Saturday, July 4, 1931: Dow 155.26 +3.78 (2.5%)

Assorted historical stuff:

"Despite reports of the rigid dietary privations engendered by the Soviet Five-Year Plan, evidence accumulates that the Russian's stomach needs are being amply provided for." On Oct. 1, 1929, the Union of Consumers' Cooperatives was serving 2.2M meals daily in its restaurants; a year later, this had increased to 11.7M, and was up to 17M at the start of this year; plans are now on to increase the number to 37M. [Note: the Soviet famine that killed millions, largely in the Ukraine, was under way about this time or possibly a little later - information is still in dispute on this.]

Editorial: While debt relief “is in the international air ... it may not be inappropriate to mention - again - that there are debt situations at home which press increasingly for consideration.” Decline in commodity prices and in wages has created hardships for corporate and individual debtors; widespread readjustment is a certainty, the question being how it is accomplished. One correspondent suggests a two-year postponement of principal payments on mortgages for borrowers with good records. Mass. State Treasurer Hurley advocates persuading banks to declare a 2-year payment moratorium for unemployed borrowers, and even proposes legislation to allow banks to lend up to 70% of value on first mortgages instead of 60% [note: 70% - radical!] There's a danger of well-intentioned legislation that would impair mortgage security, handicapping a resumption of building when it's most needed; the experience of NY with "rent laws" in the years after the war is a cautionary example of the dangers of interfering with economic laws. [Note: the annual NY City rent law hearings remain one of the best pieces of political theater around]. However, the problem is a grave one and will have to be met; it should urgently be taken up by bankers and real estate boards.

Grasshoppers have appeared in swarms not seen for 60 years covering parts of South Dakota and Nebraska. For many years, "a suggestion of humor has attached to mention of grasshoppers as a serious menace." However, in 1870 grasshoppers completely destroyed crops over a vast area in the West, and the swarms are now a big problem again. Three successive dry years have given the pests a big start; one expert estimated 100,000 eggs in a single shovelful of dirt. [Note: it's hard not to start feeling sympathetic toward Hoover - I mean, what's next? A plague of frogs?]

Commerce Sec. Lamont invites 25 coal mine operators to a conference on July 9 to consider relief measures for the industry, which has suffered particularly severely in the depression. Conference comes as result of move by Pres. Hoover to place situation in hands of Lamont and Labor Sec. Doak.

Loans to drought-stricken farmers in North Dakota and Montana are being arranged out of $8M remaining from $65M drought relief appropriation at last session of Congress; "loans are intended to provide feed for livestock and will be limited to $47.50 monthly for each farmer"; loans will mature Nov. 1.

Rather strange editorial condemning excessive nationalism; mention is made of tariffs, silly interstate disputes, France and Russia, but the main example chosen to criticize is that of "Chinese nationalists" who are closing "the sands of the Gobi Desert to the opening shovel of progress" by denying permission to Ray C. Andrews of the Amer. Museum of Natural History to make another scientific expedition there; a previous trip uncovered dinosaur eggs and the bones of the "Peking man."

Auto industry trends seen moving toward cars that are lighter, more comfortable and simpler to operate, offering high quality at a low price; "the pullman car idea is passing." Ideas under development include automatic gear shifting, moveable car seats, and a revolutionary tire combining the casing and inner tube into one unit.

"Dr. Stephen Moulton Babcock, inventor of method of determining butter fat contents of milk which revolutionized dairy industry, dead at 87."

Market commentary:

Market wrap: Stocks again seemed to follow progress of the US-French debt negotiations; while definite news was scant, optimism was widespread; stocks were generally strong, and, following under-Sec. of State Castle's optimistic statement, trading become more active and the rally strengthened in the afternoon; leaders ended with broad gains. Bond trading more active, prices generally higher; US govts. dull and steady; European issues advanced, led by German govts.; S. American bonds rallied sharply; domestic corp. mostly higher, featuring rally in lower-grade rail issues - these have advanced substantially from the lows of last month but still are trading at high yields. Commodities mixed; grains soft with wheat down substantially on rumors of bankruptcy for Canadian Wheat Pool; cotton up sharply in sympathy with stocks. Copper buying almost nil; some still available at 8 1/4 cents, with 8 1/2 more generally asked and large producers holding at 9. Silver up 1/2 cent to 29 3/4.

"It was the general opinion after the close that the market should be allowed to indicate its trend in the new week before positions are adopted." Some urged clients to take advantage of any sharp upturn to take profits. Conservative observers strongly warned against trying to pick the top and go short.

Many observers had expected the market to fall Friday on profit-taking before the holiday weekend; instead, bears apparently felt the need to cover due to fears that "something might happen over the three-day suspension to start the market sharply upward in the new week."

Nat'l Biscuit was a weak spot, down over 2 points to about 60 on reports earnings are running close to dividend requirements. IT&T was strong on optimism dividends will be maintained. Bethlehem Steel rose on adoption of revised executive bonus plan seen as more favorable to stockholders; merger rumors were also circulating. A bull pool has been operating in Amer. & Foreign Power, accounting for "the many optimistic rumors concerning the stock which have been circulated ..." However, conservative brokers are keeping customers out, and "interests in a position to know" say the earnings estimates have been much too high.

National Distillers interests admit Q2 earnings will be lower, but see better outlook due to "more liberal policy on the legal restrictions on medicinal liquor."

Some observers maintain "the market has indicated distribution at times recently. ... Pools that were active in a number of stocks are inclined to take profits and reduce their long positions on a good upturn."

Recent technical reactions seen as having strengthened market position after previous sharp upturn; "a period of profit-taking was considered necessary from time to time to permit stocks to consolidate previous gains and be in a position to respond to new favorable news."

Reichs-Kredit-Gesellschaft of Berlin semiannual report says depression lost momentum in first 4 months of 1931 in a number of important countries; however, European unsettlement in Q2 created danger of renewed recession, particularly the withdrawal of foreign funds from Germany. Price declines have continued, only partly caused by recession; blame price support efforts for delaying adjustments and making them more severe; also point to gold accumulation in a few countries. Capital movements dominated by fear and “mob psychology,” making the Hoover Plan's move toward international cooperation of “stupendous ... importance.” Difficult problems remain, but “it is highly probable that the more dangerous elements of the depression have now been eliminated.”

C. Nims of Harris & Fuller: "In financial history, 1931 will go down as the turning point year. Commodities are the fundamentals; and they manifestly cannot remain at prices below the cost of their production." When commodity prices move up definitively, business will certainly improve. "Apparently, the tide is already turning. Our government's move to suspend foreign debt payments for a year is a constructive inspiration without equal. Prosperity - clearly - is in the making."

Economic news and individual company reports:

Under-Sec. of State Castle said it was hoped to conclude a French-US debt agreement today, making a debt recess effective immediately. Foreign currencies were generally higher on belief agreement is near.

Capital flight from Germany, while below the “startling proportions” of June, has continued “in a quiet manner” with the Reichsbank losing about 120M marks since Saturday. Reichsbank reserve ratio on June 30 was 40.1%, barely above the 40% legal minimum, thanks to the $100M credit from the BIS and central banks of US, Britain and France. Seasonal factors are now expected to reduce currency demand, easing the situation, although this may depend on satisfactory conclusion of the debt negotiations. However, “in responsible quarters, there is not the faintest doubt regarding the Reichsbank's ability to defend the mark. It is stated that the institution is far from the end of its resources” including “important hidden reserves ..., enlistment of private holdings ... , rationing of credit and an increasingly higher discount rate.”

Weekly bank reports contained some positive items. Fed. Reserve banks continued expansion of credit by buying govt. securities, to the tune of $45M vs. $20M in the previous week. Increase of $73M in brokers' loans by NY member banks was first in 11 weeks and indicates renewed confidence by at least some of the trading public, although monthly report of security loans by NYSE members as of June 30 fell $43M to a new low of $1.391B.

Bradstreet's reports hot weather and the upcoming holiday stimulated retail trade throughout the country; wholesale was also improved, though many reports still showed it as unsatisfactory. Dun's reports first full week of summer weather stimulated interest in a number of seasonal lines; retail inventories in many sections were lighter at the end of June than for several years.

Chicago Mayor Cermack instructs department heads to cut at least 10% from annual expenses, including salaries; it's estimated spending cuts will save the city $5M out of its 1931 budget of $67M.

Tennessee two-year budget of $35M leads to estimated deficit of $12M due to repeal of property tax; legislature has also voted down issuance of additional bonds to meet the deficit.

NYSE sends letter to member firms asking names of employees permitted to trade on margin for their own account who traded over 5,000 shares in past 6 mos.

NYSE bond trading in June (including US and foreign, govt. and corp.) was $267.8M vs. $235.7M in May and $230.3M in 1930; most active month this year. New bond offerings this week totalled $26.9M, down sharply from $187.8M last week and $93.8M in 1930, as market awaited outcome of debt negotiations.

Texas Raiload Commission set allowable production for the East Texas area at 250,000 barrels/day for 30 day trial period. Texas Gov. Sterling says doesn't believe producers will abide by the Commission order; will call special session of Legislature next week; advocates conservation bill setting up one commission with authority over oil, water, and possibly soil; believes Texas Railroad Commission has hands full with transport.

ICC postpones its order of lower grain rates for Western railroads to Aug. 1; rails will appeal order to the Supreme Court.

Vice President Curtis and Sen. Capper (R, Kan.) will ask Farm Board to hold wheat off the market until price reaches 85 cents/bushel; price in Kansas City Thurs. was 49-50 cents. Very heavy movement of new crop winter wheat has gotten under way in the Southwest in past week. Report from Atchison Topeka & Santa Fe Rwy. territory (Kansas, Oklahoma, Nebraska, Texas panhandle, etc.) finds wheat yields good but prices low. Recent estimates of crop from main Canadian wheat provinces have declined steadily to as low as 200M bushels vs. 374M last year.

New coal bill introduced in British House of Commons in effort to prevent serious labor troubles threatening in mines; provides for continuation of 7 1/2 hour day and maintenance of existing wages as minimum scale. Bill was accepted by miners but opposed by owners.

US car production in June estimated at 250,000 - 275,000, vs. 349,396 in 1930; Q2 production about 940,000, down about 25% from 1930; first half 1.640M, down about 29%. Dealer inventories remain very low at about 300,000 or 5 - 6 weeks supply; average dealer stock is about 6 cars.

Cadillac-La Salle June shipments 1,409 units, up 39% vs. 1930; first half 10,981, up 9%. Produces 4 lines: La Salle V-8 and Cadillac V-8, V-12, and V-16. Oakland-Pontiac production in June was 8,780 cars vs. 6,500 in 1930; total first half production exceeded 1930.

Bulova Watch preferred is trading at a yield of about 16%; earnings last year covered preferred charges over 5 times; business so far this year satisfactory.

Caterpillar seen likely to cut Q2 dividend in spite of strong cash position due to immediate business outlook.

First half bank earnings: National City Bank $2.25/share vs. $2.89 in 1930; Bank of NY & Trust $10.28/share vs. $15.69.

Retail sales reports: Montgomery Ward - June $19.2M, down 19.9% from 1930; first half $107.8M, down 17.2%. W.T. Grant - June $6.3M, up 15.1%; first half $33.1M, up 10.3%. Grand Union - 4 weeks ended June 27 $2.762M, down 3.7%.

A&P will raise retail cigarette prices, clearing way for a widespread retail price hike by tobacco chains to 15 cents/pack.

US coffee consumption in year ended June 30 was a record high of 12.357M bags vs 11.166M in prev. year; per capita annual US consumption 13.2 pounds; US consumes as much coffee as rest of the world combined.

Company reports since July 1: 5 companies reported higher earnings vs. 1930 and 19 lower; 46 dividends unchanged, 1 increased, 8 cut.

Interesting historical tidbits dept.:

Entertaining list of nicknames of members of the NYSE when it merged into a unified organization in the boisterous year of 1869: William Wadsworth - "The Farmer Boy"; Mich Bouvier - "Mike from Gay Paree"; Charlie Harris - "The Milkman" (for "shocking habit" of personally opening office before breakfast); Addison Cammack - "Ursus Major" [I'm guessing he was a short-seller]; Billy Cross - "Piano Legs"; Frank Robinson - "Double or Quits"; John Slayback - "The Christian at Work"; Billy Pearl - "Dr. Smooth"; Robert Goodbody - "Turrible Things." Of the original crop of 1869 members, only two remain - Wadsworth and Bouvier.

Interesting description of rowing technique taught at Harvard by Col. Wm. Bancroft, who coached the team in 1882-84: "On the pull-through the men were drilled to lift their bodies with a violent heave at the beginning of the stroke, holding their slides rigid, ... the importance of uniformity in this regard was held to be so great that during several weeks of the early training of the '83 crew ... a rigid rod of hard wood was fastened to the sliding seats, so that all of the men should begin and end their sliding at the same instant and all slide the same distance." It was all worth it as Harvard beat Yale by 21 boat lengths.

Fourth of July special:

The famous painting The Spirit of '76 was painted a hundred years later in 1876 by Archibald M. Willard, "a wagon painter who had never received a lesson in art prior to the completion of this famous work." [note: color me skeptical]

“JULY FOURTH
Gather the stars of the midnight, And count them, one by one,
And hang them true on a field of blue, Ere the hours greet the sun.
Then take the clouds of the dawning, All splashed with the crimson morn,
That the word may go and the world may know, That liberty is born. ...
Si Tanhauser, Poet Laureate of the Long Island Railroad.”

Live theatre you could see in NY this week - if you only had a time machine:

The Band Wagon - Fred and Adele Astaire, Tilly Losch, Frank Morgan and Helen Broderick in "the most handsome and amiable of the revues"; book and lyrics by George S. Kaufman and Howard Dietz.

Billy Rose's Crazy Quilt - "Three incorrigibles of vaudeville, Phil Baker, Fanny Brice and Ted Healy, in energetic patch-work revue; frequently a bit rough, generally hilarious; reported revised after the premiere."

Ziegfeld Follies of 1931 - with Hal LeRoy, Helen Morgan, Ruth Etting, and "the usual impeccable Ziegfeld chorus" - see review yesterday.

The Third Little Show - "ingeniously and brightly staged revue, with Beatrice Lillie as deftly funny as ever."

Once in a Lifetime - "George S. Kaufman, collaborating with Moss Hart, in a sort of personally conducted tour of a consummately farcical Hollywood."

Also playing - Grand Hotel, Private Lives, The Barretts of Wimpole Street