May 12, 2010

Tuesday, May 12, 1931: Dow 151.56 +0.25 (0.2%)

Assorted historical stuff:

Sec. of State Stinson says committed to having marines leave Nicaragua by fall 1932; by that time, instruction of Nicaraguan National Guard should be completed. Says US citizens and investments abroad will be given all help to which they’re “entitled under the law of nations” but cites principle of Elihu Root not to use US military “for the collection of debts.” Contends that “unjustified accusations” regarding presence of US forces in Haiti, and now in Nicaragua, “have damaged our good name our credit, and our trade far beyong the apprehension of our own people.”

Washington report: Foreign bankers in town for the Int'l Chamber of Commerce meeting expressed some surprise at pessimism of their US counterparts; “general feeling was that the American bankers was somewhat emotional and too unused to difficult situations to meet them with as much stability as the more experienced European bankers bring to bear in ... adverse situations.” [Note: news of Kreditanstalt failure coming up very shortly.] The Chamber meeting seemed to have changed few opinions on the sore subjects of tariffs and debt policies; even those Americans who favor tariff revision envision far less sweeping changes.

Editorial: The relatively cheerful Fed. Reserve report on April retail sales [see yesterday - down only 2% vs. 1930 when all seasonal factors adjusted for] makes an interesting contrast with a production decline of about 20% for the first 4 months. This retail report is only is a part of the picture, but indicates retail consumption remains relatively satisfactory. Production curtailment has now lasted over 19 months, longer than in any major business reaction of the past 50 years; in fact, it’s not much over the average of about 2 years to return to normal production in past depressions. “It would be idle to assume that economic history ever repeats its previous patterns with any specific degree of fidelity.” Nevertheless, it's useful to observe how long it’s “previously taken the needs of a growing population to overrun restricted production and to note that, on the surface indications at least, we must now be closely approaching a state of under-production.” Declining exports man need to be accounted for, but are relatively minor compared with the demands of a domestic market of 120M.

A delegation of 22 mothers and children of unemployed men visited the White House seeking an audience with Pres. Hoover to ask for an immediate special session of Congress to relieve unemployment. Delegation didn’t see Hoover, but was referred to his secretary, W. Newton. Pres. Hoover’s emergency employment committee announces contracts awarded for public and semi-public construction since last Dec. 1 have reached $1.404B.

German Chancellor Breuning answers opposition criticism that the govt. should demand revision of reparations payments, says recognizes in principle the necessity of lowering reparations burden, but must first create “a basis whereupon it can carry out successfully those difficult negotiations.”

Hard-hitting expose by T. Woodlock charging Inland Waterways Corp. with giving secret discounts to shippers to take business from railways. [Extremely accurate excerpt: “The rate situation is somewhat complex, from the layman's point of view.”]

Cable reports from Argentina say situation is quiet.

Martial law reportedly proclaimed in Madrid; Spanish pesetas down sharply.

Nine officials of the Soviet Nijni-Novgorod Automobile plant go on trial in the Moscow People's Court for suppressing recommendations of American specialists.

Traveler’s Insurance reports US auto accidents killed 6,500 in the first quarter, up 9% over last year.

French national tourist office reports spending by tourists in 1930 was about 30% below peak year of 1928; the office is seeking govt. aid “for establishments which cater particularly to the high-class trade.” The number of visitors has continued upward, but spending is down due to the depression. Of 313,000 US citizens who crossed the Atlantic in 1930, about 200,000 visited France, supplying 10% of their tourists.

[Note: Sheer Genius Dept.] Franz Krueckenberg again demonstrates his “Zeppelin on wheels” concept in Hanover Germany; craft attains speed of 150 mph over 20 mile railway track; makers claim normal speed of 110 mph, 4 miles per gallon of gasoline.

Dr. H. Stetson, director of the Perkins Observatory of Ohio, reports results of thousands of tests prove radio reception is significantly poorer on moonlit nights; attributed to “apparent depression in the Kenelly-Heaviside layer of electrons in the upper atmosphere when the moon is overhead, suggesting the moon is an electrostatically charged body.”

Kunsky-Traendle Broadcasting Co. seeks Federal Radio Commission okay to erect television transmitter in Detroit; if approved, will start work immediately.

75 women bank executives will attend the spring conference of the Mid-Atlantic Division of the Assoc. of Bank Women, to be held in the auditorium of the NY Federal Reserve Bank on May 15.

Nassau - Broad Street subway link to begin operations May 30.

Market commentary:

Market wrap: Stocks started the week with a contest of professionals. One of the largest bear operators was back on the Street, although he had “returned from the bear outing at Hot Springs without ... one of his ablest cohorts.” Early dealings saw renewed pressure on major industrials including US Steel and American Can; other weak spots included Northern Pacific and J.I. Case. However, selling slackened as the first hour progressed and the market tone improved in late morning. Around noon, bears switched to a determined assault on Union Carbide, but rallying tendencies persisted, particularly in stocks of businesses doing relatively well, including GM, Auburn, Woolworth, Kroger, Gillette, and Wrigley. GE suffered a late break, but the general list was not too disturbed. Highest-grade bonds made continued progress; US govts. and major public utility issues strong, with many new highs; rail issues steady to firm; European steady to firm but S. American unsettled by rumors Argentine govt. might be overthrown. Commodities soft; grains narrowly mixed; cotton down substantially. Copper buying remains small as April statistics are awaited; buyers unwilling to go over 9 cents while major producers hold at 9 1/2. New lows hit in cocoa, silk, and lead. Rubber up sharply.

Conservative observers remain puzzled, keeping clients on sidelines; some interests now favor going long in stocks that have been doing well.

Brokers report customers have not been entering the market on rallies. This is a natural result of the public's experience earlier in the year; public buyers were attracted into the market several times in the hope of a good upswing, but then forced to sell out at a loss.

An “exceptionally quiet” summer is expected for business, giving little hope of economic news to stimulate the stock market. However, optimists point out that with universally recognized poor prospects, any upcoming bad news is likely to be received more placidly, as “the speculative community ... is becoming inured to shocks.” This may provide a good background for long-pull accumulation of high-grade stocks. The list of stocks “loaning flat” has been growing due to heavy demand from short-sellers; one wit observed that with call money down to 1%, we’re not too far from call money loaning flat. The Street is again hearing rumors of a wholesale price hike in cigarettes; this report has been revived on several occasions this year.

GE has been better supported lately; earnings may prove better than expected as steadily growing refrigerator sales and some gains in other products may make up for declines in other lines. McKeesport Tin Plate has sold off after a bull pool that rushed it up to 103 earlier in the year disbanded; earnings prospects are now believed lower due to smaller can consumption. Western Auto Supply is selling at about 20 in spite of maintaining its dividend at a $3 annual rate; co. earned $3.81/share in 1930 and $2.72 in 1929; sales in the first 4 months were off 11.2% from 1930, though April was ahead of 1930.

Fixed investment trusts [similar to ETFs] are continually offering new versions with assorted modifications to “satisfy the most recent whims of investors.”

F. Lisman warns rails may be underestimating gravity of the current depression, holding on to belief that earnings will recover and “Wall Street and the public are suffering from temporary hysteria. ... They do not seem to visualize now, any more than they did a year ago, that the present business depression may last for some years; that it may be a major depression similar to” those in 1875-79 and 1893-98, and if so that they may face difficulties in paying interest and refinancing.

Royal Bank of Canada monthly letter: Sees news from many parts of the world indicating “the forces which tend to correct depression are beginning to have an effect.” B.I.S. starting to help world trade; also positive are discussions on trade agreements and “carefully thought-out plans for reestablishing confidence.” Canadian govt. measures have eased depression compared to other countries by directly aiding Western farmers, increasing public works, and taking measures such as protective tariffs to increase industrial production; protective measures have led to increased interest in establishing manufacturing plants in Canada.

Economic news and individual company reports:

Int’l Chamber of Commerce meeting adopts resolutions favoring disarmament and removal of all possible obstacles to international trade. Says observance of international obligations (debts) is fundamental, though they may be reexamined under some conditions. Opposes customs unions such as proposed Austro-German one unless other countries consent. Condemns govt. interference in futures markets. Calls for conferences on agriculture and silver.

GM sales by US dealers in April were 135,663 cars vs. 142,004 in Apr. 1930; however, 34% gain from Mar. was much higher than the 15% gain in 1930.

Assoc. of Cotton Textile Merchants report on April sales showed a sharp and worse than expected setback, and dashed hopes of a month or two ago that the cotton textile industry was leading the way out of depression as it had in the past. April production was 226M yards vs. 272M in March, but sales total was only 138M, or 61% of production, vs. 295M, or 109% in March.

Weekly bank statements showed declines in all categories of loans and security holdings, and in demand and govt. deposits; time deposits were up slightly. Call money renewed at 1% for first time since 1908. Bond market keenly watching NY City $52M four-year bond sale at noon; strong demand expected.

Fall River, Mass. situation said improved 2 1/2 months after being put under control of state financing board following default [see Mar. 7].

C. Donnelly, Northern Pacific Rwy. pres., says rails in his area (Northwest) believe a freight rate increase undesirable at this time; calls for separate rate investigations in different sections of the country.

Tide Water Oil cuts purchasing price for Texas oil.

Bonbright & Co. report capital invested in US public utilities during 1930 was $1.275B, bringing total capital investment to almost $28B.

Foreign currency markets featured reversal in sterling-franc trend as sterling weakened while francs rose; this effectively blocks any immediate possibility of the long-awaited gold movement from France to England; Bank of France denied selling sterling and attributed franc strength to lower money rates in NY and London.

German financial circles anxious over proposed 250M mark treasury note issue to cover deficit due to unsatisfactory tax returns; it’s questioned whether banks can float the issue successfully.

French deficits topping 1.5B francs aren’t causing immediate alarm due to large Treasury reserves. Tax increases are believed unlikely. The govt. may be able to save large sums since some loans made during the war and postwar period on which it’s paying 5%-6% are now subject to conversion, and the govt. might pay 4%-4 1/2% on new issues. However, conversion may be tricky; amounts are large (over 100B francs in 1931-34), and Treasury would have to use cash reserves for bondholders unwilling to convert. Bondholders who bought in the war period have already suffered through a drastic devaluation; someone who bought a 5% bond in 1915 is now receiving 1 gold franc in interest instead of 5.

Australian deficit in first 10 months $96M; imports in past nine months fell $275M while exports fell $30M.

Western Canada has had beneficial local rains in many districts but is still in need of a “good soaking ... land was so abnormally dry that moisture penetrated the surface only an inch or two.” Some reports of soil drifting, but little seeding damage. Some reduction in acreage reported due to farmers’ financial difficulties.

British govt.-appointed Weir Committee strongly recommends electrification of British railroads; project estimated to take 15-20 years at cost of 386M pounds, but provide a return on investment of 7%-13% depending on location.

Belgian coal mines threaten to shut down unless govt. requires domestic consumption by certain industries.

Soft (bituminous) coal inventories on Apr. 1 were 29.5M tons, down 7.7M from end of Dec. and lowest since 1922.

R. Whitney reelected to second term as head of NYSE.

Companies reporting decent earnings: California Oregon Power, Hammond Clock.


Pulitzer Prize award to Susan Glaspell’s Alison’s House seen as “less for perfect achievement than for good intentions.” In making the award to a play from Fourteenth Street, the committee calls attention to the “pointedly bad” intentions of much of the commercial Broadway theatre this season. “The standard producers have not allowed themselves to be affected ... But conditions have seemed to allow unusual opportunity to the public purveyors of cheap smut ... lacking even a saucy smirk.” It might be expected that a general shortage of money would lead to more stringent quality requirements, but the opposite has been true; “many plays have been unaccountably inept ... probably unmatched for their peculiar union of senility of wit with lechery not otherwise disguised”; the musical comedy and revue stage has likewise resorted to “a literally infantile level of crudity” with the excuse that this is what the public wants.

The Band Wagon opens in Philadelphia tonight, a new revue by George S. Kaufman and Howard Dietz, starring Fred and Adele Astaire, Frank Morgan, Helen Broderick and Tilly Losch.

Brain teaser:

Read the following sentence: Federal fuses are the result of years of scientific study, combined with the experience of years. Now, count the f’s in that sentence - only once, no going back and recounting. An average intelligence will count 3 f’s; 4 is above average, 5 highly intelligent, and if you spotted all 6 you’re a genius and shouldn’t be wasting your time on this foolishness.


New Salesman, swinging jauntily into the office - Well, I got two orders today. Sales Manager - Fine, fine! New Salesman - Yep. One order to get out, and the other to stay out.

Wife - How could you think of bringing that Mr. Biggins home to dinner when you know I’m spring cleaning? Husband - He's the only man I know who can help move the sideboard.

So Joe was the life of the party?” “Yeah. He was the only one who could talk louder than the radio.”

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