May 20, 2010

Wednesday, May 20, 1931: Dow 138.86 -0.66 (0.5%)

Assorted historical stuff:

AFL pres. Green continues aggressive campaign against wage cuts, cites cases of bankers refusing to extend credit to manufacturers unless they cut wages as “coercion of a most reprehensible character”; calls on workers to “resist with all the power they possess the attempt of these banking interests.” Says high wages have always been coincident with prosperity; wage cuts have already had severe economic effect, but “it will be infinitely worse if the nation is forced to pass through another winter of unemployment.” Worker productivity increased 49% in 1920-29, while buying power only increased 24%; cost of living is only down 6% since 1929. Labor Sec. Doak says sees no indication of general wage cuts; Administration resisting cuts everywhere it can and hopeful standard can be maintained.

Cook County deputy controller tells bankers conferring on "Chicago tax predicament" that govt. is on the verge of bankruptcy; funds will be exhausted in a month. US Att'y. G. Johnson of Chicago estimates income of Al Capone gang in 1925-28 was $6.077M; indicates that income tax net is closing on the gang.

Editorial: Rail situation critical. Operating expenses, workforce, and maintenance already cut to the bone. Rail income must be raised; it's declined to the point where it's not a question of dividends or “satisfactory return” but of maintaining the credit of many rails. Barring cuts in wages or further layoffs, only alternative is a general rate increase; this will draw criticism that a depression is no time to raise rates, but “this is no 'normal' depression but a very exceptional one, and ordinary rules do not apply.” Rail plan to ask ICC for general rate increase reportedly has progressed much further than generally thought; rail representatives are to meet shortly in various sections, and a formal request will most likely be drawn up; it's thought the ICC “might look favorably upon such an application.”

Delegates at int'l wheat conference "expressed unanimous readiness to undertake concerted action to solve the wheat surplus crisis."

European union commission adopted resolution by British Foreign Sec. Henderson proposing appointment of subcommittee to recommend practical proposals on 13 plans offered to the commission to combat the world economic crisis.

Over 20,000 Polish miners go on strike over proposed 10% wage cut.

Editorial against Supreme Court decision allowing Indiana anti-chain store tax. "One man may be in a market covering a city square [block] ... and he will pay a tax of $3 and another one owns 25 little stands each under a separate roof, and on those he must pay a tax of $25 each. To the non-legal mind this classification looks like a distinction without a difference." This decision gives states the power to "shear the chain store sheep close to the point of skinning them ... if they are wise they will not abuse that power." Counsel for Nat'l Chain Store Assoc. say regardless of constitutionality of anti-chain laws, public has now turned definitely against them; they and their representatives “have come to realize during this depression that the chain stores are providing ... the necessities of life at the lowest possible prices”; high tax on chain stores is indirect tax on people who can least afford it; only 6 of 48 states have enacted anti-chain laws. H. Parson, Woolworth pres., takes more optimistic view on the tax, saying decision establishes it must be reasonable, and that companies paying it will be operating under a license “and therefore entitled to protection against agitation such as has taken place in the past” against chain stores.

Wool Institute urges all weaving and spinning mills under their auspices in woolen and worsted industry to end night work for women and children by July 31.

RCA work on television has progressed to the point where engineers at their N.B.C. and RCA Victor subsidiaries are testing the effects of steel buildings in NY City on wavelengths suitable for television broadcasting. [Note: they never did get that figured out.] Television broadcasting on a commercial basis is now expected by the end of 1932 in NY City and "a few other important centers."

[Note: Sheer Genius Dept.] Prof. K. Weisinger of Zurich Polytechnicum, after 30 years of experiment, has proposed propeller driven train with light aluminum coaches, speed of 223 mph.

Claude Neon Lights receives contract to provide neon lighting for NY City's airport, Floyd Bennett Field on Barren Island [now part of Brooklyn].

NY City Transit Commission plans to submit unification plan within a week without substantial change from Untermeyer proposal; hearings on the plan to begin in June; some investors accumulating NY City traction [mass transit] stocks.

One of the curiosities in the National Museum is the "Flying Dutchman," a (literally) one-horsepower railroad engine powered by a horse walking an treadmill in the center of the car. This contraption won a design competition sponsored by the S. Carolina RR a century ago; it hauled 12 passengers at a speed of 12 mph.

The oldest investment in the world is the real estate mortgage. In ancient Babylon, 2100 BC, during the reign of King Khamuragas, money was loaned on mortgage, while the great banking houses of the Egibi family, founded about 600 BC, invested large sums in mortgages on both farm and city property.

Market commentary:

Market wrap: Stocks opened under heavy selling due to liquidation of impaired margin accounts and bear pressure; weak spots included chain store stocks, US Steel, AT&T, and Atchison. Selling slackened after the early flood, but intensified again in early afternoon; Steel worked lower on cut in output, followed by other leading industrials, while sharp breaks took place in individual issues including J.I. Case and Warner Bros. Support finally appeared in late dealings, and general recovery from the day's lows took place in major industrials. Highest-grade bonds were again firm, with US govts. reaching record highs and prime corp. issues generally firm with some new highs. Lower-grade and speculative bonds weakened again, and convertibles followed the stock market lower. NY City traction issues rallied on unification prospects. Foreign issues were mixed, with considerable liquidation in S. American issues; Brazilian govts. reached record lows. Commodities mixed; grains up substantially on “oversold” condition; cotton down moderately to new lows. Copper buying continued in good volume abroad and moderate domestically, price unchanged at record low of 9 cents; price trend uncertain. Silver fell 3/8 cent to 27 1/4.

Conservative observers continue to advise against buying stocks since market has not yet indicated end of liquidation.

Both foreign and domestic investment trusts [similar to mutual funds] have reportedly been steadily selling stocks in the past few weeks; this is seen likely to "continue for a time at least." International banking circles denied persistent rumors of liquidation for the account of King Alfonso. Some of recent selling attributed to "liquidation for the account of a prominent capitalist of the Northwest" due to illness. Much of selling again attributed to foreign accounts, but opinion differed on whether it was forced. Brokers report customers with available funds not inclined to go long.

Bull traders discouraged by action in US Steel. AT&T has suffered heavy liquidation recently. American Can has sold off on can industry pessimism in spite of semi-official statements that sales are only slightly below 1930. New Haven RR seen in relatively better position than other rails since New England seems to be doing better industrially than most other sections. United Fruit drawing attention; stock is selling at 7% yield and about 80% of book value; co. said to be carrying land and fleet on books at about 1/3 of duplication cost. Texas Corp. rallied after reduction of dividend rate to $2 from $3.

Editorial by T. Woodlock: Recent reports make a broad comparison possible between electric rates in Britain and the US. British consumption in 1929 was 7,801 GWHr, or about 10% of US consumption, while population was about 36% of US. About 57% of British power was generated by govt. plants. Overall average rate was 2.93 cents/kwh vs. 2.78 for the US, while rate for lighting and residential customers was 6.17 vs. 5.13 in the US. Figures make apparent the extra costs of serving residences, which draw so much suspicion from critics such as Gov. Pinchot.

Clinton, Gilbert & Co. say investors now looking for higher returns on bonds by carefully investigating lower-rated issues; says yields of 6 1/2%-9% can be obtained on good bonds; points out possibility of increasing return by taking bank loan against 50% of bond value, paying 4% interest on the loan.

Weekly bank reports showed apparent slowdown in liquidation of total security loans; actual increase continued in loans of NY City banks to nonbrokers; "This may indicate some additional borrowing for security purchases at current low prices." Liquidation also appeared to slow in "all other" loans, but this may be due to holdings of bankers' acceptances rather than a revival of commercial borrowing.

Some observers and brokers are now saying the possibility must be faced of the business depression continuing past the summer; this would mean "many popular ideas as to security values would have to be revised"; many corporations would be forced to cut dividends by another winter of poor earnings. Many brokers now advise clients with new funds to stay out of the market until definite signs of sustained upturn.

More talk is heard of wage cuts and possible resulting labor trouble, though a crisis is seen unlikely until serious attempts are made to cut steel and rail wages. Many industrialists still hope to avoid cuts, but economists believe them inevitable.

Dow industrial average closed at a new bear market low; there were 4 new yearly highs and 195 new lows [Note: all new highs were preferred stocks except American Express]. Rail average closed fractionally higher.

Economic news and individual company reports:

Fed. Reserve continued its extraordinary campaign to drive funds into long-term investments, cutting buying rate on bills for the fifth time in a month; rate is now 1% up to 90 days. Call money renewed at 1 1/2% but was expected to drop to 1% eventually following the other recent rate cuts. Foreign currencies were stimulated by the cut, with sterling rising to a yearly high.

US April exports of $217M were a new postwar monthly low; imports of $187M were at the level of the 1921 depression. Some observers believe decline in Apr. exports reflected drop in Russian purchases; Europe has taken some of this trade by offering govt. guarantees for credits of up to 75% and up to 5 years.

Rail freight loadings for week ended May 9 were 747,449 down 27,842 from prev. week, down 19.8% from 1930 week, and down 28.7% from 1929.

Steel production for week ended Monday was 44% vs. 46% prev. week, 47% two weeks ago, 74% in 1930, and 96% in 1929. American Metal Market says steel demand now largely down to "ordinary everyday needs"; sees further decreases up to the usual summer low likely to be small. In past depressions, steel output falling below 50% would prompt manufacturers to predict it couldn't remain there for too long because that level "represented less than the actual needs of consumers." No pronounced gain is looked for in the summer, but an upturn is expected before end of Sept. Steel Institute will meet at the Hotel Commodore Friday, with industry leaders coming from around the country; meeting seen as one of most important in years; wage scales are likely topic of discussion.

Refineries ran at 68.2% in week ended May 16; stocks of gasoline fell 147,000 barrels to 45.663M. Crude oil production in week was 2.426M barrels/day, down 41,900 from prev. week and down 181,100 from a year ago. After 8 months of unsuccessful efforts to fight curtailment of Oklahoma oil output in the courts and legislature, opponents are now attempting to put the issue directly to the people using a ballot initiative.

World production of copper averaged 4,280 tons/day in April vs. 4,402 in Mar. but above low of 4,174 in Jan. Average in 1930 was 5,020.

Price of aluminum has held firm at 23.3 cents/pound, making it less competitive with copper than two years ago when the two sold at almost the same price, raising talk of widespread substitution. However, continued expansion of uses has helped offset decline in demand from established lines.

Italian trade experts discussing further expansion of trade agreement with Russia to 600M lire from current 350M; ask govt. to raise limit on guarantee of trade invoices over the current 75%.

Many sections of the Canada wheat belt received a much-needed 12-hour soaking rain.

Montreal Stock Exchange announces leading banks, “in order to show their confidence in the present situation,” have reduced margin requirements to 15% on call loans to stock exchange brokers.

Brazilian milreis rose sharply to $0.0690, half a cent above their recent low, on indication Sir Otto Niemeyer will soon issue report and recommendations on Brazil's external debt. The Coffee Congress is also currently meeting, though informed circles aren't optimistic on prospects of raising prices substantially.

London reportedly will postpone attempt to convert the $2B 5% war loan to a lower rate for up to a year, but may announce plan for some smaller issues.

New orders for electrical goods in Q1 at 84 mfrs. were $181.3M vs. $208.9M in Q4 and $314.3M in Q1 1930.

NY City seen floating a large bond issue this year to pay for transit unification; at least $162M will be needed at the start.

Sears expects 1931 earnings may exceed 1930, when they fell to $3/share after heavy charge-offs.

Ford, Ltd. (British subsidiary) is completing a plant at Dagenham [East London] with annual capacity of 200,000 cars.

Companies reporting decent earnings: Brooklyn-Manhattan Transit.

At the galleries:

Museum of Modern Art is showing much of the collection of Lizzie Bliss, one of its founders, who died Mar. 12. Miss Bliss had already left the Museum, established Sept. 1929, her paintings by Cezanne, Matisse, Picasso, Gauguin, and other leading French moderns. The rest of her collection will be widely scattered among the Museum of Modern Art, the National Gallery in London, the Metropolitan Museum, the Brooklyn Museum, and various others. Kennedy Galleries are showing Bertha Lum's color prints of Asian dancers, especially the Japanese No Dancers; these use an interesting printing method apparently of her own devising. Also being shown are an interesting group of those amazing bird prints that John James Audubon produced almost a hundred years ago.

Theatre:

Old Man Murphy - farce comedy, at the Royale. Patrick Murphy, liquor dealer in Dublin, comes unannounced to a Midwestern US city to find his son Charles in midst of a mayoral campaign. However, Charles has changed his last name to Murfree under influence of his socially ambitious wife; this has enraged "the Irish constituents of 'The Patch,' back of the railroad tracks," and Patrick must now convince the voters that Murfree is the authentic old Gaelic spelling. An Irish holiday of a play, featuring "good vaudeville and much lusty bush-whacking." Arthur Sinclair, as Patrick, is convincing indeed; "Cuchulainn could not have drawn his sword from the scabbard with more heroic poise and verve than Mr. Sinclair can whip a quart of Irish whiskey from the hip pocket of his capacious tweed pants."

Jokes:

Tourist - Is it an offense to park on Fifth Avenue? New Yorker - No sir; if you can park on Fifth Avenue it's a miracle.

"I never had such a tough time in my life. First I got angina pectoris, followed by arteriosclerosis. Just as I was recovering from those, I got tuberculosis, pneumonia, and phthysis. Then they gave me hypodermics. I tell you, that was the hardest spelling test I've ever seen."

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