “a slower curve. ... The current depression is the worst in depth and extent ... in my lifetime.” Nothing compares except depressions of the late 1870's and mid 1890's; it's much more severe than 1921 and 1907. While we may not have hit absolute bottom, “a further drastic decline is highly unreasonable.” However, start of recovery will be slow; most that can be hoped for is “an improvement from terrible to plain poor.” Modest improvement likely throughout 1931. Depression has been prolonged by artificial efforts to “fight the inevitable”; in particular, theory that high wages produce prosperity has things backward. Favors high wages when possible, but believes wages must be adjusted in industries that are unprofitable; this will increase jobs. Also criticizes “outrageous and extravagant spending of the public money”; would favor govt. spending to provide work during depression, if it could stop spending during prosperity; “as it is, they take all they can both ways”; “remedy” likely to cause new problems.

Assorted historical stuff:

AFL pres. W. Green pledges resources of the AFL for old-age relief. Favors enacting laws in each state "with a commission to care for those to be aided, with benefits of not less than $300 yearly for those in need at age of 65."

Editorial: Oil industry is in desperate straits. Oil is selling at 20 cents/barrel in the newest East Texas fields, and oil men are predicting that may shortly drop to 10. Nevertheless, Texas land owners are bitterly resisting curtailment efforts, apparently determined to sell their own underground wealth for a fraction of its worth, and destroy values in other areas in the process. This is ample reason to support the purpose behind the 10-state oil curtailment plan, as complex and uncertain as than plan is. However, one weakness that should be addressed is its restriction of producing wells while leaving drilling unrestrained; "if the flow from existing wells can be subjected to legal restrictions, why not the sinking of new wells?"

Editorial: Upcoming International Chamber of Commerce meeting in Washington offers a real opportunity for useful dialogue instead of the "usual pious platitudes." In the past year, "business men of all races have had their preconceptions roughly shaken"; they're now more open than in many years to "new points of view, to unfamiliar ideas" that may offer hope of improvement. Two years ago, the meeting was prevented from discussing the Hawley-Smoot tariff then pending in our Congress; the US should not again ask for special consideration when this subject arises. Other sensitive topics are likely to come up, including "the Russian problem, which almost daily shows new facets," international debts and reparations, and economic changes in Europe, including the desirability of strengthening Germany's economy as "a bulwark between Russia and the rest of the world."

Woodlock editorial smackdown: a correspondent writes in disputing implication that Bethlehem Steel dissidents are motivated by "antipathy to the other fellow making a million or more dollars per year." Bonus system enabled small group of executives to take $31.9M during same period stockholders were only paid $40.9M in dividends. "Can anyone assert that Bethlehem Steel, with its extremely liberal bonus system for executives, has any more efficient management than that of AT&T, Pennsylvania RR, ... US Steel, or 50 other important corporations which you or I could name without difficulty and where CEOs are receiving $50,000 to $100,000 per annum?" Woodlock responds to point about dividends; comparison to other corporations not addressed.

Ford "junking" system for worn-out cars has proved itself, and system will be expanded to capacity of 5,000 cars/day from current 300-400. Unlike other carmakers who turn junked cars over to commercial dealers after incapacitating them, Ford has a "disassembly" line on which, in about 30 minutes, all parts having value for salvage are systematically reclaimed, including glass, pipes, tires, and cloth, and the remaining hulk is compacted and melted for steel. While Ford is probably taking a loss on the junking process, it's felt the benefit of getting antiquated cars out of dealers' hands outweighs it.

Passenger airline operations are now becoming regular enough to offer some of the same features as railroads, including published schedules. Passenger volume has increased to the point where airlines are now including in their schedules a page of "general information" for passengers to take account of before travel; Eastern Air Transport's specifies that babes in arms travel without charge but all others must pay full fare, and that animals are barred.

Transcont. & Western Air to start new 24-hour coast-to-coast service Apr. 20; service may only carry mail until dark parts of airway route are lighted.

Lawsuits against Colonial Western Airways for St. Patrick's Day crash in 1929 that killed 14 result in jury award of $89,000 in damages.

The old saying "Nothing is sure but death and taxes" takes on new meaning in Denmark. "A recently compiled list of the various taxes made on Danes includes state, county, capital, income, house, ground, church, water, dog, business, radio, beer, alcohol, automobile, document, benzine, snow, inheritance, road, chimney, calendar, movie and legitimate theatres, dancing, amusement and bachelors."

Theft of freight and other goods on rails was $990,000 in 1930 vs. $750,000 in 1929; increase attributed to unemployment.

Week in review:

Stock market action was "diametrically opposite" to culmination of bull market in summer of 1929, when stocks rose steadily in face of unmistakable signs of business slowdown. In spite of "cumulative signs ... general trade was recovering from the lowest levels of depression", stocks declined, led by renewed pressure on rails. Rail earnings for first 2 months were very poor, but should now improve seasonally. Steel outlook uncertain; production declined, but opinion was split on whether production has peaked for first half. Bond trading active, irregular. US govts. firmed after announcement of $275M issue; NY State long-term bond offering sold at near-record low 3.464%. European govts. mostly firm, while S. American fluctuated under influence of unexplained plunge followed by rally in Brazilian issues. Corp. highest grade firm, particularly utilities, but most of the list trended down, particularly rails. Foreign exchange featured steadiness in sterling, weakness in franc, with speculation gold may move from Paris to London; marks declined on anticipated Reichsbank discount rate cut. Grains fluctuated narrowly most of the week, while cotton declined gradually. Call money returned to 1 1/2% after brief spurt to 2 1/2%. Fed. Reserve continued easy money policy by lowering buying rate for 46-90 day bills. Gold holdings hit new record of $4.706B. NY bank loans continued sharp decline.

Market commentary:

Market wrap: Stock trading highly professional in weekend session; volume light and fluctuations small; market firmer early and receded later, but showed no distinct trend or evidence of concerted bear action; Dow industrial average ended down but rail and utility averages closed higher. Bonds active in short session; US govts. firm; foreign steady to firm; corp. irregular with "readjustment" in many parts of the list while some rail issues rallied. Commodities strong; grains generally firm in spite of bearish Canadian report of record wheat supplies; cotton up substantially. Copper no longer available below 10 cents, though no sales have yet been made at 10.

Conservative observers increasingly anticipate a technical rally, but still advise clients against trying to catch it; instead, advise reducing long positions on advances, since they can probably be replaced at lower prices after poor Q1 earnings reports.

Traders who have been most active in recent weeks continue pessimistic, have been selling short on all rallies. Largely professional character of recent market is confirmed by concentration of trading in a few issues; in a number of recent sessions, as much as 50% of trading was in about 20 stocks, and 15% in two or three. Recent action of rails has been discouraging to the public, many of whom consider them high-grade investment issues. However, if industrials can counter rail trend over next few sessions this would be considered encouraging by those observers still anticipating a technical rally.

Overnight news was light, but Friday's included some positive items such as the sugar agreement, US Steel tonnage report, and improved markets abroad. A report was heard on the floor that "the short interest would be run in this week"; this might be accomplished quite easily with current low volume.

Copper issues strong; production and inventories have been declining, sales in the first quarter were ahead of 1930, and price outlook seems firmer. Motor shares were strong with Auburn hitting a new high of 278 1/2, up over 200 points in a few months. Other strong spots included steels, tobaccos, and tractions. Fertilizer shares have been weak on lower sales and greater need to extend credit.

Kreuger & Toll's recent report confirmed predictions by some of a favorable showing; quiet accumulation reportedly in progress for a European account. Johns-Manville down sharply after poor Q1 earnings. Radio Corp. steadied about 20 after heavy selling early in the week on report of lower-than-expected business.

Broad Street Gossip: Many traders are looking to the US Steel annual meeting in Hoboken on the 20th for official statement on dividend policy. With $240M in cash reserves, Street feels a dividend cut now is unlikely. "Floating supply" (stock in brokers' names) of US Steel common stock is down to 15.69% of shares, a record low; this indicates recent decline has been due to liquidation by traders rather than "strong box liquidation." Short interest in rails is reportedly largest in years Atchison, B. & O., Pennsylvania, and NY Central are popular targets. Stock trading volume Saturday of 615,740 shares was lowest since August.

J. Pelley, New Haven RR pres., in speech at MIT, predicts "era of great coordinated transport companies, embracing air, water and land ..."

Allegheny Region public utilities committee notes sharp decrease in industrial electric demand in their territory, although higher home consumption is compensating to some extent; because of "rigorous economies" net earnings for electric utilities should mostly be as high or higher than last year.

M. Cahill, M-K-T Rwy. pres., returns from extended tour of company lines; says it would be exaggeration to say sentiment was enthusiastic, but “it is a fact that everywhere in the Southwest there is a decidedly healthier tone to business and the impression is general that the depression has spent its force and that we may confidently look for better times.” Company freight loadings show uptrend.

Economic news and individual company reports:

First 17 states report 46% increase in Mar. car sales over Feb., though still 31% below Mar. 1930. Car makers are increasing production schedules due to low inventories, against usual trend of slackening in production starting in mid-April. J. Scoville, Chrysler chief statistician, says auto industry “steadily climbing toward normalcy”; retail sales were 47% of normal last Nov., but increased steadily month-by-month to 75% in Feb.

Treasury issue of $275M in 1 7/8% 8-month certificates oversubscribed almost 4 to 1.

Decline in “all other,” or commercial loans of $299M this year mostly restricted to NY and Chicago districts; 81% of the decline occurred there, though combined loans in those districts are only 36% of the total; decline in other districts was only 1%. Part of NY decline may be due to sales of bankers' acceptances.

Youngstown district steel output to decline 1% to 44% this week.

Fisher's wholesale commodity index declined slightly again to 75.2.

While mounting East Texas oil production is agitating oil interests, it at least has the benefit of displacing foreign crude, which can't match the 20 cent/barrel price.

Refined copper inventories in N. and S. America at end of March were 354,205 tons vs. 363,629 in Feb. and 256,020 in Mar. 1930; production of refined copper was 102,058 vs. 99,853 and 127,064; shipments 111,482 vs. 100,051 and 104,167.

Earnings of 103 telephone cos. in Jan. were $23.109M vs. $22.944M in 1930 and $24.897M in 1929.

Agriculture Dept. estimated world cotton crop for 1930-31 season at 25.5M bales vs. 26.3M prev. year.

Butter and egg futures for April hit record lows.

Soviet purchases of US products by Amtorg Trading was $33.3M in 6 months ended March 31, down 44.8% from a year earlier. P. Bogdanov, Amtorg chair., attributed decline to worsening trade relations.

World sugar conference ended; Permanent International Council on Sugar headquarters to be located in The Hague.

Bank of Netherlands discontinues delivery of gold coins for domestic purposes, but will stay on gold standard.

Commerce Dept. reports exports of radio receiving sets in first two months were $2.010M vs. $1.260M in 1930.

Feb. aircraft production by 46 major mfrs. was 172 aircraft valued at $1.864M; sales 163 aircraft valued at $1.923M; both figures gained from Jan.

Wright Aeronautical 1930 net loss was $2.198M vs $900,837 profit in 1929.

Companies reporting decent earnings: Pacific Lighting, Lehigh Valley Coal, Corno Mills.


Cracked Nuts - RKO picture at the Globe. Famed comedy team of Wheeler & Woolsey is joined by Edna May Oliver in "a round of obsolete wisecracks and familiar comedy situations which are still apparently entertaining to a number of people." Woolsey wins crown of mythical kingdom, El Dorania, in "a crap game." Wheeler buys a revolution from an insurgent general but forgets to do anything with it. Miss Oliver owns large plantations and endeavours to keep Wheeler away from her niece. "Gives the impression of having been slapped together from the readiest ideas at hand." [Note: I'd say this was a cheap ripoff of Duck Soup, if Duck Soup hadn't come out two years later].


Defense attorney - What time was it when you were robbed? Witness - Ask your client. He took my watch.

"'Do you act toward your wife as you did before you married her?' 'Exactly. I remember how I used to act when I first fell in love with her; I used to lean over the fence in front of her house and gaze at her shadow in the curtain, afraid to go in. And I act just the same way now when I get home late.'"

"'At an examination of a class in first aid, a member was asked: "What would you do if you found a man in a fainting condition?' 'I'd give him some brandy,' was the answer. 'And if there were no brandy?' 'I'd promise him some.'"

Recently, a package was lost in transit between NY City and an importer in Buenos Aires. After a complaint, the Argentine Post Office looked into the matter and reported the package had been placed in the lost parcel area because the addressee was unknown, and unfortunately had been destroyed by rats. The NY Post Office replied "the lost package contained 15 revolvers, which it is difficult to believe have been eaten by rats in so short a time."

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