Tuesday, August 25, 1931: Dow 137.62 -0.14 (0.1%)

Rest of the quote dept.:

[Note: I was familiar with the first line, but never knew it was part of a delightful rhyming couplet.]
A foolish consistency is the hobgoblin of little minds,
adored by little statesmen and philosophers and divines. - Emerson

Assorted historical stuff:

British Labor govt. resigned but MacDonald remained as Premier to attempt formation of coalition govt. as during the war; the new govt. "will go to work at once to bolster Britain's credit, impose rigid national economies, and balance a $600M budget deficit." Announcement of plan followed conference between MacDonald, King George, and opposition members; Conservative and Liberal parties expected to join govt. MacDonald expected to address the nation to explain the crisis and appeal for support for budget-balancing proposals. Coalition seen necessary to overcome strong opposition within different parties to controversial proposals including social spending cuts, tax increases, and a tariff. Trade Union Congress says support for govt. ended with resignation. Govt. resignation “eased the anxiety of the nobility and the upper middle classes” while increasing “worry of the insured workers ... and the unemployed.” Some observers “felt that the King made a wise move in retaining the Labor leader as head of the govt. on the theory that the people will accept from a Laborite measures which would never be accepted were they backed solely by a Conservative or Liberal.”

Well-informed NY banking circles don't believe the $250M US-French credit to the Bank of England has been “practically exhausted” as recently reported from London; best authorities believe the French half of the credit has been used heavily and “some recourse is now being made” to the US half. London stocks turned "distinctly firmer" later in the day; bonds declined but later recovered some losses.

[Note: Both Strangely Familiar and Unfamiliar Dept.] Editorial: Britain's financial difficulty is simple; govt. spending for "social" purposes has outrun capacity of the taxpayer. Situation clearly shows "the direct relation of a budget to the exchange rate, and the indispensable requirement of balance in one for stability in the other." Crisis shows the British rift between organized labor and "the rest of the people," most of whom are middle class. Outcome is in "little doubt"; whatever govt. is formed will substantially cut social spending to balance the budget. "It is when Great Britain's 'back is to the wall' that she appears at her best ..."

Pres. Hoover and W. Gifford confer at Rapidan on "nation-wide unemployment relief plan for coming winter." NY Gov. Roosevelt prepares measures for state unemployment aid to present to special session of the Legislature. E. Ryerson, chair. of Cook County Joint Emergency Relief Fund, says won't appeal for Federal aid unless local private and tax-supported relief agencies are inadequate; support of the Fund's campaign is “Chicago's best insurance against Federal relief with its attendant danger of a dole which would result in permanently increased taxes and a vicious undermining of ... American desire to work for a livelihood.” Arkansas Chamber of Commerce recalls last winter when about 800,000 Arkansans depended on rest of the US for their food; calls on the state to use its current abundance of food to aid the unemployed in rest of the country, particularly the “great cities of the North and East.”

Total immigration to Canada in the second quarter was 10,188 vs. 49,890 in 1930.

Lee Shubert, returning from several weeks in Europe searching for plays for the coming season, reports the London theatre is having its best season in 20 years, with 22 theatres open and doing good business.

Paris next year will celebrate the 100th anniversary of the invention of the corset. Jean Werly started the first corset factory in his native town of Bar Le Duc in 1832; the fashion caught on and he made a great fortune. Parissiennes were early adopters, "and compressed themselves as much as they could."

Bids received on three of the main buildings to be erected in Radio City, and contracts will probably be let within a week; gardens alone to cost almost $18M.

Market commentary:

Market wrap: Stocks reflected continued stalemate between "strong technical position" that makes bearish operations difficult, and disturbing foreign and domestic news that is inhibiting buyers. Shares underwent some pressure early, starting in the rails and spreading to leading industrials. However, selling petered out by end of morning and trading turned extremely dull as public continued to abstain; "professionals who tried to make markets made them at one another's expense." Limited recovery set in during afternoon, attributed to short covering. British govt. bonds declined after resignation of cabinet. S. American issues weak. US govts firm. Domestic corp. list generally lower with second-grade rails under continued liquidation; Dow average of 40 corp. bonds and average of 10 second-grade rail bonds both hit new yearly lows. Grains slumped to new season lows; Sept. wheat hit 46 7/8 cents/bushel, a record low for CBOT futures trading, while corn fell to post-1901 lows, oats to post-1899 lows, and rye to post-1897 lows.

AT&T is experiencing continued investment buying; almost 35,000 new shareholders have been added this year, bringing the total to about 635,000. Radio Corp. is subject of a bull pool operation, based on likelihood of improved earnings in the second half. Westinghouse shorts "restive" on reports of improved earnings over the past few weeks.

Newburger, Loeb comments on inconclusive market of the past week. "There were days when it seemed as if prices could not be constrained from breaking through the resistance levels of early June ... nevertheless it was found that there was a line of defense that could not be pierced ... such an exhibition could have only one meaning ... as indisputable evidence that the market has been liquidated to an extent where prices had discounted, if not over-discounted a protracted period of poor trade ... It further emphasizes the fact that the psychological hazard of unfavorable trade conditions, earnings comparisons and dividend adjustments is largely behind us." Those who now take the "one-sided viewpoint" of overemphasizing bad news "are simply missing opportunities to buy well-intrenched cheap stocks."

Editorial: While cotton situation is "tragic," proposed Long Plan to ban cotton planting altogether in 1932 would likely only make a bad situation worse. "A better way would be to leave it to the individual to plant what he can do best and" undertake a general overhaul of the Southern system of agriculture through education.

Harvard Economic Society says European situation “has taken a turn for the better” since Aug. 1, and US data available for the first half of Aug. indicates some seasonal improvement in business while commodity prices “have again shown signs of stabilization.” However,

[Note: Strangely Familiar Dept.] Letter to the editor: Smaller industries are important for US prosperity; there are 193,562 plants in the US that normally employ 500 or less workers vs. 2,747 that employ more. "We find that it is becoming extremely difficult to sell bonds or stocks of these smaller corporations ... If the present attitude is continued, how are the smaller companies to remain in business?"

"Current low prices for all but the highest grade bonds" are a disturbing factor in several directions, causing many asset write-downs for institutions and individuals. Bonds on which interest is being earned with a margin to spare are going begging for bids, leaving savings banks in particular "glutted" with the securities. "As one industrial leader put it, 'the public won't buy a gold dollar for 50 cents these days.'" [Note: at this point highest-grade status seems largely restricted to US govts., municipals and public utilities.]

Economic news and individual company reports:

Phillips Petroleum becomes first major to offer $1/barrel in Oklahoma as sought by Gov. Murray, who responded that Oklahoma oil fields will remain closed under martial law until all companies in Oklahoma, Texas and Kansas “agree to pay $1 a barrel and ... agree not to let the price go below that ...” Texas Gov. Sterling was pleased at news of the $1 price posted in Oklahoma but declined to say when martial law will be withdrawn in East Texas. Texas Railroad Commission will meet today to consider allowable production in East Texas field; difficult deliberations seen as new conservation law is unclear. Majors raised crude oil buying prices in areas including Texas, Louisiana, Arkansas, Kentucky etc.

Preliminary July car sales figures show Chrysler with higher sales than in 1930 and a sharp gain in market share (15.3% vs. 9.8%) thanks to success of the new Plymouth models; GM unit sales were slightly ahead of last year and also showed a sharp gain in market share (42.1% vs. 31.4%); Ford showed a sharp decline in market share (25.2% vs. 42%); independents showed slight gains in market share. GM net profit margin in Q2 was 18.1% of sales, the highest since 1928, in spite of lowest dollar volume of sales for the quarter in the past 5 years and production running at under 60% of capacity.

Bank auditors worked all day Sunday to speed work of checking affairs of the four large banks that closed a week ago. Some stores advertised credit for responsible buyers; the Tiedtke's store had one of its busiest days ever when it started a plan accepting 35% of deposits in closed banks as security for purchases. Record attendance reported at two local R.K.O. theatres. Peoples Nat'l Bank of Latrobe, Pa. "failed to open"; deposits $2.450M.

China will reportedly ask the Farm Board for more favorable terms on its offer to sell wheat on credit; the Chinese desire a longer term and lower interest rate.

German trade surplus for July was a record high of 266M marks vs. 41M in 1930; imports of manufactured goods hit record low of 106M. Surplus for first seven months 1.357B vs. 704M. French trade deficit for first seven months $327M vs. $190M; imports fell 13.3% while exports fell 29%. Canadian trade surplus in July was $2.3M vs. a deficit of $6.6M in 1930; total trade (imports and exports) was $99.0M vs. $162.5M.

British trade unions demanded increase in wholesale prices, worldwide or at least in Britain, through action of central banks.

BLS reports wholesale index of 550 commodities in July was 70.0, unchanged from June and vs. 84.0 in July 1930.