Saturday, June 13, 1931: Dow 136.98 +0.41 (0.3%)

Assorted historical stuff:

Editorial: Dr. Nicholas Murray Butler [philosopher and educator, pres. of Columbia U. 1901-1945] has recently added his voice to the chorus calling for "a plan" to rationalize the capitalist world; others include Stuart Chase [possible coiner of the "New Deal" phrase in 1933] and Sen. LaFollette. "Like many another advocate of the master blueprint, Dr. Butler bases its necessity on the fact that Russia has one. If Western Europe and America are not similarly equipped they will be woefully ... handicapped." While no one can deny the urgent need for a determined effort to cure the current "near-chaos," a grandiose scheme of planned production for capitalist countries, "however desirable or inevitable" in the long run, is impractical in the near term. More practical and useful would be relieving international credit strains and reducing "the extreme and narrow nationalism which has so long controlled all governments, our own included."

Editorial: NY Lt. Gov. Lehman, in speech to NY State Conf. of Mayors, has issued an urgent call for planning to relieve unemployment this winter. This is worthy of widespread attention and action. "No one knows how long depression will last," but even if conditions are turning for the better, as many now believe, "it is inevitable that unemployment this winter will be large. The response to calls for relief last winter was generous from both public [note: municipal govt.] and private sources." There may be fewer resources this year, but this is still more reason for early preparation, since it will make efforts more efficient and less costly. "The ideal relief is in productive work"; planning for this should start at once, "but without neglecting other forms of relief." NY Lt. Gov. Lehman, in speech to mayors conference, pleads for stop to mounting cost of government; points out increase has continued while incomes were sharply reduced.

Washington report: Ever-so-subtle shift seen in Administration attitude toward wage cuts. While “on the surface, the stand against wage reductions is being maintained” and “intimation that there has been a change might well meet formal denial,” there is “nevertheless good reason to believe that there has been some degree of modification.” Indications seen that Administration is ready to accept economic reality and may stop speaking out against cuts, particularly since their pronouncements against cuts appear to be making them into a political issue, threatening the unprecedented labor peace that has so far prevailed during the current depression. Movement for further veterans' bonus legislation in next Congressional session seen gaining strength. Observers skeptical on whether Treasury Sec. Mellon's European trip may involve debt-related negotiations; recall he was the central figure in negotiating the debt settlements and believes them very fair.

United Mine Workers asks aid of Pres. Hoover in calling coal operators and miners into joint meeting to lift industry from a "degrading level." Resolution states "fare of workers and their dependents is actually below animal standards ... overalls and rags constitute the clothing of the mining families, while their food consists of mush, beans and molasses ... intense struggle has reduced wages and prices to levels insufficient to maintain bare human subsistence."

Cyrus McCormick Jr., International Harvester VP, in speech at dinner commemorating hundredth anniversary of the reaper, says farmers must be helped to prevent US economic disaster; necessary "to take the farmer out of politics and put him into science."

Pres. Hoover authorizes officials of states having income taxes to inspect Federal income tax returns.

Railroads are adopting the design of theaters in which related history is depicted on wall and ceiling murals. A Midwestern railroad, in three new air-cooled dining cars, will have murals showing transportation pioneers, including the covered wagon, the pony express, and the early steam train.

NY City Board of Transportation has filed detailed plans for proposed 38th St. Midtown Tunnel through Manhattan to Queens and Brooklyn. Tunnel would start between 9th and 10th Ave., running under 38th St. to the East side of Manhattan, and then under the East River to Queens and Brooklyn; total cost about $110M. Construction of another tunnel from the west side of the project under the Hudson River to NJ is also under consideration.

Tomorrow will be Flag Day, marking the 154th anniversary of the day the Continental Congress officially established the emblem of the US as a flag "of 13 stripes alternate red and white" and "the union of 13 stars white in a blue field representing a new constellation."

Market commentary:

Market wrap: Stocks were unsettled in early dealings, with substantial selling attributed to nervousness over the German situation and special pressure on copper shares. However, rails led a resumption of buying toward noon, with leading roads pushing into new ground on the recent rally; volume was light but showed continued tendency to dry up on setbacks. Rail upturn strengthened in the last hour and started general short-covering movement, producing brisk gains in majors including AT&T, Steel, and Can; market closed with strong tone. Bond trading featured sustained rally in rail bonds, particularly lower grade; US govts. and highest-grade corp. firm while convertibles rallied late; German govts. down sharply but other leading European issues steady; S. American irregular. Commodities firm; grains strong, with wheat up substantially on forecasts of warm and clear Canadian weather; cotton up slightly. Copper sold at 8 - 8 1/4 cents, outlook seen weak due to higher copper inventories. Platinum has jumped from low of $25/ounce last week to $40; palladium also firmer.

Market observers continue to be optimistic; admit today's session could feature profit-taking but advise customers to take advantage of any reaction to accumulate standard stocks, on theory higher levels will be established next week.

Technical observers see indications stocks have reversed trend and entered a period of rising prices. Dow theory students point to Thursday's rail average advance into new rally ground, confirming the industrials advance on Wednesday. While near-term progress in stock prices is likely to be conservative since earnings in most sectors are showing no improvement, market technical position has also been bolstered by continued deflation in brokers' loans even during the rally; this is seen reflecting movement of stocks from weak hands to strong, or the opposite of Oct. 1929 when brokers' loans rose as the market started falling. Decrease in brokers loans in past week was a surprise to many in the Street, since market had rallied strongly. Market believed still largely under professional control; recent irregularity in narrow range attributed to split among traders, with some now working for higher prices but others remaining in the bear camp.

Rail observers believe some roads may postpone cutting dividends due to prospects of a rate increase. Chain store interests optimistic after Supreme Court postponed making effective its decision upholding Indiana anti-chain store tax in order to allow additional time for a petition for rehearing. Oil industry observers note gasoline in storage has decreased for the past four weeks, the first time this year it has decreased for more than a week in a row; current surplus is 17% below year ago. Companies should now benefit from seasonally higher gasoline consumption.

Average price of 14 steel stocks was 26 3/8 on June 11 vs. 80 1/4 on Mar. 31, 1930. Stocks are trading at 5.5 times average earnings over the past 3 years.

Nat'l Elec. Light Assoc. Convention held in Atlantic City. G. Swope, GE pres., suggests “joint undertaking” between companies and employees to regularize employment and avoid need for unemployment insurance; suggests industry-wide plan allowing movement of workers between companies without losing benefits. M. Thorpe, Nation's Business editor, criticizes “political kibitzers” who “look over the shoulder of every industry.” H. Reid, Nat'l Elec. Power Co. pres., calls for actively combatting cartoons that depict the utility industry as “as menace to the American people.”

London Daily Express editorial: "All pessimists are fools. What is worse, they are dangerous fools. At the present moment they are a definite curse on the community. Men on salaries that have not shrunk a penny, although the cost of living has done so by many pennies, go about muttering darkly about hard times. Holders of first-rate industrial shares are selling out at heavy losses and putting the money in the bank (where it earns nothing) so that in the future they can buy back the shares at top prices. ... Today, while the fools are moaning, wise men are planning, working, ... underwriting the prosperity that lies ahead. When those good times arrive - and they are on their way now - the fools will moan: 'If only we had known, we could have ...' Don't be a fool."

R. Stephenson, Amer. Bankers Assoc. pres., says most significant aspect of current depression is that “we have not had any semblance of a financial panic” as in previous depressions; banks “are unflinchingly taking their portion of short rations and enforced self-denial that ... readjustment demands,” in the form of lower interest rates and dividends. Unemployment is greatest current problem. Calls for raising public confidence. Commenting on the general agreement that bottom has been hit, says there's such as thing as “overstaying a depression,” as there is “overstaying a boom.”

Economic news and individual company reports:

Nervousness over German situation now appears to be overshadowing the Creditanstalt situation. Rather than the reparations question, doubt now centers on immediate future of the Breuning govt. Recent emergency decrees have been followed by “popular disapproval leading to rioting”; local banking circles expect “a crisis ... within the next 10 days” and unfavorable rumors are circulating. Capital flight remains heavy, much of it due to withdrawal of US credits, but NY banks stress they haven't closed any established credit lines; withdrawals are largely of funds that had been invested over the past few months in short-term German obligations. German banks “reported to be sound although the withdrawal of foreign funds placed on demand deposit is causing some embarassment.” Reichsbank apparently continued to sell considerable quantities of gold and foreign currency to support marks. Creditanstalt arranged to sell shares in Yugoslav subsidiary to Czech banking group. Search continues in Vienna for prominent banker to take charge of Creditanstalt, but there's not much interest in “what is considered a winding-up job.” Austrian central bank still losing foreign currency. French bankers demanding priority in future Austrian loans in return for discounting Treasury bills.

Weekly bank reports were dominated by the Chicago banking disturbances. Heavy demands for currency in the area were efficiently met through the Fed. Reserve system; circulation in the Chicago Reserve district increased $87.1M, or over 25%, and Chicago banks withdrew funds on deposit from around the country; net result was to slightly improve reserve ratio at the Chicago Reserve bank. "It is understood that the bank runs in Chicago have now largely subsided." NY City member banks continued to liquidate loans and investments, possibly due to withdrawal of Chicago balances; holdings of non-govt. securities declined $29M while govt. securities increased $28M. NY State savings bank deposits rose $22.1M during May to a new record high of $5.024B by 5.500M depositors

Brazilian state of Sao Paolo has reportedly reached agreement with bondholders to make next year's bond payments in milreis instead of foreign currencies, with funds not to be withdrawn for a year. A similar solution is rumored for Brazilian govt. bonds; this would allow avoiding “the stigma of an out-and-out moratorium.” It's hoped that a year or two's break from heavy demand for foreign currency for debt service will allow Brazil's trade surplus to restore value of the milreis.

Seven Australian govts. accept rehabilitation plan to reduce next year's deficits between 15M and 40M pounds sterling. Govt. salaries and pensions provided by public funds to be cut 16%-20%; interest paid on internal loan to be cut, saving 6.5M pounds; taxes to be increased 7.5M. Parliamentary approval seen assured.

Before extending short-term $3M loan to Detroit to meet payroll, committee of Detroit bankers has requested a detailed statement of the city's anticipated cash position for each month of the fiscal year starting July 1.

Closing arguments in Bank of US trial likely to be completed early next week.

New bond offerings in the past week were only $7.184M vs. $72.2M prev. week and $232.6M in 1930; lowest total since Jan 1930.

ICC will get railroad petition for 15% freight rate increase next week. Eastern rail consolidation plan is reportedly all but complete, and will be presented to the ICC within 10 days. Texas Gov. Sterling signs law regulating truck transportation strongly favored by railroads.

Bradstreet's reports retail trade appears to have halted downward trend last week, holding its own in general and increasing from prev. week in some sections. Woolworth report of 7.7% year-over-year increase in sales in first week of June has drawn attention to retail conditions. Prices have declined 25% to 30% in many cases, and this is seen likely to result in increased business as soon as public confidence improves. Improvement over a more sustained period would be considered important, since many believe the first signs of economic recovery would be reflected in retail trade.

GM maintained relatively strong performance in Q2; unit sales will be slightly ahead of 1930 and up over 30% from Q1; earnings are likely to match 1930.

F.W. Dodge reports new construction contracts east of the Rockies in May were $306.1M vs. $457.4M in 1930, of which residential was $88.9M vs. $116.6M and public works $108.9M vs. $134.9M. Only area to report increase in residential building was metro NY. Decline in contracts from April was greater than usual.

Refined copper inventories in N. and S. America on June 1 were 398,667 tons, up 30,746 in May; rise was well above estimates; production of refined copper was 102,695 vs. 100,501 in Apr. and 132,183 in May 1930; shipments 71,949 vs. 86,785 and 124,875.

Japanese govt. decides against calling silver conference due to belief of bankers it wouldn't be useful, and to lack of enthusiasm among interested powers.

US Pipe & Foundry (gas and water pipe, benefits from municipal building programs) stock about 22, annual dividend $2, 1930 net $3.42/share vs. $2.74 in 1929.

Canada Dry Ginger Ale reportedly making “good 'come-back'” from poor first quarter thanks to sales expansion program started in April.

Company reports since Apr. 1: 211 companies reported higher earnings vs. 1930 and 753 lower; 926 dividends unchanged, 18 increased, 198 cut.

New book:

Yacht Racing - by Manfred Curry - Scientific analysis of aerodynamics of sails, based on studies of birds' wings and airplanes.

Movie:

Daddy Long Legs - Fox film, starring Janet Gaynor, at the Roxy. Disappointing remake of the silent film of 12 years ago starring Mary Pickford. Overly sentimental and carelessly produced. Most interesting person in the cast is a child of about six, who is natural and unhesitating. "The inevitable bit of diaper changing, evident wherever small children are filmed, again introduces itself. A further overdrawn attempt at 'cuteness' is the putting of smart words into the mouths of babes in their cribs." Story, as will be remembered, is a good one: Wealthy young man pays for college education of an orphan girl. When he visits the college, unknown to her as her benefactor, they fall in love. Calling on her benefactor to ask his opinion of the young man, she learns his identity; happy ending ensues.

Joke:

Shoe Store Customer - I must have square toes. Shoe Salesman - But square toes are not stocked now, sir. Pointed toes are absolutely fashionable this season. Customer - That may be, but I happen to be wearing last season's feet.

Ex-Capitalist - Many of us had seats on the Stock Exchange a year ago, and now ... look at us. Farmer - Many of us had seats in our pants a year ago, and now ... don't look at us. - Capper's Weekly