Friday, September 18, 1931: Dow 121.76 +2.50 (2.1%)

Administrative note: I had intended to maintain the day-by-day summary here until July of 1932 when (spoiler alert) the Dow industrials finally bottomed out at 41 and change. I still intend to continue the summaries until then, but due to heavy workload, I'm going to have to cut back to a more leisurely pace for a while - I'll only be able to post a summary every two or three days. I also hope to get to some other little projects that I've been meaning to tackle for a while - stay tuned ...

Assorted historical stuff:

Col. Ayres of the Cleveland Trust Co. presents very interesting chart of US business activity since 1790; there have been 20 well-defined periods of serious depression in that time, of which the current one is the most severe. Business activity in July 1931 dropped to 28% below normal, next lowest records are 27% below normal in 1921 and 22% in 1808. Each of the country's three great wars has been followed by a “primary post-war depression, and then, after a prosperous period, by a secondary post-war depression.”

Editorial by T. Woodlock attributing failure of abundant and cheap credit to help business as it normally would to lack of confidence; “it is not potential supply of credit that is lacking ... but the will to use it. ... Doubt paralyzes the will, and the more people know of the facts, the more doubtful they become of the outlook. It is a vicious circle. ... And so long as this condition lasts, the mere addition of cash to the money supplies will not help much.”

Mahatma M.K. Gandhi says US “great hoard of gold a curse and a primary cause of the depression”; “must be dissipated, distributed, and put into circulation.” Says US has “not learned the lesson of equitable distribution of wealth ... still, your poorest are more prosperous than the Indian poor.”

Pres. Hoover appoints 18 more to Advisory Committee of Unemployment Relief Organization headed by W. Gifford, increasing membership to 99. Labor Sec. Doak says US Employment Service receiving encouraging reports from almost all parts of the country on progress of the work of connecting the jobless with jobs.

Former US Ambassador to Germany J. Gerard charges Germany “making money out of bankruptcy”; calls for bankers to “aid our own countrymen.”

Editorial: Germany's record August trade surplus of $77M, far from being favorable, is an ominous sign, since it was accomplished by reduction of German imports to their level in 1898, when Germany was just starting its industrial development. The August surplus seems to have been due to a sort of “clearance sale” in which it exported manufactured goods without replenishing raw materials. Repeats yet again warning that Germany will be unable to resume reparations payments next July.

Neville Chamberlain has, according to London reports, won over the entire Conservative party to idea of general election, with 33 1/3% tariff as chief plank.

J. S. Baker, NY State Bankers' Assoc. pres., hits indiscriminate proposals for changes in state banking law after closing of the Bank of US and other institutions; says regulations can't replace “honesty, sound judgement and conservative policies in the conduct of a bank's affairs.” J. Broderick, NY State Supt. of Banks, calls for cooperation between savings banks to analyze securities before buying; says bonds too often bought from salesmen just because they are on the legal list.

Editorial: We've arrived at the stage where wage cuts are imperative to prevent continued and increased unemployment; “it is, in fact, a choice between reduced money wages and no wages at all.”

World's greatest skyscraper builders are the three Starrett brothers - Paul, William and Ralph. Since arriving in NY in 1900, they have built the Pennsylvania Station, the Plaza, Commodore and Biltmore hotels, the NY Life Building, and, most recently, the Chrysler and Empire State Buildings.

Market commentary:

Market wrap: Stocks opened under a heavy accumulation of sell orders and showed “pronounced irregularity” in the first 3 hours, with declines in active stocks across the list; bear market lows were hit in Steel, Can, and AT&T. However, news of abrupt rallies in Paris and Amsterdam was followed by a general recovery, with sharp runups in some shares; rally picked up momentum and market closed at the day's highs. US govts. a firm spot in an irregular bond market; European issues fairly steady but S. American broke sharply. Domestic corp. issues generally weak, though a sharp late rally left the Dow 40-bond average slightly higher. Cotton futures dipped to new season lows; Oct. cotton hit 27-year low of 6.45 cents/pound. Corn also fell but wheat was strong in spite of heavy Russian shipments. Copper held at 7 cents/pound, 2 cents lower than any price previous to this year, but buying remains small.

Berlin market sharply lower on foreign selling; London stocks down on Wall Street reports and general election talk. Stocks in Paris and Amsterdam also fell sharply but rallied in late trading.

Public utilities have come under pressure recently, partly attributed to fears of legislation and agitation for lower rates. General Foods is the only member of the Dow industrial average to have held above its 1929-30 bottom.

NYSE observers say that while recent declines are mostly due to domestic liquidation, they've also been given impetus by selling from abroad, representing both liquidation and short-selling; “cable advices reflect rampant bearishness in financial sentiment abroad.”

Spencer Trask & Co.: “For the first time it may be said that security prices are in many cases as excessively low as they were excessively high during the boom year. The extent of pessimism has gone beyond all reason and has now carried to a point from which a sharp turn-about could develop.”

J.C. Penney says that though evidence of sharp business improvement is lacking, there's been some noticeable return of confidence by the consuming public over the past 90 days.

NYSE pres. R. Whitney scores attempts to help one industry or section of the country at the expense of others; calls for “free and open expression of the forces of supply and demand”; traces current problems to past interference with these forces. “There has been much criticism of the seeming inertness with which American business has faced this depression. I am not sure that in reality this passive attitude may not, in the main, have been rather wise.”

The steel trade now expects US Steel to announce wage cuts at the monthly directors' meeting Sept. 29; cut of 10% would save over $7.5M in 1931.

Col. Ayres of the Cleveland Trust Co. says much hoped-for fall upturn in business doesn't appear to be developing. Fundamental cause of problems is decline in commodity prices, but there are three more immediate problems related to that one which are “key logs in the economic jam”: fiscal troubles abroad caused by unbalanced budgets; continued decline in credit by banks seeking to protect themselves; and plight of the railroads.

Economic news and individual company reports:

Commerce Dept. reports Aug. US merchandise exports $165M vs. $298.1M in 1930; imports $166M vs. $218.4M; trade deficit of $1M was first in 25 months; both import and export totals were lowest since Sept. 1914.

Six officials of the Amer. Bond & Mortgage Co., which recently filed for bankruptcy with liabilities of $60M, were indicted by a special Federal grand jury on charges of “using the mails to defraud and obtaining money under false pretense.”

Chain store and mail order houses generally are reporting lower dollar sales and profits this year, but higher sales by volume or tonnage.

Current Reichsbank statement reveals substantial loss of foreign currency reserves as result of supporting the mark in foreign markets and liquidation of German securities by foreigners after reopening of the stock exchange.

Money in circulation Sept. 16 was down $5M to $5.087B, total Reserve Bank credit outstanding up $63M to $1.279B. Member banks in NY City report brokers' loans down $54M to new low of $1.271B; loans on securities to non-brokers up $34M to $1.728B.

Plan proposed by Rep. White of Ohio by which Fed. Reserve would make quick survey of failed banks and “make such loans as were justified,” allowing immediate partial liquidating dividends to be paid and providing some relief for depositors and communities. Fed. Reserve quarters believe this course is already effectively being followed; they point out numerous cases of member banks aiding banks about to fail; this is attributed in many cases to Fed. Reserve support, though “these instances do not become matters for publication.”

Officials from Kansas, Oklahoma and Texas, together with the Oil States Advisory Committee, will present a plan for allocation of world oil production among major producing countries over 1931-34 to Commerce Sec. Lamont on Sept. 21. Retail gasoline prices cut in Ohio and Minneapolis. Cut in allowed East Texas output, with Gov. Sterling's approval, seen likely.

NYSE seat sold for $185,000, down $10,000 from previous sale.

Companies reporting decent earnings: General Foods, Connecticut Electric Service.

Report from Paris:

The Opera Comique, one of France's foremost national theatres, is being “redecorated and rejuvenated”; when it opens Oct. 1, “our own perennially young Mary Garden” will be a leading singer. This theatre has been one of the most hospitable to US vocalists; “each year shows a lengthening list of young and not so young singers who have come from Hollywood ... Chicago, NY and New Orleans”; Miss Garden herself “became a prima donna overnight on this stage. It is not important how many years ago this was ...” [Note: Garden was born Feb. 20, 1874, so was 57; she died in 1967.]