Monday, June 15, 1931: Dow 137.03 +0.05 (0.0%)

Assorted historical stuff:

Withering editorial by T. Woodlock lambasting a certain unfortunate Rep. Ramseyer of Iowa who recently said that reduction of war debts "was not originally contemplated by Congress." These remarks are "about as complete an example as could be found of the utter blindness and deafness ... that has characterized our concept" of war debts and reparations. However, events are likely to make this stand impossible to maintain. Congress has "contemplated" the war debts as ordinary commercial transactions, and persisted in the obvious fiction they are unrelated to reparations; "Yet we smile in pitying scorn at the umbilical 'contemplation' of the devout Easterner as he murmurs to himself the mystic words 'Om mani padme hum!' ... Everyone in Europe knows that the entire fabric of international debts rests upon Germany's payments," and that Germany has reached her limit; as soon as those payments stop, so likewise will payments of war debts to us. The "fundamental trouble that lies at the root of the entire world-situation" is simply that "We have not yet ended the war. No war is ended until reasonably normal relations have been resumed by the belligerents." Under-Sec. of State Castle said Administration policy on war debts well-established but in serious crisis govt. would obviously have to consider temporary change; however, doesn't think situation at this time could be described as a serious crisis.

Federal labor investigators will urge Labor Sec. Doak to call a conference on Pennsylvania coal strikes now involving over 10,000 miners. Strikers continued marches in 3 districts; Washington County and New Kensington fields, "scenes of the major disturbances this week," were quiet. "Special forces" are deployed to prevent 1,000 strikers "from carrying out their threats to drag strikebreakers from New Lafferty Pits. Machine guns have been mounted at the mine entrance."

US Chamber of Commerce "will study problems of depression and means of recovery through 20 special committees mobilizing business men on a large scale."

Administration makes its position clear on govt. operation of public utilities; Sec. of War Hurley says need is for regulation with teeth in it, not govt. competition with private enterprise. Govt. operation only justified in "wholly exceptional cases" and "control it exercises in such cases should be only so much as is necessary to secure justice for the public." Defends veto of Muscle Shoals [govt. electric plant] bill, saying it would have wasted taxpayer money and ultimately benefitted no one.

"Count Uchida, former Foreign Minister of Japan, accepts presidency of South Manchuria Railway, showing intentions of govt. to clear up relations with China." [Note: Japanese invasion of Manchuria took place in Sept., after an apparently staged incident of sabotage on South Manchuria Railway tracks.]

David Sarnoff, RCA pres., says television still in the laboratory phase but rapid progress being made; a year ago, it was "a subject of engineering conversation" but now "transmission of sight by radio is a matter of accomplishment, not of speculation." Carefully notes that "an entirely different receiver will be necessary; radio sets now used ... are not equipped to receive television." Many practical details remain to be ironed out, including finding "wave lengths for sight transmission that will not interfere with the use of the already overcrowded channels in space" and making receivers without "rotary scanning discs, delicate hand controls and other moveable parts." Plans several experimental broadcasting stations by end of next year, including one on the new 50-story RCA building and another on a still taller building. Believes "effect of television upon the present established radio industry will be beneficial. ... These services will supplement each other."

[Note: No, this isn't ripping off the song ... that came out in 1937.] A daily battle is raging between soda fountain dispensers and their customers. "'Yes, ma'am, we have tomaytoes' ... will draw an icy stare from the fair diner, but when she orders a 'tomahto and lettuce sandwich' the jerker will calmly yell to the concocter of the great American institution: 'One tomayto and lettuce on white.'" Sometimes roles are reversed and it's the customer who "subtly insists" on tomayto. "It is high time that some lexicographer settled the question." [Note: Well, I guess "let's call the whole thing off" is snappier than "let's consult a lexicographer."]

Kodak had perfected a new “Cine-Kodak super-sensitive panchromatic” film with greatly increased speed (light sensitivity), allowing for filming indoors and in lower light; will be used for home movie cameras. [Note: I believe this was a color system.]

Once again, the NY Welfare Council "warns girls and women to stay away from NY City unless they are assured of making at least $25 a week. The average working girl in NY City pays $23.60 a week for ordinary living expenses ... Room $8, food $10.50, clothing $3.85, carfare, telephone and postage $1.25. This leaves only $1.40 a week for recreation and incidentals," including medical care [Note: not sure if that comes under recreation or incidentals].

A certain modest building at Broadway and Bleeker St. can lay first claim to a now-famous name. The "inconspicuous ... time-battered structure," of Mauve Decade (1890's) vintage, has its name engraved over the door: Empire State Building. [Note: I believe there's also a US Senate around 14th Street.]

New Haven RR will run an observation train for the Harvard-Yale boat races Friday, June 19.

Week in review:

"Stocks gave their owners the long unaccustomed thrill of making money," reclaiming a substantial amount of lost ground. Technical developments are now seen indicating a period of "gradually higher levels for the principal stocks, probably through a series of irregular movements on an ascending scale." Dow theory students pointed to confirmation of the advance by both the rail and industrial averages. While business conditions didn't appear to improve, "the better tone of the market proved that discouraged liquidation had finally been checked"; market action indicated that "investors, who had gritted their teeth and held on through the dark days of May and early June, had been rewarded with promising nearby and long-pull prospects for appreciation." Steel production continued decline due to lower automotive production and slow rail demand, though this was seen as normal seasonally. Domestic bonds were generally strong on more active trading. US govts. rose; highest grade domestic corp. issues were in demand near record highs, particularly utilities and "legal" rails. Second-grade rails rallied sharply; convertibles responded to improved stock market tone. Municipal bond market featured light trading and somewhat lower prices; Dow average of 20 long-term city and state bonds is 3.78% vs. 3.73% two weeks ago and 3.74% on May 15. German govts. fell sharply, but other Europeans were steady; S. American rallied early in the week led by Brazlian, but lost ground later. Money markets were dull, with banking situation in Chicago overshadowing other credit developments; there were three bank mergers and 27 closings in the week, with deposits of about $75M involved in the bank failures. Foreign exchange news was dominated by German marks, which fell to a new yearly low before being supported by the Reichsbank through sales of gold and foreign currency; capital flight led to strength in guilders and Swiss francs. Brazilian milreis rallied at midweek on rumored agreement with bondholders. European stocks were weak, with many issues in Paris hitting new depression lows. Grains moved moderately lower in spite of mixed crop news, ending only fractionally above season lows. Cotton established new season and post-1915 lows early in the week, but then gained significantly, with movements generally following the stock market more than crop reports.

Market commentary:

Market wrap: Stocks opened weakly, with extensive profit-taking in rails in an apparent case of sell-the-news, and some apparent nervousness about the German situation; leading rails fell 1 to 3 points in the first 15 minutes. Volume then dried up and trading settled into a narrow range through the first hour. Buying reappeared in the second hour, and prices worked broadly higher; industrial leaders including Steel and Can recaptured earlier losses while rails renewed their upswing. Bonds moderately active, prices generally higher; US govts. dull and steady; German govts. rallied off record lows and other Europeans were steady but S. American highly irregular as Brazilian and Chilean fell substantially; rail bonds continued rally; NY City tractions gained. Commodities mixed; grains firm; cotton off only slightly in spite of favorable weather reports and disappointing May consumption figures. Copper remained at 8 - 8 1/4 cents, with buying very small.

Conservative observers remain cheerful; recommend gradual accumulation of standard stocks on reactions this week, using stop-loss orders for protection.

Renewed operation by some bull pools indicated by "the support in issues which are known to have been under favorable scrutiny by the groups in the past." Bull traders have been targeting certain stocks in which a large short interest still exists. Several brokers report a steady stream of buying by customers who are paying for stock in cash and taking it off the market. The buying is in smaller lots than usual, apparently by investors looking to slowly accumulate good-sized long positions.

Rail consolidation seen helping general business; would involve $500M in spending over next 3 years, and should promote more efficient and economical operations. NY City tractions [mass transit cos.] were strong on unification progress.

Recent decrease of $49M in brokers' loans during period when Dow industrials rose 11.27 points seen as significant [normally brokers' loans would rise along with stocks]. In Sept. 1929 and on several occasions since, a conflicting movement like this has foreshadowed a turn in the market.

Historically oriented market observers, making rather talmudic comparisons of the current market with the 1921 bear, are having some scholarly disagreements on whether the industrials have hit bottom or will undergo another test. Many brokers are now recommending clients make long-pull committments; "while it is conceded that a more conservative course would be to wait for signs of a turn for the better in business, it was pointed out that stocks almost invariably emerge from a bear market before economic improvement is visible on the surface"; an irregularly higher trend is predicted even in face of anticipated poor Q2 earnings reports.

Livingston & Co. attribute part of recent liquidation in stocks to real estate situation; "where one had to reduce obligations on real estate, and owned both stocks and real estate, it was much easier to sell the stocks and pay off obligations than to sell the real estate." However, current market action "indicates that the great majority of such situations have been pretty well cleaned up." Believe we're now in period of narrow price swings typical after such liquidation, during which confidence is rebuilt; as in 1921, this is likely to be a good time to buy stocks.

Editorial: Application of the rails for a rate increase appears against "all the rules of normal economics" by which this should be a time to lower them. However, rail credit is in danger, "and revenue must be found to keep it good, economics or no economics. Needs must when the devil drives." However #2, the rails should consider modifying their request to be more compatible with ICC preferences; it's well known the ICC doesn't like general rate increases since they lead to "discriminating situations" that have to be cleaned up. A set of specific requests on particular commodities would be more likely to be approved; rails should also consider an arrangement for pooling increased revenues for benefit of the weaker roads, and putting a time limit, perhaps 12 months, on the rate increase.

C. Conway, Continental Can chair., returns from Europe; reports older British businesses such as coal, iron, and cotton are lagging but newer ones including cars, electric equipment, department stores, and canning, are developing and thriving.

C. Gruhl, Nat'l. Elec. Light Assoc. VP, charges most of current criticism of electric utilities by politicians is ghost-written by others; says critics using vicious tactics and making a number of charges that the FTC has already thoroughly investigated and found baseless.

Letter to the editor charging mortgage lenders with exacting “pound of flesh” from small real estate owners, taking advantage of “opportunity to get back what he sold at the high levels of 1929 on the basis of depression levels of 1931” [note: not sure how this worked ...]. Proposes moratorium [I assume on foreclosures].

Economic news and individual company reports:

Reichsbank raised discount rate from 5% to 7%; step had been anticipated due to heavy withdrawals of foreign currency; loss estimated at almost 1B marks so far in June. Marks strengthened Saturday, and demand for foreign currency at the Reichsbank fell to a third of Friday's level. Berlin stocks rallied from a sharp decline in the previous few days. NY bankers "extensively used" the transatlantic telephone and conversations with Berlin were said to be reassuring; it's anticipated the Reichstag steering committee will vote against calling a special session, at least temporarily assuring stability of Breuning govt.; Breuning and von Hindenburg had threatened to dissolve the Reichstag if they met to oppose govt. decrees. Cable from Berlin argued against the widespread alarm regarding situation there; pointed out subject of reparations is not new, and no party advocates repudiation of German bonds. Austrian Finance Min. estimates budget deficit for 1931 at least 150M schillings; further 1% increase in bank rate likely. Creditanstalt and foreign creditors nearing agreement to extend credits for two years. Bank of Spain expected to negotiate French loan against gold; loan believed necessary to repay BIS credit which, contrary to previous reports, has been used to defend currency.

US will end operations for the fiscal year today; Treasury likely to close fiscal year with deficit of about $950M. Despite heavy borrowing this year, Treasury has been able to save considerable interest charges due to favorable govt. financing conditions.

Car sales have turned "very spotty," though some sections and producers are maintaining good business. July will feature lowest production for that month in many years, partly due to no new mid-summer models from Buick and Chrysler; however, observers expect the industry to enter the fall season with very low inventories and are hopeful fall sales will improve after a June-July low.

Illinois House passes most extreme anti-chain store tax yet, charging annual license fee of $25 per store for the first 3 stores and $1,000 per store for all additional ones. Action of Senate uncertain; if passed, law will be challenged in courts.

BLS reports employment by 15 major industrial groups fell 0.9% in May, as did payroll totals; only groups with increases were power/water and dyeing/cleaning..

New NYSE listings in May were $236.1M vs. $416.6M in Apr. and $1.140B in May 1930; first 5 months $1.393B vs. $4.647B; of the May total, bonds were $214.3M vs. $311.9M and $441.1M and stocks $21.8M vs. $104.7M and $699.1M.

Most of world copper production is likely unprofitable at current prices of 8 - 8 1/4 cents/pound; operating costs alone, not including depreciation, are believed to be 8 1/2 cents or more for most production. Some mines have started curtailing production or shutting down, and more shutdowns are seen likely soon.

Rail application for rate increase to be filed at ICC June 17.

State Savings Bank of Royal Oak, Mich. closed; deposits about $7M.

Fisher's wholesale commodity index was 69.7 vs. 70.0 prev. week and 70.3 two weeks ago; this was below the 1913 average of 69.8 but still above the extreme low of 67.3 from Dec. 1914. The index has declined a total of 6.3 points over the past 12 weeks.

Gasoline in Chicago wholesale market sold at 2 1/4 - 2 3/4 cents/gallon.

Some unfavorable wheat weather reports received from Russia; bad dust storms reported in Saskatchewan, Canada.

Cotton consumption by US mills in May was 465,770 running bales vs. 508,774 in Apr. and 473,284 in May 1930; for 10 mos. ending May 4.365M vs. 5.322M.

Editorial: Hog prices have declined drastically, averaging $6.53/100 lb at Chicago for May vs. $10 in 1930; this is the lowest average since Dec. 1915; the Agriculture Dept. forecasts lower demand this summer. This will have serious effects on farm income in the corn belt; for example, for the year ended June 1930, hogs made up 28% of Nebraska's total agricultural sales of $463.8M.

Silver trading opens today on the National Metal Exchange in NY; in view of sharp price fluctuations over past years, it's hoped an organized market for trading silver futures will help protect exchange operations needed for trade with the Far East.

Youngstown district steel output to remain at 42% this week; buying holding up better than predicted.

Leading shipping companies in the Atlantic passenger trade will cut number of sailing this summer sharply due to slump in tourist traffic.

Commercial plane sales in first 4 months of 1931 were 479 valued at $2.430M, vs. 694 valued at $3.861M in 1930. However, sales have shown a steady uptrend from 55 in Jan. to 187 in Apr. Deliveries of military planes were 329 valued at $4.473M vs. 239 valued at $2.821M.

New Hampshire shoe industry in first 4 months of 1931 operated at 12.2% greater production rate than 1930.

Underwriting profits of 100 leading fire insurance companies fell to 2.3% in 1930 from 6.5% in 1929.

Assessed value of NY State real property for 1930 was $29.152B, up about $935M from 1929.

Under-Treasury Sec. Mills promises delegation of watch mfrs. to crack down on smuggling; delegates say over 2M watches were smuggled into the US last year.

Mack Truck operations have improved this quarter; profits expected to put co. in the black for the first half.

Shubert Theatre Corp. will default on $6.450M 6% bond payment due today.

Theatre:

The Green Pastures - By Marc Connelly, from stories by Roark Bradford. [Note: A dramatization of Old Testament stories as imagined by Southern black Sunday-school children; made into a 1936 film. Popular with white critics at the time, less so with black critics and audiences; authors were white and the story contains many racial stereotypes, but is still considered a landmark of folk drama.] Winner of the 1930 Pulitzer Prize enters its final two weeks of performances. With 547 performances completed, the play has racked up a number of impressive stats. Over half a million have seen it; box office receipts are almost $2M. The cast of 73 with which the production opened in Feb. 1930 is intact, except for one change due to death and two to illness. Richard B. Harrison, the 66-year old star, has probably broken a record by appearing in every single performance; he's walked over 100 miles on the stage's treadmills.

Joke:

"'How do I know you are in debt? I paid $5 to the Confidential Inquiry Co. and obtained the information.' 'You could have gotten it from me for half the money.'"