April 1, 2010

Wednesday, April 1, 1931: Dow 172.36 -0.20 (0.1%)

Assorted historical stuff:

Pres. Hoover says tax increase can be avoided at next session of Congress, provided Congress doesn't impose spending increases on the Administration; calls on public to discourage accomodation of "demands of sectional and group interests." Statement was a surprise, and most important made by Pres. Hoover on taxes since last August, when he expressed strong hope the 1% tax cut could be extended; however, that cut was later abandoned. Statement is in line with positions of various Senators that with economizing by govt. and business recovery the 1932 deficit would become small enough to avoid a tax increase.

Rather bitter editorial by T.Woodlock concerning the Potomac Electric Power Co., previously cited by him as a model for more enlightened electric rate setting; company has a profit-sharing agreement with the District of Columbia giving it an incentive to lower costs. Now, however, in spite of a decline in household rates from 10 cents/kwh to 4.2 cents in the 6 years since the agreement went into effect, the Public Service Commission has decided the company is making excessive profits and is demanding renegotiation. Apparently "it is more important from the 'public interest' point of view that no one should make any 'profits' from serving the public than it is that the public should be well and cheaply served. ... One cannot help wondering why it is that human beings as individuals average so high a degree of intelligent fairness in their private relations ... while collectively they exhibit so little of that quality."

Washington report: Govt. officials are reportedly more optimistic on business, though still not sure whether current improvement is merely seasonal. One undoubtedly favorable item is Weather Bureau report that drought has been broken over most of the affected area. Negotiations next week bring hope of deal among oil-producing states to bring production under control while restricting imports. Fed. Reserve has been studying some of the same banking questions as the Glass committee; reports expected within the next few months. War Sec. Hurley says favors renomination of VP Curtis in 1932, refuting rumors Pres. Hoover might choose him as running mate. Sen. Watson visits White House, says agrees with Pres. Hoover that politics has adjourned and there would be no attempt to reorganize the Republican Nat'l Committee.

Editorial: Sharp decline in auto exports ($15.5M in Jan. vs. $16.4M in Dec. and $31.2M in Jan. 1930) is of grave concern given the importance of this industry. Well-informed people variously blame business depression, politics and foreign policy; whether agreeing with them or not, these opinions deserve consideration. Not only the automotive but also "the entire foreign trade situation demands unprejudiced investigation ..."

W. Mayo, chief Ford engineer predicts that by 1941 all major railroads will be operating airlines for passengers, leaving rails clear for freight trains.

IT&T demonstrates "micro wave" radio transmission between Dover, England and Calais, France. System uses transmitting and receiving antennas only one inch long, wave length as short as 18 cm, and only requires 1/2 watt of power. Ultra-short waves are less subject to fading; reception was up to best telephone standard.

Many of the 32,000 traffic deaths each year are due to flying glass. Some carmakers have already made safety glass standard on all models, while legislation requiring it is pending in many states. Willlys-Overland made safety glass optional equipment on Jan. 1; it was chosen by 82% of buyers in the high-priced line, 77% in the medium line, but only 35% of the low priced line.

Dr. H. Eckener, Graf Zeppelin commander, anticipates joint German-US operated transatlantic airship line in 1933; passenger fares will be $800-$1,000 and trip will take 2 to 2 1/2 days. Service will start with German ship now under construction, 812 feet long and filled with 7.1M cu ft of helium; capacity will be 50 passengers, crew of 35, and 10 - 18 tons of freight.

New Transcontinental & Western coast to coast air service Apr. 1 will reduce travel time to 33 hours from 36.

New electric flashbulb for photographers is a great improvement over dangerous flashlight powders previously used, providing a brilliant 1/100 sec. flash without noise, smell or smoke, and allowing photographs to be taken in new locations such as trains, planes, and underwater.

Highest drinking fountain in the world will be located in the Empire State building, over 1,100 feet above 5th Ave; Frigidaire is supplying the 1,600 water coolers needed to slake the thirsts of the building's 22,000 permanent workers and 10,000 transients.

NY State Legislature authorizes $10M for unemployment relief, acting under emergency messages from Gov. Roosevelt.

At a time when US legislators are actively discussing ending capital punishment, figures from Austria may give them pause. Death penalty was abolished immediately after the war. Vienna police report 111 premeditated murders in 1929, 97 in 1928, and 65 in 1927; this compares with 21 in the entire territory of the current Austrian Republic in 1913.

Market commentary:

Market wrap: Leading stocks staged moderate recovery early, shrugging off bad breaks in isolated issues including General Asphalt and US Industrial Alcohol; advance progressed into early afternoon, with sharp gains in trading favorites including Auburn and Alaska Juneau Gold Mining. Rally then ground to a halt, and bears resumed aggressive attacks around 2 o'clock; US Steel and GE broke below Monday's close and reaction spread through the list, intensifying in final hour. Bond trading more active; US govts. steady; foreign irregular with Australian again higher; corp. irregular but mostly higher in both investment and speculative sections. Commodities steady; grains firm, with corn up substantially; cotton off slightly. Copper sold by at least one small producer at 9 3/4 cents; large producers are holding at 10 cents; buying quiet. Silver at 28 3/4 cents; brokers see favorable outlook.

Market observers continue pessimistic; advise staying on sidelines until market indicates reversal, reducing long positions on rallies.

Market students disturbed by pattern last week of higher volume during reactions; many believe volume indicates the market's line of least resistance. Bears predict the current downtrend could produce a "selling climax" with sharp breaks on heavy volume as in 1930; however, many observers believe this unlikely due to much lower margin positions this time around.

Morning buying attributed both to traders expecting a technical rally and to longer-term investors who missed the opportunity to accumulate before the recent rally. However, many brokers who recommended buying for a rally advised taking profits quickly; G.M.P. Murphy said recent reversal has been so pronounced that a considerable period of better support is needed before taking longer-term positions.

Market talk will now shift to first-quarter earnings, which are expected to be poor. Some observers are already studying second-quarter prospects; they admit the past months's conditions and immediate outlook don't indicate any substantial increase in earnings.

Observers are speculating Chrysler's first-quarter earnings may prove a good surprise.

Chesebrough and Horn & Hardard failed to respond to good earnings reports.

A Wall Street man left New York a week ago for a two-year trip around the world. Before leaving, he bought $250,000 worth of 24 different stocks; he told a friend that by the time he returns to New York he expects to have more than doubled his money.

Broad Street Gossip: When the decline will end is a subject of much guesswork. Bulls can point to a crowded short position, margin loans “down to bedrock,” and big banks reporting that banking liquidation was completed last year. Bears can cite expected poor earnings and lower dividends. In the end, “your guess may be just as accurate as any.” Experienced traders say public buying is the best kind, but heavy public buying doesn't always put a stock up; US steel has been declining since the third quarter of 1929 although shareholders increased from 110,166 to 149,122 in that period. Estimated April interest and dividend payments of over $1B make the recent market decline seem “made to order” for those who invest these payments in securities.

Editorial: The public perception that rails want to destroy other forms of transportation and maintain a monopoly is misguided; they simply want to be freed to use all forms of service on the same terms as other interests. The tradition that rails are a natural monopoly and must be repressively regulated is outdated; rules prohibiting rails from making use of waterways and other forms of transport have become absurd and are contributing to wasteful competition and duplication.

Utilities in the Insull system report better business and agricultural conditions in some sections; expect some improvement in Q1 earnings vs. Q4 of 1930.

H. Clarke, Fox Film pres., says film industry has ceased to be volatile; points out revenue in past 18 months has held up better than almost any other business.

Sir H. McGowan, Imperial Chemical chair., says recent months have indicated fall in commodity prices has slowed; uptrend may appear within short time.

Economic news and individual company reports:

Jury selection begins for Bank of US trial; first juror chosen is Arthur Swann of 40 W 67 St., dealer in rare books. Motion for postponement of trail due to illness of bank counsel Kresel denied. Receiver sues Nat'l Bank of Kentucky directors for over $14M, charging "improvident, wasteful and illegal acts of management."

Fed. Reserve “easy money policy ... has apparently been successful in stopping the process of bank credit contraction.” Total loans and investments at member banks expanded more than seasonally from $22.776B on Jan. 7 to $23.046B on Mar. 25. Expansion was in investments, which rose $833M, of which $668M was govt. securities; benefits of this to business “have been indirect, and in all probability the stimulation has not yet been thoroughly felt.” However, easy money hasn't been able to stop loan liquidation; “all other” (commercial) loans declined $290M, vs. a $477M decline in 1930 and average $84M increase in 1927-29.

Rail freight loadings for week ended Mar. 21 were 741,942, up 7,680 from prev. week, down 15.2% from 1930 week, and down 22.9% from 1929.

Feb. net operating income for all class 1 rails about $27.3M, 54% below Feb. 1930 and lowest since 1921; revenue $337M, down 21.2% and lowest since 1918.

Standard Oil of Calif. and the Texas Co. match oil purchasing price cuts just posted by Union Oil. Feb. domestic demand for gasoline 26.133M barrels vs. 26.461M in 1930; exports 3.6M vs. 4.9M. Oil industry appears before FTC to protest decision that 18 of 21 rules in the industry marketing code illegally restrained trade. Soviet oil production shows rapid growth; 1930 exports from Black Sea ports were 28.6M barrels vs. 25.3M in 1929 and 10.9M in 1926.

Bank statements for past week showed continued uptrend in non-govt. security holdings, up $29M in the week.

Call money rate rose 1/2% to close at 2%.

Financing was heavy in March, with new securities estimated at $675M-$700M, highest since last July and up sharply from $201.1M in Feb. While some new issues are being negotiated, the April total is expected to decline substantially.

NYSE stock trading in the first quarter was 172.3M shares vs. 227.6M in 1930 and 294.2M in 1929. March volume was 65.7M, lowest March since 1927.

US Steel dividend is now subject of bear rumors that started when NY Central cut its dividend, since both companies have the same banking sponsorship. However, Steel is in a much better position to maintain dividends due to strong balance sheet and good earnings in recent years.

British deficit for just-ended fiscal year now estimated at $125M, about half that predicted by Chancellor Snowden a few weeks ago. PM MacDonald says will submit next budget April 27; work on the budget, on which survival of Labor govt. may depend, has been slowed by illness of Snowden.

Small French shipment of gold took place to Germany, seen as “one of the most significant developments in some time in the foreign exchange market.”

Miami Mayor C. Reeder reports city operating expenses have been reduced from a peak of $6.749M in 1926 to $2.654M for year ending June 30.

$290M plan for unifying Chicago traction [mass transit] cos. declared operative.

Chevrolet production schedule increased to 85,088 units from previously planned 81,088, and vs. Mar. production of 75,266; sales gaining in many territories.

AT&T first-quarter earnings are running at greater rate than the overall 1930 result.

Pennsylvania RR 1930 net $5.28/share vs. $8.82. Phelps-Dodge (mining) 1930 net $0.18/share vs. $4.80.

Wm. Wrigley plans to use all money it receives for chewing gum in 12 Southern states to buy cotton at 12 cents/pound or less through newly formed Wrigley's Cotton Investment Fund. Plan anticipates buying about 100M pounds of cotton by Dec. 1.

Companies reporting decent earnings: Lefcourt Realty, Morris Motor (British car maker).


Bad Sister - Adapted from Booth Tarkington's novel "The Flirt." Pampered daughter of small-town family forges her father's name for the sake of a handsome swindler from the city, but repents later, returns, and marries least attractive of her former suitors; her plainer sister marries the man she would have had she not turned "bad." Story can hardly compete with tales of "gangsters and wealthy city-dwellers" more popular today, but well produced and will interest those who still prefer Tarkington's characters to those of Ernest Hemingway or Ben Hecht. Sidney Fox shows star potential in the lead role; in the supporting cast, Humphrey Bogart is excellent as the city swindler and Bette Davis is convincing as the plain sister.


Admiral conducting an examination for the Navy - Who, in your opinion, are the three greatest sailors in British history? Student - I'm sorry, sir, I didn't catch your name when I entered the room, but the other two are Nelson and Drake.

No comments:

Post a Comment