August 24, 2010

Monday, August 24, 1931: Dow 137.76 -0.84 (0.6%)

Assorted historical stuff:

Emigrant Industrial Savings Bank tells its 249,000 depositors to start buying stuff. Notes that in 1928 they "made every effort ... to encourage people to save and to resist the temptation to spend recklessly." Now, however, economic conditions have changed drastically. The dollar is worth 16% more than in 1928; to "keep faith with our depositors' best interests," the advice must change. While you should keep a reserve of at least 6 months' salary for emergencies, "if you have a surplus above all likely needs, make careful purchases of things you want for permanent use while prices remain.low."

Pres. Hoover pleased at splendid response to his invitations to join the Employment Advisory Committee, which will work in cooperation with the President's Emergency Committee for Employment; 52 of 60 invited have already accepted. Pres. Hoover was advised that Federal construction work has directly and indirectly employed 730,000 as of Aug. 1, vs. 180,000 at start of the depression; further increase of 80,000 - 100,000 expected by year-end.

NY Gov. Roosevelt will ask state legislature to take action on "relief of distress and alleviation of unemployment" at extraordinary session convening Tuesday. Editorial: Gov. Roosevelt's decision will be "commended by all. If there is one thing clear, it is that the resources of NY State must be opened this winter to the degree necessary to ensure all its needy citizens of food, clothing and shelter." Regarding unemployment, all are agreed that ":so far as is humanly possible jobs shall be found for our unemployed. However, this shouldn't imply "hasty and ill-considered" legislation such as a move toward unemployment insurance. In any case, Gov. Roosevelt's "course is in refreshing contrast" to Gov. Pinchot who is calling for Federal aid; this should be "the last recourse."

Morris Harvey College in Barboursville, W. Va., will accept farm produce as tuition this school year; produce will be used in the college dining hall.

[Note: I was wondering what happened to that old Eastern rail consolidation plan, which a few of you may recall was announced with great fanfare back in January and has been repeatedly reported as all but settled since.] Eastern rail consolidation plan apparently "side-tracked" indefinitely over unwillingness of NY Central to agree to "granting trackage rights to the Pennsylvania over the Nickel Plate along the south shore of Lake Erie between Brocton, NY and Ashtabula, Ohio."

British Cabinet held its first Saturday meeting since the war; Labor govt. and "the Trade Union element" seriously deadlocked over how to balance the budget; imminent resignation of govt. rumored. Bank of England announced it will extend period of higher currency circulation for 3 weeks; action seen reflecting domestic political uncertainty. Spot sterling was steady, but futures were sharply lower. British military branches ordered suspension of all contracts for military works until further instructions, in line with recent economy (austerity) campaign.

Lord Beaverbrook, British newspaper owner, calls League of Nations "branch of French Foreign Office" and says England should withdraw.

Franco-Soviet nonaggression pact reportedly signed in Paris.

Chrysler Motors dealers (including Dodge, De Soto, and Plymouth) are offering buyers of new cars "a new service plan known as the Owner's Service Policy" that "provides for the replacement of parts that are defective in materials or workmanship without charge ... during a period of 90 days from date of purchase or until 4,000 miles have been recorded on the speedometer, whichever occurs first." The policy also contains four coupons "which entitle the owner to free inspection and to a comprehensive list of service operations at the conclusion of 500 miles, 1,500 miles, 2,500 miles, and 4,000 miles."

Rubsam Corp. of Delaware wins suit against GM in Detroit Federal Court charging infringement of their patents on "demountable rims" for car wheels.

New giant Cunard liner being built will prevent pitch and roll using 300-ton, $1M device "utilizing gyroscopic principle."

Commercial sailing ships have completely disappeared from the Upper Great Lakes with the sinking of the ship Our Son in the severe storms of Oct. 1930. Cargoes are now carried in modern steel vessels, many over 600 feet long and with capacity of 16,000 tons or more.

Labor Sec. Doak asked the "commissioner of conciliation of Los Angeles" to go to Las Vegas "to straighten out complaints relative to employment and working conditions on Boulder Dam" (later Hoover Dam).

A generation ago, advanced US students went abroad for postgraduate studies. Now, leading US universities are “equal in efficiency to any in Europe, and some are world leaders in special lines.” One consequence is that “much to the joy of students, French and German are no longer required ... Few ... American students ever mastered these languages through study, ... and they were always regarded as difficult and despised subjects.”

Gardner F. Wells, pres. of the Boston, Revere Beach & Lynn RR, found dead in the company office; “had been shot through the mouth.” [Note: There are occasional items like this in the Journal, where it's not clear if a suicide had occurred.”

Market commentary:

Market wrap: Major stocks under pressure early; considerable selling reported from abroad on concern over British govt. crisis; majors including Steel, Can and AT&T fell; NY Central hit a post-1921 low. However, selling showed no momentum after initial accumulation of orders was absorbed; trading turned sluggish and the “market ... displayed indifference to attempts to impart impetus to the downward movement.” Bonds more active, featuring rally in highest-grade rail issues and in oils while rest of corporate list generally fell; foreign list featured sharp rally in Argentine govts. while British eased slightly. Corn fell sharply to new season lows close to 40 cents/bushel. Wheat was lower in spite of Farm Board's large Brazilian coffee swap deal and prospect of sale to China.

The more optimistic traders point to relative resilience of the stock market over the past ten days in spite of "domestic banking difficulties, foreign political and financial troubles, discouraging unemployment figures, disappointing earnings and China's flood catastrophe." While few expect an immediate business recovery, "as one leading trader put it, 'he must be a pessimist indeed who does not believe that this great country is not going to recover its prosperity. The slower this recovery is the more sure it will be, and the more lasting and substantial it will prove."

Attitude of the most active bullish traders in recent weeks is that the market as a whole might work somewhat lower, but “the halcyon days for bearish operations have been seen,” and selected companies that have completed adjustment to the changed business cycle are now ready to increase profits and reward bulls. A prominent example is W. Danforth, who was operating on the short side before the 1929 crash, but has been actively buying since May. After their recent success in Safeway, Danforth interests have switched to Lambert, which earned $4.77 in the first half (down only 25 cents from 1930), reported July sales ahead of 1930, and, at the current price of about 70, yields over 11%.

Recent bond market weakness may be a factor restraining public interest in the stock market. Decline in the Dow 40-bond average since July 11 has been more severe than the one late last year; last Dec. bonds and stocks hit lows simultaneously but recently bonds have "been outstanding leaders in seeking lower levels."

Considerable speculation is in the air on possible New Haven RR and Pennsylvania RR dividend cuts. US Steel monthly directors' meeting tomorrow will be watched closely for signs of the rumored action on wage cuts.

Earnings of publishing companies generally held up well in the first half of 1930, despite the general business trend, but "gave belated recognition to the depressed conditions" in the first half this year. Six NYSE-listed cos. earned $15.9M in the first half of 1929; this rose to $16.3M in 1930 but fell to $10.4M this year.

Yet another editorial on how Europe is key to the depression: "When will the depression end is a question often asked but never satisfactorily answered. "The Wiggin report (of the bankers committee in Basel) "answers the question by saying that 'until the situation improves in Germany there can be no general recovery ...'" In this "great world emergency would it not be becoming in the US to throw politics to the winds and take the leadership ... to win the peace and remove the great obstacle to ending the depression?"

Week in review:

Stocks were unsettled following the previous week's recovery. While some indications of seasonal business improvement developed including a continued rise in steel output, there was also some disturbing news. “Banking difficulties” broke out in Toledo and other locations; these lead to a steady decline in bonds caused by forced liquidation at the banks. The bond selloff showed no signs of ending and “finally forced large traders sponsoring the campaign for higher prices to take to the sidelines until the banking disturbances had subsided.” The looming question of wage cuts also caused concern. A British govt. crisis broke out as efforts to close the deficit ran into complications. Some indications also appeared of a relapse in the German situation, including continued withdrawals at savings banks.

Bond prices were irregular on dull trading. Feature of the week was severe decline in all grades of railroad bonds, as they suffered heavy liquidation by banks and corporations. Public utilities showed good resistance but eased slightly. Oil company issues rallied. NY City tractions [mass transit] issues weakened in absence of the long-awaited Transit Commission report on modified unification plan. Foreign list was weak, featuring sharp decline in German govts. on reports of continued withdrawals from savings banks; S. American issues also showed some sharp declines after Chilean announcement of debt moratorium.

Cotton sagged to new lows, with spot quoted at a post-1899 low of 6.50 cents. Louisiana Gov. Long proposed a plan for the Federal govt. to sponsor a worldwide one-year holiday for cotton fields. Wheat showed little response to bullish crop news, with most months selling under 50 cents, close to the year's lows.

Fed. Reserve statements showed sharp rise in circulation due to banking difficulties. Holdings of govt. securities showed no change, indicating increase last week was a one-time occurrence not presaging a renewed policy of credit expansion. Money markets very quiet. Foreign currency markets dull; sterling was firm, reportedly on Bank of England support.

Economic news and individual company reports:

Automotive output is falling significantly; August production is now estimated at 147,000, and Sept. will "do well to equal the August figure." Outlook based on current forward orders from dealers is indifferent, but some industry people hope "for a brisk pickup in sales after Labor Day" as "hundreds of people returning from vacations in worn-out machines will, with the first touch of fall weather, begin to think about the hazards of winter driving." One eagerly awaited development - resumption of large-scale output by Ford - now seems unlikely for another 60 days as Ford officials are still working out details of the motor suspension system to match the impressive smoothness of the new Plymouth. Occasional bursts of steel buying give the impression business is picking up, but "result chiefly from the fact that the industry is operating on a hand-to-mouth basis."

In spite of higher offers of 70 - 77 cents/barrel by Texas Co., which was matched by other majors, Oklahoma fields remained shut down by martial law as Gov. Murray held out for $1 a barrel. Wholesale gasoline prices climbed toward 6 cents/gallon. Texas Brig. Gen. J. Wolters and 1,200 cavalrymen barred a group of refiners from holding a protest meeting as "an affront to the Governor's orders."

Justice Dept., as usual in large mergers, will investigate the two large proposed oil combinations for antitrust violations. E. Suebert, Standard Oil of Indiana pres., denies rumors of merger negotiations with Union Oil of California.

Texas seen as key to adoption of Louisiana Gov. Long's plan for all Southern cotton states to prohibit "the planting of a single cotton seed in 1932." Conference of cotton men called by Long in New Orleans unanimously endorsed the plan, along with Sen. Caraway's supplemental proposal for the Farm Board to buy 8M bales from farmers at above-market prices and then allocate them back to farmers, conditional on their agreeing not to grow any cotton in 1932.

Fisher's wholesale commodity index fell 0.1 to 69.4 , within 0.1 of the postwar low of 69.3 reached 3 weeks ago. However, the index has shown signs of stabilizing, varying only 0.2 over the past 5 weeks.

Bradstreet's weekly reports both retail and wholesale trade "spotted"; fall showings starting and summer clearance sales still going on; low inventories indicate success of sales at clearing out stocks, even if at low profit. Dun's reports sales in dollars below a year ago, but physical volume slightly higher.

Midland Bank estimates total US long-term investments abroad at $14.8B - 15.4B, with over 35% of US direct investment in England.

Nordwolle (large German wool co. whose failure helped precipitate the recent crisis) losses estimated at 255M marks; all capital lost and creditors will lose about 83% of their claims; largest creditor is the Darmstatder bank, 76M marks.

German budget deficit for four months ending in July is at annual rate of $252M.

With harvesting under way, Bank of Montreal estimates total grain crops in Canadian prairie provinces will be about 50% of normal; damage concentrated in Southern districts.

Brazilian coffee bartered for surplus US wheat by the Farm Board will be withheld from consumption for a year, after which it will be sold in monthly installments of 62,500 bags to avoid disturbing the coffee trade.

Commerce Dept. reports formation of international pencil cartel.

Labor Dept. denies it's investigating reports of wage cuts at Wright Aeronautical. Ralston Purina cuts wages of 1,000 officers and employees up to 15%.

Theatre report:

The 1931-32 theatre season officially gets under way tomorrow evening. Earl Carroll will bring the 9th edition of his Vanities into the new Earl Carroll Theatre, just completed at a cost of $4.5M including $125,000 for a cooling plant that works both for the audience and backstage. The top ticket price will be only $3; low price made possible by 3,000 seat capacity. Production is, according to the producer, "the most costly, lavish and massive ever prepared." The scientifically equipped stage allows effects previously impossible; a 5-ton chromium set is lifted with ease, and the 46-foot dinosaur featured in the show can be taken away in a 40-foot elevator in a few minutes. Cast will include 50 performers. Other new productions include The Improper Duchess, starring Irene Bordoni; Grand Opera Blues, a comedy; After Hours, which "looks like a typical John Golden comedy"; and Cloudy With Showers, also a comedy.


Vegetarian - Yes, ever since I have given up meat I have had the desire to climb to greater heights ... Friend - And look for nuts?

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