April 9, 2010

Thursday, April 9, 1931: Dow 169.54 +2.51 (1.5%)

Assorted historical stuff:

Editorial celebrating Chicago's defeat of Mayor W. Thompson in Tuesday's elections [last Republican mayor of Chicago; subject of many corruption charges including being on Al Capone's payroll; once held successful "debate" with two large rats representing his opponents; threatened to punch King George in the "snoot"]. "Only under peculiar and extraordinary conditions ... would three terms of the grotesque Thompson region have been a possibility ... his defeat is a source of satisfaction to the entire country."

Another Woodlock editorial smackdown! A reader complains that in criticizing the Progressives, Woodlock hasn't mentioned why they've become more vocal: "the Progressive doctors have barged into the hospital" because they believe, with reason, that "their Conservative brethren have so far made a mess of things through persistently trying to cure the sick man by dosing him with the same truck that poisoned him in the first place." In response, Woodlock compares the Progressives to the "Flaming Youth" who, after the World War, "informed its elders that they had made a mess of the world, that their entire system of faith and morals was wrong, and that 'youth' would take the helm" free of the "old inhibitions ... taboos, and hypocrisies." This movement has now apparently petered out; todays youth "threaten to be more serious than our elders" and are rediscovering "that there are truths and 'standards' which do not change with time." What Progressives don't realize is that leadership is a rare quality that must be recognized, not imposed; public control of business would mean "control of the more competent by the less competent, and biology tells us that it will not 'work.'"

Editorial: In past depressions, "the first indications of trade recession were normally accepted by big and little employers as full warrant for unhesitating discharge of employees and, wherever possible, reduction of wage scales." This time has been different; corporations have been slow to cut employment or wage scales, and, surprisingly, stockholders haven't raised much complaint about change from the former dogma that "owners of a business had a prior lien upon its earning power."

Extensive survey of industrial sickness and accidents found huge social and economic losses; 1930 saw 23,000 deaths and 3M injuries due to industrial accidents, accounting for $4B of losses; costs of sickness were an additional $6B. Losses are largely preventable as "shown by ... a large steel company which, in an eight-year 'safety-first' campaign, has reduced its accident rate about 50%." Other companies "through establishment of their own medical forces and by educational campaigns have reduces losses due to illness, sometimes as much as 90%."

60,000 farm and general workers to strike in Denmark protesting wage cuts; 44,000 unskilled workers in Norway to be locked out.

Delegates of Northern district of New South Wales, Australia vote to secede and form new "State of New England."

A recent study of 1,410 suicides in San Francisco found: about 300 were women; married out-numbered unmarried 3 to 2; most were between 40 and 50 years old. Most common method is inhaling gas, followed by guns and jumping from windows or boats. Most common motives are bad health, mental derangement, financial loss, liquor, lack of work and domestic quarrels. Month with most suicides is Dec., least July.

Utah law prohibiting billboard advertising of cigarettes upheld by State Supreme Court.

Fishermen along France's Breton coast last summer suffered a plague of "devil fish," AKA octopus; attempted extermination was foiled by deep water and rocky ocean bottom. Plague was unprecedented there and no satisfactory explanation has been given.

Dr. G. Burgess, US Bureau of Standards director, announces first liquid helium produced in low-temp. lab; helium is hardest of all gases to liquefy.

Canadian Pacific Railway's washday must be something to see - it owns 2.5M pieces of linen including its railway, hotel, and steamship departments, and washed 33.1M pieces last year. Washing is done mainly in their hotels, but assistance is often required from outside sources.

Louis B. Mayer elected pres. of Assoc. of Motion Picture Producers, succeeding Cecil B. De Mille.

Market commentary:

Market wrap: Stocks opened firmly in spite of recent poor business news; late morning brought some irregularity, lead by pressure on rails, sulphur stocks, and Fox Film; however, good support came in and rally again progressed into early afternoon; another bear attack developed in the last hour, bringing heavy selling in Radio Corp. and some weakness across the list; however, support again came in and market turned up at the close. Bond trading mixed; US govts firm again; foreign list helped by sharp rally in Brazilian issues; corp. highest-grade firm but weakness in many lower-grade and speculative issues. Commodities mixed; grains mostly steady, with wheat firm and other grains narrowly mixed; cotton down substantially. Copper buying remains quiet; small amount offered at 9 1/2 cents, other producers not quoting. Zinc declined to 3.90 cents/pound, lowest price since 1902.

Conservative observers still cautious; advise against trying to profit on technical rallies; recommend protecting long positions with stop-loss orders slightly below resistance levels of past 2 days, since if stocks break through those levels they may go even lower before a good recovery develops.

Almost all the Jan.-Feb. rally has now been erased, bringing many stocks back to the area where accumulation came in at start of the year; it remains to be seen if important buying will return. A well-known market student says he distrusts the current market since US Steel is reaching new lows while trading favorite Auburn is reaching new highs. Volume has declined sharply in recent weeks, from 3.966M daily avg. in Feb. 28 week to 2.248M in week ended Saturday. This is seen reflecting lack of public interest and a market in professional hands. Despite the lower volume, the fact the market has shown no rallying power makes many believe a selling climax will come before market is ready for substantial recovery.

Rail freight loadings figure caused some disappointment, showing small week-to-week decrease and slightly larger decline vs. 1930. Tobacco shares were strong early after two chains increased retail prices to 15 cents/package.

Pennsylvania RR is subject of some dividend rumors, though nothing has come from "responsible quarters" so far. Allis-Chalmers dividend considered uncertain; although business is gaining, co. probably failed to cover dividend in Q1. United Fruit Co. reported Q1 earnings of 91 cents/share vs. 72 cents in Q4 and 46 cents in Q3; observers feel co. may have turned corner after being bear target in Dec. Woolworth declined on disappointment they only declared regular dividend with no increase. Auburn again rose sharply.

Broad Street Gossip: Recent market action has upset many traditions, including the ones about never selling a dull market, a market with mostly bearish sentiment, or a stock after the bad news is already out. It's also been unusual in that stocks whose earnings have held up fairly well have declined along with the rest. US Steel, normally a bull leader, seems to have been borrowed temporarily by the bears for use as a bear leader. Recently released shareholder lists seem to counter rumors that the public or large shareholders are liquidating; instead they bear out theory of many traders that speculative trading has been moving the market.

Rally in Brazilian bonds seen as technical; since the revolution last Oct., the milreis currency has declined from $.1078 to record low of $.0730 in March. Brazil has a trade surplus, but is losing heavy amounts of gold due to interest payments abroad; gold holdings at end of Jan. were only $8M vs. $139M a year earlier.

C. Nash of Nash Motor says Midwest shows signs of trade revival, should be moderately prosperous by Jan. 1932; auto industry building sales gradually.

J. Barnes, General Bronze pres., says depression in building industry continues throughout country, sub-normal volume of new construction work available.

J. Mooney, GM Export Co. pres., says high tariffs a threat to US exports. Says US made past errors in ignoring repeated warnings from 1919-29 that US couldn't continually export vast quantities of good without making it possible for customers to pay, and in passing Hawley-Smoot tariff. Third error, being made now, is ignoring trading arrangement being made by major countries that “threaten to leave America out in the cold.”

Bernard Baruch says expects "more general prosperity" to follow current situation "when adjustments are made"; recommends rigid economies.

M. Norman, Bank of England gov., visited Sec. of State Stimson, who wouldn't give details of Norman's talk but said he was "no protagonist of optimism."

Economic news and individual company reports:

Steel industry reported mix of positive and negative news. Production dropped again, but rumors of an impending steel price war decided on by US Steel at a secret meeting April 3 were strongly refuted. Upcoming US Steel unfilled orders report seen likely to show a moderate increase. Finished product prices showed mixed trends; scrap was slightly firmer. Opinion was divided on whether production had peaked for the first half, with some attributing the decline to a temporary overbuying error by a large car maker. Outlook for structural steel looks strong.

Current schedule for April car production indicates 14% gain over March to 320,000 vehicles, best Mar.-Apr. percentage increase since 1925.

Total known security loans (more comprehensive total than brokers' loans) declined $66M in March to $7.712B, the 11th consecutive monthly decline; total reduction in that period was $2.922B or 27.5%. Loans are now 41.6% below peak on Sept. 30, 1929 of $13.205B, and are back to mid-1927 level, though total value of listed stocks and bonds is $101B vs. $82.667B then. [Brokers' loans declined much more, from peak of $6.8B to under $2B].

Judge J. Moore temporarily blocks East Texas oil curtailment order; petition was on grounds curtailment violated antitrust laws and was based on unreasonable market demands, not conservation of Texas oil and gas resources.

US electric output for week ended Apr. 4 was 1,672 GWHr, down 1.6% from 1930, vs. a 1.5% decline prev. week and 2.3% two weeks ago.

Total of $4.869B in foreign govt. debt is outstanding in US market (excluding Mexican and Russian debt). Price fluctuations have been wide due to some fears of default. While some are pessimistic on the outlook, level of defaults has been relatively small since the war, though three S. American issues have defaulted this year.

Banco Agricola Italiana closed; had 200 branches, current liabilities 1B lire; customers being distributed to other banks, govt. guaranteeing them against loss.

Delegates from US, Cuba, and 6 other countries met at international sugar conference in hope of establishing world sugar price this week.

Leaf tobacco exports in 1930 were 579.7M pounds, 65.4M over the 10-year average and second-largest in last decade.

NY City Board of Estimate approves $50M first step in 10 year, $272M program to add 540M gallons of water to NY City's daily supply.

Reports confirmed of planned merger among 20 NY City banks to form institution with assets over $100M.

Western Union reports 11.5M telegraph messages transmitted in Jan., about 14% below last year.

Strike of 20,000 miners against Glen Alden Coal ended.

Companies reporting decent earnings: Kreuger & Toll, Assoc. Telephone Utilities, Chesapeake & Ohio Rwy. (against industry trend), Boston & Albany RR, Assoc. Portland Cement Mfrs. Ltd.

Books of interest:

J.M. Keynes 2-volume Treatise on Money. Keynes is a pragmatist who doesn't believe in laissez faire, but at the same time is not an impractical economic theorist who believes in "a magic formula to correct economic disequilibrium." In the current emergency, he "urges that central banking authorities 'go the limit' in putting money at the disposal of banks through open market operations," believing there's no hope for lasting recovery until worldwide "long-term market-rate of interest" declines greatly to somewhere near prewar level. Keynes “makes no dogmatic assertion” his theories will solve the business cycle or price fluctuations, but presents good evidence they will have a strong influence if applied, “and that the experiment is well worth trying. ... Mr. Keynes' book is, unfortunately, many years ahead of its time. It is idle to hope that central banking authorities will give his theories serious attention for many years ... Nevertheless, it is a distinct contribution.”

Theatre:

Joy of Living - at the Masque. European comedy import concerning happenings at the Berlin home of the nouveau riche Gustaf Marx, during 12-hour period starting at 3 o'clock one morning. Marx has just made a fortune trading a stock; he meets the down-and-out, suicidal Adam who just lost everything trading the same stock; Marx talks Adam out of suicide and into becoming his valet. Marx decides he needs female company and sets Adam to the task; he brings in a penniless girl from the streets and the two men become rivals for her love. Marx, in a drunken state, offers Adam credit, Adam uses it for a stock deal to make himself rich again and ruin Marx in the process. In a happy [I think] ending, Adam wins the hand of the young lady, we discover both he and the lady are members of the aristocracy, and Adam makes Marx a partner in his new gold mining company. Actors try hard, but absurd plot is too much of an obstacle.

Jokes:

"Young Wife - Would you be surprised if I gave you a $50 check for your birthday, darling? Husband - Yes sweetheart, I would. Wife - Well, here it is all made out and ready for you to sign."

A knee-slapper from Lord Dawson of Penn in the current Atlantic magazine: "A farm laborer in England had been out of work for many months and had been living on the dole. He remarked to his physician one day: 'Doctor, do you know I had an offer of work some days ago which would have given me five shilling more a week than I am getting from the dole, but after giving it thorough reflection, I preferred to remain independent.'"

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