August 5, 2010

Wednesday, August 5, 1931: Dow 136.50 -1.00 (0.7%)

Assorted historical stuff:

Editorial: A reader asks whether the people of this country would vote for cancelling the interest on foreign debts. The question should be, how long must it be until the people realize foreign debts are in fact uncollectible? "At the root of the world's sickness is a combination of debt, public and private, in volume totally unprecedented, with a level of commodity prices which has undermined the foundations on which that debt was created. The whole credit system ... is functioning poorly and it is of the first importance to prevent its breakdown." The most helpful measure toward this would be removal of intergovt. debt obligations; this would help the US at least as much as other countries.

Texas House calls on Pres. Hoover to call special session of Congress to stabilize currency, charging Congress has "delegated control of monetary system to selfish interests to detriment of people."

97,139 immigrants were admitted to US in fiscal year ended June 30, vs. 241,700 for 1930; first time since Civil War that the total fell below 100,000.

Labor Sec. Doak reports to Pres. Hoover on progress of the newly reorganized Federal employment service. With 332 offices assisting in placing unemployed persons, total placements in jobs by Federal and cooperative employment offices from Apr. 1 - July 31 were 638,689.

Editorial: Independent merchants shouldn't mistake the Supreme Court decision upholding the Indiana anti-chain store tax as proof of economic soundness. If chain stores in fact provide cheaper goods of established quality, then the people will ultimately be convinced of this and have no use for the anti-chain taxes. Some are warning that in another 20 years chains will have a "virtual monopoly" of retail trade; if consumers can be convinced of this they might back anti-chain measures. "But with innumerable chains already in competition ... it will require more than mere assertion to establish a distant possibility as a compelling reason" for the public to take sides in a "struggle between ... private interests."

Navy Sec. Adams approves new policy calling for building up US fleet to be on par with navy of the British empire.

"Two stones' throws, or, say, three Elevated stations" from Wall Street is a curbside market many decades old, though content to be obscure - the secondhand clothes market of Bayard Street, around the corner from the Bowery. Here, one can find the "bid and asked on dusty derbies," or conduct "pool operations in patched shoes." Curiously, this market too is complaining of depression though it usually thrives in hard times; it may be that merchants are finding it hard to unload the goods bought in flush days at a reasonable profit margin.

All-time great real estate deals: The 160-acre Medcef Eden farm [located in Manhattan, extending from the Times Square area Northwest to the Hudson River] was bought by John Jacob Astor over 100 years ago at a foreclosure sale on a $25,000 mortgage [Note: In a remarkably modern sequel, Astor was then sued by Eden's heirs and the case dragged on in NY courts for over 20 years until Astor settled for another $9,000]. In the time since, it's estimated the Astor family has received $100M in income from the property.

Market commentary:

Market wrap: Stocks worked lower most of the session; weak spots included US Steel, American Can, and AT&T while GM was well supported; volume continued unusually small and there was little evidence of concerted bear pressure. Market was unsettled in early afternoon by decline in rails following poor loadings report. However, trading turned very dull as the afternoon continued, and a moderate recovery from the lows took place in the last hour on short-covering. Bond trading extremely dull, prices irregular; European govts. listless and little changed; S. American irregularly higher; US govts. slightly lower; domestic list mixed, with utility issues steady on reinvestment demand while weak spots included second-grade rails, convertibles, and real estate bonds. Commodities weak; grains generally fell, hitting new season lows but rallying somewhat in later trading; cotton hit new 16-year lows but rallied to close slightly higher. Some copper sold at record low of 7 1/2 cents; this price was 1 1/2 cents below the pre-1931 record; price now 7 1/2 - 7 3/4 with buying small.

Conservative observers see no new encouraging developments, continue to favor sidelines.

While German conditions appeared improved, domestic news items were discouraging, including Standard Oil of Indiana dividend cut, sharp decline in Youngstown district steel output, weakness in wheat, and unseasonal decline in rail freight loadings. Prospect of continued small rail traffic is discouraging to observers who had predicted an increase starting at the end of July.

AT&T is subject of dividend rumors, with observers pointing out it's "dominated by the same banking interests" as US Steel. However, conditions at the two are quite different, with AT&T maintaining earning reasonably well considering business conditions. "The financial district is confident" GM will maintain its $3 dividend rate (8% yield) at today's board meeting. Public interest in the stock has increased somewhat after recommendations from several brokers.

When brokers' loans were at high levels a few years ago, a decline in the total was hailed as a positive sign. Now, however, with brokers' loans regularly setting new low records, the opposite view prevails; the low total is seen reflecting public reluctance to borrow in order to carry stocks, even at a time when yields on many well-fortified dividend stocks are well above brokers' loan rates.

Discussion of recovery has become quite popular, but the most conservative observers note that while eventual recovery is certain, there's "nothing on which to base an accurate forecast as to how long the so-called bottom of the depression will continue." Various foreign and domestic factors are "checking the development of confidence among consumers"; without this, it's unlikely that even a seasonal recovery will develop.

Germany special:

German Chancellor Breuning gave an internationally broadcast speech on the eve of the reopening of Germany's private banks. Urged countrymen not to rush to the banks, and only to withdraw urgently needed cash. With no current possibility of foreign help in form of a new loan, German business must rely on own efforts to better conditions; cooperation of the people needed for resumption of trade. Dismissed danger of currency inflation due to govt. measures, saying “there are not too many but too few banknotes in Germany.” Praised Hoover one-year debt moratorium as “historic” and said it had now essentially been realized, but several weeks of delay had caused severe economic consequences for Germany. Repeated Germany's willingness to come to terms with France in an economic settlement.

All eyes are once more turned on Germany.” Full withdrawals are likely to be allowed from banks tomorrow, other than savings banks. It will be necessary to continue strict control of foreign currency transactions. “Advices from Berlin are encouraging and bankers here believe that Germany will gradually work herself out of the difficulties although setbacks are possible from time to time.”

Removal of restrictions on German interbank transfers went smoothly. Many banks voluntarily allowed unlimited withdrawals by depositors without problems. Latest rulings of new German “Devisencentrale” appear to prohibit imports other than industrial raw materials; officials are trying to appease importers by saying the restrictions will only last a few days.

French and German bankers held long discussions on extension of short-term credits; it's believed the French bankers may agree to limited extension considering that "immediate withdrawals are for the most part impossible anyway." NY bankers have been meeting for the past few days studying proposals of Reichsbank pres. Luther for extension of credits; some difficult points have been encountered, and there's also concern about attitude of creditors from other countries. An announcement is expected before end of the week.

Germany has reduced the percentage of foreign wheat millers are allowed to use to 3% from 40% due to a good domestic crop and govt. austerity policy; this was seen as making significant German purchases of US surplus wheat unlikely. However, German govt. is reportedly receptive to plan for buying US cotton and copper on credit. Sen. Harris of Georgia protests plans to sell surplus cotton to Germany, saying this would be "taking away a market which rightfully belongs to the current crop."

London stock markets rose after the holiday, but, contrary to expectations, sterling fell against dollars and failed to rise against francs. Bank of England reported a small gain of gold for the day. National Bank of Czechoslovakia raised discount rate 1% to 5%.

BIS, in monthly meeting, noted difficult financial situations in Austria and Hungary but “decided to maintain the policy of watchful waiting until the political situation becomes clearer.”

Economic news and individual company reports:

Mexico City's financial district was gripped with fear Monday as depositors swarmed the foreign banks and withdrew heavily.” Bank runs attributed to closure Monday of Credito Espanol de Mexico, a Spanish bank; this was first bank suspension in Mexico City in several years. Foreign banks paid out large sums, with many depositors leaving “weighted down with bags of silver pesos.” In wake of demand for pesos, the dollar fell from 4 to 3 pesos in value while prices rose and merchants refused to extend credit. Banco Nacional de Mexico denied it had closed or would close; said bank in sound position and supported by govt. and central bank; bank opened early Tuesday and announced it would stay open as long as needed to pay all waiting depositors. “Financial circles” blamed Mexican bank runs on govt. law removing gold from circulation [as currency] and moving to exclusive silver standard. Lifting of restrictions on gold exports from Mexico has already resulted in transfer of at least 10M gold pesos to US; further shipments believed likely. Mexican govt.'s drastic measures, including granting Pres. Rubio power to levy emergencytaxes, have provoked widespread protests.

Pres. Hoover announced 758 public building projects now authorized at total cost of $453M; expects $300M will be under contract by fall.

Recent weekly banking reports show a reversal of the recent encouraging uptrend in “all other” (commercial) loans; these rose $165M from June 24 - July 15 but have declined $60M since.

US Steel will reduce salaries 10%-15%; hourly wages not affected. Youngstown district steel production is down 9% since Monday, to 33%.

Tennessee Comptroller informs Gov. Horton the state's coffers are practically empty; state employees face possibility of no pay Sept. 1.

NJ decides to postpone sale of $20M highway bonds until bond market conditions improve; attempted sale of the issue has already failed twice.

Rail freight loadings for week ended July 25 were 741,752, down 15,803 from prev. week, down 19.3% from 1930 week, and down 32.7% from 1929. Boston and NY Chambers of Commerce oppose 15% rail freight rate increase.

Refineries ran at 65.1% in week ended July 25 vs. 69.0% prev. week; stocks of gasoline fell 547,000 barrels to 36.742M. Crude oil production in week was 2.501M barrels/day, up 13,700 from prev. week and 14,650 below a year ago; increase again due to East Texas area, which rose 92,650 barrels/day to a new high of 597,550 while production in Oklahoma and California fell substantially.

Efforts to rebuild nitrate cartel failed again; all agreements between producers suspended. Russia plans a large expansion of its nitrate industry, and is bidding for services of some US executives.

Australia experienced big drops in both imports and exports for year ended June 30, but showed trade surplus of $141.5M.

Chevrolet output in July was 66,307 cars and trucks vs. 84,597 in June and 58,690 in July 1930; third consecutive month of higher output than in 1930. Auburn Automobile shipments in July were 2,580 cars vs. 646 a year ago. Sales of washing machines in the first half rose to 341,025 vs. 319,229 a year ago. Kelvinator reports June shipments 40% ahead of 1930, July shipments 49% ahead; orders on hand Aug. 1 substantially ahead of 1930; production "running full force" to meet demand."

Earnings reports: Public Service of NJ half $2.02 vs. $1.92. Pacific Tel. & Tel. half $4.02 vs. $3.04. Mack Truck Q2 $.16/share vs. $1.85; half ($.07) vs. $2.49. Adams Millis half $2.49 vs. $2.15.

Companies reporting decent earnings: Public Service of NJ, Pacific Tel. & Tel., Adams Millis (hosiery).


Politics - MGM film, at the Capitol. A "hilarious comedy vehicle" for Marie Dressler and Polly Moran that also includes some effective drama, as when Dressler, playing Hattie Burns, a modest landlady, is angered at the murder of an innocent girl during a gang war and speaks out at a political rally for the mayor's reelection. The mayor hedges when asked to close the nightclub where the murder took place, and Hattie enters the campaign herself. The city's women eventually resort to the tactics of the Greek women in Lysistrata, declaring a sex strike against the men of the city; "many comic situations are presented, showing how embarassing life is made for the men by this concerted action." Following some melodramatic complications, Hattie is elected mayor and her daughter marries the intended victim of the gangsters' bullets, who was "put on the spot" after he threatened to quit the rackets.

The Reckless Hour - First National Film, at the NY and Brooklyn Strand theatres. Dorothy Mackaill's acting is so intriguing that viewers are "likely to enjoy the film in a pleasant mood of unconsciousness of the fact that the old romantic hokum is being dispensed ... Story is the old one of the poor working girl who believes the polished words of the rich roue and lives to suffer and regret until an understanding male comes along to marry her." Plot has been somewhat modernized through addition of sophisticated sister and modifying of father's part to make him sympathize with his daughter once she's "in trouble" rather than "banishing her from his household as he would have done in the old days."


[Note: Best. Joke. Ever.] Teacher - This system of memory training is foolproof. For example, suppose you want to remember the name of the poet Robert Burns. Simply fix in your mind's eye an image of a London policeman over a fire. See - Bobby Burns! Student - Yes, but how am I to remember that's not Robert Browning?

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