July 21, 2010

Tuesday, July 21, 1931: Dow 144.48 +2.06 (1.4%)

Germany special:

Statesmen of seven world powers assembled in the House of Commons in London “for a historic conference at which, in perhaps the greatest effort at international cooperation ever made, Germany's financial salvation will be attempted. At the same time, political peace in Europe will be sought, with a mutual understanding between France and Germany that will enable them to bury their ancient enmity and distrust and live as good neighbors.” PM MacDonald, in opening speech, stresses importance of conference in restoring confidence and credit to the world. Praises Hoover plan as “act of rare courage and statesmanship” but warns “time is against us”; urgent to halt withdrawal of foreign capital from Germany; “otherwise it will be difficult to stay the flood before it has overwhelmed the whole of Central Europe with consequences social, political, and ... financial which no man can estimate.”

Confirmation received that London negotiations will center around proposed two-part $1B loan to Germany, $500M to the Reichsbank to defend currency, and a later $500M loan to repay existing foreign loans; total foreign money in Germany is about 5.3B marks or $1.26B, and it's seen desirable to replace floating foreign capital with a fixed loan to avoid withdrawal in a future crisis. Considerable optimism expressed in Berlin; it's hoped US-British pressure will get France to moderate unacceptable political demands, though “it is recognized that French balances in NY and London place France in a strong position.”

US will reportedly make certain relief proposals at the conference. US position is that it's useless to loan money to Germany until withdrawal of foreign capital is stopped; Sec. of State Stimson said “There is no use pouring more water into a leaky tub. The first thing to do is to plug the leak.”

Editorial: Even taking the most optimistic view, the London debt conference now at best promises a "slow and gradual repair of international finance." Hopes of a "quick and positive change in the current of European and consequently of world affairs" have given way, a month later, to prolonged negotiations which, "after several of the most impressive meetings of government heads since Versailles," are still in the preliminary phase. Pres. Hoover remains apparently "determined to hold the US aloof from any but the financial emergency aspect of the German position." However, US involvement in political issues seems inevitable since restoration of German credit depends on a political accord with France. "Through no fault of the President's ... his move to help Germany has ... become a plea for a real reconciliation between France and Germany. ... The prospect is hopeful, but can hardly be thought to promise that quick regeneration of the world's economic activities it at first appeared to usher in."

J.F. Schroeder Bank of Bremen suspended; deposits about 165M marks; no progress in discussions with Reichsbank and foreign creditors to save the bank. “There is complete order in all banks and savings banks which are paying out the small amounts permitted under the emergency banking decree. Clearing house system set up to allow unrestricted transfers between accounts at the 40 leading German banks.

Bank of England lost 1.8M pounds sterling in gold to Paris; continued losses are now expected for some time. Spanish pesetas fell on intensifying inflation concerns; Bank of Spain statement shows circulation July 18 at 5.470B pesetas vs. 4.744B on Apr. 11, and gold reserves 2.275B vs. 2.426B on July 4.

Hungary and Germany sign new trade treaty giving preference by Germany to Hungarian wheat; US likely to object.

Romania to seek financial aid in Paris and Geneva as result of crisis arising from Banca Generale failure and agrarian depression. Czechoslovakia considering "strict banking supervision." Banco de Cataluna of Barcelona, recently closed, "reopened quietly and resumed operations on a restricted scale."

Assorted historical stuff:

Stuart Chase, economist, says centralized planning with mandatory powers is essential to control of mechanical civilization; warns US is headed "backward to a frightful cataclysm unless it adopts a national plan that will control and guide basic industries, govern investment of capital and keep purchasing power in step with production." M. Woll, AFL VP, says has received favorable responses from industry in reply to proposal for industrial congress to plan future guidance for industry.

Editorial by T. Woodlock: While some cases of abuses by public utilities can be found, the industry as a whole is "no better or worse than the general average of human performance." Real reason for all the political agitation concerning the industry is twofold: it directly serves perhaps 70%-80% of all US voters, making interest of politicians obvious, and, "as human nature is constituted ... we cannot endure to see public utility enterprises pay what looks like a large profit to their owners, no matter how cheap and efficient may be the service which they supply."

15,000 coal miners employed by the Pittston Co. are voting on a strike proposal endorsed by leaders of the United Mine Workers.

Editorial: In blaming the current marketing system for the low price of wheat, Sen. Capper is "threshing over old straw that has been turned and threshed times without number." The Senator is now backing three bills aimed at the futures markets for commodities, and, unfortunately, Pres. Hoover has been led into supporting his effort. Congress this winter is likely to spend a great deal of time on attacking the marketing system, ironically led by those who "put over the present Agricultural Marketing Act that has been such a ghastly and costly failure." The Senator should study Sir Josiah Stamp's recent report finding that speculation actually helped the farmer. It would be unwise and harmful to the farmer to restrict commodity markets. "No man will buy a commodity if there are restrictions upon the sale of it. It is impossible to devise a system of marketing where there are speculative buyers of wheat or cotton without speculative sellers also." Pres. Hoover wires Sen. Capper that debt moratorium will aid wheat prices by stimulating foreign markets. Farm Board chair. Stone agrees with Pres. Hoover that part of price difficulties of Kansas farmers is due to paralysis of export markets.

First anniversary of ratification of London Naval Treaty finds US with 11 ships being built, Britain 30, Japan 17, France 60, and Italy 19. Total European-US disparity in naval building since 1922 is even more pronounced.

Japanese population is 64.450M, up 7.9% from 1925 which in turn was up 6.7% from 1920. British population is 44.790M or 685 per square mile, highest density in Europe except Belgium. Numerical increase in population smaller than any decade since 1861 except the war period.

Louis French, retired official of Indian Civil Service, appointed director of Palestine development scheme that Britain will finance with loan of $12.5M.

Gen. Emilio Aguinaldo, former revolutionary, proposes US grant Philippines immediate independence but preserve free trade status for at least 10 years.

French govt. launches new submarine called L'Espoir with speed of up to 20 knots, believed to be a record.

J. Hall, NY broker, flies from NY to Havana in eight hours 35 minutes, breaking old record by 46 minutes.

Russia has reportedly perfected a machine that produces cotton-like textiles from flax, hemp and other fibers that grow in many parts of Russia.

As usual, NY led all states in value of foreign exports in 1930 with total of $698.7M; next were Texas and California.

Pennsylvania RR carried 55,000 people to and from Atlantic City and other South Jersey resorts, a record for one-day summer seashore excursion traffic.

"Canning Sound" - "Radio has been responsible for many new developments ... To give realistic color to the broadcasting of plays ... one of the country's pioneer stations has built up a library to meet every need." Directors can order "a can of street traffic, or a couple of hundred feet of ocean surf." The sounds are recorded at their source and may be used over and over. "Some folks enjoy a concert ... better if the number is followed by applause." It will soon be possible to end a studio-produced concert with applause worthy of the "prima donna at the Metropolitan, because the applause at the Metropolitan will be recorded and reproduced when and where desired." [Note: Someone once unnerved me with the observation that most of the people you hear laughing when you watch a sitcom are dead.]

Once again, Hollywood stops at nothing for authenticity. Peter Shaw, an native of England and world traveller who spent two years in Africa, has constructed a village in Hollywood that "conforms authentically with original African villages he knows."

Market commentary:

Market wrap: "Not since the dull days before the Coolidge bull market picked up momentum in 1924 has speculative interest had fewer features to feed upon than it did in yesterday's session." However, stocks were "distinctly firm" despite very light volume. Opening was higher on announcement "France and Germany had agreed to work in harmony" but lapsed into "pronounced dullness" after initial gains. "Some relief from the monotonous" was provided by spurts of activity in sugar and oil shares, but even these subsided by afternoon, and the tape was frequently motionless. Leading stocks receded in mid-day but mostly recovered to the morning highs later. Bond trading considerably less active and "for the first time in days .. displayed the characteristics of a dull mid-summer session." Both foreign and domestic list moved within a narrow area; highest-grade domestic issues showed a firm tone, in some cases extending previous gains slightly. Commodities mixed; corn down sharply while other grains were somewhat lower; cotton up very sharply on late rally attributed to short-covering. Foreign buying of copper was heavier, with a total of 5M pounds sold Monday at equivalent of 8 cents; Germany was largest buyer. Silver up 1/8 cent to 28 1/8.

Total NYSE volume for Monday was about 700,000 shares, lowest since May 1926. This was about equal to the trading done in 13 minutes of the biggest day in Exchange history, Oct. 29, 1929, when 16.410M shares turned over; Monday's volume was 271,300 shares less than the trading in GM alone on that day.

Traders took to the sidelines pending European news, particularly after "indications that the London parley was likely to drag out to some length." "Most of the traders went about their social life earlier than usual."

Incoming earnings reports for the second quarter have in many cases been much better than anticipated earlier in the period; Westinghouse is an outstanding example, swinging to a profit after showing a substantial loss in the first quarter on mch higher refrigerator sales.

Buying in oil shares attributed to expectations of substantially lower production due to widespread well shutdowns in the Southwest. This has led to higher prices in some areas, and a general advance could follow if restriction continues and the "East Texas difficulty" is solved. Major oil cos. will have dividend meetings in August; none are currently covering dividends from earnings, but all have strong cash positions, and prospects of higher prices before year-end may influence directors to maintain dividends. Leading sugar stocks have been more active than in several years; prices for raw and refined sugar have been steadily advancing in recent weeks, with raw sugar up about 40% from the end of May. Rise attributed to Chadbourne plan and hot weather, which has stimulated demand for ice cream and soft drinks. At current price of 1.53 cents/pound for raw sugar, Cuban producers are still unprofitable after interest and depreciation, but Puerto Rican producers are profitable thanks to 2 cent duty on Cuban sugar; South Porto Rico Sugar has doubled from the year's low. Copper shares developed strength in response to higher foreign copper demand. Movie shares showed strength. Large public interest always drawn by Radio Corp. in the past has apparently died down pending decision in some important lawsuits, particularly the important govt. suit on patent pooling.

Tobacco shares remain popular with the bulls, with most trading close to the year's highs. One commentator looks for a dividend hike from American Tobacco.

Fertilizer shares are at a low ebb thanks to unstable income over the past decade; some now sell well below net quick assets and several industry leaders still have strong balance sheets. However, upcoming earnings reports "will not make pleasant reading" and "outlook for next season is far from encouraging."

Reports from Rochester of improvement in men's clothing business and higher wool prices drew some interest; the clothing business, "like the shoe industry, must enjoy certain replacements irrespective of depression" and "probably 95% of the clothing worn by men in this country is partly made of wool."

E. Rybicki of NY City Dept. of Public Welfare predicts "vigorous spurt of business next spring," believes unemployment "nearing its lowest mark."

Harvard Economic Society says “present indications are that the long decline in business” ended in Q1 and that Q2 “saw an approach to recovery.” While revival in building is not in evidence as in past recoveries, “business volumes in general have improved.” Partial setbacks in May and June attributed to stock decline and foreign conditions, and will “probably prove temporary.” Note “acute crisis” in Germany but believe suspension of debt payments will lessen strain.

Economic news and individual company reports:

Nat'l Industrial Conf. Board reports June business declined more than seasonally, continuing contraction that started in May and reaching roughly the low at start of the year; unless reversal takes place in July, low point of the depression reached several months ago may be overtaken.

Fed. Reserve July bulletin gives different reason for open-market purchases of govt. securities than the optimistic interpretation that it was done in belief business and banks were ready to use additional credit; says move was made necessary by withdrawals of currency by depositors due to bank suspensions, together with excess cash in bank vaults. Fed. Reserve figures show 166 bank failures in June, 80 in the Chicago Reserve district. For the two months ended June 24, US gold holdings gained $200M, much of it from Germany; $90M was added in one week, most for any week in US history.

Deterioration in California irrigation district finances is "now engaging the attention of some of the state's most able economic, financial and political minds." A few years ago development of the districts was thriving; now, 22 of 74 active districts are unable to make bond payments and, of total bonded debt of $96.0M, $41.4M is in default. "At the moment no handy remedy to return affairs to their former state has appeared." Coral Gables, Florida officials agree with bondholders' protective committee on plan for refinancing all bonded and floating debt. New bonds will total $4M, paying 6% and maturing in 40 years. City will cut operating budget $51,000 to $220,000. NY legislative banking committee ignores Republican demands for investigation of State Banking Dept.; votes instead to examine testimony in Bank of US trial in order to improve State banking law.

Commerce Dept. reports most European countries show budget deficits for the most recent fiscal year, including Germany ($297M), Britain ($113M), France ($86M) and Austria ($38M); countries with surpluses include Greece, Spain, Netherlands, Switzerland and Yugoslavia.

Wages of Mexican Federal employees cut up to 25% to save $7.5M. Mexican Congress expected to debate agreement with T. Lamont for renewal of payment on foreign debts in Sept.

BLS reports index of retail food prices June 15 was 118.3 vs. 121.0 on May 15 and 147.9 on June 15, 1930.

Steel buying so far in July has continued the slow pace seen in June; improvement isn't expected until about the end of August at the earliest; some authorities believe fall buying may be delayed beyond the usual seasonal time since customers are still cautious and the price situation hasn't yet fully stabilized.

ICC hearings continue. ICC Commissioner Eastman questions claims that increased rates and higher rail revenues would lead to prosperity through higher rail spending; points out that in 1930, despite rails' voluntary maintenance of capital spending though most of the year and veterans' bonus payments of $800M, there was no improvement in the economy. Questions advisability of raising railroad rates 72% over the 1916 level when commodity prices are 13% lower. Attributes better prices on utility bonds to more conservative capitalization. Rails serving drought areas in Montana and N. Dakota ask ICC permission to provide lower emergency rates on hay and other feeds to aid farmers. Examiners submit tentative report to the ICC revising freight rates on hay throughout the West.

Sinclair Oil & Gas wins temporary injunction barring Texas Railroad Commission from enforcing production curtailment in East Texas. Texas House, as part of legislative investigation of the oil industry, heard testimony from Commission officials on efforts to enforce curtailment.

Indications are that farmers in Kansas and other Southwestern states will make little reduction in wheat seeding this fall for the 1932 crop. Other crops are also low, and no employment is available in the cities; apparently "farmers prefer to go on producing wheat rather than join the army of unemployed"; they hope for revised tariff policies and improved markets. Agriculture Dept. reports Australian wheat acreage for 1931-32 about 13.6M acres, down 25% from last year. Canadian Nat'l Rwys. estimates Canadian wheat acreage this year at 23.0M acres, down 8% from 1930.

Canadian report: Canadian wheat pool further threatened by court case against the Saskatchewan pool charging law forcing producers to market through the pool is unconstitutional. Senator W. McDougald agreed to testify on charges the Beauharnois Power Corp. contributed almost $1M to the Liberal Party before getting a concession for the St. Lawrence River. Agreement to testify came after govt. threat "to send him to 'the tower,' an unprecedented action in Canadian history"; McDougald had previously claimed Parliamentary immunity. Building permits in 61 Canadian cities in first half totalled $57.5M, down 33% from 1930, partly due to lower costs.

Pacific Northwest reports record Alaskan salmon sales for year ending June 30 and good outlook for 1931.

NYSE seat sold for $235,000, down $15,000 from last sale.

Sears-Roebuck sales, after running well behind 1930 for the first four months of the year (5.8% - 14.8%), have been much closer since (0.9% - 5.3%). Sales in the four weeks ended July 16 were down only 1.0% from 1930, and mail order sales showed an encouraging increase for the first time this year.

Earnings reports: Chesapeake & Ohio RR half $1.55 vs. $1.96. General Foods Q2 $.87/share vs. $.88; half $1.93 vs. $2.01. National Biscuit Q2 $.66/share vs. $.80; half $1.36 vs. $1.48. Beech-Nut Packing Q2 $1.43/share vs. $1.72; half $2.63 vs. $2.96. Maytag Q2 $.52/share vs. $.40; half $.88 vs. $.44. Pierce-Arrow Q2 $.04/share vs. $1.87; half $1.00 vs. $1.57. General Railway Signal Q2 $1.64/share vs. $1.72; half $2.10 vs. $3.03. Congoleum-Nairn half $.42 vs. $.40. A. Hollander & Son half $2.15 vs. $.96. Madison Square Garden year ended May $1.08 vs. $1.30. Trunz Pork Stores half $.98 vs. $1.11.

Companies reporting decent earnings: General Foods, Maytag, Congoleum-Nairn (floor coverings), A. Hollander & Son (furs), Trunz Pork Stores.


Murder by the Clock - Paramount film, at the NY and Brooklyn Paramount theatres. "A skillfully constructed ... cinematic tale of a selfish woman who inspires men to kill." Laura Endicott is married to the drunken nephew of a wealthy old woman who chooses to bequeath her fortune to him in preference to her "idiot son." Choice proves unfortunate as nephew kills the old woman to inherit the fortune immediately. Nephew is next to be killed so Laura "may be free to marry her lover, a sculptor. Then it becomes the lover's lot to die at the hands of the idiot, who wants Laura for himself." Lacking somewhat in credibility; taken at "face value, however, it provides a mildly thrilling hour's entertainment."

Racist joke:

"We consider tipping a degrading custom, and have formed a society to put a stop to it." "Aye, I'll gladly join it!" said the Scotsman. "Good; the membership fee is only 50 cents a year." "Hmm. I'm thinkin' it'll be cheaper for me to tip."

1 comment:

  1. This comment has been removed by a blog administrator.