Tuesday, June 30, 1931: Dow 152.67 -4.26 (2.8%)

Assorted historical stuff:

Agreement not yet reached on Hoover debt plan in negotiations between Sec. Mellon and French officials. However, delay was attributed to technicalities and negotiations continue positively. British PM MacDonald announced acceptance of plan in principle by govts. of Canada, Australia, New Zealand, South Africa and India. Belgium and Austria also accepted plan. Pending meetings of Commission on European Union adjourned until outcome of Hoover plan settled.

German people, "Cabinet ministers and taxicab drivers, worried directors of the Reichsbank and humble merchants, ... high and low await word from Paris and from Washington that the last obstacle to Herbert Hoover's debt moratorium proposal has been removed. ... Three roads lie before the Germanic peoples today - the Hoover road to normal rehabilitation as mapped out by centuries of capitalistic experience; the Fascist road as defined by the Hitlerites, which means debt repudiation and a revival of the nationalistic, swashbuckling, imperial spirit; and the route to thorough communism, leading down the red Russian road to complete collapse of the existing Germanic social order." Although acceptance of the plan will only reduce a heavy tax rate by about 7%, the gesture has had a tremendously positive psychological effect throughout the land. Current German predicament is "not new in economic history," being a classic story of boom followed by "inevitable ... deflation and collapse"; current situation is serious, with over 4M unemployed of the total 60M population; however, there are some optimistic signs including recent revival of output in many branches of industry and trade surplus in the face of worldwide depression.

Sen. Smoot (R, Utah), after visit to White House, says doesn't foresee any Congressional opposition to Hoover debt plan, or need for extra session. Doubts anything can be done about silver situation at present due to time being taken by consideration of debt plan.

Editorial: The "suddenly awakened interest" of some Midwestern congressmen in Philippine independence appears to be due more to their desire to erect tariff barriers against Philippine products including coconut oil and sugar than to the "star-spangled cloak of freedom." Filipino leaders themselves have said they want independence but with a transition period of military protection and access to US markets. We shouldn't abruptly abandon "13M islanders to a chaos like that of China" and set up one more "focus of disorder" in an already unsettled Asia.

Honduran govt. officials predict end of revolution after killing of revolutionary leader Gen. Ferrera.

Editorial by T. Woodlock reviewing article by C. Edge in current issue of “World Petroleum” containing a number of interesting assertions backed by statistical evidence, including that the oil industry has “reached the highest possible demand for its products that can be supported continuously by the people of the US,” that the farmer can't support a car on his income and is paying for it by mortgaging his property, and, most intriguingly, that the car is responsible for the decline in average birth rate from 24.2 in 1915-21 to 18.3 in 1930. Woodlock is dubious on whether the last item represents causation or just correlation, but acknowledges the industry has “social implications of profound importance ... Mr. Edge's suggestion as to one of these implications has certainly the merit of originality, and it may contain at least some truth.”

After 14 years of breeding experiments, USDA scientist Dr. John Parker has developed a promising new variety of wheat resistant to cold, drought, and disease.

Deepest mine in the world is a gold mine in Morro Velho, Brazil. The miners' journey 7,500 feet below the surface takes four hours and must be done in three stages - elevator, cable car, and "iron dump car attached to strong steel cable." An average of 17,000 tons of ore is lifted to the surface each month. Gold mine at Perth, Australia called the Sons of Gwalia, which Pres. Hoover helped found 33 years ago, has yielded total of 50 tons of gold valued at $32.5M.

Catch o'the day - A fisherman on the Seine River in France recently hooked a fine pair of church bells which had been thrown there at the time of the French Revolution to prevent their being cast into cannon.

Melvin Traylor, 52, pres. of First Nat'l Bank of Chicago, one of the largest banks in the US, was raised in the "Kentucky backwoods"; he didn't get his first pair of shoes until the age of 7, and saw his first railroad at 19.

Bank and trust officials have grown to detest bad weekend weather even more than the general public; they've found that clients forced to remain indoors will often spend at least part of the time going over their securities and checking their financial status; "the thousand and one questions which arise must be answered Monday."

Market commentary:

Market wrap: Stocks opened weakly, following European markets lower on news of delay in agreement on Hoover plan; major industrials and rails experienced good-sized setbacks. Trading slackened as prices worked lower, and general list settled into narrow range at mid-day, remaining "listless and largely devoid of special features" for rest of the session. Bond market turned dull with prices mildly reactionary; US govts. steady; foreign issues slightly lower; rails irregular; public utilities firm; industrials mixed with continued gains in some weaker issues. Commodities mixed; grains up strongly on reports of hot, dry weather in US and Canada; cotton down sharply on technical setback. Copper rose 1/4 cent to 9, making a rise of 1 1/4 cents since some metal was sold at 7 3/4 on June 20; foreign buying continued in good volume while domestic was very light. Silver fell 3/8 cent to 29 1/8.

Conservative observers continue to favor accumulation of standard shares on reactions, protecting accounts with stop-loss orders.

Observers were encouraged by lower volume during reactions. Brokers report many customers are still on the sidelines, even though they are carrying large credit balances in their accounts. The public has apparently been more cautious than traders in entering the market, although those who missed the sharp recovery starting 10 days ago are picking up shares on minor reactions, and "a good sized setback would increase such a demand."

Apparent govt. determination to remedy conditions that have unsettled business has caused many to speculate farm relief may be next; one authority suggests govt. purchase of cheaper farmlands for reforestation in order to reduce acreage planted.

While "optimism ruled in important quarters" on the chances for further stock gains later on, a "breathing spell" was expected by many based on the rapid gains in the past two weeks, and by market's reaching the important technical level of a 50% recovery from the previous decline, which would be expected to draw some resistance to further advances. In addition, price movements so far in 1931 have consistently paralleled those in the 1919-21 bear market, which hit bottom on Aug. 24, 1921, had a similar sharp rally to the recent one until Sept. 13, and then moved sideways for over a month before resuming the uptrend.

Saturday marked 10th anniversary of the NY Curb Exchange's [later the Amex] move indoors from the "picturesque outdoor market which prevailed for many years on Broad Street." During that decade, the Curb has grown in size and prestige beyond the most optimistic predictions. 10 years ago the Curb list was mostly non-dividend paying, low-priced issues; now more than half pay dividends and are accepted as collateral by banks; the list includes almost every important US industry and many foreign businesses. The new addition to the Curb Exchange building will be dedicated in mid-July.

Although scrap prices are the lowest in many years, recent substantial buying by US Steel and Bethlehem is encouraging since “the large interests usually know when scrap is at bottom, and as a rule take the lead in a buying movement.”

Harvard Economic Society says conditions now favorable to stabilization of commodity prices; prices in June "were already showing some signs of stabilization" before the Hoover plan; adoption of the plan "will probably improve commodity markets ... considerably earlier than could otherwise have been expected."

Editorial: Fisher's commodity index has now advanced two weeks in a row. While the rise, from 69.7 to 70.3, is admittedly modest, and "one swallow is not regarded as the herald of summer," this turn at least "gives hope that the downward course that has been proceeding all too rapidly has been arrested and may turn upward." Commodities may have been "a more sensitive barometer of world conditions than anyone realized"; they hit a low point before the public was aware of the international crisis, and have promptly rebounded as the Hoover plan was proposed "almost at the zero hour," and enthusiastically received. The decline in commodities has in fact strained the world credit system. Many explanations are advanced for the great price declines, and for surpluses of "wheat when people are hungry, of cotton when people need clothing." However, at least one very large reason is "lack of confidence," on which credit depends, and which is "changeable as thought." This now seems to have been helped, and successful conclusion of the plan should be reflected in improved commodity demand.

J. Raskob (GM exec., Democratic Nat'l Committee chair.) says Hoover plan a very constructive move, should help materially in stabilizing the world economy. Names two main issues for the 1932 election as Prohibition and tariffs; believes tariffs must be lowered to restart world commerce.

Economic news and individual company reports:

The US govt. will close the fiscal year with a deficit of about $860M, the first since Treasury Sec. Mellon left private business to take his office 10 years ago. Govt. faces a difficult test in the coming year, with another and probably much larger deficit expected. The Administration is expected to avoid a tax increase at the next session of Congress by cutting spending and issuing long-term bonds. However, a new tax plan is likely to be put before Congress after the 1932 elections, which will increase taxes and to some extent switch to more stable forms of taxation offering revenues that fluctuate less with the ebb and flow of business. Prohibition opponents have again advanced repeal as a means of closing the deficit and even cutting income taxes; estimated revenue from 17 states alone would be $906.4M.

Central banks have reportedly arranged for their deposits with the BIS to provide “a permanent emergency fund of about $40M for intervention in any menaced market.” Reichsbank lost about 30M in foreign currency Monday, but this was believed due to withdrawal of maturing short-term loans at end of first half rather than capital flight. Marks were slightly higher on the day; guilders continued to decline but Swiss francs rallied sharply. Stock prices in Berlin were lower, but this was held to be a normal technical reaction to the very sharp rally last week, in which some stocks rose as much as 40%. British pound was lower, but this was held due to an anticipated bank rate cut made possible by a stronger gold position rather than to any unsatisfactory condition. Election victory of Spanish conservatives didn't cause much movement in pesetas.

White House request that Farm Board decide on a more definite policy on disposing of its surplus wheat has caused much comment in grain circles; the request was interpreted to mean Pres. Hoover wants the Board to hold the surplus for a designated time, but the Farm Board reaction is still uncertain. Three Western Canadian provinces will give banks $22M in provincial bonds as compensation for losses on guaranteed advances made by the banks to the Wheat Pool.

Eastern railroads probably will hold final meeting on consolidation Tuesday, at which all remaining details will be worked out; plan likely to be presented to ICC on Wed. or Thurs.; this would mark end of merger conferences begun almost 7 years ago.

Automotive output in US and Canada in May was 327,853 cars and trucks vs. 352,867 in April and 444,699 in May 1930; first 5 mos. 1.378M vs. 1.960M.

Arguments heard for “certificate of reasonable doubt” for convicted Bank of US officials, which would allow them to go out on bail pending appeal. Counsel for S. Singer complained that the trial judge practically directed a verdict. NY State Republican chair. Macy asks Gov. Roosevelt to reconsider decision to retain J. Broderick as State Supt. of Banks.

US Veterans Bureau announces new soldier bonus loans disbursed in the past 4 month have reached total of $793M, to 2.064M world war veterans.

Some definite action expected on NY City transit unification in the next 10 days; Transit Commission is making determined effort to prepare plan for adoption before July 7; progress reported on BMT demand for $7M more than provided for in Untermeyer plan. S. Untermeyer working on new NY City transit unification plan removing BMT as operator of city subway system now being built (8th Ave).

Commerce Dept. estimates US investments in securities and industrial development in Europe at $4.4B-$5B; largest part in Germany, $1.350B-$1.525B.

Colombian Pres. E. Herrera assures his Congress Colombia will meet all her financial obligations. Argentine Fin. Min. E. Uriburu says country can meet all financial obligations without need of moratorium or other arrangement. Chile will bring US and British banking interests in to investigate the country's financial situation, particularly its govt. obligations; will attempt to avoid moratorium on debt payments.

Companies reporting decent earnings: Sierra Pacific Electric.

Jokes:

Attorney 1 - Well, how's business? Attorney 2 - Rotten. I just chased an ambulance twelve miles and found a lawyer in it.

Amateur poet - Dear Editor, will you please read the enclosed poem carefully and return it with your candid criticism as soon as possible, as I have other irons in the fire. Editor - Dear Sir, please remove the irons and insert the poem.