Friday, July 31, 1931: Dow 136.93 +.0.74 (0.5%)

Assorted historical stuff:

15,000 reported drowned in Central China flood; Yangtse Valley crops ruined.

Labor Sec. Doak says immigration no longer an economic menace; average of about 5 aliens is leaving the US for every 3 entering; expects fewer than 50,000 immigrants in 1931 vs. 1.3M in 1914; Pres. Hoover has helped situation by ordering strict enforcement of law barring immigrants “likely to become a public charge.”

Editorial critizing statement of War Sec. Hurley that spending on inland waterways is not to be restricted by Pres. Hoover's austerity program. Subsidized waterways make transportation cheaper for the favored few in position to use them, while drawing traffic away from the rails and making transportation more expensive for the country as a whole. "No better way to sabotage the President's economy plan could be devised than to seek out in advance points at which it can be made subject to exceptions ... because of political considerations." Waterways appeal to voters in many areas due to misconception that water transport is always cheaper, and to "a spreading conscious willingness of the individual to get something for his personal use at the public expense"; Congress must be on guard against this "predatory human instinct."

Editorial calling for research to find new uses for agricultural products; cites example of cottonseed, which once was such an unwanted nuisance that states made it a crime to throw the seeds into streams, but is now valued at $250M annually. "If the Department of Agriculture, which has in it some of the best trained minds of the country, were to be given annually for research purposes a moiety of what the Farm Board has wasted there would be reason to expect a real farm relief that would lift up agriculture and help the whole country." E. Joliet, Illinois farmer, burns 75 acres of oats rather than harvest crop at additional loss of 4 cents/bushel; can only get 11 cents/bushel for crop it cost 40 cents to raise.

Iowa officials adopt tentative plan for destruction of grasshoppers by spreading poison from planes.

The US Weather Bureau is experimenting with a mobile weather station carried in a truck to help those fighting forest fires in California. The German Army may have originated the idea during the war, when they maintained a "field weather service" with instruments transported in automobiles.

A "little red schoolhouse" built in 1863 is still in use in Washington state; it was Pacific County's first school house and is still a one-room school, now the only one in the county.

Henry Ford was 68 years old Thursday. There was no special celebration; he spent the day at his estate and the Dearborn labs.

"American cities are slowly transforming themselves, but most have been unable to solve the automobile parking problem satisfactorily." Cities built since the car became popular are taking a more systematic approach to the problem. For example, Boulder City, built for workers on the Boulder Dam, will allow no parking or stopping of cars in the streets for any reason, but open parking spaces will be provided all over town, so it's always possible to find a convenient place to stop.

Germany special:

Bankers meeting in Berlin have drafted a detailed plan for prolongation of foreign short-term loans to Germany by 6 months; outline was cabled to heads of world central banks. Amount involved is about 5.5B marks, of which about 2.5B are acceptances (short-term bills) and 1B deposits. Dutch, Swiss and French creditors, "whose attitude is not very conciliatory," weren't represented at the meeting, while the British attitude will depend on results of the French-British credit negotiations; unless London is insured against renewed withdrawals of French balances, its ability to extend German credits will be "seriously restricted." However, it's hoped the "vast majority" of creditors will give their approval in a few days and that ultimately 80%-90% of credits will be prolonged voluntarily, with "the recalcitrants ... dealt with under a special decree." Failing an agreement, a moratorium would be inevitable. It's understood interest payments due Aug. 1 have been provided for.

Indications of brisk German retail trade, possibly reflecting public desire to turn money into goods, has aroused concern of inflation once banks are fully reopened; it's uncertain if money withdrawn will be "hoarded" or spent. It's believed it may be impossible to fully reopen savings banks since most only have "3% to 5% liquidity." Reopening of commercial banks is believed essential to avoid "stoppage of business and huge unemployment. On the other hand, the continuance of restrictions on savings banks would not affect general business."

Bank of England raised rate again, to 4 1/2% from 3 1/2% previously; seen as effort to avoid proposed Bank of France credit and support sterling through “straight central bank measures.” Sterling rose to more than a cent above the gold point against dollars, although it remained only slightly above the gold point against francs. London clearing banks raised rates on current accounts to 2 1/2% from 1/2% two weeks ago, while 3-month bill rates rose to 4 1/4% - 4 5/16%. NY bankers expect a substantial flow of funds from NY to London, attracted by the higher rates. However, the Paris-London flow remains uncertain; French investors "seem not yet relieved of their scare" and British loss of gold continues at a lower rate. Bank of England reported rather dramatic deterioration of position in past week; gold holdings fell to 133.3M pounds sterling vs. 150.0M; reserves 33.9M vs. 53.9M; reserve ratio 32.4% vs. 49.3%; holdings of govt. securities 52.6M vs. 34.4M. Bank of Sweden raised rate to 4% from 3%.

British Chancellor Snowden says budget outlook serious unless considerable savings are made, but strongly refutes “the impression that the budgetary position of Britain is in a hopeless state of bankruptcy”; argues British position better than that of any other country. Says govt. anxious to undertake huge war loan conversion, giving large savings of interest.

Bank of France offer of credit to Bank of England was made in francs (2.5B), first time since the war that the Bank of France didn't use dollars or sterling in important international credits; this is seen signifying “future French efforts toward definite leadership in European finances.” Bank of France gold holdings hit record high of 57.9B francs.

Market commentary:

Market wrap: Market fluctuated through a dull session. Prices opened lower, with steel and can shares particularly pressured. A recovery set in before mid-day on short-covering, but the rally failed to draw public interest and prices fell back off the day's highs in late dealings. Bond trading continued midsummer dullness, with prices generally slightly lower. Foreign issues mainly moved narrowly with no important news developments on the day; S. American issues continued yesterday's downtrend. Domestic issues generally heavy; US govts. slightly lower; rails weak but utilities relatively steady. Commodities mixed; grains moderately lower; cotton slightly higher. Crude rubber hit new record low at 5.50 cents/pound. Copper at 7 5/8 - 8 cents domestically with buying small; some "second-hand" copper sold at 7 1/2 cents; foreign buying somewhat better. Silver up 1/4 cent to 28.

Conservative observers continue to recommend sidelines; many believe market will "face a test in the near future" since trading range was broken on the downside.

Chrysler provided the most action, rallying on pool operations and speculation the Ford shutdown would help position of its new low-priced Plymouth car. Textile shares were strong, with American Woolen preferred hitting a new 1931 high. AT&T has been subject to some selling in the past few days; there's relatively little of the stock "in the Street," allowing operations on either side to easily affect the price. Deere hit a new yearly low after omitting dividend; Case fell on dividend nervousness. Barnsdall and Childs fell after omitting dividends. Humble Oil fell following testimony of pres. Farish at Texas House oil industry investigation.

Rails stocks have been pressured on poor first-half earnings and outlook; there's renewed speculation that some leaders may be forced to cut dividends, including NY Central, Pennsylvania, and B.&O.

Severe reaction to US Steel dividend cut attributed to small short position in the market, leading to lack of short-covering.

Survey of investment trust [similar to mutual fund] first half transactions on the 25 most popular stocks they hold reveals some interesting trends. Stocks more heavily bought than sold were largely utilities including Consol. Gas, PG&E (no sellers at all for those two), and Public Service of NJ; GM was also in this group. Stocks heavily sold were a diverse group including AT&T, NY Central, US Steel, American Can, Union Carbide, Standard Oil of NJ, and Liggett & Myers. International Harvester held the distinction of drawing no buying or selling at all.

This year promises to be better for aviation transport companies; with mail payments from the govt. on a "definite basis," transport lines are gradually turning profitable thanks to additional revenues from the passenger and express business. Number of passengers is slightly below a year ago, but longer-distance lines are seeing an increase; transport cos. are increasingly branching into providing express [delivery] service.

G. Hill, Amer. Tobacco pres., says cigarette business has held its own thanks to “extraordinary efforts in scientific merchandising, backed by enormous expenditures for advertising”, but other outlets for tobacco are declining; warns against current tobacco overproduction and effect on prices to the farmer.

More talk of wage cuts is heard each day, with some economists insisting that maintenance of high industrial wage rates after prices have fallen so sharply is “one of the major influences retarding business recovery.” Considering higher purchasing power of the dollar, it's argued wages could be cut in those cases where they've “kept up costs and prevented industrial concerns from showing a reasonable profit on the small business being done.” Editorial by T. Woodlock citing large gains in railroad wages since 1915 (average rate up 89%). Question of rail wages concerns the public since they must ultimately pay for them; since rail profits are restricted by law, "the public has undertaken a certain responsibility to railroad security owners and can not fairly expect them to bear alone the burden of increasing or maintaining wages in bad times."

Economic news and individual company reports:

W. Green, AFL pres., estimates 175,000 lost jobs in July, bringing total unemployed to 5.2M.

Bethlehem Steel reports sharply lower Q2 earnings ($1.5M vs. $7.7M and slightly below preferred dividends) but keeps 50 cent dividend on common, vs. $1 last quarter and $1.50 previously. E. Grace, pres.: “I don't see any indication of a pickup in business. I must say that we pray for an improvement rather than anticipate it.” However, discussing general business, says “Industry in the US was never in a sounder or better position to take care of itself in a depression than it is today.” No comment on possible wage cuts; wage rates have been maintained so far. Steel price situation appears more stable.

NY, Chicago & St. Louis Rwy. (popularly known as the Nickel Plate) omits both common and preferred dividends. Pennsylvania RR operating earnings for first half down over 50% from 1930; seen unlikely to earn dividend in 1931 but has most cash of any US railroad.

Bell System reported loss of 100,000 telephones in the first half (out of over 20M in use at end of 1930). However, AT&T revenues showed an increase and it's expected to cover its 1931 dividend.

Unconfirmed reports say Justice Dept. is investigating whether simultaneous rise in prices of major cigarette brands was a conspiracy violating antitrust law.

Acting Wyoming Gov. Clark telegraphed Pres. Hoover asking him to stop sale of crude oil on govt. land at below $1/barrel.

Money in circulation July 29 was down $14M to $4.780B, total Reserve Bank credit outstanding up $3M to $945M. Member banks in NY City report brokers' loans down $26M to $1.390B; loans on securities to non-brokers up $4M to $1.683B.

1.3M bales are being held by the Cotton Stabilization Corp; however, total held by the Farm Board and agencies created by it is estimated at 3.5M bales. These huge holdings "hanging over the market" are causing grave concern in the cotton trade on where prices will go when the new cotton crop starts moving in a few weeks. Farm Board vice chair. Williams says Board had $117M loaned to cotton cooperatives and the Cotton Stabilization Corp. as of July 1; says Board doesn't expect to sell any of its "stabilization cotton" at present. Texas Gov. Sterling receives no acceptances in response to invitation to 15 cotton state Governors for conference on acreage.

Agriculture Dept. reports Midwestern wheat farmers plan to reduce 1932 acreage due to low prices; summer plowing below normal; Farm Board continues to urge 20% cut in acreage.

Canadian govt. "has flatly refused to establish a federal wheat board"; suggests three Western provinces form a corporation that Federal govt. would help finance; proposal has been subject of three-day discussion among provincial leaders; decision anxiously awaited by thousands of farmers.

Nitrate cartel apparently off again; German syndicate cuts nitrate prices 37% and blames Chileans for breakdown in cartel agreement.

German govt. revenues in Q2 were 1.808B marks vs. 2.122B in 1930. Austria, Switzerland and Czechoslovakia protested German $25 tax on travel out of the country, saying it's causing serious hardship to the hotel and tourism business.

Argentine Provisional Govt. applies duties of 5%-50% to many articles previously admitted free.

Irish Free State imported $375M in Russian goods in year ended May 31, vs. only $15M in previous year.

Lord Kylsant, former Napoleon of the shipping world, found guilty by Old Bailey jury of issuing misleading prospectus; sentenced to 12 months imprisonment under “easy treatment rather than the hard labor sometimes specified.”

World's largest mining co. by production in 1930 was Union Miniere Haut-Katanga, which produced 138,949 metric tons, an increase of 1,957, refusing to curtail production until "the situation became desperate."

Youngstown district steel production is up 3% since Monday, to 45%. Dow average of 8 iron and steel products unchanged at $43.98.

NYSE seats sold at $210,000 and $205,000, down $25,000 and $30,000 from last sale.

Ford announced annual summer vacation shutdown to start Aug. 1. Standard Oil of NY - Vacuum Oil merger approved almost unanimously. Diamond Match [Kreuger-associated] will raise match prices about 1%.

Earnings reports: Consol. Gas of Baltimore Q2 $1.18/share vs. $1.26; half $2.81 vs. $2.93. Engineers Public Service year ended June $2.18 vs. $2.67. Pacific Lighting year ended June $3.97 vs. $4.33. Bell Telephone of Penn. Q2 $15.81/share vs. $14.36; half $31.33 vs. $28.95. Pittsburgh & W. Va. Rwy. half $.54 vs. $2.60. National Tea Q2 $.24/share vs. $.21; half $.51 vs. $.75. McGraw-Hill Q2 $.54/share vs. $.94; half $1.16 vs. $1.84. Crown Cork & Seal half $1.18 vs. $2.34. Hazel-Atlas Glass Q2 $1.80/share vs. $1.01; half $2.57 vs. $1.56. Bon Ami Q2 $1.65/share vs. $1.77; half $3.00 vs. $3.25.

Companies reporting decent earnings: Consol. Gas of Baltimore, Pacific Lighting, Bell Telephone of Penn., Kelvinator, Hazel-Atlas Glass, Bon Ami.

Movie:

Son of India - MGM film. A "handsome production" concerning "interracial love." Ramon Novarro stars as Karim, a young Indian jewel merchant who barely survives an attack by bandits. Managing to preserve a single valuable diamond, he is accused of stealing it; his life is saved by the intervention of an American man. Years later, with Karim now wealthy, he meets Janice, an American visitor, when she presents a trophy to him after his team has won an international polo match. They fall in love on a tiger hunt in the jungle, and "Janice decides to throw convention to the winds and marry the handsome Hindu." A few days later, Karim is delighted by a visit from the man who saved his life, only to find he is [note: wait for it ...] Janice's brother, and has come to "ask Karim to practice the Hindu creed of renunciation by relinquishing his claim to Janice's love." He does so, and the film "ends on a sad note, with the shattering of a beautiful romance upon the rocks of racial prejudice."

Joke:

Judge - How far were you from the spot where the cars collided? Witness - 22 feet 9 inches. Judge - How do you know it was exactly that distance? Witness - Because I measured it, thinking some fool might ask me.