June 3, 2010

Wednesday, June 3, 1931: Dow 121.70 -1.07. (.9%)

Assorted historical stuff:

At the US Governors conference in French Lick, Indiana, crusading Gov. Gifford Pinchot of Pennsylvania defied the conference committee's attempt to exclude controversial subjects, and discarded the topic he was assigned of "Timber Needs of the Future" to deliver a blistering attack on four major utility interests that he claimed control about 90% of US electric power generation and work together for the common goal of milking the public. "As the nation deals with electric power, so shall we and our descendents be free men, masters of our own destinies and our own souls, or we shall be the helpless servants of the most widespread, far-reaching and penetrating monopoly ever known." NY Gov. Roosevelt delivered a somewhat moderate [and wonky] sounding four-point plan for US govt. to do what it can to overcome depression, including scientific tariff designed to aid movement of commodities between countries, better system of national taxation, cutting excessive costs of local government, and extension of insurance to cover sickness and unemployment.

Delegation of economists, labor leaders, and unemployment committee officials headed by B. Marsh of the Peoples lobby called at the White House Monday with letter to Pres. Hoover asking for a special session of Congress to relieve unemployment; delegation did not see the President. Pres. Hoover's Emergency Employment Committee reports contracts for public and semi-public construction projects in past 6 months were $1.623B.

Editorial: Expected request by the German govt. for modification of reparations may follow two possible paths. The Young Plan allows for postponement of part of reparations payments; separately, the allies have an option to postpone part of their war debt payments to the US. However, this may not be enough relief for Germany, and relief for allies would be uneven, with France getting the most benefit. It seems highly likely that Germany will ask for more extensive relief, and that the US will be asked to forego all or part of the annual $228M it receives in war debt payments, and even to "reopen the whole account" of reparations and debts. "We may expect, then, that before the month is out the US will be more squarely face to face with Europe than it has been at any time since the Armistice."

Letter to the editor arguing that depression would "end in 30 days" after repeal of Prohibition. Lists benefits, including govt. revenue from excise tax, saving of large spending on enforcement, increased commodity prices and railway traffic, and immediate benefits to "not less than 600 industries."

Editorial by T. Woodlock: Accurate and complete picture of the short interest to be gathered by the NYSE questionnaire, together with the earlier one in fall 1929, should throw much light on the subject of bearish speculation, "concerning which so much heated rhetoric is lavished from time to time." Bears are generally much smaller in number than bulls, and therefore tend to become more prominent than bull operators, even though "the latter marches in the open with a brass band while the former seeks to cloak himself in an atmosphere of dignified silence and cloistered seclusion from the vulgar crowd." Part of this may be due to a desire to avoid revealing "feet of clay." Bear operators can more easily "pyramid" their operations on small capital, and bear markets tend to cover ground more quickly than bull markets, "fear being naturally a stronger motive than hope." This has lead to many meteoric episodes of sudden wealth for bears, but "it is a curious fact that the annals of the Street are lacking in the names of men who have made and kept large fortunes by speculation on the short side."

John Calder, steel construction engineer from the US, appointed supervisor of Soviet steel building trust uniting 90 plants.

US will withhold recognition of Edwin Barclay, newly elected Liberian Pres., pending reforms of "existing slavery and sanitary conditions."

Chemists at Nat'l Research Council in Ottawa invent new process for producing ethylene from natural gas, offering prospect of making some use of over 10,000 tons of natural gas being wasted daily in the province of Alberta.

A recent survey of US tourists who visited Europe during 1930 found the most common reasons given for travel were: "educational interests, Passion Play, pleasure, love of travel, recreation, health, to fulfill a desire for adventure, curiosity, and the sea voyage. One woman mentioned shopping as her incentive." Of the 2,000 respondents, 48% were under 30; 68% said they received more than anticipated, over 25% received what they anticipated, and only 5% were disappointed.

Population of Paris is 4,887,503, an increase of over 32,000 from 1926.

Total of 1.160M vehicles passed through the Holland Tunnel in May, a new monthly record.

Analysis by Columbia University professors of the Untermeyer plan for NY City transit unification approves of it; says plan "points to an early time when the city's rapid transit commitments can be carried at an annual budget charge of less than $20M."

Market commentary:

Market wrap: Stocks were forced to absorb further liquidation, but selling appeared to be "approaching temporary exhaustion." Sell orders accumulated overnight due to "unloading of impaired marginal holdings"; US Steel and several major rails hit new bear market lows. A sizeable rally developed around 11 o'clock but petered out as fresh selling broke out around noon; selling broadened across the list in mid-day and market turned irregular in the last hour. Bonds active, generally lower; US govts. firm; foreign reactionary; corp. highest-grade firm but rest of the list weak led by rails, with many new lows. Commodities mixed; grains somewhat higher in spite of bumper crop estimate; cotton down substantially to new lows, with July at 8.28 cents. Copper remained at 8 1/2 cents; foreign buying better after price lowered to parity with domestic.

Sentiment is slightly improved; more than a few observers are still talking of a possible good technical rally, though they haven't yet advised buying in anticipation. While bulk of the afternoon buying was attributed to short covering, there seemed to be more resistance to selling and some new buying by the public. Some traders have adopted a strategy of selling companies with suspect dividends short as directors' meetings approach; "this maneuver has worked out satisfactorily on more than one occasion" as the number of dividend cuts and omissions has been increasing recently. Some public liquidation seems driven by concern that dividends may need to be cut even if business has hit bottom, since it may stay flat for a prolonged period.

List given of 25 NYSE-listed stocks that have declared regular quarterly dividends since May 1, but are trading to yield 10%-15%, including Briggs & Stratton, General Baking, International Cement, Wesson Oil, White Rock. International Match [Ivar Kreuger-associated] officials say company has shown consistent sales improvement so far in 1931. National Distillers is expected to earn about $2.50/share this year, over double the 1930 figure; co. is benefiting from liberalization of government rules on medicinal whiskey. Westinghouse is reportedly "one of the popular targets with a certain bear group."

NY City traction [mass transit] shares have been resilient as progress is seen on transit unification; differences on price are said close to being settled.

Will R. Hays, Motion Pictures Producers & Distributors of America president [creator of the Hays code that dictated many restrictions observed by the US movie industry from 1930-1968] says "fear has seized the wheels of progress and jammed the brakes"; blames continued depression on lack of financial leadership.

The Administration and some market observers believe large wheat crop will be positive for general business this summer.

J. Bell, General Mills pres., says wage cuts, "all other things being equal ... will make for greater and not less unemployment." A. Roeder, pres. of Colorado Fuel & Iron (largest employer in Colorado) makes strong statement that "no benefit" can come from wage cuts.

Current discussions of stock market and economic conditions tend to stress that the problems now facing us are different from past depressions. However, “similar comment was heard in every depression in the past.” Each crisis brings its own conditions, but they've always been solved “almost without outside aid. ... This will happen again.” Capital is plentiful and cheap; most corporations are in satisfactory financial condition. “Undoubtedly, leaders of American business will show the same aggressiveness at the appropriate time” as in the 1921 depression, “when the foundation for nearly a decade of progress was laid.”

Dow industrial average closed at a new bear market low; there were 2 new yearly highs and 389 new lows.

Bear market is now by far the worst in the 34-year Dow Jones records; the industrial average is down 68% from its peak vs. a 46% decline in the 1921 bear market and a 48% decline in the 1907 bear. In addition, the current downturn that started on Feb. 24 has now seen a decline of 37%, surpassing the severe break from Sept. 10 - Dec. 17, 1930. Some observers now believe the market is "in line for a technical recovery, irrespective of outside economic considerations."

Economic news and individual company reports:

Viennese banking firm of Auspitz Lieben insolvent; liabilities about $5M.

Sir R. Squires, Premier, says Newfoundland not bankrupt and financial condition not as serious as reported.

Spanish govt. demands all Spanish banks turn over proceeds of foreign operations; forbids exports of food and raw materials. Fin. Min. Prieto says decline of peseta checked by govt. to arrest exporters holding foreign currency. Orders banks operating in Spain to give sworn statements of funds or gold held for them in foreign banks within 48 hours. “If any of these are found to be false it is quite probable that some members of the bank boards will be sent to jail. A period for stern measures has begun.” Pesetas rose sharply to $.0948 from $.0783 on Monday. Sterling rose slightly, but futures turned negative on large selling; traders say it's evident a bear position in being built up. Portuguese escudos are to be stabilized July 1 at $.04424, vs. prewar par of $1.07875.

Canadian govt. looks to close deficit largely at expense of US-Canada trade; determined to reduce huge US exports to Canada while inducing US industry to build Canadian plants. Emergency tariffs of last summer seen as successful in promoting this objective; new budget looks go further by raising $95M though higher duties on US products and taxes on US-financed plants in Canada. US govt. says won't protest tariff unless it discriminates against US in particular.

Tennessee House presented with eight articles of impeachment against Gov. Horton, including "moral delinquency" in purchase of a $2,850 piano using state funds. Gov. Horton has been under fire since last fall, when banks controlled by Rogers Caldwell failed, tying up almost $7M in state funds.

Cook County defaulted on bond payments due June 1; area banks refused to advance funds to avoid default but are willing to pay par and interest on the defaulted bonds; this is believed to put them in a stronger position to audit the county's books and secure judgment on the bonds. County situation uncertain as tax reform pending in Illinois legislature may not pass. A law is pending to allow Illinois counties to issue refinancing bonds, which might relieve the situation, though those bonds may not fetch the best prices in current circumstances. Chicago in less immediately precarious situation as they can borrow from some other funds.

Ivar Kreuger arrived for US visit on the steamship Europa, but was reticent on the subject of conditions in Europe and on operations of any of his affiliated companies; said there was no particular significance to his visit at this time.

NYSE member collateral loans as of May 29 were record low of $1.435B vs. $1.651B Apr. 30, $4.748B a year earlier, and high of $8.549B ending Sept. 1929.
US deficit for fiscal year ending June 30 estimated at $900M - $950M, including "sinking fund" of $440M applied to national debt; this will leave national debt about $500M larger after the fiscal year. US income tax returns in fiscal year to May 29 were $1.565B vs. $1.884B a year earlier. Early orders for the $800M new issue of long-term 3 1/8% Treasury bonds to be dated June 15 indicated there would be an enormous oversubscription.

Rail freight loadings for week ended May 16 were 755,071 up 7,339 from prev. week, down 18.7% from 1930 week, and down 28.7% from 1929.

Editorial: Initial estimates are for a total wheat crop of about 893M bushels, one of the largest on record, together with a large carryover from a year ago, although spring wheat is doing worse than average due to drought. However, it's still possible for crops to deteriorate, and reports on the Canadian crop are poor. The wheat market is "bear on one side and bull on the other, with its identity to be finally determined by the weather."

Refineries ran at 69.3% in week ended May 30; stocks of gasoline fell 654,000 barrels to 44.795M. Crude oil production in week was 2.462M barrels/day, up 25,000 from prev. week and down 147,300 from a year ago.

American Machinist reports machine-tool market remained dull, declining slightly in May; "Gloom is widespread, an almost certain token, it is believed in trade circles, that an upturn is about to begin."

Cotton textile trade slower, as expected following sharp decline in raw cotton prices. Inventories reportedly very low.

Little of importance seen developing at International Coffee Congress now in session before the Colombian delegate arrives on June 10. In the meantime, the Salvadoran delegate has proposed creation of an international coffee bank, while one Brazilian delegate advocates a joint coffee and sugar propaganda campaign.

NY City tax collections on personal property and real estate as of May 31 were $199.9M, up $4.2M from 1930.

Justice Dept. won't appeal recent US District Court decision in favor of allowing merger of Vacuum Oil and Standard Oil of NY.

British Woolworth profits in 1930 were over $17M on 434 stores, vs. Woolworth's earnings of about $25.5M on 1,881 stores in the US.

Companies reporting decent earnings: National Standard [industrial wire], Cleveland Railway Co.


Three Loves - German silent film, starring Marlene Dietrich, at the Warner. Made "just prior to her sensational Hollywood debut little more than a year ago"; will do little to enhance "the splendid reputation that the German actress has made as a result of her work in ... Morocco and The Blue Angel" but does offer "frequent shots of the silk clad Dietrich limbs, almost as if the plethora of Hollywood flashes of that character had sprung from German ancestry." Story concerns Stasha, a European charmer holding a certain fascination for men; she gets her lover Dr. Karoff to shoot her husband, but things end badly when, hemmed in by the police and with the "vacillating Stasha already moving toward her third lover, the maddened doctor kills her also."


Wife - Going to the club again, and you know the rent is due next week? Husband - Oh, I'll be back before then.

Usher - We can't stand the wage cut you propose. This work is so wearing to the nerves. Theatre Manager - Wearing to the nerves? All you have to do is stand in the wings and listen to the piece. Usher - Yes, exactly.

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