Saturday, September 19, 1931: Dow 115.08 -6.68 (5.5%)

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:

Interesting editorial criticizing "rag money" proposal by one Dr. J. Commons, Univ. of Wisconsin economist. Commons proposes the Fed. Reserve issue "greenback, or fiat money" in order to restore the 1926 commodity price level. By his laughable reasoning, this would be sound since the Fed. Reserve would only inflate moderately and would have the power to deflate when things go too far. "In brief, we can take it and we can leave it alone. We can use it without abusing it. ... We have abundant strength of character (i.e., the Fed. Reserve system) to tell us when we have had enough ... When the right time comes we shall firmly refuse 'just one more drink' and go home in good order. ... Dr. Commons, of all men, should know his economic history; when was there ever an experiment in currency inflation that did not end with the patient in the gutter? When was there a case where the 'just one more' was refused? ... How 'old times' do come back, if one only lives long enough!"

Owen D. Young and W. Gifford, leaders of Pres. Hoover's unemployment relief organization, expressed confidence that local public and private funds would be adequate to combat distress of unemployment this winter. However, Young refused to rule out Federal funds and said the country could be assured that no one would suffer for want of food; this was interpreted to mean the Federal govt. would step in if necessary.

Rep. J. Byrnes (D, Tenn.), ranking Democratic member of the House Appropriations Committee, suggests increase in surtaxes and rigid govt. economy to balance the budget.

NY State Republicans pass own unemployment relief bill despite threat by Gov. Roosevelt to veto and call another extraordinary session of the Legislature.

Amer. Bar Assoc. annual convention officially opposes Prohibition by vote of 13,779 to 6,340. Finnish Interior Min. predicts early end to Prohibition in Finland; admits impossibility of preventing smuggling. Fleischmann Yeast pleaded no contest to conspiracy to violate Prohibition laws, in govt.'s first test of responsibility of large corps. for providing supplies to makers of illegal alcohol; was fined $3,000. W. Newton, Pres. Hoover's secretary, admits asking Census Bureau for number of people employed in manufacture of beer in 1914, 1919, and 1929, but denies he sought the figures for Hoover.

"Air pilots on scheduled transport duty must always be in perfect physical condition. Their health is taken care of as carefully as that of the most valued racehorse. Few jobs are so confining and permit so little exercise," which is considered one of the essentials to keeping a pilot fit for emergencies. The Boeing flight surgeon believes golf is the best exercise for pilots' particular needs; pilots on the Boeing system almost inevitably stow a set of clubs before takeoff.

W. Fullen, Transit Commission chair., says hopeful a plan for NY City transit unification will be ready for promulgation by the Commission before end of month. N. Amster says city has not abandoned unification plan, but, on contrary, is closer than ever to agreement with transit cos.

The Smiths now lead the Cohens in NY City's latest telephone directory, 1,916 to 1,636. However, if the Cohns, Smyths and Smythes are included, the Cohens retake first place as NY's leading family.

European special:

"Banking support" entered the Paris stock exchange Friday for the second day in a row, producing a strong rally after new lows were hit in the first hour of trading. Brussels suspended put and call operations to "curb speculation."

Stock market collapse in Amsterdam has accelerated gold movement there. US exported $550,000 in gold to Holland; first gold exported to Europe since Aug. 1930. Banking situation in Holland and Switzerland being watched.

British situation causing some concern. Bank of England lost about 1.750M sterling in gold to Holland; sterling weakened, while futures fell to a wide discount. Bank of England took steps to restrict withdrawal of small amounts of gold for “hoarding” by refusing to pay out sovereigns and restricting gold payment to bars (worth $8,000 each). British general election talk circulating; some fear Labor will make large gains among voters angered by govt. spending cuts. British politicians are demanding restrictive measures to prevent capital flight from London.

J.H. Oliphant & Co. attributes recent selling in "worldwide investment stocks" in the past two days to London; "minds of British investors are confused by their own specific troubles as well as by the American corporate situation." Many disturbing rumors circulating about measures British govt. might take on sterling, including borrowing private holdings of foreign securities, deflation of the pound, and adoption of monetary silver.

Possibility of abandoning the gold standard has now become a topic of conversation in the London financial district, though it is “minimized in responsible quarters who realize that such a course of action would be a catastrophe.” However, a tariff on imports to restore trade balance is now seen as inevitable, since balancing the budget alone won't be enough to safeguard sterling.

Considerable agitation in French commercial circles over possible British tariff on luxury items; England took half France's luxury exports in 1930, amounting to 3B francs. Lille district makes formal protest claiming possible ruin. Newspapers voice reprisal threats.

Agreement for extension of short-term German credits finally signed between German bankers, Reichsbank, and bankers' committees from numerous other countries.

Apparent failure of League of Nations to secure financial aid for Austria and Hungary has clouded outlook there.

Market commentary:

Market wrap: Stocks had one of the weakest sessions in months; "frightened and necessitous liquidation" combined with renewed short-selling and uncovered stop-loss orders, sending shares progressively lower through the day; selling continued right up to the close. US govts. the sole firm spot in the bond market, as all other classes declined; heavy selling developed in late trading, and "prices fairly crumbled away". Foreign list unsettled by sharp break in German govts.; S. Americans again suffered heavy liquidation. Dow average of 40 domestic corp. bonds reached new yearly low at 90.51, down 0.44; lowest since Sept. 1924. Cotton prices again hit new season lows. However, grain prices were relatively steady, showing a mix of small gains and moderate losses. Copper buying practically nil in spite of record-low price of 7 cents/pound, at which hardly any mines are profitable.

Dow industrial average closed at a new bear market low; there were 2 new yearly highs and 232 new lows [note: as usual, the yearly highs were in preferreds].

Conservative observers continued to recommend the sidelines. "Pessimistic views were heard on all sides after the close" due to the new lows hit in leading shares.

Considerable disappointment seen as various rumors of "some favorable development late Thursday" failed to be confirmed. Market also unsettled by foreign developments including break in sterling and in German bonds. Leading insurance stocks broke sharply, with volume much higher than in the past few months; Sun Life dropped 250 points to 650 bid, while most other leaders fell 5%-10%.

Over the past 3 months, investment trusts [similar to mutual funds] “have experienced one of the dullest periods in their existence”; changes in portfolios limited.

Q3 earnings estimates are generally being revised downward due to slow business in July and Aug., and little seasonal improvement so far in Sept. Uncertainty over earnings seen keeping many investors on sidelines until reports come out in several weeks.

R. Masson, Credit Lyonnais general dir., says US conditions depressed chiefly in comparison with abnormal 1929 boom; praises avoidance of starvation, disorders and public dole in spite of 6M unemployed.

A. Coleman, Asst. Postmaster Gen., says 15% increase in first and third class mail handled in larger cities forecasts return of prosperity. However, other postal officials disagree with Coleman and "this upturn has not yet appeared in postal figures."

Economic news and individual company reports:

August a disappointing month for chain stores and mail order houses; sales of 39 representative cos. down 6.15% in Aug. from a year earlier, vs. a 2.6% decline in July and a 2.2% decline in June. Business affected by banking troubles in certain sections, as well as prevalence of infantile paralysis. It's estimated the paralysis epidemic cost Woolworth $500,000 in August sales.

Texas Railroad Commission has drafted order reducing allowed oil production per well in order to bring total output back below 400,000 barrels/day. However, order is being held up by protests from oil operators.

Weekly trade reviews again divided. Bradstreet's reports unseasonably warm weather retarded trade throughout the country in past week. However, Dun's reports retail trade at current lower level of prices continues to enlarge as fall season advances; also reports adoption of five-day week in a number of large industries has substantially added to the number employed in various lines.

W. Atterbury, Pennsylvania RR pres., called upon company employees to join management in evolving plan for stabilization of rail employment and business.

Weekly banking reports gave first indication that perhaps the worst of the recent "currency hoarding" has passed, as currency in circulation declined seasonally by $5M. However, best estimates are that about $1B more currency is now outstanding than warranted by the current volume of business. Increase in security loans to non-brokers would normally be encouraging (indicating buying by "strong hands") but may be due to banks demanding security collateral on what are really commercial loans.

US cigarette output showed marked decline in Aug., with total of 9.521B produced vs. 10.578B in Aug. 1930. However, loose tobacco and cigarette papers showed increases.

Sales of electric washing machines in Aug. were up 8.5% over July and 6.5% over Aug. 1930.

New bond offerings continued more active; total for week ended Sept. 18 was $67.5M vs. $75.4M prev. week, $7.5M two weeks ago, and $80.9M a year ago.

French Treasury revenues in Aug. were 44M francs above estimates; first 5 months 200M above.

Company reports since July 1: 217 companies reported higher earnings vs. 1930 and 676 lower; 1,060 dividends unchanged, 24 increased, 196 cut.

Companies reporting decent earnings: British Columbia Power, Arundel (sand and gravel).

Theatre:

Singin' the Blues - black melodrama by John McGowan, at the Liberty Theatre. Police are closing in on Jim Williams, who has killed a policeman in a Chicago gambling raid and fled to Harlem with his pockets full of winnings. But Jim falls in love with night club prima donna Susan Blake and "tarries when it is in his interest to slip away to the South," spending much of the play a step and a half ahead of the police. Simple but entertaining; McGowan takes shortcuts in storytelling but actors are "more than competent and the staging is often picturesque."

Movie:

Alexander Hamilton - Warner film, at the Hollywood. Starring George Arliss in the title role, adapted from his play; least effective of his talking films since he's a much better actor than playwright. "Today, when history is being pretty thoroughly de-bunked by most writers," the film seems even weaker than the play did in 1917. Not that Mr. Arliss has made Hamilton a saint, for he treats "frankly, although rather unconvincingly Hamilton's affair with Mrs. Reynolds." However, film provides a "sketch portrait which lays too great emphasis upon the sentimental and grandiose side of the first Secretary of the Treasury."

Joke:

Timid Traveler - Has anyone ever been lost crossing the river here? Ferryman - No, sir. My brother drowned here last week, but we found him next day.