June 9, 2010

Tuesday, June 9, 1931: Dow 136.40 +6.01 (4.6%)

Assorted historical stuff:

Editorial: The Breuning govt. in Germany has staked its survival on making progress toward reduction of reparations, without which it can't hope to get popular approval for its austerity program. What would follow collapse of the Breuning govt. is impossible to predict; "A Teutonic brand of fascism would be little less troublesome for the world than a Germany going communistic." The US and France have been skeptical on the urgency of Germany's predicament, but it may soon be demonstrated; while the Breuning govt. is operating with emergency powers, it can and no doubt will be called before the Reichstag in extraordinary session to report on the results of their London meeting and defend their austerity decrees. It's clear that the course of German politics will now depend on the attitude of other European govts. and in turn on Washington's attitude on war debts. If the Breuning cabinet can survive until Secs. Stimson and Mellon arrive in Europe, a British-US attempt should be made to bridge the reparations crisis.

Interesting editorial by T. Woodlock on current US feeling regarding Europe. “Our national psychoanalyst readily would discern a 'superiority complex' ... We feel that we have rid ourselves of the out-worn ideas that still plague Europe, of which its troubles are the just and natural consequence ... So we gather our skirts around us and declare that we will have nothing to do with these unseemly squabbles, and we look askance at all things 'international' - particularly bankers! ... Whence the complacence and self-confidence? It is something more than the ordinary national pride ... It is a settled mental conviction rather than an emotion.” Explanation is greater space available in the US. “We never have been crowded. In the Old World, there long have been two men after each job, ... a man at one's heel and a man at each elbow. Here, we could always move on into open spaces ... Nor have we ever known what Europe ... calls 'hard times.' What we call 'hard times' are no worse than the normal routine of life for most of Europe, year in, year out.” Calls for introspective common sense, humility and sympathy; “as a practical matter the 'isolation' on which we so earnestly insist for ourselves” may eventually prove “the worst kind of 'entanglement.'”

Editorial: The menace of Russian wheat exports to North American farmers may be exaggerated. Spring wheat seeding is reportedly late, particularly in the Ukraine and Lower Volga; outlook for yields is not good; while nature may help Russia as she did last year, "Lloyds would hardly insure the chance." Russian officials are giving estimates of production far higher than 1930, "but paper statistics are not always the same as wheat." Russia exported about 95M bushels from the last crop; this is a significant amount, but reportedly led to bread prices as high as $1.25 a loaf in Moscow and recent bread riots there. "Russia may temporarily disturb the wheat market but she cannot for long disturb it when obliged to starve her own people."

AFL pres. Green says rumors AFL would agree to 10% wage cut "positively untrue." Labor Sec. Doak repeats support of existing wage scale.

Over 1,600 employees of Empire Steel, who struck against wage cuts 3 weeks ago, marched en masse to company officials and said they wanted to help during the company's financial crisis (now in "friendly" bankruptcy); volunteered for 3-month 5% wage cut.

Navy Dept. anticipates savings of $25M as result of plan worked out in weekend conference between Pres. Hoover and Navy officials.

Treasury Sec. Mellon to sail for Europe; will spend 6 to 8 weeks in France. Sec. of State Stimson also travelling to Europe.

Rep. La Guardia asks War Dept. to refuse deliveries from Wright Aeronautical Corp. until it reestablishes prevailing rate of wages in the area.

Dr. C. Pabst, chief dermatologist at Greenpoint Hospital, estimates annual loss of 200,000 working days caused by sunburn, in many cases deliberate.

New Canadian tariff of 15 cents/pound on US publications likely to be relieved on case-by-case basis after publications satisfy the Fin. Min. "that they do not carry cheap sex or crime stories. ... It is said that the Canadian govt. has no desire to prevent entry of the better class of American publications."

Canadians hold distinction of world's most talkative nation, at least measured by telephone usage. In 1929, Canadians held 257.7 phone conversations per capita; the US was next with 231 and New Zealand with 212. In cities of over 50,000 Canada had 23.3 phones per 100 people; US was next with 22.9.

Increased popularity of foreign beers in Belgium has caused Belgian brewers to spring into action. Brewers have recently organized a research bureau to improve their products. A school for master brewers was started in Brussels in 1925; last term there were 45 pupils, of whom 12 graduated "with grand distinction."

The advertising medium of matchbook covers, once largely restricted to makers of nationally advertised products, is becoming more widespread; users include hotels, musical comedies and nightclubs, and even charitable institutions; covers have appeared in Dutch, Swedish, and other languages.

Market commentary:

Market wrap: Stocks opened under pressure as sell orders accumulated over the weekend and bears renewed operations; prices worked generally lower, with sharp declines in major rails. However, liquidation dried up after first hour setbacks and support came in on reactions; pressure was lifted from the rails toward noon and better tone spread across the list; NY Central staged a robust rally and major industrials joined in, with American Can particularly strong; rally carried on up to end of session. Bond trading very quiet, prices irregular; US govts. steady; S. American mostly higher; European generally steady but German lower; highest-grade corp. steady but lower-grade rails and some other sections that rallied sharply last week turned lower. Commodities mixed; grains heavy, with wheat down substantially on reports of some Canadian rain and good French crop; cotton closed up moderately after rallying from a new 16-year low. Copper buying quieter, price remained at 8 1/4 cents.

Market sentiment cheerful; observers who had predicted further recovery and advised buying were encouraged by resistance shown to reactions; some favored using stop-loss orders to protect accounts, raising limits as the rally extends.

Bears have been confident that the market will have a secondary reaction to around last week's lows after the recent sharp rally; this would follow precedent. However, after the recent rally investors now seem willing to step in on setbacks and pick up stocks with "well-fortified" dividends and high yields; this should provide "more ammunition to fight the bears than ... for many months." Short covering and buying by the public were reportedly heavier. Many believe that “floating supply” of stock has been shrinking; investment demand around recent lows was likely heavy, and buyers removed stock from the Street.

"Interests close to the bankers" say there may still be some "liquidation overhanging the market" since there are "still a few situations remaining to be cleaned up." However, this liquidation was not as urgent, and those with the securities to dispose of could wait for a good technical recovery to get well under way before selling.

Rail strength in recent sessions attributed to "growing belief that a demonstration will be made in the carrier group" after application for a rate increase is filed.

Early weakness in NY Central reflected nervousness on dividend cut at Wednesday's meeting. Pennsylvania RR also weak after report of Q1 loss. Chrysler is trading about 17, with net working capital over $15/share; had Q1 loss but is seen making a good showing this quarter.

Although recent pressure carried Insull Utility Investments down to the low 20's, it is still trading at one of the highest premiums over breakup value of any holding company; breakup value at end of 1930 was $4.55/share and is now likely to be considerably lower.

Calif. oil industry more optimistic than in several months due to recent production cuts; expect rise in crude oil prices within a few days.

Harvard Economic Society says "latest evidence justifies the view previously expressed that we are approximately at the bottom of the business depression," notwithstanding unsatisfactory developments in May. "Cyclical decreases in business have limits, both in extent and duration, and the limits of a major (but not exceptionally long) depression have now been reached." Note widespread gains in manufacturing activity since last Nov., when seasonally adjusted. Very unfavorable conditions in other countries may prolong US depression, but they haven't prevented an improvement in business volumes this year.

D. Friday, economist, predicts by this coming Jan. US production will be 25% higher than last Jan.; this won't mean a return of boom times, but will be proof of an upturn. "In fact, business is on the way up now. Production as measured by the Federal Reserve index" has been rising since start of the year. "Investigation has shown that during depressions the income of the people as a whole falls only 15% to 18% from the high levels. Income from dividends this year will be within 15% of the biggest year we have had, 1929."

Interesting ad calling for optimism by North Amer. Trust Shares: “I believe in the ability of the American citizen to swim upstream, hit fast ball pitching, break out of a half-nelson and have a pretty good time in the bargain ...”

Economic news and individual company reports:

Creditanstalt losses to date estimated at over 300M schillings; gains additional 100M schilling credit from B.I.S. and central banks. French govt. reportedly close to agreeing to discount half the recent 150M Austrian Treasury bond issue. Marks were steady, but this was attributed to active support by the Reichsbank; heavy withdrawal of British funds was reported due to the Creditanstant difficulties. Stocks in Paris broke sharply, losing all the gains of last week's rally; fall attributed to German demand for revision of reparations.

After a conference of leading bankers lasting 40 hours, two Chicago bank mergers were announced, producing two of the country's largest banks. First National absorbed Foreman-State, with $200M in deposits, which had run into trouble; to insure against loss, Foreman stockholders raised a guarantee fund of $2.550M and the Chicago Clearing House contributed $10M. First National will now have about $770M in deposits. Also, Central Trust Co. and Nat'l Bank of the Republic merged to form Central Republic, with $295M deposits. Business at the merged banks went on normally but six smaller "outlying" banks were closed.

I. Kresel, chief defense witness in Bank of US trial, denies his own grand jury testimony regarding $8M transaction of Jan. 1930; judge had to admonish him several times to avoid sharp comments when answering cross-examination questions. Committee of Bank of US stockholders and depositors asks NY State Supt. of Banks to sue for recovery of $25M from directors and discontinue bank branches. Banking dept. points out suit now would endanger reorganization plans.

Leading chain retail systems in May continued impressive showing; dollar volume was behind last year but it's likely tonnage was ahead due to price reductions. First 17 chain store and mail order cos. to report showed May sales of $142.3M, down 6.2% from 1930. However, most of the decline was due to a 25.9% drop in Montgomery Ward sales because of liquidation sale in 1930; excluding Ward, sales were only down 2.4% and 3.1% in the first 5 months.

Texas Gov. Sterling says will decide soon on calling special session of Legislature to deal with East Texas oil situation. "Some of the brainiest man in the industry say they don't know the solution or what should be done, so what can be expected of a poor governor ... Everyone might as well go fishing for a week for it appears no decision be reached until then."

It's become evident the proposed rail freight rate increase will be strongly opposed before the ICC; the Nat'l League of Commission Merchants, representing shippers of 1M carloads of produce yearly, said freight charges are already excessive and announced a program of "strenuous opposition."

Spanish Fin. Min. Prieto attributes fresh rise in banknote circulation to hoarding; proposes new stabilization loan and agreement with France by which Bank of France will discount commercial bills; also sees possible agreements with US regarding imports of oil and other merchandise. Peseta futures are now trading at a discount, and banknote circulation is "rapidly mounting," now reaching 5.293B pesetas vs. low of 4.604B on Mar. 28.

Canadian report: New Canadian tariff seen having mixed effect; will benefit some industries but, together with general tax increase, certainly increase living costs. Canadian Bank of Commerce estimates industrial output about at 1927 level, but output sold at abnormally low profit; this "may seem discouraging, but ... we find that such a degree of retrogression is less than in most other countries." New Canadian building awards in May were $36.9M, largest monthly total this year and 62.5% over April; first 5 months were 28.3% below 1930.

Three US and one British oil co. have almost completed negotiations for loan of over $10M to Mexico to be used for govt. payments in arrears due to heavy revenue decline. This is first financial transaction between the oil companies and the Mexican govt. since Doheny interests loaned the Obregon administration $10M in 1923 to suppress the De La Huerta revolution.

Revised NY City transit unification plan prepared by S. Untermeyer was announced; contained no important revisions in price to be paid for traction [mass transit] company properties. NY City traction shares and bonds rallied; securities are all selling considerably below figures to be paid in the plan, although final action is unlikely for several months since plan must go through several approvals. It would be very desirable for the plan to go into effect by Dec. 1, when the new city subway will be ready for operation.

Chicago and Cook County local govts. will be forced to reduce 1931 spending by $30M or 15% as banks won't lend more than 60% against anticipated taxes.

American Can pres. Phelps says sales so far in 1931 about 8% under record 1930 level, but expects to make up decrease; urges co. salesmen to buy stock.

R.H. Macy reports unit sales in past week were up 42% over 1930 in response to “their campaign to cure the depression.”

Companies reporting decent earnings: Hufvudstaden Real Estate (largest owner of city real estate in Sweden, affiliated with Kreuger & Toll).


Never the Twain Shall Meet - "somber South Seas offering" starring Leslie Howard, at the Capitol. Audiences will highly enjoy the live revue starring Ted Lewis and his "orchestra and a bevy of entertainers ... quite the best revue now appearing off the legitimate stage." Once the movie starts, however, the quality drops off considerably. Mr. Howard is the vacillating Daniel Pritchard in this remake of a decade-old silent film; he woos and wins Tamea, a "South Sea passion flower," becoming a beachcomber in a "rather silly" sequence, but ultimately realizing that East is East, West is West, etc., and returning to his fiancee. "Conchita Montenegro, a Spanish newcomer ... has the role of Tamea, which Anita Stewart played with half the wiggles and twice the success in the original silent version." Karen Morley plays Daniel's long-suffering "cool, lovely fiancee Maisie Morrison" to whom he finally returns.


Matrimonial Agent - You don't like any of these photographs? I'll show you one more, and if that's not suitable I can do nothing for you. Now, how about this one? Client - Yes, that is just the type of lady I like. Agent - Then what about an interview with her? Client - Unfortunately, I already divorced her.

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