April 18, 2010

Saturday, April 18, 1931: Dow 160.23 -2.36 (1.5%)

Assorted historical stuff:

Henry Ford says first effect of repealing Prohibition would be widespread decline in wages due to “resultant demoralization of labor.” Also states that “no one can question the great increase in general business since the advent of prohibition.”

W. Gifford, AT&T pres., comments on doubtful record of economists in forecasting and moderating business cycles. Points out that modern weather forecasting began about the time of Ben. Franklin's observation that storms travel in opposite direction to the wind. "The practical application of ... economics to the science of business is younger than the application of meteorology to safety at sea and ... agriculture. It is not surprising, therefore, that it is still in a formative state ..."

Wickersham Presidential Commission to make 9 reports over next 2 or 3 weeks, all related to crime. Editorial: Chairman Wickersham is correct in saying a complete overhaul of the criminal justice system is needed, but seems too pessimistic on the possibility of short-term improvement, almost depairing of substantial gain before years of extensive study. “As a people we do not hesitate to experiment in other fields ... and should not too much hesitate to do so in execution of the law.” An overly conservative approach in the US has reduced judges from position of independence to mere administrator and “spectator at a performance of lawyers whose rightful place is on the vaudeville stage.” Overhaul will be a long process, but attention the subject is getting will give immediate benefits, such as the current inquiry into the NY courts. Even “awkward ... episodes” in the Senate Judiciary Committee “when a nomination to the federal bench is dropped into its midst” may indirectly help strengthen judiciary by informing public opinion.

Att'y Gen. Mitchell says antitrust enforcement difficult in view of depression; while he has no authority to declare a moratorium on enforcement, “we have been impressed by the necessity of using peculiar care to make no unwarranted attacks on any business institution ...”

Washington report: Economic observers in Washington see hopeful signs on horizon; economic history indicates current improved bond market is leading indicator of recovery, while weakness in metal markets reflects past conditions. Slight increase in residential building also hopeful. Poor sentiment also reflects past conditions and is typical of depression bottoms, though "world-wide nature of the present depression is not denied or ignored." Main cause for recent drop in Russian orders from US seems to be govt. guarantees by other countries allowing Russia to buy on credit; these countries include Britain, Germany, Norway, Austria, Poland, and Denmark. However, sales in the first 2 months of 1931 were strong, reflecting Russian dependence on the US for farm machinery. After recent Nicaraguan incident, US will in the future investigate carefully before landing US forces in response to “pleas that American interests in that republic are threatened. ... Apparently the Hoover Administration is determined to avoid armed intervention and the Congressional criticism that it causes,” not to mention effects on Latin American relations. However, intervention may still be necessary to protect “property or lives.”

Argentine pres. Uriburu says govt. won't fall into hands of radicals; cabinet merely resigned to give him free hand to cope with current problems; will complete new cabinet of “patriotic Argentines who are above party politics.”

France recognizes new Spanish republic.

Packard-Diesel powered Bellanca plane makes non-refuelling endurance test flight of 73 hours 48 minutes; total cost of fuel $48.50.

US Steel secures American rights to rust and heat resistant steel patents of Krupp interests in Germany.

First all-metal house on display at Grand Central Palace; construction mainly steel, aluminum, and glass. Weight only 1/12 that of concrete and steel construction.

Citrus fields in California now use crude oil burning heaters in their orchards to protect against frost damage. Oil storage tanks for the heaters in these districts have a total capacity of 47.6M gallons. One enterprising Santa Clara grower uses an electric dehydrator for apricots and prunes, which has a capacity of 3,000 pounds and produces a more uniform product than the sun in less time.

Snake and crocodile skins are in growing fashion for women's handbags and shoes; many snakeskins come from the Southwest US, and alligator skins from Florida, although large imports are also coming from the Philippines and Mexico.

Joe Leblang, "chief of the Broadway cut rate theatre ticket business," dead at 57; estate estimated at $20M.

Market commentary:

Market wrap: Moderate early improvement in stocks gave way to "renewed selling of an insistent character"; bears put particular pressure on US Steel, rails, and utilities, causing them to give ground under heavy offerings; selling spread into practically all departments and continued up to the close, with activity picking up in the last hour; public liquidation was heavy and demand largely limited to short covering. Bond trading quiet, irregular; US govts. dull, steady; foreign mixed - Argentine issues rallied while Australian and Brazilian were weak; corp. highest-grade rails firm but speculative and convertible issues irregularly lower. Commodities mixed; wheat firm but corn lower; cotton slightly up. Copper is at 9 3/4 cents but with little buying; price now seen likely to average below 10 cents in 1931 unless smaller producers can be kept under control; "price action during recent weeks has pointed out clearly to all consumers that if they wait long enough they can name their own price for copper." Zinc, crude rubber, and butter hit new lows. Silver market observers pleased with gradual rally since Apr. 6; encouraged by prospects of higher demand from China.

Market observers continue cautious. A good technical rally is considered increasingly likely, but most advise using it to reduce any long positions.

Bears turned their attention to targets that had been relatively resilient, including GM and leading utilities such as Consolidated Gas; these gave ground under heavy selling. Increase of $27M, or 1.48%, in brokers' loans was in line with expectations, though bears contended it indicated transfer of stocks from investors to marginal accounts. Bears also argued much of recent increase in short interest was "selling against strong boxes" (investors hedging stocks that they own), and that "genuine short interest" was less than indicated.

IT&T sold off on concerns they might lose Spanish concession, though co. officials said they expected to keep it since it was awarded by act of Parliament. A.M. Byers is reportedly subject of operations by a "bob-tailed [small] pool" which has been having difficulty attracting a following to the stock in spite of its sharp break over the past month. Observers say Hershey Chocolate may do better than expected this quarter as it benefits from low commodity prices.

Oil shares have been unsettled by continued increase in East Texas production; crude oil there has reportedly been sold as low as 15 cents a barrel. Aviation shares have been more active, reflecting seasonal pickup and successful Detroit aircraft show. Commercial aircraft sales resulting from the show reportedly strong.

Recent poor sentiment is reflected in reaction to dividend announcements; Vanadium dividend omission caused sharp break but Pennsylvania RR announcement of regular dividend payment had little effect.

Municipal bonds have been firm, with good demand from banks and insurance cos., Dow avg. yield of 20 long-term state and city bonds is at 3.83%.

Editorial: March trade figures, though up from Feb., are no cause for celebration. Feb. is always a low point for trade; "gain is merely seasonal, and not a large one, either." A truer comparison with March in previous years shows drastic decline, with exports of $237M vs. $369.6M in 1930 and $481.7M in 1929, and imports of $211M vs. $300.5M and $383.8M. Some details may be more encouraging, including a rise in silver exports, which may indicate better conditions in China.

H. Scandrett, St. Paul RR pres., says co. has cut maintenance expenses to some extent, but railroads, being subject to state and ICC regulation, can't cut expenses proportionally to loss in business as other industries are able to.

F. Ecker, Met. Life Ins. pres., says US people now possibly too pessimistic about business conditions "by just about six months," in the same way they were too optimistic in the six months preceding the 1929 crash; “cites strong cash position of corporations as important indicator for business improvement.”

Some economists believe generally strong corporate balance sheets are postponing wage and dividend and adjustments that must come before a recovery.

L. Robinson, Second Int'l Securities pres., discounts “artificial shortcuts to business recovery” but feels two constructive trends at work: “inevitable revival of consumer purchasing” to replace worn-out necessities, and increased efficiency. However, immediate outlook for stocks obscure due to psychological factors.

Economic news and individual company reports:

Price, Waterhouse audit of Bank of US shows realizable assets of $141.101M, slightly more than net liabilities of $140.372M. S. Rosoff says this verifies his stand that depositors would be paid back fully if his reorganization plan was put into effect, avoiding a forced liquidation with large losses (plan would repay depositors in 70% cash and 30% stock in new bank). At Bank of US trial, it emerged that long before bank closing Superintendent Broderick told Bank of US officials their loans to affiliates were too heavy. It also emerged that H. Lipschutz, asst. Treasurer of many of the bank's affiliates, had acted as “an automaton” for bank officials, signing documents purely on their instructions. NY legislative committee to investigate State Banking Dept. administration by J. Broderick.

Dun's reports lack of forward momentum in general business; brighter outlook from earlier in the season dissipating. As time passes, it's becoming clearer that “the prevailing economic transition is deep-rooted ... and the experiences of other similar periods do not in all ways afford a reliable basis for comparison.” Bradstreet's reports ebb in wholesale and industrial activity, though retail has been stimulated by spring weather.

Farm Board says has received many proposals for dealing with wheat surplus, but so far none have merited serious consideration as national program. Outlook for wheat seen firmer as European demand is increasing; European crop this season was about 5% below last, and exporting countries appear to be reducing acreage due to low prices; recent lack of moisture in US and Canada raises possibility of another drought.

Major oil cos. agree to stabilization plan of Oil States Advisory Committee, limiting production based on nationwide supply and demand.

This week's NY bank statements showed increases in loans and deposits, a reversal of recent trend; possibly due to NY State income tax payments. Holdings of non-govt. securities continued to increase.

C. Higbie, director of many industrial corps. in Michigan area, reports on careful check of Detroit business activity made over past day: April car sales running ahead of March, sees no signs of change in trend; car production to rise 10%-15% in April over March.

Largest drop in rail loadings in March vs. 1930 was in Northwest, 21.1%; smallest in “Pocahontas district,” 12.4%, and East, 13.9%.

BLS reports index of wholesale commodity prices in March was 74.5 vs. 75.5 in Feb. and 90.8 in Mar. 1930.

Commonwealth Bank of Australia reportedly threatens to cut off credit to federal and state govts.; seen as effort to force sounder economic policy. Australian Senate rejects fiduciary notes bill that is “backbone of the government's finance policy,” providing for issuing 18M pounds for farm and unemployment relief.

Austria says it's suspending negotiations with Germany on economic union until League of Nations meeting in May.

German steel ouput in March was 811,000 tons vs. 1.202M a year earlier.

French unemployed on national dole 51,804, on city doles 21,570.

Manchester cotton market slower; demand from India unsatisfactory.

NYSE seat sold for $275,000, down $25,000 from last sale.

US Steel changes pension plan to make retirement mandatory at 70 and remove upper limit of $100/month on payments; will result in large number of executive retirements over next few years.

Goodyear cuts wages of workers at mill in New Bedford 5%-10%.

Aluminum Co. of Amer. continued high 1929 level of production in 1930 in spite of sales decline of about 33%, resulting in higher inventories and current liabilities. However, uses of the metal have increased in structural, automotive, and furniture fields.

Company reports since Apr. 1: 56 companies reported higher earnings vs. 1930 and 148 lower; 105 dividends unchanged, 4 increased, 35 cut.

Companies reporting decent earnings: Connecticut Electric Service, Peoples Gas Light & Coke, Reynolds Metal, Philip Morris Ltd., Penn.-Dixie Cement, Westvaco Chlorine Products.


Melo - by Henry Bernstein, translated from French, at the Ethel Barrymore Theatre, starring Edna Best, Basil Rathbone, and Earl Larimore. "Another triangle play, built around empty victories and wistfully rich defeats in love"; the characters, being musicians, "play their own accompaniment to these events." Marcel Blanc, violin virtuoso, falls in love against his will with his close friend Pierre's wife Romaine, "a sensuous and vivacious child of nature" to the point of madness. Romaine, apparently afflicted with same madness, administers slow poison to Pierre since she would rather kill him than wound him. Pierre is saved from death, but a remorseful Romaine then throws herself in the Seine. Much later, Pierre confronts Marcel and begs him for an understanding of why his wife took her own life; Marcel convinces Pierre it was him (Pierre) that Romaine truly loved; the two then play a sonata together.


"'Heard about Jimson being in the hospital?' 'In the hospital? Why, I saw him last night dancing with the dizzy blonde.' 'Yeh; so did his wife.'"

Cactus Joe reports he's not going with a Wild West show this summer: 'The big desperado work is being done in the big cities. I'm goin' to organize a Wild East show.'

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