July 25, 2010

Saturday, July 25, 1931: Dow 139.01 -3.62 (2.5%)

Germany special:

Berlin report: Although there was general disappointment regarding results of the London conference, and the Reichsbank and govt. are being criticized in financial and industrial circles because the domestic moratorium has again been prolonged, "more optimistic views everywhere are apparent." Transfers between Clearing House bank accounts are now allowed up to 50,000 marks, and unrestricted internal transfers are anticipated.

Sec. of State Stimson says will not discuss new financial aid when he arrives in Germany Saturday; it's explained that "questions of new money for Germany have been referred to the committee of the BIS which is to be appointed, and there is nothing that the Secretary could do about this subject." Washington expects the BIS study to "take quite some time, probably months." Stimson says increase of good feeling between French and Germans was a very worthwhile thing.

"No general policy has yet been adopted" on maturing German loans in London for which funds aren't available. "Limitation of transfers between German banks is causing considerable embarrassment but it is hoped that relief will come through the operations of the German Clearing House."

Rather strange editorial on “sanctions” clause in the Young Plan (for reparations); the clause provides that if a question arises whether Germany has acted to deliberately destroy the Plan, the matter shall be submitted to the Permanent Court of International Justice; Germany agrees that if the Court decides it has so acted, the creditor powers “resume their full liberty of action,” that is, are free to reoccupy German territory. Editorial approves of having the World Court decide.

London is still losing gold at a heavy pace; net of 4.3M pounds sterling was lost Friday, making 9.4M in the two days since the last statement and bringing holdings to about 141.6M; at least 4M of the total Friday went to France. Sterling rallied Friday, but renewed pressure was expected Monday; "future prospects are clouded by the fact that France is taking home her balances unmindful of the higher interest rates to be procured in London and apparently for purely political reasons." Bankers in NY believe Bank of England may need to quickly raise discount rate again to 5% to replenish gold stocks before the seasonal fall drain. US banking authorities will likely "give hearty support to any program looking to the reduction of the swollen gold stocks which the US possesses, particularly so if the metal were sent to London." Swiss francs made a new yearly high and guilders were strong. Hungarian Nat'l Bank raised discount rate 2% to 9%.

Assorted historical stuff:

Rep. Treadway (R, Mass.) again urges calling of the dreaded extra session of Congress, this time only a few days before the regularly scheduled time to make sure Congress can organize in time to approve the Hoover moratorium plan. Sen. Watson, Republican floor leader, said this wasn't needed.

Labor Sec. Doak and Commerce Sec. Lamont have written 125 operators of coal companies asking if they would attend a national conference of coal operators and employees. Pres. Hoover will decide whether to call conference after receiving replies.

After receiving several hundred telegrams from Southwestern and Western oil producers requesting an embargo on oil imports, Pres. Hoover received a ruling from Att'y. Gen. Mitchell confirming that he was not authorized by Congress to declare such an embargo. "With the London conference having adjourned and the international financial situation cleared, Pres. Hoover left immediately after lunch Friday for a week-end trip to his Rapidan camp."

Prof. H. Sperl, arguing Austrian case for customs union with Germany before the Permanent Court of International Justice, says Austria would be led "gently but firmly back into a barred cage" under interpretations of opponents.

Chinese residents of the US are being encouraged by the Nationalist govt. to return to China "in order to participate in the renaissance that is just beginning there"; educated Chinese are said needed to aid in industrial development.

Day-old Chilean cabinet headed by F. Gana resigns and is replaced by one led by C. Froedden, one of Pres. Ibanez' oldest friends.

Argentine govt. retakes control of towns of Corrientes and Resistencia after revolutionary disturbances.

Berlin is now being referred to in some European quarters as the Chicago of Europe [note: not sure if this is good or bad ...].

The "tin hat," a novelty used successfully during the war to reduce head injuries, is now replacing the traditional coal miner's hat made of canvas with a leather scoop. The latest hard-boiled chapeau is much improved, being made of light but tough fiber; it's designed to protect against falls of coal and rock from overhead, one of the main causes of accidents to miners. The hard hat was introduced by Philadelphia & Reading Coal; now, Lehigh Coal is offering it for sale, at cost, at all its mines. As a further safety measure, the hard-toed boot was recently placed on sale by P. & R. C.

Some large orchard areas of the country report a shortage of bees needed for pollination. This has created an industry of raising "package" bees in small boxes that are then mailed to growers, who, upon receipt, pull out a cork, releasing the bees to do their work. Colonies of bees are also rented, with a keeper maintaining them.

The artesian well which supplied ancient Pompeii with water has been rediscovered among the ruins; plans are now underway to reopen the well, lay new pipes, and make the Pompeii garden fountains flow as they did almost 1,900 years ago.

Interesting story on Albert J. Wright, successful stockbroker, member of the NYSE since 1885, with houses in London, Newport and Buffalo, who has just married "one of old Russia's patrician line" in a ceremony attended by the Archbishop of Canterbury and other world figures. Wright has been completely blind his whole business life ever since, as a star pitcher for his New England college, he was struck on the forehead by a "liner from a terrific batsman."

Market commentary:

Market wrap: Stock traders appeared to turn their attention to domestic developments following adjournment of the London conference. US Steel opened weakly on increasing speculation of dividend cut; other leaders generally declined. Trading turned very dull after initial selling; mid-day was sluggish except for isolated gains in issues including Gillette and American Woolen. A heavier wave of selling broke out in the afternoon, attributed to more general dividend nervousness and evening up for the weekend; oils and rails declined; Bethlehem fell sharply. Selling picked up momentum in the last hour; Steel, Can and other major industrials extended losses and the whole market was under pressure. Bond trading featured sharp afternoon downturn in German issues following a firm opening, bringing most issues close to their year's lows; remainder of foreign list turned reactionary although trading was relatively light. Domestic list "desultory" with price changes narrowly mixed; US govts. somewhat lower. Commodities weak; grains moderately lower; cotton down sharply in spite of unfavorable weather reports. Copper remained at 7 3/4 - 8 cents with buying small. Silver up 1/8 cent to 27 3/4.

Conservative observers continue to recommend the sidelines until "most of the uncertainties confronting the market are out of the way." [Note: Dec. 4, 2035]

Smaller trading volume in the past week reflects lack of interest in the market shown by the public as well as some professionals; many traders are also away on vacation. Even leading bears, who have maintained their short positions, have not been actively pressing. Thin markets have developed in many stocks.

"Judging from comments heard around the Street," the German situation "suggests possible developments which could be unusually disturbing for a time at least. Uncertainty over European conditions has kept many important traders out of the market in recent sessions."

No likely prospect of significant improvement seen in steel operations seen for the third quarter. Oil price increases in midcontinent field seen as encouraging. Wool trade seen getting further boost from announcement "in Paris that woolen garments for women will be the leading styles in all classes of clothing from dresses to evening wraps for the fall and winter"; this reverses a decision that hit wool manufacturers hard some years ago. Wool prices have been rising rapidly.

Curb Exchange [later Amex; small cos.] trading featured sharp break in Standard Oil of Indiana on dividend rumors; weakness spread to oils on the big board. Lambert (toiletries and medicinals) is reportedly target of a large short interest; recently reported Q2 net of $1.95/share was better than expected, almost covering the $2 quarterly dividend (stock is about 66).

J. Harris of Harris, Upham & Co. say cuts in US Steel's dividend and wages have long been known by many to be essential to any sustained uptrend. "Let there be a return to equilibrium. Let governments make no effort to keep up one class of prices, because they admit themselves they can't keep up all. Democracy professes fairness to all, partiality to none. Let it be displayed. ... There may be a paroxysm of fear because of dividend and wage reduction, but it will pass. Courageous, sane action is always ultimately rewarded."

Economic news and individual company reports:

Weekly banking statements showed discouraging reversal of credit expansion, as loans and investments at NY banks fell $93M, with all types of loans and investments sharing in the decline. Figures from the previous week had shown banks outside NY were still deflating credit; "now that the NY banks are apparently doing the same, only one conclusion can be drawn, namely that bankers are not yet ready to expand operations. Fed. Reserve officials appear to have recognized this. Last week, for the first time in 5 weeks," they stopped increasing holdings of govt. securities; apparently "active efforts to expand credit volume have been abandoned, at least for the time being."

Youngstown district steel production rose for the second time this week, and is now at 41%, an increase of 7% from the level starting the week.

Bradstreet's weekly reports trade and industry holding their own but "seasonal lull is unmistakably imminent." Very hot weather slowed retail sales in general but helped some lines. Dun's reports business mainly affected by seasonal influences; retailers generally reported "continuance of the buying which was noticeable last week." Price increases in some commodities helped public confidence. Wool, silk and shoes show particularly strong improvement.

Several state and municipal borrowers in the past two weeks have rejected bids for their bonds, including NJ, S. Carolina, and Boston; the first two have rejected bond tenders twice in the past few weeks, readvertising the bonds in hopes of getting better bids.

New bond offerings this week were $28.9M vs. $47.8M last week and $73.7M a year ago; $15.5M were public utility issues and $8.4M municipals.

Editorial noting ICC decision to further expedite rail rate case by barring “those who would question the reasonableness of railroad wage scales.” Many shippers have taken this approach in protesting the rate hike, asking “why they should be charged higher rates in order to support the 1929 wage scales for rail empoyees, at a time when prices and wages almost everywhere else are and have been coming down”; the ICC has now “slammed the door of its hearing room” on them.

Sir Otto Niemeyer completes study of Brazilian finances asked for by govt.; recommends various reforms including setting up a new central bank, minimizing bond issuance, attaining "budget equilibrium," and reorganizing post and rail services. However, report makes no mention of debt moratorium and contains "no indication that Sir Otto feels Brazil may not be able to continue to fulfill its external engagements."

British govt. will introduce legislation, if needed, to financially support the Indian govt. in order to maintain its credit “pending settlement of the constitutional question and of the financial problems which will arise out of it”; the Round Table conference to settle the question will be held in the fall. It's estimated 1B pounds of British money is invested in India. “Indian govt. securities have declined steadily from the time the Congress Extremists first talked of repudiation.” Agitation of merchants and mill owners to reduce value of rupee has caused export of capital, forcing govt. to persistently borrow sterling in London to support the rupee; a govt. of India bond issue failed in May.

French rail receipts from passenger traffic in first half were 1.401B francs vs. 1.474B in 1930, and from merchandise traffic 5.507B vs. 6.098B.

Mexican Finance Sec. Montes de Oca has called meeting of bankers and business leaders Saturday to "discuss problems associated with the continued decline of silver peso, which is reaching serious proportions." Shutdown of Mexican textile mills threatened by impossibility of buying raw materials using silver rather than US dollars or gold.

Chilean govt. cancels commercial treaty with Germany in response to increased German duties after breakdown of world nitrate cartel.

Canadian tax of 15 cents/copy on newspapers consisting largely of fiction will be delayed.

Life insurance claims paid in US and Canada in 1930 totalled $2.642B; largest claim was $4.690M by J. Dorrance, Campbell Soup pres.

Assessed valuation of NJ property fell from $5.576B to $5.529B in year ended July 1.

Total US pack of peas this year estimated at 13M cases, down 42% from 1930.

Gillette takes care of yet another lawsuit, settling an ongoing legal battle with United Cigar Stores by paying them $1.9M in cash to dismiss a suit and countersuit; the companies will now resume friendly business relations. Meanwhile, the shareholder lawsuit continued with testimony on pool operations in the stock in 1930.

Chrysler's strong Q2 report followed GM pattern of strengthening the balance sheet and cutting expenses. Chevrolet retail sales for the first 20 days of July were up 12% over 1930. American Chain's outlook improved by contract for cables and suspender ropes for proposed Golden Gate bridge, conditional on successful sale of bridge bonds. Mead Johnson (leading US maker of baby food) is selling around 80, only a little above its yearly low, in spite of an unbroken 14-year streak of increasing profits and 30 years of increasing sales. Stock now yields over 6% and is selling for about 8 1/2 times 1930 earnings.

Earnings reports: Caterpillar Tractor Q2 $.22/share vs. $1.20; half $.77 vs. $2.99. Gen. Amer. Tank Car Q2 $1.55/share vs. $2.44; half $3.02 vs. $4.58. Baldwin Locomotive half ($1.29)/share vs. $1.31. Allis-Chalmers Q2 $.40/share vs. $.94; half $.78 vs. $1.87. International Cement Q2 $.92/share vs. $1.91; half $1.57 vs. $3.25. New England Tel. & Tel. Q2 $2.38/share vs. $2.32; half $4.70 vs. $4.40. Corn Products Refining Q2 $1.05/share vs. $1.21; half $1.82 vs. $2.28. Hudson Motor Car Q2 $.19/share vs. $.67; half $.33 vs. $2.12. Amer. Bank Note Q2 $.09/share vs. $1.01; half $.14 vs. $2.00. Gen. Printing Ink Q2 $.48/share vs. $.71; half $1.26 vs. $1.53. Charis Q2 $2.01 /share vs. $2.18; half $3.28 vs. $3.48.

Companies reporting decent earnings: New England Tel. & Tel., Charis (women's apparel).


'How was the scenery on your trip?' 'It ran largely to tooth paste and smoking tobacco.' [Note: believe this is a reference to billboards.]

Sunday School Teacher - Now, if you saw bad boy cutting off a cat's tail, what would you read to him from the Bible to convince him that he was doing wrong? Boy - What God hath joined together let no man cut asunder.


Appearing at the Palace: "Ethel Merman, sensational blues singer of Girl Crazy, heads the excellent bill," displaying "remarkable breath control, excellent tone placement, ... perfect enunciation and a commanding stage presence." Lou Holtz is held over as master of ceremonies; he has "weeded out the bits of ineffective material he included in last week's bill and has replaced them with more spontaneous and enlivening samples of humor." William Gaxton has a new sketch in which he wins a bet that he can get four different types of woman to kiss him within five minutes.


Holy Terror - a Fox film. George O'Brien stars as Tony Bard, the hero and "terror" of the title, who can "not only ride polo horses in the East to victory, but ... guide the most skittish western steeds over dangerous gulches in the Rockies to escape pursuing villains." Also in his skill set is taking a tail-spin in his plane and emerging "unscathed after crashing through the wall of a house into a ladies bathroom"; in fact, this is how he meets the heroine. Film opens with shooting of Tony's father while being visited by a stranger from the West; remainder of film concerns Tony's efforts to find the stranger and obtain a reckoning. In a final twist so ridiculous the reviewer feels the obligation to reveal it, the stranger turns out to be the hero's real father and the shooting accidental; ending finds hero and heroine "weeping copiously over the man hitherto regarded as a villain." Mr. O'Brien is likable as the hero; Humphrey Bogart is excellent as a ranch foreman employed by the mysterious stranger, making a believable villain.

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