August 27, 2010

Thursday, August 27, 1931: Dow 139.93 +3.28 (2.4%)

Assorted historical stuff:

New British govt. headed by Ramsay MacDonald sworn in; to meet immediately. MacDonald broadcast an appeal for popular support; asked help of "rich and poor alike"; announced dole reduction; strongly refuted charges Labor govt. fall was due to "conspiracy of bankers" or that "foreign countries are trying to harm us."

Washington officials, "while not desiring to be quoted," reportedly feel British coalition cabinet "is one of the most constructive and helpful events since the war" and "an inspiring spectacle." Ramsay MacDonald's "courageous" speech "entitles him to be ranged alongside of the greatest of his predecessors in British statesmanship." Foreign exchange disturbances believed "about over." Sterling up strongly over past two days. Restored confidence produced by new govt. expected to make high Bank of England rate effective in attracting capital from European money markets now glutted with funds. It's believed Britain could raise large amounts of credit in Europe and the US if necessary.

Observers in Paris sympathetic to British political efforts but noted disturbing weakness in sterling futures; some surprise also expressed that sterling is not being supported against guilders or Swiss francs. Bank of England credit from Bank of France believed almost exhausted, but "no doubt" that Bank of France would join the US Fed. Reserve in any further needed credit.

New long-term loan for Bank of England is reportedly "under tentative discussion in NY and Paris."

Pres. Hoover's new unemployment relief organization has designated Oct. 19 - Nov. 25 as period for concerted nationwide campaign to raise relief funds for agencies throughout the country; will organize local drives into "great national appeal for millions of dollars to aid the jobless." Target of $20M set for NY City relief funds; aid will be given only to residents who prove they have voted here twice in order to avoid "rush of unemployed to this city to take advantage of the charity planned." Gov. Roosevelt reportedly completes $25M emergency unemployment relief program; will “insure definite relief methods” but avoid introduction of “cash dole.” Cook County may have trouble selling $2M poor relief bonds at sufficiently low rate (under 5%), after defaulting on some bond payments last June 1.

Tammany leaders in NY [Democratic] are "having grave difficulty holding their forces in line against" immunity bills being considered in the NY State legislature that would aid investigation of NY City corruption. The bills are favored by Republicans but Gov. Roosevelt and several Democratic assemblymen are also supporting them. Democratic Leader Dunnigan, in a long prepared statement, denounced the investigation as "outside meddling with the affairs of NY City" and violation of home rule amendment in the state Constitution. Tammany legislative leaders were "collecting sworn charges of Republican wrongdoing in upstate counties" with aim of forcing Gov. Roosevelt to permit legislative investigation of Republican officials.

Cost of producing helium at the govt.'s plant in Amarillo, Texas has been reduced to $5.95 per 1000 cubic feet from average cost of $11.47 since the plant started a little over 2 years ago. About 16 years ago, small amounts of extremely rare helium were sold for $2,500 per cubic foot.

Foreign-born white” population of NY City was 2.293M on Apr. 1, 1930; of the total, 442,431 were born in Russia, 440,250 in Italy, 238,339 in Poland, and 237,588 in Germany. National total was 13.366M, or 10.9% of population.

The old Waldorf-Astoria (demolished in 1929 to make way for the Empire State Building) has presented its guest registers to the NY Public Library. There are over 300 volumes and 10M guest signatures, including McKinley, Cleveland, Roosevelt, Taft, Wilson, Harding, Coolidge, Hoover, Buffalo Bill, Alexander Graham Bell, John L. Sullivan, Mary Pickford, etc. [Note: Hoover lived out his last years in the new Waldorf-Astoria, dying in 1964; I believe he still holds the longevity record for ex-US presidents at over 31 years, though Carter is now nearing it.]

Market commentary:

Market wrap: Stocks opened weakly, with US Steel pressured on disappointment over lower steel output and failure to take action on wage cuts. However, early afternoon report of American Can 1931 earnings estimate of $6/share caused short-covering in that stock, which spread to other issues and brought a good rally from the day's lows; improvement in grain markets also was encouraging. Rally continued through the afternoon, though over the counter stocks including banks and trusts reacted after the NYSE close. Bond trading featured reversal of recent trends; second-grade rail bonds rallied for the first time in two weeks while high-grade rails fell. US govts. were firm, while the foreign list was mixed; British and European bonds were generally steady though Hungarian fell sharply; Australian and Brazilian issues rallied while Argentine fell. All grains moved sharply higher; cotton up substantially.

Conservative observers remain cautious, believe rally due to technical conditions, temporarily oversold market.

Traders in various bull pools are complaining of inability to attract a public following to recent operations.

Rather obscure discussion of whether the range-bound trading since early July represents “accumulation” or “distribution.” Many observers feel “persistent refusal of the market to break through on the downside, with the rails so close” to their bear market low indicates accumulation [note: that's the good one] in preparation for extension of the mid-August rally. However, this theory would “obviously” be destroyed if “rails penetrate their June 2 lows, and the industrials follow.”

Considerable discussion now heard about railroad wages; many authorities believe rails will make “strenuous attempts” to cut wages through agreements with workers if the ICC fails to grant them a rate increase. Rail car loadings report disappointing; increase of 7,956 was about half as large as expected.

Most formidable obstacle” to recovery in grain markets seen as lack of speculative interest due to Farm Board liquidation and virtual paralysis of US-Europe export business. However, fundamentals should improve thanks to lower acreage and production worldwide.

Editorial by T. Woodlock clarifying earlier editorial in which he dismissed a reader's suggestion that bankers should stand behind bonds they issue. Notes letter from another "experienced and wise" correspondent who says "our bankers must be laughing up their sleeves at some of the things they have put across on the American investor, especially in the way of foreign loans." Concedes some issuing houses may not have exercised "proper care with respect to bonds" but maintains best way to improve standards is "sharper vigilance and longer memories" on the part of buyers. Letter from Frederick Pierce placing even more blame on the bond buyers, who, it is alleged, “constantly insist on a larger return on their money” and follow “fashions in securities the same as in clothes.”

Labor Sec. Doak notes definite improvement in shoe and textile industries; shoe industry believed operating at over 90% of capacity; number of cotton industry employees in July up substantially over 1930; wool makers helped by tariff. "One of the most successfull cotton mill managers of New England" sees "tremendous business in cotton goods ... just as soon as raw cotton values are stabilized"; inventories very low; "ample evidence of a heavy demand waiting to be released."

Nat'l Foreign Trade Council emphasizes need to “stop profitless merchandising” as first prerequisite for recovery. Notes recent slowing of commodity price decline from 1.25% a month over past two years to 0.5% now.

Editorial listing main causes of the depression as: “bankruptcy of world statesmanship” and European political tensions; drop in commodity and property values at time when “world is enmeshed in an unprecedented network of debt, private, public and international”; and govt. spending for “so-called 'social' purposes” at a time of sharply reduced revenues. England and Germany are now making a good start at tackling the last item, but action is needed on the first two; repeats call for postponement of reparations and war debts. Editorial on the parallel NY unemployment relief efforts by Gov. Roosevelt and by the committee of financial leaders mobilizing private resources. While Gov. Roosevelt's program has drawn support from Republicans, and is careful to avoid “any semblance of a dole,” there's still the danger of taking “an unsound step ... from which there may be no turning back later.” Unemployment relief is best handled by private initiative, since in govt.-run charities, “it is usually seen that political expediency finally develops a system whereby the loafer is 'taken care of.'” This has become a curse to England and Germany. If unemployment relief “is thrown upon the state the problem may never be solved.”

Economic news and individual company reports:

Berlin stock exchange, to reopen Sept. 3 after 7 week suspension, will impose restrictions on trading for some time. Stock price changes during the day will be prohibited; "for every security only one quotation will be fixed each day by the official brokers, and even calling out of other quotations will be forbidden." Transactions will only be allowed for cash and immediate delivery. Berlin money rates rose due to approach of end of month; call money at 9%-10%.

Weekly steel reviews rather disappointing; with Aug. drawing to close, still little sign of seasonal rise in production; improvement to date “little more than ripples on a sea which remains at ebb tide.” Auto industry not showing expected gains; other lines show mixture of gains and losses as backlogs are low and demand intermittent; construction offers best prospects. Finished steel prices steady but scrap prices are back to June lows after showing strength for several weeks. Steel production for week ended Monday was a little under 32% vs. 33% previous week, a little under 32% two weeks ago, 58% in 1930, and 89% in 1929.

Increases in gasoline and crude oil prices continued around the US. Eastern gasoline distributors reportedly have resumed buying gasoline in the California market for shipment to Atlantic ports. Oil production limit for East Texas expected to be 250,000 - 270,000 barrels/day (vs. over 650,000 recently). Progress reported in Standard Oil of NJ - Standard Oil of Calif. merger negotiations.

First 35 rails to report July earnings show net operating income down 38.7% from 1930 and 58.5% from 1929; revenue was down 17.7%. The same rails in June reported year-over-year declines of 15.4% in income and 12.8% in revenue.

Fed. Reserve Board's seasonally adjusted index of industrial production fell 1% in July to 83% of the 1923-25 average; this compares with the low point of 82% in Dec. and the recent high of 90% in April.

J. O'Connell, “customers' man” in broker Burley & Co., indicted on charges of circulating false reports about condition of Chatham Phenix Nat'l. Bank.

Sharp decline in July cigarette production (10.700B, down 9.78% from 1930) attributed to buying ahead by the trade due to price increase imposed June 24; change to new cellophane wrapping also a factor. Another factor may be taxes now levied by 12 states of up to 5 cents on cigarette sales.

Commerce Dept. reports July wholesale candy sales down 21.8% from 1930; first 7 months down 12.4%.

American Can net income for 1931 likely to be about $6/share, down substantially from record high of $8.08 in 1930 due to drastic curtailment in many important food packs. However, usual annual dividends of $5 should still be covered by good margin.

Union labor came to aid of the Rocky Mountain Fuel Co., which had backed their fight against 25% wage cuts in Rockefeller-controlled Colorado coal mines. 600 miners volunteered to postpone half their wages and act as “voluntary salesmen for the company”; miners charged non-union operators were attempting to “reduce coal miners to a condition of economic slavery” and pledged to “mine and put coal in every market at prices” matching any price made by non-union operators.


Die Blonde Nachtigall (The Blond Nightingale) - UFA film, at the Cosmopolitan. Attempt to film a German "type of popular entertainment known ... as the Volkssteuck" that combines "comedy, tragedy, burlesque and vaudeville." Unfortunately, result is "a routine hack-work picture with an absurd continuity, stock characters and pusillanimous direction." Story of a "simple peasant beauty whose voice takes her and her Hanswurst of a father from a barnyard ... to the Hirschfeld Follies ... would make a quite complete satire on melodrama and sleazy sentimentality, if it were deliberate."


"If all the actors in Hollywood were laid end to end ..." "Why? Are they making a ganster picture?"

Electric Company President - Perhaps we should call ourselves the Light Brigade. Customer - Yes ... because of your tremendous charges!

1 comment:

  1. The movie reviewer must have been having a bad week. Ouch!