August 29, 2010

Saturday, August 29, 1931: Dow 140.78 +2.12 (1.5%)

Assorted historical stuff:

Letter to the editor passionately calling for more vigorous govt. public works program funded by "Welfare Loan" bearing rate of 1%-2% that those with jobs would have to subscribe a small percentage of their income to. "We need not worry about increase in the govt. debt. For war purposes we did not hesitate to issue bonds to the tune of $30B for bullets and destruction. The dangers of peace are fully as great as those of war. Famine in the midst of plenty now saps the life of untold millions. Have we billions for destruction and nothing for construction? Then God help humanity! Why cannot America, land of ingenuity and leader of progress, rise from her slough of despond, reawaken her spirit of courage, and ... step forward resolutely ... We have the means, but where is the man?"

NY Gov. Roosevelt presented unemployment relief program to the special session of the state Legislature. The main relief bill “specifically forbids the payment of any cash dole.” The $20M cost of the bill is to be covered by a 50% increase in state income taxes, covering all brackets; the additional tax on a $5,000 income would be $12.50 for a single person and $1 for a married one; on a $20,000 income it would be $125 and $102; and on a $100,000 income $1,163 and $1,128. Gov. Roosevelt also signed the immunity bills [note: rather vigorously opposed by Tammany for some reason] that give the Hofstadter committee investigating corruption in NY City the power to grant immunity to witnesses.

Editorial: The administration now says it doesn't want to link war debt questions with disarmament, and therefore won't propose any important steps on war debts and reparations before the Geneva disarmament conference in Feb. This will leave little time to tackle the fundamental war debt problem before the Hoover debt holiday expires July 1, and many other short-term German credits fall due before then; the Administration is "smoking on a powder keg." Under-Sec. of State Castle says benefit from successful disarmament conference would be much greater due to economic depression. Would be very sorry to see the conference postponed, but if League of Nations decides to do so US govt. couldn't oppose the decision.

Farm Board has received "somewhere between 500 and 1,000" proposals for solution of the cotton problem in response to its plan to plow under every third row of cotton; "the Board has indicated that after it digests the various plans it may evolve and make public some other proposal."

White House states that, despite reports to the contrary, Pres. Hoover continues to advocate maintenance of current wage levels.

Savings effected by various US govt. depts. total over $25M, or enough to finance the Depts. of State and Labor this fiscal year. The War and Navy Depts. reported saving about $7M each, and the Interior Dept. $8M-$10M.

Germany reportedly offers to abandon customs union with Austria in return for international pact reducing tariffs on industrial products by 10%.

Argentina decrees new elections for Nov. 8; has had provisional govt. led by revolutionary leader Gen. Uriburu since last fall.

Loan of $65M from Met. Life Insurance Co. is being negotiated for construction of Rockefeller [Radio] City. Would be largest mortgage ever, shattering previous record of $27M for construction of Empire State Bldg., also issued by Met. Life.

Planned NY City spending on subway building next year is about $70M vs. $100M in each of last two years.

The US Weather Bureau is now in its 62nd year. With over 200 major stations scattered over the US, the Bureau is guardian of shipping in three oceans, of 18,000 miles of airways, and watchman against earthquakes, floods, storms, and fires.

The Norwegian Whaling Co. reportedly received an order from a French concern for 25 dead whales and 100 live penguins. The whales will cost about $7,000 each; they are to be stuffed and used in exhibitions.

Francis "Borax" Smith, discoverer of borax in Death Valley, dead at 85.

Market commentary:

Market wrap: Stocks showed “the greatest animation ... on the upside in ten days,” though trading remained largely professional; major industrials including Steel, Can and Westinghouse rose while trading favorites like Case and Auburn advanced sharply; strength also spread to leading rails. The rally followed reports of large credit to Britain and improvement in bond market, but was seen largely due to a technically oversold position, indicated by recent inability of bears to bring out increased selling on reactions. Bonds continued recent improvement on more active trading. Rail bonds extended their rally, with some recently weak issues rallying sharply. Industrials and convertibles trended up. British and European issues steady to firm; S. American "showed more stability." US govts. slightly lower. Grains rallied most of the day under leadership of corn but fell sharply late to close lower; cotton up moderately.

While a better feeling has developed in market circles, conservative observers continue recommending the sidelines until market demonstrates ability to carry through on recoveries. Conservative interests believe "best to be expected of the market in the immediate future is a series of short technical movements ... until a definite improvement comes in fundamental conditions." Both bulls and bears have been unable to make much progress in recent operations.

Bears continue “to ask what there is to put the market up,” citing continued bad news including foreign unsettlement, banking disturbances, and no convincing evidence of business improvement. Bulls counter that these have already been “extensively discounted by the great deflation in stock values over the last two years,” pointing out the market's recent resistance to a slew of bad news since early July. This indicates that technical factors favor prolongation of the uptrend since the bear market lows of June 2. Furthermore, if the Dow industrials and rails rise above the June 27 highs of 156.83 and 88.31, “Dow theory would indicate emergence from the primary bear market, and embarkation upon a major advance”; recent very low volume “has been closely paralleling the pronounced dullness” seen in July-Aug. 1921, when the previous major bear market was establishing a bottom.

J. Fitzgerald, Eastern rail spokesman, estimates that in the first 5 months of 1931 rail operating and capital spending is down $5M per working day vs. 1929.

Editorial praising "courageous" action of the Chatham Phenix bank in prosecuting someone under a NY law for spreading unfounded rumors about them. It's generally hard for banks to act against "hysterical rumor mongers"; in addition to laws, there should be a "responsible ... organization to see that sound banks in a community are not subjected to this unfortunate experience"; it could use advertising to counter "the spread of mischievous reports."

Economic news and individual company reports:

J.P. Morgan announces $200M one-year credit to British govt. from US banks; credit of about the same size expected from France. Ease with which large new credit was arranged seen stimulating confidence in sterling. European observers believe Britain is suffering from strain of restoring sterling from the postwar low of $3.20 to parity of $4.87 without necessary control of spending; “at a time when strictest economy was necessary, the British govt. went ahead on new idealistic social services which plunged the govt. deeply into debt.” This has been exacerbated by the large amount of short-term foreign money in London, which is subject to sudden withdrawal. However, it must be remembered that Britain holds about $13B in foreign investments that “could be realized if the situation became really desperate,” though in practice large-scale selling would cause serious losses.

Kreuger & Toll reports profits are holding well; recurring income in the first half about $14M vs. $15.2M in 1930; for full year expect $24M vs. $25.1M; no government defaults on payments due. Debts as of Sept. 1 will be reduced by $20M from $70M total at start of 1931; remaining debts are long-term, much of which can't be called sooner than four years from now.

Review of the German credit crisis shows that the 6 leading banks there lost 21.3% of their deposits in June and July; total deposits on May 31, immediately after collapse of the Austrian Creditanstalt bank, were 10.395B marks; this fell to 9.277B on June 30 and 8.167B on July 31.

Weekly bank statements since June 17 have shown “a distinct contraction of credit,” especially outside NY City; member bank reserve deposits are down $59M. At the same time, there's been an “almost unprecedented” rise in currency circulation of $238M. This clearly means “Fed. Reserve credit has not been used in the US recently as the basis of an expanding credit volume to stimulate trade.” On the other hand, a sizeable increase in use of the excess US credit base abroad “is decidedly constructive” since currently Fed. Reserve banks are “about the only institutions” in the US able “to advance funds to distressed European situations in a hurry.” While the Fed. Reserve's activities haven't noticeably stimulated either world or domestic business, they have “been a powerful factor in preventing more serious breakdowns.”

NY State Banking Supt. Broderick announced closing of Bank of Europe Trust, deposits $9.5M. Two Michigan banks closed, total deposits $4.3M.

Texas Railroad Commission will ask Gov. Sterling to maintain martial law in East Texas area until its oil production curtailment order is completely established and observed by all operators; request due to attitude of Sinclair Oil and a few other producers. East Texas quota expected to be set at compromise value of 300,000 to 325,000 barrels/day. Trade circles expect general rise in gasoline prices across the US due to recent developments and continued increase in consumption.

AFL pres. W. Green estimates current US unemployed at 5.1M; 2M more will be be added by Jan. if industry lays off workers at usual rate.

US gold holdings will shortly top $5B, a record high for any country; total as of Aug. 26 was $4.992B.

Bradstreet's reports retail trade in slow period between summer and fall seasons, but volume holding its own thanks to continued sales, buying of school supplies, and cooler weather. Wholesale trade more favorable than in several weeks; belated seasonal pickup apparent in orders.

New bond offerings this week were $8.2M vs. $67.9M a year ago; offerings in Aug. were below $10M in three of four weeks.

Heavy rains over much of Canada delay grain harvesting for several days.

Census Bureau reports total sales by 1.549M retail stores in 1929 were $50.0B, of which food retailers accounted for 22.6%, retailers of automobiles and products (including gas stations) 19.1%, general merchandise 14.3%, apparel 8.6%, furniture 4.6%, and restaurants 4.2%. 15,577 US hotels had total 1929 receipts of $962.8M.

NYSE seat sold for $192,000.

Company reports since July 1: 183 companies reported higher earnings vs. 1930 and 567 lower; 645 dividends unchanged, 17 increased, 118 cut.

Companies reporting decent earnings: Hackensack Water Co., W.T. Grant, Universal Leaf Tobacco.


The Earl Carroll Vanities - "A bewildering combination of the spectacular and the most commonplace sort of crudity," but one that left the audience well pleased. Numbers included: "'Mask and Hands' ... employing quite a number of draped ladies in a bizarre impression situated in spirit somewhere between Edgar Allan Poe and Aubrey Beardsley"; "the tom-tom scene utilizing Ravel's 'Bolero'"; "Will Mahoney capering up and down the elongated keyboard of the 'Mahoneyphone' with xylophone hammers strapped to his feet"; and "the 'Pajama Dance' by Lucille Page, a contortionist." In the more elaborate and detailed scenes, "some of Mr. Carroll's nudes are fairly certain to appear sooner or later without any other reason than Mr. Carroll's notions of showmanship."

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