Saturday, July 11, 1931: Dow 146.97 +2.06 (1.4%)

Assorted historical stuff:

Editorial: "Crude petroleum selling in the fields at less than 10 cents a barrel in Texas and averaging 18 cents in Kansas means that a long threatened disaster has now overtaken the oil producers of the US." Producers may now try drastic action to rescue themselves; Federal govt. "should think twice before interfering" even though "some things may be done which will fall outside a strict construction of the antitrust statutes." With the oil market in its current state, "restraint of trade can ... have little more than academic interest to the consumer." It may be argued that producers have themselves to blame, and this may be true in some areas such as East Texas, but producers who "conscientiously" curtail production in one area can be "set at naught" by "the folly of wild overproduction" elsewhere. Texas will now try once more to combat this folly by "drastic legislation"; "producers throughout the midcontinent field can help ... by uniting in restrictive measures, even to closing down where that is practicable." The cause is not lost; "Oil has not lost its intrinsic value to the world. Consumers are still willing to pay a substantial price for it." 4,500 oil wells in Southwest Texas face shutdown due to low crude prices; this will ruin many of the wells due to water intrusion.

Pres. Hoover denounced as unpatriotic the short-selling of wheat by “a limited number of speculators,” but made it clear he wasn't referring to ordinary hedging transactions or the legitimate grain trade; regarding the speculators, said “the confidence imposed upon me by law ... does not permit me to expose their names.” Extraordinary bear market in wheat has now lasted two years in spite of govt. efforts to maintain prices. July wheat is now below 53 cents/bushel, down over 93 cents from peak of July 1929. In recent sessions, prices have dropped steadily in spite of some bullish news including very poor Canadian crop and report of substantially smaller world supply in 1931-32. Farmers have been hard hit; an Illinois analysis put the cost of production for wheat at 69 1/4 cents/bushel, vs. a price at the local grain elevator of 38 1/4 cents. Situation seen "forcing curtailment ... to a greater degree than any behests of a governmental agency."

United Mine Workers officials were invited to meet in Washington July 13 with Commerce Sec. Lamont and Labor Sec. Doak, regarding coal industry problems.

A special Presidential committee censured the Louisiana & Arkansas RR for cutting wages in violation of the 1929 White House agreement to maintain existing wage scales.

Sen. Brookhart (R, Indiana) condemned chain stores as "a phase of the great monopolistic phenomena that are now rapidly transforming the US into a financial autocracy." Calls for farmer, laborer and independent businessman to "unite in a common cause and destroy this fortress of economic oppression."

H.L. Doherty of Cities Services Corp. filed $12M in libel suits against the Kansas City Star newspaper for their attacks on his utilities.

British Labor govt. suffers several defeats on electoral reform law.

Several Russian aviation engineers working while serving sentences for sabotage and counter-revolution were given amnesties and cash prizes "in recognition of the excellent work they had done under surveillance."

"Argentina using good offices in effort to solve present crisis between Bolivia and Paraguay."

After remaining indoors on doctor's orders Thursday, Treasury Sec. Mellon hit the beach at Cap Ferrat Friday, appearing “gay and in improved health.”

Pres. Hoover recently commissioned the German artist Heinrich Lauer to paint the old Huber farmhouse near the village of Ellerstadt from which the President's ancestor Andreas Huber emigrated to the US in the mid-17th Century.

"The largest idol ever found in America" was reportedly discovered 40 miles from Mexico City; it's 33 feet high, and dates from pre-Aztec days.

First of eight "seadromes" to be built in the Atlantic for transoceanic airmail route; construction to start in spring 1932.

National Broadcasting Co. to establish television station on top of the Empire State Building.

Kaye Don sets new world motorboat speed record of 112.5 mph driving Miss England II, shattering record of 103.4 mph that he set in April.

New George Washington Bridge to be opened in Nov.; toll for passenger cars set at 50 cents; trucks and buses up to $1.50.

Lower Manhattan has undergone many changes over the years, but one constant has been the weather-beaten shack in the center of Whitehall Street, opposite the Staten Island Ferry, at which Dave Everis has been opening clams for nearly half a century. "Bankers and brokers, clerks and longshoremen can be seen any day at the little counter" eating the "delicious bivalve mollusks, sprinkled over with old-fashioned peppersauce, or vinegar and perhaps a dash of horseradish."

Market commentary:

Market wrap: Stocks were irregular in the morning, but trading again showed tendency of turning dull on reactions. US Steel was pressured but drew good support and recovered after unfilled orders announcement; "Steel's stimulating leadership," together with afternoon reports that a large credit for Germany was near, brought a widening rally through the afternoon, with "brisk bullish demonstrations ... in various sections of the market"; major stocks advanced and whole market developed a strong tone; day's best prices were reached in late trading. Bond trading featured recovery in German issues following report of agreement on a credit; other foreign bonds mixed, with S. American unsettled by break in Chilean list; domestic corp. list featured strength in high-grade issues, spreading to some lower-grade bonds during the afternoon; US govts. were dull and narrowly irregular. Commodities mixed; wheat declined again to new season lows, reaching lowest levels since the severe depression of 1894; July wheat fell below 53 cents; other grains irregular; cotton recovered from early setback to close slightly higher.

Conservative observers continue advising a waiting attitude, believe market will be irregular today.

"Influential interests" were reportedly again active in "confident accumulation" of majors including NY Central, US Steel, GM, American Can, Westinghouse, J.I. Case, Woolworth, Standard Oil of NJ and AT&T. Some buying was for the account of people who accumulated shares before announcement of the Hoover debt plan; "consequently, renewed demand from the same sources was taken to mean that international bankers were confident that a satisfactory solution would be found for Germany's financial difficulties."

Danforth [former major bear turned bull] interests have continued accumulating stocks in the past few sessions on belief trend will be higher over next 2 weeks; the group expects US Steel to maintain its $7 dividend rate, and is particularly bullish on Woolworth based on excellent 1931 outlook.

"Indications have been seen that the bears have been testing the market," though they haven't followed up their efforts when stocks drew support. Popular belief is that many of the bears are waiting for poor Q2 earnings reports to cover part of their commitments.

[Note: An interesting part of some of the individual stock-related items is the distinction they make between stocks that are "well bought" (approved by "important banking quarters" or "interests," with buying taking place in a "normal market" and some of the buying for cash) and the opposite (stocks that are subject of attempts to run up the share price, usually by pool operations).]

Electric Boat reflected operations of a new pool that has become interested in the stock based on recently received Navy contract for a submarine (the USS Cuttlefish) and indications Navy plans expanded submarine development and construction.

The railroad proposal to the ICC for a 15% freight rate increase has generated heavy correspondence between the ICC and "volunteer correspondent-advisers throughout the country" who took the opportunity to "tell it to the ICC." Now and then "a pointed letter from an indignant railroad stockholder" takes the railroad side, but the consensus of "undertakers, farmers, a shoe-horn manufacturer, merchants, lumber dealers ... etc., etc., ad infinitum" is against the increase.

Germany special:

Conversations between Dr. Hans Luther and French officials reportedly completed; participants pledged to secrecy, but reports circulated that a large new credit was agreed on. Heavy German losses of foreign currency continued. Reichsbank has reportedly decided to make credit restrictions more severe. London banks reportedly agree to unified policy of not withdrawing credits, provided German banks honor losses incurred by British banks in Nordwolle failure, since British banks feel they were “grossly misled concerning the affairs of this company.” State Dept. says has received information Darmstadter bank is sound, contrary to reports of difficulties following Nordwolle failure. The 1,000 German banks and industrial cos. that joined in the 500M mark guarantee to the Reichsbank (through Gold Discount Bank subsidiary) include the leading companies in Germany. Francs were strong against marks, sterling and dollars; marks are below the gold export point although none has yet moved to France.

"Opinion in foreign bond circles is that ultimately Germany will work out of her difficulties ... observers point to the vital dependence of other nations on Germany's economic well-being ... and their consequent enforced interest in preventing financial collapse." Recognize that after the postwar mark inflation episode, it's difficult to combat "the tendency to send capital from the country the moment danger appears imminent" but "serious alarm is not felt over the longer-term possibilities."

“NY banking circles” now believe large credits to Germany by central banks or US commercial banks are unlikely until “Germany has taken strong steps to restore her credit position by internal economies and credit restrictions.” Leading NY banks are definitely “not formulating plans for further loans”; Fed. Reserve is considered unlikely, and France is likely to attach political conditions. Some believe imminent danger of the German situation greatly exaggerated by Germany and the press; it's believed solution is to tighten credit to the point “Germans will not be able to afford the purchase of foreign exchange” to send funds abroad. It's also questioned whether a loan would be effective in stopping capital flight. Finally “with due appreciation of the current political and financial stringency, bankers point out” Germany has largely brought the problem on herself by long-term govt. overspending.

Economic news and individual company reports:

US Steel unfilled orders as of June 30 were 3.479M tons, down 141,129; decrease was “somewhat larger than the Street had anticipated.” Steel authorities believe demand won't increase until after Aug. 15.

Advisory committee to Chicago Mayor Cermak condemns plan to pay teachers and contractors with scrip as dangerous to city's credit status and likely to cause losses to those accepting the paper.

France's leading shipping co., Compagnie Generale Transatlantique or the French Line, appeals to govt. for aid after announcing 1930 operating loss of 30M francs, not including reserves or depreciation; a loss of 120M francs is expected in 1931.

Spanish bank failures have reportedly been limited to the Bank of Cataluna group, with runs elsewhere subsiding; Spanish govt. is refusing to intervene in Bank of Cataluna, claiming it's a private institution.

"Chilean Council for Nat'l Economy compiling vast plan to place chief activities of country under scientific management to meet effects of depression."

Weekly banking reports showed Fed. Reserve maintained policy of increasing available credit by buying govt. securities; $5M increase in holdings showed natural slowdown from the $44M increase last week; credit base also expanding due to gold imports, and next few weeks should show whether member banks and businesses are using the additional credit. One encouraging indication is that "all other" (commercial) loans at NY City member banks increased $14M, making the fourth consecutive weekly increase - the longest and largest expansion of the year.

Bradstreet's and Dun's weekly reports disagree somewhat. Bradstreet's reports slight slackening in retail trade throughout the country, due to customary summer dullness and reaction from holiday buying; wholesale trade appeared to rise slightly; some evidence prices are stabilizing. Dun's reports "hot weather and the general acceptance of the better times philosophy have resulted in the largest retail sales in many cities since early in the spring."

R.G. Dun & Co. report June business failures down 1.6% from 1930, with total liabilities down 19%; total liabilities in Q2 down 7.2%. Industrial production in Q2 was down about 15% from 1930 vs. a 30% year-over-year decline in Q1; sales were down about about 18% vs. 30% in Q1.

June sales of 39 leading chain store systems and mail order houses were $290.1M, down 2.3% from 1930; first half $1.719B, down 4.4%. Novelty and drug chains did best; they reported increases in both June and the first half, likely helped by higher store counts. Fed. Reserve preliminary report shows June department store sales down 3% from 1930; first half down 9%.

New bond offerings in past week remained low at $30.6M vs. $26.9M prev. week and $146.7M a year ago; largest category was municipals.

US total oil refinery capacity on Jan. 1 was 3.988M barrels/day, up 5% from 1930.

Govt. estimate of US wheat crop as of July 1 was 869M bushels, about 12M below average of private estimates and about 6M over the 1930 crop. Corn crop estimated at 2.968B bushels, 874M over the 1930 crop.

Bank of Montreal reports some improvement in Canadian crop conditions due to better weather, though too late to save crops in many areas.

Permanent Wheat Committee adjourns for "indefinite period"; shelves recommendation for international wheat conference and votes to submit wheat clearing-house proposal to various govts. concerned.

US production of boots and shoes in May was 28.533M pairs, down 4.9% from April but up 16.4% from May 1930; first 5 mos. 131.8M, down 2.1%.

NYSE seat sold for $250,000, up $25,000 from last sale.

Hershey Chocolate expected to earn a record high of over $5/share in first half vs. $4.36 in 1930; profit margin at record due to low raw material costs (stock now about 93, yield over 5%). Safeway Stores to become second-largest chain store system behind A&P with acquisition of MacMarr Stores; will have over 4,000 stores and annual sales over $300M. A&P sales for 4 weeks ended June 27 were $80.9M, down 2.5% from 1930; sales by weight were up 15.8%. United Fruit Q2 profits were down 43% from 1930, reflecting lower profit margin on banana sales.

Town of Nitro, W. Virginia, built by govt. during the war for $70M and later sold to the Charleston Industrial Corp. for $8M, sold at public auction for $250,000.

Company reports since July 1: 10 companies reported higher earnings vs. 1930 and 39 lower; 89 dividends unchanged, 2 increased, 20 cut.

Companies reporting decent earnings: Hershey Chocolate, Lehigh Valley Coal, Equitable Office Bldg.

Theatre:

"The minds of so many writers are wandering or inactive, depressed perhaps by the weather and the contemplation of bread lines. It has often been said ... that some one creative writer or another could not 'stand prosperity.' ... The past year seems to have given us a demonstration to the effect that creative writers ... cannot stand depression. ... The theater has felt the difference. It was to be expected that there would be a curtailment in the production of plays ... in fact there are now three theatres dark for everyone that is lighted. The theatre for many months, however, has been suffering in quality as well as quantity. ... Writing people are not so detached from the common conditions of the country's life as they, and many romanticists, may think."

Jokes:

Boss - Young lady, that filing cabinet is supposed to be very exact. How is it you can't find what you are looking for? Stenographer - I'm looking for my lunch.

This one had them laughing out loud at Dinty Moore's [somewhat shady restaurant at 46th and Broadway, where you could possibly get liquor - but you didn't hear it from me]. It seems Chicago gangsters imported a fearless Italian to kill their enemies on a piecework basis; he demanded $200 per murder, payable in advance. The other night he got his $200 and a new job that he proceeded with. A few hours later the "mob" roused him. "You dope," they growled, "you knocked off the wrong guy and we paid you the $200." "So aw right," he indifferently replied. "Da next one is on me." [Note: I don't get it either ...]