July 3, 2010

Friday, July 3, 1931: Dow 151.48 -1.18 (0.8%)

Assorted historical stuff:

US and France positive on progress of debt relief negotiations; Under-Sec. of State Castle says “negotiations ... are continuing in an admirable atmosphere and we feel very optimistic as to the outcome”; note from Pres. Hoover reportedly makes good impression in France as leaving way open to compromise on disputed points. Editorial: The US and France seem to be talking in circles, each insisting that the Young Plan (for reparations) must be preserved while at the same insisting on their own modifications, and likewise insisting that the Plan must be resumed in a year. However, the US and French positions are so fundamentally similar that eventual agreement seems likely. Both recognize the Young Plan is currently unworkable; their next step should be to recognize that it's impossible to predict what will be possible in a year. Without a moratorium, the Young Plan “is already in the discard”; what's being negotiated isn't preservation of the Plan but salvage of as much as Germany is able and willing to support. The French seem to dislike the Hoover proposal because it so clearly modifies the Young Plan “and therefore opens the way to tampering with the Versailles Treaty.” However, Pres. Hoover has “wisely urged that the nations deal first with immediate necessities and leave the rest on the knees of the gods.” National City Bank supports Hoover plan as helping restore stability, which in turn will allow free flow of capital needed to reestablish prosperity; if one year isn't enough to restore normal conditions, “the purpose which has prompted the one-year moratorium will dictate the action then to be taken.” Another Woodlock editorial charging that France, while its people “have a desire for peace perhaps more intense than can be found elsewhere in Europe,” has attempted in the Versailles Treaty to continue the war by other means, in particular by reducing “her ancient enemy” to a permanent “condition of enforced impotence” and securing for herself “a perpetual superiority of military power.”

Census Bureau estimates annual US population growth rate has declined to 0.7% from 1.2% due to fewer births, more deaths, and much lower immigration. US population on July 1 estimated at 124.070M.

Chinese govt. will establish national economic planning commission patterned after Soviet planning body.

British Royal Commission, after 2-year study, attacks labor conditions in India; recommends limiting hours, eliminating child labor, and improving living conditions.

"All of Southern Peru reported in revolt."

Building railway locomotives larger and larger has finally made some of them too long to go around sharp curves. A British builder has now developed a new type of locomotive made in three sections, enabling it to "bend" around the sharpest turns.

Over 100 whales, "groaning mournfully," were recently dashed to death near the North Island of New Zealand, after being overtaken by a terrific storm as they moved down the coast. It will cost the New Zealand govt. over $2,000 to tow the dead whales out to sea.

Cafe Procope, the oldest cafe in Paris, recently closed after 246 years in business. Opened in the Latin Quarter in 1684, the cafe's patrons included Voltaire and Rousseau. Two years ago it became a vegetarian restaurant, but apparently was unable to survive on a clientele of "impecunious students."

A South Carolina bank has joined those trying to increase cotton use by adopting cotton stationery. The cotton-based "paper" takes writing and engraving sharply and clearly, but erasures are a problem; however, it might also have the advantage of being usable as a substitute handkerchief.

Ralph Budd, Great Northern Railway pres., attributes success of his railroad's board of directors meetings to their location - they're held on office cars while the board is out traveling on the railroad for up to a week.

W. Atterbury, Pennsylvania RR pres., on education: "The evolution of our race has been so closely associated with the development of the marvelous human hand that I think anyone who grows up without having acquired some degree of manual skill in a productive process has missed something. I do not think it makes the slightest difference that in the case of some particular boy, there is no likelihood he will ever have to make his living by manual work. In becoming proficient at a branch of manual work he gained something invaluable which I do not believe can be built into his character and personality in any other way."

Market commentary:

Market wrap: Stocks again fluctuated along with perceived progress of the US-France debt negotiations. After opening little changed the general list rallied sharply following optimistic announcement of French Premier Laval; buying may have also been due to shorts covering before "leaving the street for a prolonged week-end holiday." As the session progressed, volume dropped sharply and stocks lost most of earlier gains. Weakness developed in the fourth hour, and prices trended down, with rails particularly weak. Bond trading somewhat less active, prices steady to firm; US govts. dull and firm; foreign list somewhat higher, led by "rallying tendencies" in German issues; rails "crept upward"; industrials "displayed better tone"; oils continued uptrend; highest-grade issues benefitted from reinvestment demand. Commodities mixed; grains moderately higher on reports of frost in Canada; cotton down substantially. Copper buying very dull, with large producers still asking 9 cents but small amounts sold at 8 1/4.

Conservative observers advised staying out of the market today, and taking profits on long positions if stocks move up; predict stocks can be replaced at lower prices after technical reactions next week.

Rails were subjected to bear pressure on prospects higher rates won't arrive for some time. Preliminary reports indicate June car sales may have shown a smaller seasonal decline from May than in 1930. Sugar securities have rallied on improving prices and outlook; Chadbourne plan appears to be "drawn a little finer than former agreements of its kind."

Radio Corp. rose sharply on proposed consent decree setting up open patent pool and ending govt. antitrust suits. "Important interests have resumed activities in Woolworth"; rumors are circulating that "something special will be done for stockholders at a meeting next week, probably Wednesday or Thursday."

Bulls have been encouraged by "scale support" in evidence during recent market reactions.

It's believed interest and dividend payments now being received by investors may come back into the market in the next few days, particular with so many stocks selling at attractive yields.

Incorporated Investors [large investment trust, similar to mutual fund] believes it's a good time to buy sound stocks due to attractive prices, lowest interest rates in over a decade, and signs of approaching business improvement; added substantially to holdings in June.

Market observers point to diligent work by leading industrials on increasing efficiency and cutting expenses; this may result in Q2 earnings above the most pessimistic estimates, and, more importantly, may lay a foundation for higher profits when normal conditions return.

Demand for farm machinery has shown moderate improvement recently. J. Kurn, St. Louis - San Francisco Rwy. pres., expects record crop movement in 1931; sees more optimistic feeling in people along the railway's lines, which has led to a small improvement in buying.

Economic news and individual company reports:

Chicago Mayor A. Cermak writes letter to Lehman Brothers to combat the "tremendous amount of garbled, adverse publicity that the City of Chicago has been receiving in the public press for the past few years." Says financial status sound; current difficuties traced to effort in 1928 to correct obvious inequities in taxation by making a complete reassessment of all real estate; this took two years instead of the anticipated 6 - 8 months, putting tax collections for the following years way behind schedule. Argues tax warrants are safe based on anticipated collections. Points to reforms in budget law that should reduce spending; "it is the sincere and honest desire of this administration to decrease and not to increase taxes." "Gov. Emmerson of Illinois turns tax crisis situation over to 11 representative men in effort to avoid default on bonds in certain sections."

Farm Board announces new policy limiting sales of wheat holdings to 5M bushels/month over the next 12 months (current holdings estimated at 200M; sales "will be conducted in such fashion as not to depress the movement in prices"; limit excludes foreign sales). Vice Pres. Curtis and Kansas Gov. Woodring criticize policy. Texas Gov. Sterling telegraphed Pres. Hoover urging drastic action to prevent any Farm Board sales for at least 6 months, citing large crop in Texas. Editorial praises Farm Board policy as "doing now the right thing to get out of the results of a wrong thing." Approves of decision not to announce minimum price, since "immediately that would become the maximum price." Similarly, sometimes "social workers, distressed at bad labor conditions, have demanded a minimum wage fixed by law. These demands have come to nothing because of the realization that the minimum would become the maximum," leaving workers worse off. Farm Board chair. Stone lashes out at critics in the grain trade; says they had argued that a definite statement on policy would increase prices; “now that they have their statement, let them go ahead and raise prices, Mr. Stone said.” Charges “old wheat traders are trying to discredit everything the Farm Board does ... and behind that is that they don't want farmers to organize.” Says current world conditions should benefit wheat prices.

Canadian Premier Bennett says condition of grain in Western Canada threatens greatest natural disaster in country's history. Will take relief measures since at least 100,000 people are faced with lack of food for themselves and fodder for livestock. Forecasts of five private grain experts as of July 1 indicate a bumper US wheat crop of 881M bushels, 30M above 1930, in spite of extensive drought damage in the Northwest. Bureau of Agric. Economics estimated world wheat crop excluding Russia and China at 3.075B bushels, about 225M below last year; however, sees year of continued low prices due to large carryovers.

Western rails will appeal decision of Chicago Federal court in favor of ICC-ordered cuts in grain rates; rails claim the cuts would lead to large revenue losses.

More detailed estimates of Federal revenue in fiscal year just ended: total $3.317B, down $861M. Corporate income taxes $892M, down $226M. Individual income taxes $731M, down $330M, with collections in the 6 months ended June down $258M or about 49% (decline partly attributed to capital gains/losses). Customs duties $378M, down $209M. Misc. internal revenue and receipts $569M, down $59M.

Bank of England passed end of first half with little of the usual tightening in money markets due to "tremendous amount of short-term funds seeking employment in London plus the striking increases in gold reserves over the past few weeks." Bank of England, in a surprise, held rate steady instead of cutting it. However, it's believed the bank is just postponing action until the US-French negotiations are settled; it's feared that if the negotiations fail, France might make large-scale withdrawals of its foreign balances, and “the Bank of England might find itself in an embarassing situation.”

Banque de Geneve, with capital of 20M Swiss francs and founded in 1848, in difficulties; aid being arranged by consortium of Swiss banks headed by National Bank of Switzerland.

State of New South Wales again fails to make interest payments, with Commonwealth govt. meeting the payments as previously this year.

Hoboken demands return of $713,769 in city funds at the closed Steneck Trust Co., charging officials knew bank was insolvent when they accepted the funds.

Money in circulation July 1 was up $107M to $4.840B, total Reserve Bank credit outstanding down $10M to $950M. Member banks in NY City report brokers' loans up $73M to $1.479B; loans on securities to non-brokers up $7M to $1.733B. Fed. Reserve continued policy of expanding credit, buying $45M in additional govt. securities after buying $20M in prev. week; the Reserve banks had previously refrained from such buying “on the grounds that neither banks nor business has sufficient confidence to use more credit.” NY City banks increased loans and investments $223M, including a $92M in “all other” (commercial) loans; however, banks outside NY seem to have used the additional Reserve credit mainly to reduce rediscounts at the Reserve banks.

Dow average of 8 iron and steel products rose $.67 to $44.25, first gain since Jan. 14. Scrap markets showed definite improvement in the past week, though firmer tone was attributed more to technical factors than improved demand.

Chicago wholesale gasoline prices up 1/8 cent to 2 5/8 - 2 7/8 cents/gallon.

Operating income of 106 telephone cos. in first 4 months of 1931 was $94.0M vs. $91.8M in 1930 and $92.7M in 1929.

NY State commission for tax law revision continued conferences; main objective is to revise tax system "to bring about decreased taxes on real estate (which now pays 70% of the state taxes) without encouraging local extravagance."

Bethlehem Steel stockholders approve modified executive bonus plan; lawsuit against previous plan to be dropped. Unlike previous plan, new one deducts depreciation from earnings used as basis for bonus calculation; bonus amounts will be published in annual report.


Ziegfeld Follies of 1931 - Presented by Florenz Ziegfeld, at the Ziegfeld Theatre. Twenty-third edition of the revue, and the first since 1927, "may not give off any one lasting ... impression," but is, by and large, entertaining and does offer "several individual effects that are by themselves highly meritorious." Hal LeRoy, "the lanky young dancer," follows up his showstopping debut on Broadway a few months ago with some more fantastic hoofing. Mr. LeRoy also debuts as an actor in an elaborate sketch entitled "Broadway Reverie," in which he's shot and mortally wounded in a hijackers raid on the Club Piccadilly, dying in the arms of Ruth Etting playing a "world-weary cigarette girl"; both of those performers can make a major impression unassisted on a large stage. Helen Morgan sings a Singapore song, "Half-caste Woman," by Noel Coward, and also appears as a bride in a "rather typically smirking" sketch entitled "Victim of the Talkies," in which she and her new husband, both movie actors, have to send for a director on their honeymoon. As usual, "the girls are many and beautiful," with a variety of costumes and "now and again very little at all." An ensemble dance with parasols "is one of the prettiest numbers ever staged in a musical show."


Physical Culture Expert - All these exercises must be taken in front of an open window. Student - That's rather awkward. P.C.E - Why so? Student - Well, I need the increased strength first so I can open the window.

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