July 18, 2010

Saturday, July 18, 1931: Dow 142.61 +0.62 (0.4%)

Germany special:

"All Germany quiet on first pay day since financial crisis. Wage payments facilitated by release Thurs. of about 500M marks. Public awaiting outcome of Paris and London conversations." Panic of past few days dying out, as is rush to convert cash into commodities. "Many new deposits in German banks reported"; restriction of withdrawals from banks applies only to deposits made before crisis. "Private banks authorized to buy and sell foreign exchange, but will only sell for legitimate business requirements. Marks reach best level since crisis at $.2310 in NY. ... Breuning prepares new decree to restrain flight of German capital and to facilitate return of estimated 8B mark German capital abroad"; requires German taxpayers to declare under oath amount of capital held abroad, and gives govt. right to question banks on size of deposits held abroad.

French Premier Laval declared "France is not a Shylock. We will assure Germany that France understands her troubles and that we are willing to do more than our share." At meeting with US and Britain, said wouldn't impose conditions on Germany such as dropping Austrian customs union or halting second "pocket battleship." However, does expect "voluntary proofs" of Germany's peaceful intentions, including curbing anti-French campaigns and Fascist demonstrations against Versailles Treaty and postwar borders. Optimism felt in Paris that "Germany's financial salvation is only a question of days," provided Germany willing to agree.

Four-power meeting to take place in Paris tomorrow afternoon; Germans will meet first with Premier Laval and FM Briand, after which US and British officials will join. Premier Laval implied French cabinet had discussed German relief measures; details as yet undecided; amount of loans will be determined after Germany makes needs known.

"Int'l Conference of Experts" met in London to iron out remaining technical details of Hoover plan, already in practical effect since reparations and war debt payments are not being paid as of July 1.

"European stock markets stronger as confidence generally increases." Sterling fell back after Thursday's sharp gain but later recovered; traders remained optimistic on gradual return to normal levels; calmness of Bank of England in “refusing to be stampeded” into a rate increase “was most reassuring to the market.” Bank of England lost 1.554M sterling in gold to Europe. London and NY bankers reportedly agree on joint action to maintain existing credits to Germany. Heavy German buying of copper raised question whether some Germans might be trying to convert foreign currency holdings into commodities.

Assorted historical stuff:

Editorial: Wheat farmers are facing a problem "admittedly serious or distressing," but question of a farm debt moratorium is one interested states should decide after examining both sides, and is certainly not within power of the Farm Board. Conditions in the wheat market now are affected by the general economic decline and by emotion, with "wheat selling below its worth"; it's likely farmers who can hold their wheat for some time will gain, since world supply should be smaller this year; bridging of the German crisis should help matters. "But such a prospect of course avails only the farmer who can afford to hold his crop. The one who has a mortgage on his land ... and a family to support cannot get along on an assurance of something better in the future. Self-interest would seem to dictate to mortgage companies ... to make extensions so far as possible." Cites example of equally serious crisis in the cattle industry 10 years ago that was solved by Eastern capitalists who quickly formed "a huge pool with sufficient capital to save the industry. Surely the Southwest has sufficient leadership, and the country has the money, to make small loans to farmers who cannot otherwise meet interest and taxes." "As a result of the tendency to hold back wheat following the first rush by farmers to get their grain to market and pay off pressing obligations, much wheat is being piled on the ground by farmers," particularly in newer wheat sections with less developed storage facilities.

M. Woll, AFL VP, says business recovery won't come from wage cuts but general increase of wage levels throughout country; unemployment can be eliminated by constant reduction of working hours and days. Rep. F. Condon calls on Pres. Hoover to help end Rhode Island textile strikes; charges employers caused the strikes by levying wage cuts during depression. Met. Life Ins. reports that while US wage earners are at much higher risk of murder or manslaughter than Canadian ones, death rate from all causes combined is about 9% higher among industrial workers in Canada. Labor Sec. Doak assails those who sneer at patriotism and attempt to prevent deportation of alien radicals; predicts more unwanted persons will be deported this year than last, when 18,000 were sent home.

"Emperor Haile Selassie of Abysinnia, 'Conquering Lion of Judah,' steps down from rank of absolute monarch and voluntarily grants his subjects a constitution, establishing two-chamber parliament with responsible ministers."

South Manchuria Railway is commended on its 300-page report "Progress in Manchuria to 1930," containing "probably as complete a study of the history and characteristics of the country and its resources as has been presented by any railroad in the world" including "geographical, financial and administrative features of Manchuria, historical background" and a complete study of the Railway. Lengthy statistics are given on trade, agriculture, mining, manufacturing, currency and credit, education and sanitation. Individual studies are "handsomely illustrated and augmented with maps and charts."

S. Untermeyer urges taxpayers and civic organizations to oppose NY City transit unification plan that Transit Commission will put forth next month; says city shouldn't pay "excessive" price for BMT and IRT elevated lines. NY City Board of Education reduces requested spending for school supplies to $1.160M from $1.187M last year due to lower prices.

During the war, women at a New Jersey clock factory painted numerals on the dials with radium to make them luminous. To point the brushes, they put them between their lips. The radium introduced into their systems has now proven fatal to 20 of them, and even the women's children show signs of radium poisoning.

Market commentary:

Market wrap: Stocks moved moderately higher early on very light trading; slight reaction in late morning was followed by a very dull period at mid-day; the uptrend resumed in the afternoon, with majors including Steel and Can pushing upward and reaching the day's highs; weekend profit-taking caused some late irregularity. Bond trading featured continued recovery in German issues; Central European list generally stronger; S. American mixed on inactive trading. Domestic issues relatively steady and inactive. Commodities soft; wheat rebounded from early setback to finish somewhat lower; corn down sharply; cotton narrowly mixed as weather continues favorable. Copper remained at 7 3/4 - 8 cents. Silver down 3/8 cent to 28 7/8.

Market observers continue cautious; see rally if German situation is straightened out in upcoming conferences, but advise accepting profits on upturns; thereafter, believe market will be governed by domestic developments and advise "side line position until a definite trend has been established."

Wall Street was cheered by favorable news and indications of greater confidence regarding German conditions, including advances in the European markets and mark exchange, and the constructive French offer to lighten demands for political guarantees in return for a German loan.

June railroad earnings will appear next week; based on car loadings, they will compare poorly with last year. GE has been subject of predictions in the financial district that Q2 earnings will be improved somewhat from Q1. Westinghouse is also seen improving from a large loss in Q1 to a possible small profit in Q2. International Match [Ivar Kreuger-associated] preferred stock has sold off on fear European conditions will affect earnings; depreciation in bonds of countries in which the company holds loans has affected sentiment in the stock. Continental Can followers are more optimistic, believing earnings this year should not be much below the $5.04/share reported last year. Several large investment trusts accumulated shares in the first half. Lorillard is subject of discussions of dividend possibilities due to benefits of cigarette price increase; stock appears to be gaining popularity with public buyers. Allied Chemical was sold on news of price cut in ammonia sulphate from $32/ton to $27.50 following collapse of the international nitrate cartel. Walgreen, at 17, is trading only a point or two above the year's low in spite of strong June sales report (up over 11% from 1930; 9 months ended June up 2%).

Market students point out the rail averages again predicted the general market trend, reacting before the industrials. Because of the apparent accuracy of the rail average as a market indicator over the past 20 months, "leading interests are now giving more attention to this group than in a long time."

Because stocks broke through the anticipated resistance levels this week, there's more talk of the possibility of a "double bottom"; if another sharp reaction develops, leading stocks should develop support at or around the lows established in late May - early June.

Much of recent liquidation attributed to uncovering of stop-loss orders during reactions; brokers report recent buyers have tended to put stops a few points below their buy prices.

E.F. Hutton calls attention to the performance of GM, which through almost two years of depression has maintained, and earned, an annual dividend of $3/share; this totals $130.5M annually on 43.5M outstanding shares (stock is about 37). "This is a record that no dominant corporation of comparable size and position has ever matched." Q2 earnings will be good, and there's talk of important developments concerning minor or new lines in fall or early winter (although the three major lines won't have model changes until year-end). Company appears to have good sponsorship and "confidence of well-informed interests."

Editorial: The threat to railroad credit is not only an issue to savings banks depositors and insurance policy holders, but ultimately even affects the shippers who are opposing the rail rate increase. Failure of rails to cover interest payments by the legal margin for another year would make their bonds ineligible for savings banks for the next five or ten years by the usual legal requirements; this would raise cost of financing to rails, in turn raising transportation costs.

Economic news and individual company reports:

Encouraging signs of credit expansion continue to be seen in weekly Fed. Reserve reports. Reserve policy of buying govt. securities to expand available credit is continuing; increase last week was $10M, bringing total since the new policy was adopted in the week ended June 24 to $79M. Total loans and investments of NY City member banks have increased $211M since June 17, in sharp contrast to last year's contraction of $117M over the same period; of the increase, $188M has been in "all other" (mostly commercial) loans.

ICC hearings continued. Milwaukee rail pres. Scandrett testified rate increase proposal originated with a group of railroad executives and not with the bankers. Louisville & Nashville pres. Cole disputed criticism rails are not being operated as economically as they might be, saying they are most efficient in the world. ICC prescribes extensive revision of rates on livestock throughout the Western district; contains many reductions but most changes are increases.

"Important stockholders of Montgomery Ward & Co. who favor a merger with Sears, Roebuck & Co. are understood to have completed their general study of the situation and are now going over it with a view to determining their next step." Merger would create co. with gross sales over $600M, or over 1% of total US retail sales of $50B in 1930. Sears-Roebuck has shown a relatively good earnings record, having ended its expansion program earlier while Ward continued it into 1930. Consolidation seen offering opportunity for large savings. FTC refuses to confirm or deny report of intended merger.

Bradstreet's and Dun's weekly reviews report retail trade has held up favorably compared to last year; it's at a low level but not showing the usual seasonal contraction and is actually picking up a little in the East, particularly in the NY metropolitan area where many stores report sales above last year. Summer apparel is the major retail item; sales are reported from every section of the country.

Commerce Dept. reports June exports $187M vs. $294.7M in 1930, imports $176M vs. $250.3M; first half exports $1.316B vs. $2.076B, imports $1.110B vs. $1.736B.

June automotive output excluding Ford was about level with 1930 at 175,000 cars and trucks; GM gained about 14,000. By contrast, Ford June output was about 75,000-80,000 vs. 174,528 in 1930. In the first half, total industry output was about 1.633M, down 29% or 676,000 from 1930; of that decline, GM accounted for about 40,000, independents 200,000 and Ford 436,000.

F.W. Dodge reports construction contracts in 37 states East of the Rockies in June was $331.9M vs. $306.1M in May and $600.6M in June 1930.

BLS index of employment in 12 manufacturing industries in June was 72.2 vs. 74.1 in May and 85.5 in June 1930; index of payrolls 62.5 vs. 66.6 and 84.1. Of the 12 industries only food showed increase in employment and only tobacco showed increase in earnings.

NY City banks' “thorough ... housecleaning of doubtful items, together with considerable administrative economies” effected over the first half makes it seem likely earnings for that period “will prove to be the worst the banks will show.” First half earnings in the were worst so far in the depression, in many cases not covering dividends. However, officials seem to have been disposed to “make any write-offs necessary to enter the second half of the year with a clean slate,” and only 3 of 27 representative banks cut their dividends;

Amer. Bankers' Assoc., after nationwide survey, says most banks are paying depositors a higher rate than returns available from safely invested funds. Seamen's Bank for Savings will pay 4 1/2% this quarter; only NY City savings bank still paying 4 1/2%; has limited deposits to $500/quarter per depositor.

Stockholders in Industrial Bank & Trust of Roxbury, Mass., and in Overbrook Nat'l Bank of Philadelphia, both closed, are assessed for par value of their stock to cover deposits and other liabilities. Northwestern Trust of Philadelphia closed by State Banking Dept.; deposits about $6.5M.

New Jersey sale of $20M 3 1/2% highway bonds fails for second time; state rejects bids received as too low. Bid slightly above par accepted for $6M Golden Gate bridge and highway 4 3/4% bonds. Mississippi sells $5M bond issue to reimburse depositors at 32 defunct state banks.

Western railroads are considering accepting scrip issued by Chicago Board of Ed. to pay teachers as payment for tickets.

Financing in first half, including refinancing - corporate $2.207B vs. $4.401B in 1930 and record high of $5.795B in 1929; foreign govt. $422M vs. $473M and $141M; US state and municipal $845M vs. $743M and $700M; land banks $61M vs. $31M and none; total $3.534B vs. $5.648B and $6.636B.

Agriculture Dept. sees another year of low world wheat prices in spite of considerably smaller total crop, due to very large carryovers in N. America, Argentina and Australia.

Texas House passes resolution authorizing investigation of all phases of the oil industry; charges were made in speeches on the House floor that Standard Oil subsidiaries are largely responsible for the chaotic condition of the industry, and resolution sponsors said they would come under close scrutiny. Standard Oil of Calif. profitability doubtful for Q2. East Texas oil sold at average of 16.2 cents/barrel last week. Independent Petroleum Assocs. of Texas asks Pres. Hoover to declare temporary embargo against foreign oil; says thousands of wells abandoned and many operators facing bankruptcy. About 75,000 barrels of daily production has been shut in in the Oklahoma City field. Refiners dependent on local oil have raised buying prices back to 22 - 37 cents.

Shoe production continued gains, with June output estimated at 27M pairs, up 13% from 1930; first half 158.8M, up 0.2%

Company reports since July 1: 36 companies reported higher earnings vs. 1930 and 99 lower; 163 dividends unchanged, 4 increased, 40 cut.

Earnings reports: Johns-Manville Q2 $.78/share vs. $1.16; half $.91 vs. $1.97. Sun Oil half $.49 vs. $2.42. Hudson & Manhattan RR Q2 $1.00/share vs. $1.24; half $2.02 vs. $2.51. Bohn Aluminum Q2 $1.38/share vs. $.83; half $2.62 vs. $1.95. Telautograph Q2 $.40/share vs. $.38; half $.80 vs. $.75. Companies reporting decent earnings: Bohn Aluminum, Telautograph (machines transmitting diagrams by wire).


Night Nurse - a Warner Bros. film, at the Strand. "A more or less intimate glimpse into the life of one of those young women who go out into the night to tend the sick or who remain at hospitals to assist in emergency cases and be harassed by the jibes of saucy internes." Barbara Stanwyck stars as Lora Hart. Some early scenes when Lora "is 'learning the ropes' from a blase fellow nurse, played amusingly by Joan Blondell ... are fairly interesting." However, later episodes are "incredible, lacking in good taste and packed full of banal dialogue"; "most excruciating" are "long stretches showing drunken orgies at the home of the dying children, where Lora and various men" engage in hand-to-hand combat, with a "heroic young bootlegger" eventually coming to her aid. Clark Gable, as usual, turns in a professional performance as the villainous chauffeur conspiring with an unprincipled doctor to let the children die so he can marry their always-drunk mother and gain control of the children's trust fund; however, he is wasted on an unworthy part.

A critic comments on the Hoover debt plan:

"Interviewed at his home in Abilene, Kansas, George William Grouse" said he was the first man to have said Hoover should have proposed the moratorium a year ago. He continued, "It was I who pointed out at the time that the Monitor could have sunk the Merrimac in forty minutes' less time if Ericsson had tilted his cannon two degrees lower. I showed how McKinley could have prevented the war with Spain if he hadn't let the Maine put in at Havana. ... That's only a few of my constructive criticisms," he added modestly. "' Let me show you something,' said Mr. Grouse, reaching for a scrapbook and searching for his eyeglasses. But he couldn't find them because they were on the back of his head. - New York Times."

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