Monday, June 22, 1931: Dow 138.96 +8.65 (6.6%)

Assorted historical stuff:

Pres. Hoover announces Administration is considering steps "to assist in economic recovery both here and abroad" and aimed at "strengthening the situation in Germany." Hoover continued to discuss the German situation with Congressional leaders and cabinet officials. Govt. officials have become concerned over past few weeks with "perilous situation" in Germany; failure of Breuning govt. would lead to Fascist or Communist regime and imperil economic stability of Germany and the world. Steps to be taken uncertain, but it's been learned Pres. Hoover has been sounding out Congressional leaders on calling a moratorium on war debt payments. Also possibly under consideration is extending some credit to Germany through Fed. Reserve banks. German capital flight, after several days of improvement, suddenly worsened Saturday; Reichsbank resorted to some restrictions on credit, and further drastic restriction was feared. German banks granted the Reich a 250M mark credit at 9% to cover govt. debts maturing in near future. Short-term rates are at 7%-9%. Austrian commercial banks raised rates on deposits to 5 3/4%-6%, a sharp contrast to record-low rates in other countries. Foreign aid to Austria so far amounts to 350M schillings - 200M from central banks and BIS, and 150M temporary credit from Bank of England.

Editorial: Pres. Hoover's "discreetly short and simple statement" is highly significant and encouraging. Washington has "at long last ... acknowledged .. that the whole world is in the ditch together and that the US cannot expect to climb out alone." To be sure, it's premature to jump to any conclusions; measures for lasting relief will take many months, and Congress must be consulted. However, the "new light on an otherwise dark horizon" is that initiative has been taken by "the one man who ... could take it with a logical authority." In any emergency of this scope, "confidence based on realities is the first requirement. Given that, temporary but serviceable bridges across the abyss become almost a matter of detail"; already, participation of the Fed. Reserve of NY bank in temporary Austrian aid suggests "what may be done on a larger scale to tide Berlin over. The US govt. has now set its hand to the plough and must finish the furrow without looking back."

F. Croxton, head of Pres. Hoover's emergency employment committee, is sponsoring a national campaign to promote relief through local agencies this winter; the commitee will act as coordinator for relief campaigns to be carried on by several national welfare and relief organizations.

Brazil, until recently, had "welcomed all and sundry immigrants," admitting 874,087 during 1920-29. However, because of the recent world coffee glut Brazil has tried to help their depressed economy by restricting immigration, and many recent arrivals from Europe were returned there.

"A worm of discontent is gnawing" at the French apple industry, centered in the famous apple district of Normandy, home of Calvados - "an apple-jack of unique authority." California fruit has been taking France by storm in spite of prices almost double those in NY, due to superior packing, more uniform quality, and possibly the glamor of its land of origin. "A Norman campaign against the American apple is to be conducted along an almost world-wide front."

Yet another highly technical editorial by T. Woodlock calling for investigation of the govt.-sponsored Inland Waterways Corp's unfair competition with rails; this one concerns the "water-line differential" issue; the ICC could investigate the matter motu proprio [on own initiative; expression usually applied to the Pope].

A demonstration of the new Spicer-Dufay color film process at the Royal Society in London was so impressive that "this critical audience of Britain's leading scientists was moved to applause by the beauty, accuracy, and definition"; scenes included the Society's president performing chemistry experiments, orchids, and animals at the London Zoo. Film base is printed with matrix of minute red, green and blue squares, about 500,000/sq in; over the matrix is a "panchromatic emulsion of high sensitivity." Pictures can be taken in almost any light, and no special attachments to camera or projector are needed. Film is "non-inflammable." Almost 200 world patents granted, another 200 pending.

Japanese theatres have come up with an inventive system for handling patrons who wish to leave a performance and reenter later. Instead of the ticket for readmission we use here, the doorman stamps the patron's palm with a rubber stamp bearing the seal of the theatre.

Isaac Arron Hardoon, "British Indian subject and wealthiest foreigner in China," dies leaving $50M estate; owned 2/3 of "Nanking Road, Shanghai's Broadway."

A detail of Boston longshoremen recently ended a day's work and emerged from the ship's hold to find they could hardly recognize each other. Men who had started the day with "honest locks of gray" hair now found them a vivid green, the brown-haired were fiery red, and the brunettes had become "stunning blondes. This discovery naturally produced a delicate situation, ... and an inquiry was pressed." The foreman explained that they had spent the day loading TNT, and the hirsute metamorphosis was due to minute particles of explosive in the air; as compensation, the men were paid double.

Week in review:

Stock trading developed "intense dullness" during the week, typical of the periods "when memorable bear markets of the past were in their dying stages"; volume on Wednesday fell below 1M shares for the first time since Oct. 1926. Shares worked lower most of the week, reversing part of the previous week's rally, before staging a sweeping rally Saturday after Pres. Hoover's announcement. A period of narrow, irregular movements is anticipated while groundwork is laid for a better market. Stocks in Berlin rallied early in the week but lost much of their gains later; stocks in Paris fell. Steady flight of capital from Germany resulted in heavy gold losses by the Reichsbank, most of which went to the US; Switzerland and Holland also received considerable funds; influx of gold to London seen making technical position of Bank of England "exceptionally strong." However, German political situation seemed improved after the Reichstag steering committee decided at midweek not to call a special session, and Pres. Hoover's announcement provided further encouragement. Huge US gold imports had "no apparent effect on the credit structure"; money markets remained dull with rate cuts apparently not imminent, as the Fed. “sterilized” gold receipts. Fed. Reserve credit outstanding fell $22M while currency in circulation rose $33M, probably due to "bank runs in the West" [note: I think this refers to the Chicago area]. Member banks in NY continued to cut loans and investments; security loans fell $79M and non-govt. securities $46M. Steel output fell under 38%, and further seasonal declines were expected through mid-summer. However, steel manufacturers have "taken steps to better their position by adopting a firmer stand" on some third-quarter prices. Commodities were mixed. Wheat hit new season lows in spite of "sensational" reports of poor spring wheat conditions in Canada and the US Northwest; winter wheat harvest going well. Corn held relatively steady. Cotton moved irregularly higher in spite of good crop weather and poor May textile report. Bonds "unusually irregular" in slow trading. US govts. "maintained characteristic firmness"; German bonds recovered substantially, ending in sharp rally Saturday; other European issues were firm; S. American bonds "displayed characteristic irregularity, mixing sharp gains and losses; Argentine and Brazilian ended strongly while Chilean were weak. Rail bonds staged recovery; NY City traction [mass transit co.] moved higher; convertibles worked generally lower. Industrial issues "developed many weak spots," as many issues with suspect earnings fell to new lows; oils were stronger.

Market commentary:

Market wrap: Stocks advanced sharply in Saturday's short session after Pres. Hoover's statement; bears were apparently "caught without warning by this unexpectedly favorable turn of affairs"; short-covering became increasingly urgent through the first hour; after brief hesitation, upswing gained fresh vigor in the second (final) hour; "a runaway market was seen in various stocks recently under severe pressure." Rails set a particularly rapid pace, with "sensational uprushes" in Union Pacific, Atchison, and NY Central; industrials advanced under "stimulating leadership" of US Steel; IT&T and J.I. Case were notable strong spots. Bond market generally strong, featuring sharp rally in German govts., improvement in both "legal" and second-grade rails, and continued strength in NY City tractions. Commodities very strong; grains and cotton up sharply. Copper remained at 8 cents, with buying negligible. Silver up 1/8 cent to 26 7/8.

Conservative observers encouraged by market resistance at anticipated level, believe uptrend will continue; advise customers to pick up their favorite stocks on any setbacks; continue to recommend stop-loss orders.

Many important dividend meetings will take place in the next week or so; particularly closely watched will be the Westinghouse one on Wednesday, which has been the subject of much speculation for weeks. Brokers' loans have declined for 9 straight weeks, for a total drop of $430M to the new low record of $1.419B in the most recent report; they've also declined in 40 of the past 53 weeks, for a total drop of $2.579B. This would seem to indicate "a tremendous amount of deflation" and stocks "passing into stronger hands," though these constructive influences may not be felt until business improves.

Most rail observers believe recent 5-point decline in the rail average was a natural technical rection after previous sharp 13-point advance, and didn't indicate market skepticism on likelihood of a rate increase. Interests following the situation say it's unthinkable the ICC would totally reject rate increase; worst case would be for the ICC to reject general increase and ask for list of increases on specific commodities; most likely is approval of a general 7%-10% increase.

Foreign exchange observers hope aid to Germany will be in form of reparations relief rather than further loans; moratorium on all war debts was the favored plan, possibly followed by int'l conference to clarify “the whole debt puzzle.”

Many market observers believe the recent decline was an attempt by the market to discount future poor Q2 earnings reports; consequently, when the actual reports appear the market may act much better than anticipated. One conservative observer believes main feature of the summer market will be ability to resist bad news; sees market entering "typical accumulating stage," dull but laying the groundwork for a rally starting sometime in summer and through the fall.

Most investment authorities believe "time has arrived to make selections of standard stocks which the purchaser desires to carry for several years." There's no particular rush to buy, since a period of "pronounced irregularity" and continued poor business news is likely in the summer, as expected in the transition from bear to bull. However, "the long-term investor should not become alarmed over developments of this nature, but rather regard business and market irregularity as affording conditions suitable for accumulating stocks" that have been "thoroughly deflated" and are well-positioned to benefit from recovery.

Editorial: Sen. Capper recently noted that the US imported a quarter of a billion dollars more agricultural products last year than it exported; the implication was that foreign producers were underselling our farmers, "something that will send cold shivers down the spines of farmers and give occasion next winter for more thundering into the Congressional Record." On closer examination, the vast majority of US agricultural imports are of products that the US makes either not at all or in limited quantities, such as silk, coffee, and crude rubber.

Economic news and individual company reports:

Three of four Bank of US officers found guilty of misapplying bank funds (pres. Bernard Marcus, exec. VP Saul Singer, and Herbert Singer, "the latter's son"). Jury deadlocks on the fourth, H. Pollack, VP and director. Sentencing on Tuesday; officials found guilty were remanded to the Tombs [jail in downtown Manhattan]; expected to appeal. Charge on which officials were convicted involved cover-up of $8M debt owed by two bank affiliates to the bank, through a transaction in which yet another affiliate was made to buy some real estate equities at "arbitrary values" from the bank.

Suit brought by Bank of France against Chase Nat'l and Equitable Trust over $5.2M of Russian gold is dismissed. Trial had lasted 9 weeks, with defendants producing over 10,000 documents, most in Russian. Close to end of the trial, "the jury was discharged, overwhelmed by factual and legal tangles"; both sides agreed to have the judge decide the case, and he duly found for the defendants.

Stockholders of Savona Nat'l Bank of Bath, NY, closed Apr. 29, assessed $100 a share for protection of bank's creditors. Condition of Mississippi banks said better as 35 banks have been reorganized and 3 more are scheduled to reopen this month; during the emergency last Dec. and Jan., 75 banks there were closed.

Electric World reports definite signs of rise in industrial activity; industrial electric demand in May rose 13% over Jan., vs. a 2% decline in 1930 and a 3% rise in 1929; May index is only 8% below 1930 and 19% below the peak in 1929.

ICC asks rails for additional data related to rate increase application, mainly concerning what specific commodities the rails plan to exempt from the increase, and particularly whether agricultural products will be exempt; data requested within 15 days. Request seen leading to possible delay in action. Rails paid a record high of 7.61% of revenues in taxes during the first 4 months of 1931, vs. 6.62% in 1930. Recent ICC decision allowing Southwestern rails to lower rates on oil seen as important help to rails; marks return to earlier principle allowing rails to lower rates in some areas to meet competition without applying the reduced rates universally.

Ivar Kreuger sailed on the Europa after spending 3 weeks in the US on business, particularly on IT&T acquisition of interest in L.M. Ericsson. Also on board the Europa was Bernard Baruch, joining his family in England.

Fisher's wholesale commodity index rose for the first time in 15 weeks, to 70.0 vs. 69.7 vs. prev. week; since Mar. 6, the index had lost 6.3 points.

Youngstown district steel production will rise to 41% this week; started last week at 42% but dipped to 40% at midweek.

Nat'l Retail Credit Assoc. urges stricter bankruptcy laws.

Illinois Senate killed the proposed severe anti-chain store tax bill by postponing consideration to next legislative session.

Russia is predicted to become a net cotton exporter this year for first time in history, based on estimated acreage and yield.

Canadian Bureau of Statistics reports continued drought and wind in prairie provinces has reduced condition of wheat crop to worst on record.

Chevrolet has sold a remarkable 528,000 cars in the first half, thanks to "novelty and the right price," showing a market still exists for innovative well-priced products even in a depression. It's now believed Chrysler can duplicate the feat with its "vibrationless" offering to be announced July 6. This is the first "really new method of attaching the motor to the car frame" in a long time; it dispels vibration not by cushioning on rubber or springs, but "by allowing it to spend itself in a rotary motion." The result is a fast, smooth, and economical 4-cylinder car; in tests, the car ran smoothly at 55 mph with one spark plug disconnected.

Baldwin Locomotive is in 100th year; has made about 61,600 locomotives; using current lull to put plants in shape and diversify business.

Treasury reports more revenue from playing-card stamps, "indicating an increase in card playing with greater unemployment."

Suit filed against Coca-Cola by widow of Joel Chandler, creator of "Uncle Remus" stories, for copyright infringement by using Remus characters in advertising.

Companies reporting decent earnings: Sherwin-Williams.

Movie:

Die Drei Von Der Tankstelle - UFA film, at the Cosmopolitan. Normally it's a "perplexing dilemma" to choose between the excellent fare at the rathskeller in UFA's Cosmopolitan theatre and the movie attraction. This week, however, the movie must be given the honors; this light romantic operetta brought forth "gales of laughter and genuine interest" from the first-night audience. Three young men return from a road trip to find their money lost in a bank failure and are forced to start a gas station; they then compete for the hand of Lilian, a charming and "dainty" customer; lover's quarrels ensue; “eventually Lilian resorts to duping her choice, the errant Willy, into signing the wedding contract.” [Note: starred real-life couple Willy Fritsch and British actress Lilian Harvey.]

Jokes:

Judge - You say your window was broken by a big rock. Was it as big as my fist? Witness - It was bigger. Judge - Was it as big as my two fists? Witness - It was bigger. Judge - Was it as big as my head? Witness - It was about as long, but not as thick.

'You want to marry me? But you've only known me three days!' 'Oh, much longer than that, really - I've been two years in the bank where your father has his account.'