April 7, 2010

Tuesday, April 7, 1931: Dow 169.72 -2.71 (1.6%)

Assorted historical stuff:

Canada's banking system offers interesting comparison with the recent epidemic of bank failures here. From 1900 to the present there have been only 4 chartered bank failures in Canada in which depositors were not eventually paid in full. Three of these were before the war, the fourth since; total deposits were $17.5M. In the US there have been 7,000 bank failures since 1914 involving liabilities of about $3B; in the last year alone, 1,345 with total deposits of $865M.

Editorial: Senate floor leader Watson's (R, Ind.) statement that the next Congress won't raise taxes, while probably accurate as political weather forecast, is based on unsound reasoning. Watson says business recovery would be delayed by heavier taxes, but business will be disturbed by heavy Federal spending, whether enabled by higher taxes or borrowing. While Pres. Hoover has also expressed hope a tax hike can be avoided, he added the caveat that this would require holding spending down, and said the people would have to cooperate to discourage new spending. This is unlikely as long as [income] taxes are confined to such a small slice (2M) of the population; a "spendthrift Congress" won't be reined in until "the number of citizens who directly pay something, no matter how little, as a result of its prodigality is increased enough to exercise some power at the polls."

Gov. Roosevelt vetoes bill allowing town supervisors to issue short-term notes to pay off bond interest, calling it "at variance with all sound methods of finance."

Testimony heard in ongoing suit brought by govt. to recover $11M in alleged excess wartime profits from Bethlehem Steel; R. Evans, Bethlehem Steel chief counsel, contends US Steel made 50% profit on wartime contracts vs. Bethlehem's 21%.

Editorial: In response to J. Raskob's call to Dem. Nat'l Committee members for suggestions on farm relief, "unasked advice is rarely appreciated, yet the subject is of such importance that this newspaper ventures to offer a suggestion." Agriculture should no longer be given "special favors ... to the detriment of other legitimate interests." The Farm Board should be stripped of power to speculate in commodities or to loan money; it should survive, but purely as a fact-finding body within the Agriculture Dept. to "show the farmers how to help themselves."

Wileman's Brazilian Review says country faces most serious economic crisis in its history, even greater than at declaration of Republic in 1889. During period after the Republic was formed, states were given financial autonomy; as result, Brazil buried herself in external and internal debt by 1930. Following revolution of Oct. 1930, provisional govt. has assumed much of the state debt and faces severe situation; further political disturbances will have disastrous effects on Brazil's credit.

Yet another Woodlock editorial on perils of public power. Oregon and Washington have approved public utility districts, supposedly to allow cities economic advantages of larger units. Perhaps concept of public power needs to be tried out on a large scale somewhere, but there should be accurate accounting of the result. The two states above have made tax revenue available to power districts; there's apparently no intention to make them pay as they go. "It is a very dangerous thing to open the tax budgets to experimentation in the utility business without ... taking extreme precautions against hit-or-miss operations." This can lead to "indiscriminate slashing of rates to begin with and a constantly increasing load on the taxes" along with destruction of private utilities.

Telephone users in Japan who don't like the number they were assigned can purchase a new one through dedicated brokers. The luckiest numbers such as 8 and 357 fetch astonishing sums, often from $500 to $3000 or more. Unluckiest numbers (42, signifying death, and 49) are assigned to police stations.

California prison inmates are allowed to take correspondence courses offered by the University of California. A large number take advantage; one day last Sept., a total of 657 San Quentin prisoners graduated from these courses.

"A tree carved with the words 'Kit Carson 1846' was recently discovered ...near Mud Lakes in the Eldorado National Forest of California. Six inches of new wood had grown around the original blaze." Another tree carved by the frontiersman in 1846 is still standing in what is known as Kit Carson Pass in that Forest.

Market commentary:

Market wrap: Stocks gained slightly in early trading but fell under renewed bear pressure, concentrating on US Steel. Majors declined through the day, with Steel hitting a new 1931 low at the close. However, trading was relatively dull following rise in call money, with heavy selling limited to isolated spots including Pullman due to dividend uncertainty, and the volatile Vanadium. Bond trading very dull; US govts. steady; foreign list disturbed by sharp break in Brazilian bonds, though Berlin issues were strong; corp. highest grade steady, particularly utilities, but "readjustments went on" in much of the list. Commodities soft; grains fell back after sharp rise Saturday; cotton down slightly. Copper still available at 9 3/4 cents in enough volume to meet current low demand; large producers holding at 10 cents.

Conservative observers bearish; recent market action has discouraged all public buying.

Most brokers now recommend customers wanting to buy should favor “thoroughly deflated” issues that have not been subject of bull pool operations, but have favorable prospects and financial strength. Increased bear confidence in past week attributed to return of three important operators “after a winter sojourn in the South and Cuba.” US Steel will report unfilled orders Friday; interest in the announcement is keen since the stock has recently seemed pivotal to both bears and bulls. Some NY traction bonds rallied on prospects a transit unification law may be passed this week.

Dow theory students have been encouraged by the rail average's ability to hold stubbornly above last year's lows so far in April; this has "gained many adherents for the theory that the December lows will stand unless some unexpected change for the worse occurs in the business situation." Current downtrend has lasted longer than the severe break late last November, and would have been expected to bring in "most of the liquidation immediately overhanging"; slowdown in selling since Thursday "strongly suggests that no further extensive liquidation lies immediately ahead."

Broad Street Gossip: Bulls have been confounded by recent market action; a few weeks ago most were optimistic and new yearly highs were outnumbering new lows by about 5 to 1; now, both of these have reversed. However, generally bearish sentiment isn't a bad sign, since “tradition teaches that when sentiment is overwhelmingly bearish, one can look for an improvement ... ” Consensus of both bull and bear is now that stocks won't start permanent improvement “until more definite signs are seen of business recovery.” Many industrials closed the year with record cash and security holdings; many brokers also report record cash levels. To the editor, in response to the Justice Dept.'s charge of sugar industry price fixing and excessive profits: “I am a holder of sugar stocks, and if the sugar companies have made lots of money I would like to know what they have done with it.”

Market value of all NYSE-listed stocks Apr. 1 was $53.336B, down $3.718B in March; borrowing by NYSE members against stock collateral $1.909B, up $69M; borrowing as percentage of value 3.58%, up 0.36%; average share price $41.08, down $2.88. Trading volume of 25 most active NYSE stocks in March was 26.289M shares, up 25% from Feb. and third straight sizable increase; 20 of the 25 declined in price. Leader in shares traded was United Corp. with 3.256M shares; in value traded Auburn, $145M.

H. Sinclair says petroleum prices will have to be increased or companies will be unable to stay in business.

H. Alloway relates interesting observation by William C. Whitney on effects of depression on tobacco sales: “The more laborers out of work, the more restless strikers there are, the more tobacco earnings there are”; men out of work or on strike consume much more tobacco.

W. Storey, Atchison, Topeka & Santa Fe RR pres., returns from 4-week inspection tour of lines, says crop conditions as good as he's ever seen them.

F. Dame, North Amer. Co. pres., says “depressing and backward-looking surveys” are missing many signs of improvement, including absence of usual seasonal dip in electricity demand in their system.

Nichols Copper chair. C. Nichols says doesn't believe mining industry will improve until fall.

Harvard Economic Society sees economic upturn soon; business has shown improvement in important directions, allowing fully for seasonal influences.

Economic news and individual company reports:

Jury selection for Bank of US trial completed; trial probably will open this morning.

Pres. Hoover's employment committee reports public and semi-public works contracts have passed $1B since Dec. 1; see stable or slightly improved conditions in industrial employment; continued need for relief in most areas.

Auto industry is being aided by new plan in which industry compensates dealers to junk cars that are antiquated or unsafe instead of reselling them.

Treasury financing to be announced by Sec. Mellon Thurs.; expected to offer over $300M in certificates. Govt. debt operations will be important factor in financial picture for several months at least; Treasury likely to attempt shift of debt to longer-term since recent borrowing due to deficit and veterans' bonus has increased already high short-term debt. Call money unexpectedly rose to 2 1/2%, highest since Jan. 2; attributed to withdrawal of $100M from demand loan market due to recent Treasury financing and cashing of Apr. 1 dividend and interest payments. March bond offerings rose sharply after lull caused by veterans' bonus agitation; total of $661.9M vs. $147.0M in Feb. and $583.0M in Mar. 1930; highest total since Oct. 1927. Municipals were 43.4% of total, rails 28.8%.

S.W. Straus & Co. report NY City building plans filed in Mar. were $51.2M, up 96% from Feb. and up 39% from Mar. 1930.

Sharp 20%-50% rise in leather prices in past month from very low levels should help tanners; fluctuation mirrored a severe decline and limited rebound in shoe production. However, current shoe production remains 30% below the 1923-1930 average.

Average retail price of gasoline has declined over 48% in past 10 years, but tax rate has increased over 2,600% and now adds 13%-52% to the price. Price range 10 years ago was 23.05 - 31.43 cents, or 23.33 - 31.53 including tax; range is now 11 - 22 cents or 15 - 26 cents including tax. California oil production fell 9,300 barrels/day to 521,400 in week ended Apr. 4 following drastic purchasing price cuts.

George R. James accepts reappointment to Fed. Reserve Board on request of Pres. Hoover.

French coal miners abandon plan to strike as protest against wage cuts.

Breuning govt. commission recommends Germany adopt five-day workweek to fight unemployment; number of German unemployed close to 5M. G. Platakoff, head of Russian chemical industries, arrives in Berlin to direct details of shipment of $75M of German machinery to Russia.

Banca Agricola Italiana, capitalized at 80M lire, to be liquidated, branches absorbed by other banks.

Canadian report: Rail freight loadings for year to Mar. 28 were 607,795 vs. 740,134. Construction contracts awarded in Mar. totaled $27.3M, up 5.3% from Feb. and up 12.6% from 1930. New bonds in first quarter were $191.5M vs. $162.6M. Govt. raises tariffs on imported gasoline to combat “dumping,” protect refiners. Newsprint industry suffering from low demand; companies conferring to avoid price cuts.

Colombian Senate considering contract for exploitation of Catatumbo oil region; contract specifies company must begin development within 2 years, construct $25M pipeline, hire 75% native workers, and pay govt. percentage royalty on oil; several Senators already on record opposing it.

MacDonald govt. in Britain said considering required quota of 15% British wheat to be used by bakers to absorb all milled wheat from British farms.

W.T. Grant March sales $5.334M, up 7.4% over last year; F.W. Woolworth $21.724M, down 3.3%; American Stores $10.771M, down 4.7%.

Wrigley seen possibly raising dividend due to strong financial position and growing earnings (stock is 73; annual dividend $4; earnings in 1930 of $6.14/share vs. $5.80; earnings have increased every year in the last decade except 1926; cash and securities per share $12.69).

B.F. Goodrich cuts wages in line with recent Goodyear cuts.

Companies reporting decent earnings: National Electric Power, Southwestern Gas & Elec., Paramount Publix, Alaska Juneau Gold Mining.


Dirigible - Directed by Frank Capra, starring Jack Holt, Ralph Graves and Fay Wray. Depicts efforts of two navy pilots to reach the South Pole by air to enable famed explorer Louis Rondell to plant US flag there. First attempt by Jack Bradon (Holt) flying poorly built dirigible crashes in storm over the Atlantic; second attempt by Frisky Pierce (Graves) using airplane successfully reaches pole but crashes when Frisky attempts spectacular landing, killing the explorer. Two survivors make improbable attempt to walk 900 miles across Arctic ice back to base camp when Bradon comes to rescue in more modern, better-built dirigible [played by real life pride of the navy the USS Los Angeles]. Directed with imagination and force; air scenes are thrilling; long struggle over the snow is credible due to Capra's sympathetic treatment; male leads display fine acting while Fay Wray plays Frisky's long-suffering wife Helen with “more than her customary conviction.”


Business Man to his daughter's suitor: "I regret I cannot see my way to allow you to marry my daughter at present, but give me your name and address; then, if nothing better turns up in the near future, you may hear from us again."

"He - I have many reminders of my prowess in winter sports. She - What are they? He - Three cups and two medals. She - Lovely. I have trophies from winter sports also. He - What are they? She - Five engagement rings."

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