Editorial: Official figure for US deficit in the just-ended fiscal year will be $850M, more or less [note: another estimate below]. After adjusting for the "sinking fund" (subtract $440M) and for veterans' bonus payouts (add $575M), the year's real deficit reaches a sobering total close to an even billion dollars; next year will also bring a reduction of $246M in incoming war debt payments due to the Hoover plan. Relieving this grim picture somewhat are a number of spending cuts "fairly crying to be made." The "futile Farm Board" should not be given any more money, and Congress ought to rescind the $100M already provided for this year. Also, amortization of govt. liability on veterans' compensation certificates can safely be omitted due to the large payouts already made. These two items alone add up to $400M; "if Congress has the will, they will be only the beginning of a program by which the country can avoid new tax measures, despite the deficit and the moratorium." Federal deficit now estimated at $905M, an improvement from earlier $1B estimate; spending $4.207B vs. earlier $4.435B estimate and vs. $3.994B prev. year; receipts $3.310B vs. $4.178B prev. year, of which income taxes were $1.860B vs. $2.411B; public debt increased to $16.796B from $16.185B but average interest rate fell to 3.58% from 3.80%.
John L. Lewis, United Mine Workers pres., requested Pres. Hoover call a conference on problems of the coal industry; Hoover responded the Administration wished to lend every possible assistance to any constructive program put forth by coal operators and miners; referred communications from Lewis' organization to the Secretaries of Commerce and Labor for advice.
A. Iselin & Co. prepared survey of Russia based on extended trip in April - May by “trained observers from the firm's Paris office.” Predicts popular dissatisfaction as it's realized Five Year Plan isn't producing the results hoped for, but believes “character of the population and the power of the Communist party will probably prevent a general uprising. ... Possibly the country will have to pass through a period of chaos accompanied by famine and local violence.” In any case, in nearer term world is likely to face unmanageable amount of Russian raw material exports. Govt. printed about 3 times more currency than planned but controls many prices; currency can be bought abroad at 10%-15% of official rate. Believe trade situation unsustainable in long term since Plan requires huge imports which can't be paid for by exports and probably will be financed through foreign credits. Living conditions poor, though this was also true before the war; population “insufficiently fed and clad”; note “very poor conditions of public and private buildings and the prevalence of filth”; rail stations “crowded with multitudes of poor people going from one point to another in the hope of finding better living conditions.” However, population largely bearing up thanks to “very clever and incessant propaganda.”
Acting Treasury Sec. Mills says Treasury won't make any "sweeping decision" under the tariff provision barring products of forced labor that becomes effective Jan. 1 [aimed at Russian products]; under the law, each commodity must be decided on its own merits.
Editorial by T. Woodlock concerning horrendously unjust position of Gov. Roosevelt favoring original investment rather than reproduction cost as basis for calculating fair utility returns. Stand is “profoundly discouraging ... 'return' is but the wage of capital, and if that wage does not go up when prices go up the value of that capital is decreased.” [Note: something tells me these impassioned positions will be reversed as the long-term trend switches to deflation ...]
The aviation industry continues to expand in spite of depression. Airplanes consumed 35M gallons of gasoline in 1930 vs. 3.3M in 1926; over 3,000 miles of airways will be electrically lighted this year; 20 more radio communication plants will be installed. By the end of 1931 airplane pilots will be able to receive weather reports by radio in almost every square mile of the US. Second Asst. Postmaster Gen. Glover predicts sharp rise in air mail to 1M pounds/month within next few months; says airline passengers won't be satisfied with speeds of 90 - 100 mph, but will demand 135 - 170 mph.
Elmer G. Sperry, gyroscope wizard, just before his death a few months ago invented an electric appliance to detect cracks in steel rails, which have caused so many rail wrecks over the years they have become known as "rail cancer." Recent tests have shown that by applying electric currents cracks can be detected that otherwise would grow until the rails fell apart.
Remington Rand, in spite of recent lean earnings, is maintaining its extensive R&D programs; new products incude a noiseless portable typewriter, an electric accounting machine, and the first tabulating machine supporting "direct subtraction mechanically."
United Air Lines cuts transcontinental airfares from $215 - $245 to $200.
Nome, Alaska is a far cry from the glory and glamor of 30 years ago during the mining excitement. Its population has declined from 40,000 then to less than 2,000 now, but it's still important enough as a business center to have a bank, since considerable gold and copper mining is still done in the area.
R. Randolph, Chicago Assoc. of Commerce pres., estimates rackets cost Chicago $165M annually, or about as much as the city budget.
Census Bureau reports NY City contains 103,623 retail stores, with annual sales of $4.403B, of which 87,234 are single-store independents. Types of stores: 42,947 food, 13,639 apparel, 5,529 automotive, 8,438 restaurants.
Market commentary:
Market wrap: Stocks were weak in early dealings following reports "the French continued obdurate" in negotiations on the Hoover plan; leading shares dipped but drew "good support on a scale down." Stocks showed some improvement from mid-day through the fourth hour, but selling resumed following a decline in copper price and forecast for a 3% reduction in steel output; final dealings showed "pronounced unsettlement." Bond trading quiet, prices somewhat reactionary; US govts. steady to firm; foreign issues "inclined to sag"; industrials and second-grade rails irregularly lower while highest-grade utilities and rails were steady. Commodities weak; grains and cotton lower; copper weakened to 8 3/4 - 9 cents, demand lower.
Market sentiment continues cheerful, though some bulls are more cautious and believe "the market should be allowed to prove ability to hold on rallies before large blocks are taken." Conservative observers warn against short selling, favor using stops to protect current holdings.
Some believe the market may react when an agreement is reached on the Hoover plan in a case of selling the news, since a substantial anticipatory rally has already taken place. Some observers believe the market's technical position has been weakened by the recent rally, attributing much of the upturn to short covering. "However, those who watch market conditions closely insist that a substantial short interest still exists." A number of bear traders seem to have been "feeling for the top" in recent sessions, "putting out lines" but then covering when the market shows good resistance.
J.I. Case was strong on reports W. Danforth (longtime bear operator recently turned bull) was buying and a short squeeze was planned. Johns-Manville was in demand on sharp improvement in second-quarter earnings.
With yesterday's session being the last of the first half, assorted institutions naturally would have preferred a strong finish to improve the appearance of first-half statements. However, nothing developed to compare with the sharp late rally on the corresponding day a year ago.
Editorial: Govts. of three western provinces of Canada are now getting a $22M lesson in the "so-called 'orderly marketing' of wheat," which turned out to be a failed speculation on the possibility of a crop failure in 1930. "If misery loves company western Canada can look toward the US where the same folly is being reenacted on a larger scale," not only in wheat but in cotton and other products. The direct costs in our case are still unclear, but from the effect on new crop prices, it's a safe bet the indirect costs will be even larger. For both the US and Canada the lesson will be costly, but if "legislators learn anything by this experience the expenditure will not have been in vain."
Amer. Metal Market reports sentiment in steel industry further improved due to outside developments [Hoover plan]; production has continued decline but this is almost inevitable at this time of year; attitudes stronger on maintaining and improving prices. Amer. Machinist reports "mounting spirits" in machinery and machine tool markets thanks to the Hoover plan; "word from various districts in the past week show inquiries and a few more orders."
Confidence continued that the Hoover plan would be followed "by other far-reaching steps toward economic stability," possibly including "huge international credits," a steady rise in silver prices and in other commodities including coffee, rubber and silk, and impounding of govt. wheat and cotton to keep it off the market.
Economic news and individual company reports:
"Run on the Reichsbank's foreign currency reserves, emanating from US bankers, increased"; losses amounted to 40M marks Tuesday and 90M since last Saturday; three-fourths of recent $100M central bank credit used; withdrawals attributed to uneasiness over negotiations on Hoover plan. Local bankers [note: I think this means NY] "not disturbed" over withdrawals, explaining they "were anticipated and provision made for them." “Bankers in close touch with German affairs” believe difficulties are gradually clearing up, see more normal credit position by fall; point to additional $50M credit obtained from Gold Discount Bank to defend marks. Sensational rally in Berlin stocks last week has been followed by considerable profit-taking, leading to declines so far this week; money markets are tight, with daily money at 8 1/2% - 11%.
Detroit gets $5M loan from Ford Motor Co. at 3 1/2% interest rate until Sept. 15.
Meeting of Eastern rail executives on consolidation adjourned without agreement; progress reported, will meet again July 7. ICC will have initial hearings on 15% rate increase starting July 15, and more hearings Aug. 31. This schedule dashed hopes of an emergency increase as early as Sept. 1; any increase likely wouldn't become effective until late in the final quarter. Rail freight loadings for week ended June 20 were 739,116, up 6,663 from prev. week, down 19.7% from 1930 week, and down 30.9% from 1929. Operating income of class 1 rails in May about $41M, down 41% from 1930 and 60% from 1929; gross $368M, down 21% and 31%. NY Central reported May revenues down 23.3% and operating income down 51.4%; report was disappointing, showing declines worse than for the first 5 months as a whole, and worse than the average of other major rails for May; stock declined.
Refineries ran at 66.3% in week ended June 27; stocks of gasoline fell 432,000 barrels to 41.868M (prev. week revised up to 42.300M). Crude oil production in week was 2.442M barrels/day, down 40,400 from prev. week and down 169,000 from a year ago. Texas Railroad Commission considering new oil production curtailment plan for East Texas; seen likely to limit output to 240,000 barrels/day vs. current 360,000 and put curtailment "on the well basis"; major producers say will accept any plan approved by the Commission.
US new car registrations in May were 247,727, down 6.8% from Apr. and 28.2% from 1929; first 5 mos. 975,219, down 29.9%. US automotive exports in first 4 months were $72.0M vs. $141.4M in 1930 and $254.1M in 1929; drastic decline attributed to extreme depression in best markets and foreign tariffs.
Money markets remained easy, showing no sign of the usual temporary tightening due to bank “window dressing” for June 30 statements.
Hudson County member banks of NJ Clearing House Assoc. raise $5M fund to protect depositors of county banks from effect of closing of Steneck Trust of Hoboken on Saturday.
NYSE volume in June averaged 2.256M shares/day, smallest June average since 1927; heaviest full session was 5.066M and smallest 916,901. Total volume in first half was 332.0M shares (average of 2.213M/day), vs. 493.3M in 1930 and 537.6M in 1929.
Oklahoma wheat harvest featured better quality and increased quantity.
Discussions by leading copper producers on curtailing output broke up without definite decision.
Dr. G. Vissering, Bank of the Netherlands pres., says so far Holland is one of the countries that has suffered least from the depression; foreign trade was maintained well in 1930 and business failures were only slightly above 1929; money rates are at record lows.
French budget deficit for 1931 to reach at least 2.3B francs ($92M).
Japanese govt., despite storm of protest and threatened strikes, cut salaries of all workers earning 1,200 yen annually by 10% effective June 1; walkouts were threatened but workers eventually accepted the cut. However, savings made were relatively modest and the cuts seem to have been mainly a test case to "determine whether really radical reforms will be possible." Govt. has appointed three commissions to "smooth the way for sweeping administrative, fiscal and taxation reforms." These will "effect tremendous savings" touching every department and are bound to be unpopular.
S. Untermeyer will ask NY City Board of Estimate to exercise city's right to recapture subway lines from BMT and IRT.
Philip Morris Ltd. is expected to show substantially higher profits for the 6 mos. ended Sept.; sales of their main cigarette, Marlboro, are up sharply due to anticipated narrowing of the price difference between leading brands (likely to rise to 15 cents/pack) and the premium Marlboro brand (20 cents).
Companies reporting decent earnings: IBM, Philip Morris Ltd., Consol. Gas of Baltimore, Parker Rust-Proof.
Report from Paris:
Baggeson, the Danish clown, AKA "the man of 100,000 plates," has passed away. Like Severin, the beloved French Pierrot, he died far from the greasepaint, on his estate, "for he, too, had coined laughter into gold." Baggeson's specialty, which he never changed through more than a generation, was the breakage of crockery - the 100,000 plates in his nickname referred to his annual consumption. This prompts another melancholy review of the rise and fall of the circus clown. "Among the earliest memories [note: and deep psychological traumas] of most men and women is the whitened face of a laughing clown." First clown, Bill Saunders, was a feature of the first circus - Astley's, established in 1770 on what is now the Waterloo station in London. For the next 100-odd years, the clown's costume was that of the court buffoon; "those were the days of literate, not to say literary clowns." Clowns wrote their own dialogue, and hurled real wit at the crowd; rulers feared their topical quips. The whitened face with scarlet markings was first adopted in 1860 by the Price Brothers. About the same time, Tom Belling, an American clown, invented the auguste, "a frock-coated type of pantomimist" performing "finely etched jesting" that became the dominant type for many decades. There followed the golden age of the star jester; for example, Dan Rice, who flourished 50 years ago, was the highest paid circus performer of his time, making and losing several fortunes; George Fox played Humpty Dumpty on Broadway for 2,000 nights, applauded by Edwin Booth. In France and Germany, clowns can still get top circus billing, but in the US and England "Pierrot's candle is almost dead." With the widening of the tent, US circuses switched to the "clown in mass production," tumbling and clowning in groups of 10, 20 or more. By 1910, no clown but the tragic Marcelline was paid more than $100/week. Salaries in all branches of theatre have increased since the war due to the demand from movies, but with a few exceptions, such as Grock in London and the Fratellinis in Paris, the big-time clown head-liner is no more.
Joke:
'Getting this fifty dollars from my husband was like taking candy from a baby.' 'Honest?' 'Yes, he put up an almighty holler.'
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