April 8, 2010

Wednesday, April 8, 1931: Dow 167.03 -2.69 (1.6%)

Assorted historical stuff:

Supreme Court Justice Oliver Wendell Holmes Jr., who recently turned 90, continues to sprinkle literary gems into his opinions. In a recent case he wrote that corporations must abide by the laws that created them and not claim all the privileges of a private citizen; "We have to consider not a geometric equation between a corporation and a man but whether the difference does injustice to the class generally." In another, he observed "The interpretation of Constitutional principles must not be too literal. We must remember that the machinery of government would not work if it were not allowed a little play in its joints."

NY State Democratic efforts to pass banking regulation to protect depositors by requiring segregation of savings accounts at commercial banks blocked in State Senate; Gov. Roosevelt had asked for the measure after the Bank of US failure.

Gov. Roosevelt signed bill providing additional $10M to carry on work of NY City's privately started emergency employment committee.

Editorial against attempt of Mahoning Valley steel mills to suppress weekly production reports on grounds the recent poor figures are encouraging buyers to hold off for concessions. This "new policy of mystification ... has not even the narrowest practicality to recommend it" since buyers have other ways of testing the market. Deceptive optimism of early 1930 had poor consequences; "today ... businessmen are convinced that fearless recognition of facts, no matter how disagreeable ... is the only really helpful course."

Editorial: Agriculture Dept. report of Feb. farm exports makes grim reading; index of exports was 71 vs. 85 in Jan., 79 in 1930, and 107 in 1929. Business conditions caused part of this decline, and on that score recent developments are more cheerful. However, the report's details suggest political factors as well. For example, wheat and flour exports are at 43 vs. 65 in Jan. and 78 in Dec.; political actions in this country have met with retaliation in form of tariffs and quotas on those products. "Can it be that our policies in respect to reparations, war debts and tariffs have anything to do with strangled markets for farm products?"

Editorial by T. Woodlock: For first time in its history, rail industry is faced with a fight for its life; trends of recent decade make clear the threat from other forms of transportation. Rails must put aside “tradition of individualism” and embrace “foresighted statesmanship” and “united action,” recognizing that “common interests ... are more important ... than are their individual differences.” One interesting idea is the “railroad umpire” proposed by F. Lisman in “Railway Age.”

Washington report: Supreme Court to decide important cases including suit against Indiana tax directed against chain stores, and State of Arizona suit to block construction of Hoover Dam. M. Norman, Bank of England Gov., gave some statistics on British unemployment insurance, "probably not unmindful of the fact that a Senate survey of the subject is underway." British unemployment fund now owes $340M to the Treasury, and this is increasing about $5M/week; large increase in unemployment has upset initial calculation that the system would pay for itself through required contributions. Talk is being heard of possible wage agitation as it appears some industries may need to break ranks and start cutting wage rates due to drastic declines in profitability. This may interfere with "one of the encouraging aspects of the past few months ... the scarcity of labor disputes."

Scheduled airlines carried 417,505 people in 1930, more than double the 1929 total.

Leather belts joining engines and generators in San Francisco's Mills building have been in constant use since 1891, surviving the 1906 earthquake and fire and travelling a total of over 5M miles around the flywheels in that time; "there is not a sign of wear on them."

Anita Colombo was recently named director of the famous La Scala opera house in Milan, becoming the first woman director of an opera company and the subject of bitter protests; although "enraged men were able to salve their pride" by pointing out Colombo's "firmness, masculine energy and businesslike habits" were due to her "Teutonic origin," and therefore not likely to be imitated by Italian women.

Western Show Co. sues Ringling Brothers for $1.040M, charging conspiracy to create monopoly in circus business.

Market commentary:

Market wrap: Stocks opened weakly on accumulation of sell orders; pressure again converged on US Steel, which worked slowly lower; Bethlehem also sold off; selling broadened and decline spread through the list; major industrials including Westinghouse, GE, and American Can sank with some nearing their bear market lows; trading favorites suffered sharp declines; market closed with weak tone. Bond trading picked up a bit but was still quiet; US govts. firm after successful NY State bond sale; foreign govts. again unsettled on acute Brazilian weakness; corp. irregular, mostly lower; NY City traction bonds strong after adoption of unification bill. Commodities weak; grains declined; cotton down sharply. Copper buying quiet; one small producer sold at 9 1/2 cents but others are out of the market.

Conservative observers continue cautious, believe bears have upper hand; while some say a technical rally is overdue, most advise reducing holdings on any rallies that develop this week.

Selloff in steel shares intensified in afternoon after announcement of steel production decline; US Steel came within a point of its bear market low reached last Dec., while Bethlehem was pressured by reports questioning safety of dividend. Rails received some support after Atchison declared regular dividend. Oil shares recovered early following report of production decline last week.

Recent market action has been puzzling traders due to largely professional character, "with price movements dependent almost entirely upon the trading activities of various big operators." Responsible observers of cigarette industry discount rumors of rise in wholesale prices in near future, believe this won't happen until July at the earliest. Cement interests acknowledge downtrend in demand and prices over past few months. Some observers believe Chrysler will be able to make a relatively good showing even at lower sales volume due to firm control over expenses.

Broad Street Gossip: Some attribute the market decline to lack of public buying, but many big corporations showed large increases in shareholders in Q1; "evidently, the investment public was in the market in the first quarter, but not the speculative public." It's been a very dull market, but professional bears haven't been afraid to target it in spite of the tradition against selling a dull market. One broker observes there's little buying power under the major stocks; a stock that can be run up 5 points by buying 25,000 shares can be put back down on 10,000 or less. Brokers in the stock lending market report short interest is still large, with bears reluctant to cover as long as market "lacks signs of rallying power." A good 1931 appears likely for steel rail production, since production in 1931 was only 1.835M tons, down 828,000 from 1929 and 685,000 below the 1920-29 average.

Committee for Petroleum Economics forecasts world gasoline demand Apr. 1 - Sept. 30 at 252M barrels, down 0.8% from 1930; US demand 222.8M, up 1.5%.

Increasing confidence seen in Germany's future, “in direct contrast to the feeling of alarm” last fall. At that time, mere hint of revision in reparations greatly disturbed markets; now, report that Britain has invited Chancellor Breuning to London, apparently to discuss reparations, has had no effect.

J. Monnet, Transamerica vice chair., sees several hopeful European developments in recent months that haven't been fully appreciated in US, including apparent French-Italian rapprochement, possible increase in French lending, economic strides in Germany, and contribution to stability by Bank for International Settlements. Sees clear signs of returning confidence in Europe; speed of recovery will depend on resumption of foreign lending in US and French money markets.

Dr. S. Miller, Nat'l Assoc. of Credit Men manager, says US as creditor nation is morally and economically bound to lend to other countries to stabilize business.

K. Collins, R.H. Macy VP, says over half of $6B installment debt incurred prior to start of depression in 1929 has been liquidated, and an increasing number of families is again in position to buy freely.

T. Watson, IBM pres., says company is hiring more employees in 1931; earnings, which set record in 1930, continuing to increase this year.

Economic news and individual company reports:

Bank of US trial opened with lengthy argument by defense counsel asking for dismissal, leading to several clashes between opposing counsel. Judge ordered defense to produce memorandum by Friday; in the meantime, trial will be resumed this morning.

A.& P., "world's greatest chain store system, paid its respects to the business depression" by reporting record-breaking 1930 in almost every way; earnings were $13.86/share vs. $11.77 in 1929 and $5.49 in 1925; sales were a record $1.066B, $12.1M over 1929; cash rose to $73.4M, double all current liabilities; profit margin was 2.88% vs. 2.40%, highest since 1924.

Steel production downtrend continued; week ended Monday was 52% vs. 55% prev. week, 57% two weeks ago, 74% in 1930, and 95.5% in 1929.

Refineries ran at 62.5% in week ended Apr. 4; stocks of gasoline decreased 1.368M barrels to 46.076M. Crude oil production in week was 2.252M barrels/day, down 23,250 from prev. week and down 278,350 from a year ago. Declines in Okla. and Calif. production offset increase in East Texas. Capacity for oil delivery from East Texas fields will soon double from current 125,000-150,000 barrels/day, as six major companies are building or planning pipelines. Area now has 130 producing wells and 400 drilling tests and wells in progress; daily production averages 145,000 barrels.

Call money eased back to 1 1/2%, confirming view that flurry to 2 1/2% on Monday was temporary.

NY State $35.0M issue of bonds due 1932-1981 sold at interest cost of 3.46%, about the lowest on record; cost for previous issue last April was 3.78%.

Treasury announces $275M offering of 8 month certificates Apr. 15, of which $200M will be used to pay veterans' bonus.

Monthly bank statements reveal flow of veterans' bonus loan payments; as yet only about $25M of $175M paid out has found its way into bank deposits. Recent trend of banks selling govt. securities while buying non-govts. continued, seeming to confirm greater confidence in business conditions.

NY City transit unification bill was passed in Albany late Monday night after emergency message from Gov. Roosevelt; State Sen. Knight dropped his proposed amendment, leaving Board of Transit Control nominations entirely in hands of mayor and traction cos. It's likely the merger will take place this year. Traction [mass transit] stocks rose after the vote, but are still well below prices indicated in the unification plan as it must pass through a gauntlet of required approvals and possible modifications by the Transit Commission, the companies involved, the Board of Transportation, and the Board of Estimate.

Rail freight loadings for week ended Mar. 28 were 740,079, down 1,863 from prev. week, down 16.4% from 1930 week, and down 23.6% from 1929.

Amer. Iron and Steel Inst. figures on March steel production show less than seasonal gain; figure was 16.17% higher than the Dec. low, while a year ago March recorded a 23.39% gain from the low; the year-ago gain also came off a much larger starting point.

NYSE bond trading in March was $247.0M vs. $194.4M in Feb. and $351.2M in 1930.

Canadian representatives of mortgage cos. and financial interests urge govt. to abandon plan for debt adjustment board.

Argentine business failures in March were 43.6M pesos ($15.2M), highest for the month in 30 years and up sharply from 18.2M pesos in 1930.

Texas Corp. says it considers new Colombian oil law so drastic it won't undertake development on its 800,000 acres of properties.

So. Cal. Edison reports Q1 revenues will probably be higher than in 1930; forecasts rise in connected load of 14% during 1931.

Representatives of 20,000 coal miners vote to continue strike against Glen Alden Coal Co. in Wyoming Valley.

Anaconda Copper is earning slightly more than the $1.50 annual dividend rate in spite of low copper price and production rate, an indication of its efficiency and low cost of production.

S.H. Kress Mar. sales were $5.259M, up 0.7% from 1930; J.C. Penney $12.443M, down 12.4%; Walgreen $4.499M, up 2.2%.

Companies reporting decent earnings: A. & P., Eastman Kodak, Pennsylvania Gas & Elec.


Skippy - Paramount film based on Percy Crosby's cartoon. Starring Jackie Cooper of Our Gang comedies fame as Skippy and Bobby Coogan [younger brother of Jackie Coogan] as Sooky Wayne, the boy from Shantytown befriended by Skippy. The boys have 3 days to come up with the money for a license for Sooky's dog to save him from the pound; Skippy must also convince his father, the local health supervisor, not to tear down Shantytown. They fail to save the dog but in the end the father is "reformed in a flash" and the three walk arm in arm down the street. Film is dull, lacking “freshness and sparkle” of the cartoon; acting generally poor although Jackie Cooper gives excellent performance.

At the galleries:

John Levy Galleries are showing Mexican modernist Jean Charlot's "ultra-racial and boldly carved-out forms ... use of ancient symbols in his work has led him to evolve strange anatomical variations on the human form." In event of "exceptional importance," American-Anderson Galleries will auction off woodwork of a complete room by Samuel McIntire, famous architect and cabinetmaker of Salem, Mass. [1757-1811, one of earliest US architects, Federal style].


"Who can dispute New York's leadership in the art of finance when even a policeman of that city was able to save $1,500 a month out of a $3,000 a year salary?"

A kind old lady in a small village arranged for lessons to help one of the villagers who couldn't read. Some time later she ran into him and said: 'Well, George, I suppose you are able to read the Bible now?' 'Lord bless you, mum,' George replied, 'I graduated from the Bible to the football news over a week ago.'

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