May 23, 2010

Saturday, May 23, 1931: Dow 139.49 -0.05 (0.0%)

Assorted historical stuff:

Pres. Hoover says will not call extra session of Congress in spite of many requests from organizations, religious and otherwise. "I know of nothing that would so disturb the healing processes now undoubtedly going on in the economic situation. We cannot legislate ourselves out of a world economic depression; we can and will work ourselves out." Believes a large majority of Congress agrees with this stand.

Grosvenor Jones of the Commerce Dept. reports US loaned $23B abroad in the period 1914-30, more than any other country; admits economic conditions here and abroad would be improved by renewal of lending, but points out in defense of US bankers that “many countries borrowed to the limit and some exceeded the limit” when times were more prosperous and foreign bonds could be easily sold in the US.

Steel Institute meeting features some differences of opinion. C. Schwab, Bethlehem chair., somewhat optimistic; feels production close to bottom; believes securities over-liquidated due to fear; sees preservation of wage scale as a primary obligation. J. Farrell, US Steel pres., disagrees wages are in fact stabilized, says industry living in “fool's paradise”; strongly attacks industry price cutting; if current situation continues most producers will fail to earn preferred dividends this year. Somewhat ominous closing statement: “unless we do a better job something is going to happen”.

W. Gifford, AT&T head, says opposed to price freeze to eliminate profits in wartime; prefers taxation as a means of doing so. Urges Congress to pass resolution specifying govt. policy of eliminating profits in any future wars.

Under-Treasury Sec. Mills says Treasury experts scientifically studying the US tax system in effort to formulate method of stabilizing govt. revenues; some taxes were set up during the war on an emergency basis, without full planning. Mentions particularly the capital gains tax, which tends to "swell abnormally" govt. revenue during periods of inflation and business expansion, while depressing it during periods of deflation and depression; however, elimination of capital gains tax would require revolutionary rewriting of income tax system.

German stocks have fallen back near the year's lows this week; negative factors include dissatisfaction with League of Nations council, bank crisis in Vienna, and disappointment over Oldenburg elections [a Nazi success]. Outlook for lower wages, higher taxes, and dividend cuts also discouraging.

Cuban revolt reportedly suppressed, but calm is uneasy; govt. warns of suspension of Constitutional guarantees on any new disorder; no fatalities reported.

Immigration into Argentina down 41% in first 4 months of year.

Private fortune of Spanish royal family estimated at only $8.5M by provisional Fin. Min. Prieto.

War Dept. is reportedly developing a revolutionary program contemplating abandonment of most fixed US coastal fortifications and development of defense system using railroads and highways for mobile armament.

Rolls-Royce developing and close to testing a new aircraft engine that uses crude oil as fuel.

The FDA has adapted a precision instrument to measure tenderness of various fruits and vegetables, replacing the molars of human experts in determining if a fruit is fit for canning. The "mechanical 'tooth'" tester consists of a flask, plunger and gauge. As mercury is poured into the flask its weight bears on the plunger, the gauge measures the weight necessary to puncture or crush the sample.
Prof. C. Marvin, US Weather Bureau chief, has invented the clinometer, a new device for measuring the flyer's “ceiling” (height of clouds). A searchlight is pointed vertically at the clouds; at a fixed distance from this light, often 1,000 ft., the user sights the clinometer on the white spot created by the light on the clouds. Angle of sight is measured using a pendant that hangs on a scale from the instrument; calculation of the ceiling is then a simple matter of right triangle geometry.

The Conowingo hydroelectric plant on the Susquehanna River contains a "butterfly wing" that controls 54,000 horses. The wing, named for its shape, is a 136 ton valve that withstands a water pressure of 3M pounds when closed, but allows water to strike a water wheel at 180 tons per second when opened, generating 54,000 horsepower. It took 3,000 men two years to complete the dam and plant which contains some of the largest water wheels ever made.

That old reliable publicity stunt of beauty insurance has caught on in Japan; Osaka dance hall girls are insuring their legs, and a movie actress recently got her picture in the papers by insuring her nose.

Bond Club of NY held its 11th annual outing featuring golf at the Sleepy Hollow Country Club, horseback riding, a diving exhibition, and whippet racing, followed by the usual jovial dinner. This year featured revival of the Bawl Street Journal lampooning the financial district "with charity for none and malice toward all."

Market commentary:

Market wrap: Stocks had somewhat encouraging session for the [remaining] bull forces. Major rails continued higher early following decision to ask ICC for rate increase. However, skeptical bears were inclined to challenge the rally, and found a basis in US Steel pres. Farrel's strong attack on price cutting; Steel was heavily sold, as were other individual shares including Anaconda, Allied Chemical, and Peoples Gas. The general list, however, displayed good resistance; volume dried up on recessions, and leading shares settled into a narrow range; closing tone was steady. Bonds showed distinct improvement; highest grade issues moved upward, while substantial rallies occurred in several lower grade and speculative departments that had been weak lately; rail issues generally strong on planned request for rate increase; S. American issues rallied on report Argentina would ship $2.633M in gold to the US for interest payments. Commodities mixed; grains closed steady to firm on late rally after corn hit new season lows early; cotton somewhat lower. Copper buying more active at 8 3/4 cents; larger producers at 9. Silver down 3/8 cent to 27 1/8.

Sentiment helped somewhat by better market action, but conservative observers still recommend sidelines until market shows ability to resist another bear test.

The market has again demonstrated that swings go to extremes. In 1929, stocks continued to move ahead after conservative observers became cautious due to speculative enthusiasm; recently, many stocks have been deflated in spite of fair earnings and uninterrupted dividends, "due solely to pressure by the bears" causing investors to liquidate out of fear. While quite a few professional bears and traders have covered shorts in the past few weeks, many bears are reportedly maintaining their positions almost as aggressively as when averages were 30 points higher. Some observers have been criticizing the banking element for a "lack of reassuring statements" to check "needless sacrifice of investment holdings" by frightened investors. However, when "frightened liquidation is in progress", statements from bankers wouldn't stop it, and they would then be in for much more criticism.

Even the most optimistic believe plans of Eastern rails to ask for rate increases will take at least a year to comply with all the necessary formalities. Immediate significance seen as “united front which it revealed in the present emergency,” a refreshing change from excessive rail competition of past few years.

Yet another anti-Farm Board editorial. Cotton, the greatest US cash crop, is now selling 25% below prewar level, while export markets are being lost. Proposed remedies: end Farm Board to restore competitive market; educate producers on efficient cultivation and fertilizer; work to increase trade and reduce tariff barriers.

Some investment interests contend “steps might be taken to improve the bond market” to prepare it for the huge Treasury refunding operation less than a month away. New bond offerings rose for the fourth straight week, to $88.0M vs. $60.0M last week and $174.7M a year ago. New municipal financing is expected to be heavy in the next few weeks as borrowers are eager to take advantage of the strong market.

Paris stocks down sharply on flood of bear rumors. Foreign currencies generally higher; sterling at new 1931 high. Spanish pesetas down on inflation fears as banknote circulation is to increase by 200M pesetas after already rising 555M to 4,950B in past year.

Sad letter from small investor: “Can't you do something to put a little bright news in your paper? Those bear raiders in Wall Street work on your poor reports. Kindly help a poor widow only to get her money back, as I am sick and in need of my money.”

Editorial: One of the readjustments needed for business revival is that retail prices fall to match the severe decline in wholesale commodity prices since 1929. It's therefore encouraging that the BLS reports city retail food prices fell 2% in the month to April 15 and 18% in the year to then. Other components of the cost of living are also falling, but further progress is needed. There's no wholly satisfactory measure of cost of living, but a good estimate is that it's declined 20% in the past 2 years, while commodity prices are down 24%. However, farm prices have fallen much more sharply, and commodities generally have been falling longer than retail, returning to prewar levels while retail prices remain 24% higher than in 1913. The price situation bears on wage cuts not because it justifies them but because it compels them. People whose buying power depends on price of wheat, copper, silver, etc. can't pay retail prices for cars, radios, etc.; therefore lower prices for those goods are inevitable.

Economic news and individual company reports:

In what was seen as a test case of bank officer culpability, US District Court Judge F. Wham cleared officials of the closed First National Bank of Eldorado, Ill. of criminal negligence, blaming the bank failure on the growing business depression. G. Richardson, pres. of McCartney Nat'l Bank of Green Bay, Mich., and E. Funk, cashier of Saucon Valley Trust of Hellerton, Penn., commit suicide.

Recent banking reports show that in spite of Fed. Reserve's drastic lowering of rates for very liquid short-term loans, total Fed. Reserve credit outstanding has actually declined in the past 2 weeks. Many economists question whether short-term rates “are a factor at all at times when caution is the byword of both banks and business men” and believe the Fed. can only stimulate business by increasing credit outstanding. Demand deposits at NY banks only showed $11M drop in spite of rate cut to 1/2% by NY Clearing House. Drop of $40M in brokers' loans to new low record of $1.631M was lower than expected; a larger drop was predicted due to heavy recent liquidation.

News of Eastern rail's decision Thursday to ask ICC for widespread rate increase was "received with much interest at the offices of the commission"; ICC said to be sympathetic, but the rate increase "will face an uphill fight" with state commissions strongly opposed; rails seen needing to present united and definite proposal.

Article claiming large steel makers may be “raiding” the scrap markets by deliberately selling to lower prices in the open market so that they can buy directly from scrap producers at lower cost.

Internal revenue collections for 10 months ended April were $2.006M, down $360.3M from 1930.

Plenary session of the international wheat conference postponed until today after serious difficulties arise over proposed plan of committee to regulate exports. Sen. Caraway (D, Ark.) says restriction of US exports or acreage at the wheat conference would starve "farmers off the farm and into the cities." 16 European countries join the Agricultural Mortgage Credit Co., a League of Nations project to help farming conditions in Europe.

One of the first measures of the reorganized Creditanstalt is expected to be closing of the Kruppworks.

Turkish budget for fiscal year starting June 1 set at $102M, down $17.8M from prev. year.

Spanish Republican govt. rescinds oil monopoly granted to monarchist govt. of Romania and transfers it to Russia, claiming cost savings.

Grain men led by J. Barnes, US Chamber of Commerce chair., met earlier in the week with the Farm Board to "obtain definite information" on the Board's plans for dealing with its huge wheat holdings; Board was not forthcoming on grounds they didn't want to tie their hands; "it was said that there is still time enough for a serious crop shortage to develop somewhere." Farm Board announces organization of Nat'l Fruit & Vegetable Exchange, the eighth national commodity sales agency set up through the Board. Southwestern wheat farmers showing no enthusiasm for movements to withhold new crop wheat from markets; expected Kansas crop of about 175M bushels, based on current prices, promises to bring about $61M to farmers vs. $95M in 1930 and $138M in 1929.

Montgomery Ward mid-summer catalog featured average price reduction of about 15% from 1931 spring-summer catalog, with many prices below those in 1911; D. Webb, general merchandise manager, said "The power of cash has increased tremendously during the last few months. Manufacturers have been badly in need of money - ready to make almost any sacrifice to get cash. They were eager to sell us - even at prices which totally disregarded manufacturing costs." Sears-Roebuck sales showed a sharp increase in the four weeks ended May 21, to only 0.9% below the 1930 period.

Lucky Strike cigarettes continue strong sales; April sales rose about 500M from 1930; this contrasted with drop of 65M in total Apr. cigarette production.

Company reports since Apr. 1: 163 companies reported higher earnings vs. 1930 and 620 lower; 514 dividends unchanged, 10 increased, 119 cut.

Companies reporting decent earnings: Canadian Hydro-Electric Ltd., Selby Shoe.

Film:

Le Million - a Rene Clair production, at the Little Carnegie Playhouse. Delightful slapstick of the Chaplin genre, sparing on dialogue and heavy on pantomime; story of a lost lottery ticket and frantic efforts to recover it. The protagonist, a young artist, discovers his good fortune just as he is on the verge of being arrested by creditors. The ticket is in a coat pocket at home that unfortunately has been given away by his girlfriend, and, after a stop in a pawn shop, has wound up in possession of an opera singer. On to the comic climax involving the artist and a friend attempting to steal the coat off the back of the tenor during a performance. Rather than reshooting, the director uses an ingenious technique to make the story comprehensible to an English audience, involving a sort of Greek chorus of two Englishmen who blunder upon a celebration in the neighborhood and are then intercut with the film, commenting on the plot developments.

Theatre:

A Modern Virgin - by Elmer Harris with Margaret Sullivan and Roger Pryor, at the Booth Theatre. More successful attempt at the theme of flaming youth previously visited by Harris in Young Sinners. Story concerns Teddy Simpson, a "conventionally naughty" 17 year-old young woman, who sleeps without pajamas, reads suppressed books and generally drives her guardian aunt to distraction. Engaged against her will to Bob Winslow, she rebels through secret telephone flirtations with other men, two of whom happen to be Winslow's friends. These two plan to teach Teddy a lesson and win her over to Winslow, but the plan falls through due to Teddy's ability with a conveniently placed sabre. Eventually Winslow is convinced to give Teddy more freedom, finally winning her. Play "not as unhealthy as the title might suggest, nor as sophisticated as one might wish" but runs smoothly; dialogue uneven but often witty; cast has contagious enthusiasm.

Jokes:

Ad in the Central China Post: “The news of English we tell the latest. Writ in perfectly style and most earliest. Do a murder commit, we hear of it and tell it. Do a mighty chief die, we publish it and in border somber. Staff has each been colleged and writ like the Kipling and the Dickens. We circle every town and extortionate not for advertisements.”

A man who gave his name as Ed Sweet, applied to Warden Swope of the state prison in Santa Fe, New Mexico, for permission to see the institution. A guide was called, who showed Sweet around. Returning to the office. Sweet told the warden he was keeping the prison in very good condition, and that he believed he would stay. "What do you mean, stay?" asked the warden in surprise. Then Sweet drew some commitment papers from his pocket, showing he had been sentenced for one year for theft. He had come to prison voluntarily, without a guard. - Capper's Weekly.

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