June 24, 2010

Wednesday, June 24, 1931: Dow 143.89 -1.93 (1.3%)

Assorted historical stuff:

US officials cheered by worldwide rally in financial and commodity markets following Hoover proposal for a one year suspension of reparations and war debt payments. Pres. Hoover is now canvassing Congress regarding the proposal, in lieu of calling a special session of Congress to register its sentiment; no official action is necessary before Dec. 15, after the next regular session convenes. "Pres. Hoover's action, so far as could be recalled, is unique in national affairs. It corresponds closely to the action of a corporation executive [who], when obliged to work fast, takes an informal poll of his directors or stockholders and then obtains official ratification ... at the next annual meeting." If it works, this technique may find frequent use during long recesses of Congress to let the President act without calling an special session. Latest reports indicate proposal will be accepted by all affected nations and become effective shortly; French govt. seen accepting plan, though possibly with internal political complications. Rumors of further international action to help the German situation received no official confirmation.

Editorial: World-wide reponse to the Hoover proposal has been impressive, but some risks threaten it; chief among these is apparent inclination of some nations including France and Italy to attach various conditions to their approval. Some of the stipulations may be worthy in themselves, but to attach them formally to the proposal threatens to delay or scuttle it, in a situation where "time is of the essence." A good example was set here by Pres. Hoover himself in renouncing any connection of the plan with disarmament proposals. The "financial and political breakdown of Germany ... must be prevented, and that within a very few months. Everything else can wait."

Noted economic forecaster George Bernard Shaw says believes the US will be exceedingly lucky to get any payments from Europe, and in fact will be lucky if she doesn't have to rescue Europe from financial oblivion. William Randolph Hearst comes out against Hoover proposal; says US taxpayers shouldn't be asked to pay any further price of "European war frenzy"; furthermore, "says that ... revision of war debts is purely a plan of international bankers who will benefit through commissions"; supports Coolidge for next US Pres. Letter to Pres. Hoover from German Pres. von Hindenburg was apparently not the reason for Hoover's sudden decision to publish debt proposal Saturday evening, since letter was not delivered until Monday morning.

Editorial by T. Woodlock responding to letter questioning whether US forgiveness of war debts would mean the US would pay much of the cost of a "war started between other nations and for which we were in no way responsible," and whether this in fact "might tend to encourage future wars, perhaps also at our expense." Woodlock sets the letter-writer straight. First, “it is about as certain as can be anything human that ... it will be many a long day before this country ... lends money to any other country ... for war or any other purpose.” If the war has taught us anything, it's that govt. debts “are, in fact, uncollectible the moment the debtor govt. is no longer willing to pay.” Second, the US has in fact lost much of the money in question in any case, since there's no realistic chance of collecting it. Third, attempts to collect it are likely to breed future wars. Finally, one certainty “is that any future wars on a large scale, whether we are concerned directly or not will be 'at our expense' anyhow, for all such wars as the last are at everyone's expense, and it is hard to tell, judging by the ultimate consequences, who 'won' and who 'lost.'”

Editorial: Pres. Hoover's apparent recent stand against all capital gains taxes on grounds they intensify both booms and busts may be logical, but is probably too radical a change for the US tax system. Current concept of capital gains as income is so deeply ingrained in our income tax system that its elimination would require "pretty complete rewriting and reinterpretation of this complex law."

Canadian Pacific liner Empress of Britain completes transatlantic crossing from Cherbourg to Father Point in record time of 4 days, 12 hours, 30 min.

Highest-paid official in Nassau County last year was the dog catcher, who made $17,760 averaging a catch of 341 stray dogs per week. His motto: "I just mind my own business and work hard."

New NY City elevator regulations become effective next month; allowable speed increased to 1,200 feet/minute from 700; regulations will permit double-deck cars and two cars within one shaft [Note: what could go wrong? dept.]

Market commentary:

Market wrap: Stocks experienced persistent profit taking and bear pressure in the morning and through mid-day. However, selling was absorbed in a narrow range and "stout resistance" developed to efforts to extend early setbacks; relative steadiness in leading rails and industrials was punctuated by continued bullish demonstrations in special groups including coppers, oils, and amusements. A brief rally around 1 o'clock was wiped out by heavy selling on disappointing steel production and freight loading reports; however, setbacks in leading shares were easily held to technical proportions. Bond trading slowed somewhat, prices irregular in some sections but mostly higher; S. American issues rallied while German and other European were steady; German bonds as of the June 22 close had advanced sharply from the year's lows, with gains ranging as high as 14 1/2 points; US govts were slightly lower again; speculative and convertible industrial issues "showed more vigor than for a long time"; highest-grade rails firm but second-grade narrowly irregular. Commodities weak; grains down substantially and cotton down moderately, though both recovered some ground from the day's lows. Copper buying was very heavy from both domestic and foreign consumers; price at 8 1/4 cents but expected to rise to 8 1/2 today. Silver down 5/8 cent to 28 1/4.

Conservative observers believe market acted relatively well in the circumstances; advise buying standard stocks on good-size reactions on theory market will feel positive "effects of latest constructive developments for some time yet."

Foreign markets generally lower on substantial profit taking. Foreign currencies were irregular as market awaited further developments on inter-govt. debt relief; marks were firm, and capital flight from Germany has practically stopped. Reichsbank position is improved, but still precarious; it was reported to have secured a $300M credit from the Fed. Reserve but this was unconfirmed; support from the BIS was also reported.

The short interest was "rather severely punished" by the recent sharp rebound; many had left the financial district for weekend holidays and so were unable to cover their positions until Monday; "at times, covering was urgent and heavy," some of it from foreign locations.

Oil industry observers encouraged by California advances in crude oil and gasoline prices; believe if East Texas situation was "properly adjusted" prices could be advanced from current record low levels in other sections.

A number of large consuming companies are said to have been buying commodities to replenish depleted inventories.

While some profit-taking was to be expected after the sharp rally in the past two sessions, "experienced analysts were generally of the opinion that the danger of an extensive reaction at this time was not great." Poor business news can hardly come as a surprise at this point, and therefore has likely been largely discounted. Technical indications strongly suggest that, even if stock prices eventually revisit the June lows, they should work higher for some time first, though undoubtedly at a slower pace. Advance through the 145-155 range would be considered highly significant.

Canadian Dept. of Trade and Commerce sees outlook for higher wheat prices due to low European wheat supplies, lower acreage in many countries, and poor North American crop prospects.

Recent "satisfactory manner in which ... pressing problems were adjusted" has led Wall Street to the inference that "the situation both here and abroad is under better control by the banking interests than most observers realize. Acute conditions in Berlin, Vienna, and elsewhere were handled rather quickly, although for a time considerable anxiety existed regarding the possibility of most disturbing developments at those centers."

J. Pelley, NY New Haven & Hartford RR pres., says "no indication of improved business conditions to be found at the present moment."

Viscount Bearsted, Shell Transport & Trading Ltd. chair., says "cannot hold out rosy prospects for the current year." However, oil industry concerns a vital requirement of civilization, therefore must continue to exist, and will be one of first industries to revive when world conditions improve.

Well-informed opinion” in Washington holds that the farm mortgage situation is due to improve, thanks to low money rates, commodity prices nearing bottom, and farm costs likely to fall. However, a possible adverse factor is farm taxes, which remain relatively high.

Economic news and individual company reports:

Bank of US officials sentenced: B. Marcus (pres.) and S. Singer (exec. VP) receive 3 to 6 years; H. Singer "an indeterminate sentence in the penitentiary."

NY State Comptroller Tremaine denounced gossip about banks and securities; "particularly wants to protect banks from the gossip that drifts through Albany from politicians, representatives of investment houses and sometimes even banks themselves." [Note: from banks themselves - inconceivable!]

Weekly bank statements continued to reflect drastic security loan liquidation. However, "all other" (commercial) loans rose $12M after declining only moderately for several weeks; this may indicate business loans are about to expand in normal seasonal fashion. Continued decline in non-govt. security holdings "is difficult to explain by any other reasoning than that banks as a group desire to maintain an extremely liquid position." Society for Savings, one of the largest mutual savings banks in New England, cut mortgage rate 1/2% to 5 1/2% [note: not sure what the term was].

Rail freight loadings for week ended June 13 were 732,453, down 28,437 from prev. week, down 20.9% from 1930 week, and down 31.5% from 1929. ICC allowed rails to cut rates on cotton from Mississippi valley to New Orleans to meet truck competition.

Steel production for week ended Monday was 35% vs. 38% prev. week, 39% two weeks ago, 66% in 1930, and 95% in 1929. Amer. Metal Markets says just as breaks in the stock market led to noticeable decreases in steel buying, "there is excellent reason for believing that the debt moratorium with the rise in the stock market will have a distinctly favorable influence on the buying of steel" due to improved business sentiment. "This may not result in heavier operations within the next few weeks but should serve to reduce the usual seasonal decline." American Machinist says tool markets remain inactive.

Refineries ran at 66.8% in week ended June 20; stocks of gasoline fell 1.428M barrels to 41.982M, lowest since Jan. Crude oil production in week was 2.482M barrels/day, up 19,250 from prev. week and down 116,500 from a year ago. Two large groups of East Texas oil producers disagree on methods to correct overproduction. Oklahoma Federal Court to hear application of Champlin Refining for permanent injunction against state enforcement of curtailment. Standard Oil of NJ cuts price of gasoline in "tank car lots" in NY by 1/4 cent to 5 1/2 cents. A. Clinger of the Warren County Assoc. of Oil Producers says Pennsylvania oil producers "faced with the absolute necessity of lowering the present production."

President's Emergency Employment Committee reports total contracts for public works since last Dec. 1 were $1.769B.

German govt. raised taxes 3 times in 1930, but is now enacting a “veritable book” of further tax increases and spending cuts to cover a 1.8B mark deficit, including higher taxes on income, sugar, and gasoline, and cuts in unemployment insurance, govt. salaries and pensions; almost all industry will be put on a 40-hour week.

British govt. to introduce bill to borrow $125M more for unemployment insurance fund, bringing total debt of the fund to $575M.

European tobacco use in 1930 was about equal to 1929, but down 0.5% excluding Britain, which was up 2.5%; prices were generally maintained.

NY Chamber of Commerce comes out in favor of 15% rail rate increase. Almost all states west of the Mississipi seen opposing rail rate increase.

Tentative settlement reached in Pittsburgh Terminal Coal Co. strike, providing for wage increases, full recognition of United Mine Workers Union, and "right of the miners to elect a check-weighman."

Bureau of Agric. Economics reports percentage of total farm cash income from different products during 1925-29: cotton 14.59%, milk 14.52%, hogs 12.91%, cattle and calves 10.05%, eggs and chickens 8.13%, wheat 7.89%.

Breakdown of NY City transit unification conferences threatens as result of disagreement on price city is to pay for BMT and IRT; difference is about $8.6M.

T. Watson, IBM pres., reports IBM's European sales in April and May were up about 22% vs. 1930.

Companies reporting decent earnings: Woolworth Ltd. (British affiliate), Brooklyn-Manhattan Transit, Hamilton Woolen Co.

Movies:

Confessions of a Co-Ed - a Paramount film, "based on an anonymous diary." Story is a letdown from the sensational title, being "a very mild confessional, concerning indiscretions no more extraordinary than a 'free love' relationship and the 'co-ed's' subsequent marriage to another man to protect the child to be born." Happy ending ensues when, 2 years later, the girl's first and only real love returns from South America, learns of his child, and the "false marriage" is dissolved so the girl and her college sweetheart can start over. Fortunately, acting and direction are superior. Norman Foster is likable as the young man who marries the girl but later nobly gives her up when "he learns of his friend's prior claim." [Note: nobly giving up the girl seems to be a common theme in movies of the time ...]

Versuchen Sie Meine Schwester - Another infectiously funny German musical comedy; this one concerns Anny Spatz, maid to a theatre star, and her machinations to tread the boards herself and meet Vienna's matinee idol Julian Holt.

Joke:

Farmer - If I were as lazy as you, I'd go and hang myself in the barn. Hobo - No, you wouldn't. If you were as lazy as me, you wouldn't have any barn.

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