September 3, 2010

Thursday, September 3, 1931: Dow 137.31 -2.82 (2.0%)

Assorted historical stuff:

Rep. W. Wood, chair. of House Appropriations Committee, says doesn't see need for tax increase by next session of Congress; favors covering deficit by short-term loans, cutting military spending.

Editorial: Exchange of surplus US wheat for Brazilian coffee is yet another Farm Board fiasco. Financial performance of the Board on this deal recalls Mark Twain’s adventure buying a hog for $2, feeding it $4 worth of corn, and selling it for $3. At current coffee prices, the Board is getting about 40 cents worth per bushel of wheat, but owes about 30 cents of storage and freight charges, leaving it with a net of 10 cents for wheat that it likely paid over 90 cents for; total loss about $20M. The Board neglected to require US shippers and millers for the wheat, losing them substantial business. Finally, the Argentine wheat displaced by this transaction will just find its way into the world market, increasing competition. “If this be stabilization, may we be spared from any more of it.”

Full-page ad by Packard Motor Co. defending buying of new cars as superior to donating money to the unemployed since it puts men to work.

"A commercially practicable" radio and television set will reportedly be offered for sale this fall by Philadelphia Storage Battery Co., maker of the Philco radio.

Study of air conditioning Pullman cars proceeding successfully; several trains likely to be equipped next summer. Various systems being tested work by "mechanical refrigeration," ice, and "a water spray device."

"A new occupation open to women and girls is that of 'air maid,' or social hostess on passenger planes." Most big air lines now have an "air maid" on each flight. "Young women who have had experience in business and who know how to get along with all kinds of people are preferred. They make themselves agreeable to passengers, ... answer questions, make a hand at playing bridge or other games, and in general help passengers to while away flying hours pleasantly."

An Elizabeth, NJ grocery store owner, "his trade having fallen off on account of the depression," was so determined to keep his store open at all times that recently, when his entire store building was being moved 200 feet to the rear of his property, “he stood outside, and, as each customer gave him an order, he raced into the moving structure and filled it.”

Visitors to the French Colonial exposition from its opening on May 7 to Aug. 31 were 18.085M, a daily average of 156,000.

Calvin Coolidge on his reputation for saying very little: "It really isn't necessary to say anything. I have discovered that the average man can tell all he knows in 10 minutes, so why interrupt him?"

Market commentary:

Market wrap: Stocks experienced considerable selling, as bears “proved able to shake the general list out of the recent rut into a definite decline.” Opening was weak following discouraging steel news; selling spread across the list, particularly to stocks with dividends in doubt. Severe pressure then developed on the rails after announcement of dividend omission on Lehigh Valley RR; major rails including Pennsylvania and NY Central fell sharply, and the Dow rail average broke to a new bear-market low in early afternoon; this was followed by increasing selling across the general list, major industrials fell and the whole market was under pressure in late afternoon. Bond prices turned irregular after early strength; profit-taking emerged in some recently strong railroad bonds though others continued to rally. Convertibles fell late, reflecting stock market action. S. American bonds generally lower. Grains down in spite of bullish spring wheat report; wheat futures for later months again made new season lows. Cotton down moderately.

Conservative observers point to market action as vindicating their "'hands off' policy of the past few weeks"; urge customers who do have positions on either side to protect them with stop-loss orders.

Dow rail average closed at new bear market low of 65.83, though the industrials are still well above their June 2 bear market low of 121.70.

Most interests expect the market to be tested again, possibly when a number of bear traders return from vacation. An initial sharp decline would uncover may stop-loss orders by recent buyers; support encountered during this reaction would be a telling indicator. "The popular belief is that before the end of Sept., the bears will make an effort to break through the June lows"; if successful, "it is logical to expect increased liquidation, despite the fact that longs are well margined."

While some bullish operators have been encouraged by the recent pattern of lower volume on reactions, this may not be as important in the current largely professional market as in a normal one with public participation; the bulk of trading is now accounted for by floor traders and "those working to scalp small profits."

Tobacco shares were pressured; one concern is increasing prospect of state taxation, though “it is understood that where taxes are imposed no shrinkage of consumption has been experienced. Record earnings for 1931 are almost guaranteed by the June 24 price increase.

General Mills has been strong, on increased sales of packaged goods. J.C. Penney is close to the year’s high; co. has been able to increase earnings in spite of lower sales. Sherwin-Williams continues to be among the few companies doing better than in 1930; one reason is that they sell a lot of paint for interior work to householders, and in the depression many are doing their own painting and redecorating.

Gain of 0.8% (5,975 cars) in rail freight loadings was smaller than most authorities had expected, and well short of the usual seasonal increase; decline of 34.2% vs. same week in 1929 was the largest this year. Yet another editorial on the rail situation. Regrettable that so little of the general public realizes broad implications of rail emergency, particularly drastic decline in rail securities; “investors have long been taught to regard railroad obligations as a stable and substantial division of the investment field. The railroads are and long have been a highly regulated industry; if their profits were to be limited their well-being was at the same time to be protected ... since they render a service indispensable in the public interest.” ICC hearings on the rate increase have taken a disturbing turn, “their outward appearance has assumed the aspect of a popular referendum, with the preponderance of articulate opinion against the proposed advance.”

Economic news and individual company reports:

Weekly steel reviews again disappointing; as The Iron Age somewhat poetically put it, "with autumn close at hand, hopes of seasonal recovery ... are waning." Neither production or demand points to an uptrend; "specifications, instead of improving, are barely holding their own." Most lines are weak; automotive output still declining; improvement in rail demand apparently awaits results of the rate increase case; agricultural machinery clouded by "abnormally low level" of farm product prices; in "miscellaneous industrial" category, many "plant vacations" will last until after Labor Day. Main support for demand is from construction, much of it public works. Some reports of renewed price "shading" (discounting) by producers. Steel production for week ended Monday was 31% vs. a little under 32% previous week, 33% two weeks ago, 57% in 1930, and 87% in 1929.

France is suffering a strange combination of falling wholesale prices but "gold inflation" in retail prices; thanks to influx of gold, circulation is about 80B francs vs. 72B a year ago; wholesale price index down to 111 from 127 (due mostly to imports), while retail prices are higher.

Reichsbank end-of-month statement considered highly satisfactory; feared end-of-month money squeeze didn't develop; “exceptional period incidental to the closing of the banks” ended; mark believed out of danger.

Swedish market again saw liquidation in Kreuger stocks Tuesday, coming mostly from London; this wiped out earlier gains after Ivar Kreuger's optimistic statement. Ecuador Senate rescinds match monopoly granted to subsidiary of Swedish Match.

30% cash dividend authorized to Bank of US depositors and creditors; affidavit by Supt. Broderick says payment won't affect reorganization plan of a group of bankers headed by Gen. Lincoln C. Andrews. Bay City Bank, Michigan, failed to open; deposits over $6M.

State of Pernambuco, Brazil defaulted on bond interest due Sept. 1. Brazil limits power of state and city govts., prohibiting new taxes and bond issues.

Lehigh Valley RR suspended common dividend; will affect Pennsylvania RR and Wabash Rwy. due to their large holdings of Lehigh stock.

Texas Railroad Commission reportedly will stick to its order setting East Texas allowable production at 340,000 barrels/day, in spite of Gov. Sterling's strong desire for lower figure; Gov. Sterling previously ordered martial law maintained over the oil fields, and "direct conflict" looms between two branches of state govt.

Treasury announced it expected oversubscription for $800M offering of 20 - 24 year 3% bonds, and that its $300M one-year 1 1/4% offering is already heavily oversubscribed. New bond financing (non-US govt.) in August continued sharp decline seen in July; total of $99.6M offered in this area was lowest for any month since Aug. 1928. Seasonal apathy and the unsettled foreign situation combined to reduce all categories but municipal borrowing. Bond offerings in first 8 months (including all categories but US govts.) were $2.812B vs. $4.002B in 1930.

Fed. Reserve monthly review noted unusual demands in money market during August, thanks to “unseasonal demand for currency” and foreign fund movements. Banks largely exhausted their excess reserves in satisfying these demands. However, thanks to increased use of Fed. Reserve credit, supply of funds was ample and money rates practically unchanged.

Private estimate of US spring wheat crop was a record low of 115M bushels, while estimates for Canadian spring wheat rose somewhat.

Amer. Tariff League reports volume index of imports in July was 99, up from 95 in June and 91 in July 1930 [note: seems a bit fishy to me ... ]

Auto accessory business off sharply from Q2, though only a little below 1930 level.

The amusement industry is enjoying its usual seasonal improvement in attendance that accompanies start of the new season's films. "The low point in quality of film releases is apparently reached in mid-summer," and this affects attendance more than the weather. Industry feels outlook is "as bright as can be expected in view of general conditions"; box office will probably be slightly down from 1930 for rest of the year, but this may be offset by expense cuts at all the major cos.

US Gypsum denies FTC complaint it is misleading the public by using trade names such as "sheetrock" and "rocklath" to describe its materials.

Companies reporting decent earnings: American Home Products, Sherwin-Williams.


Friendship - Written by, produced by, and starring George M. Cohan, at the Fulton Theatre. Review is more than a little confusing. One theme of the play seems to be sympathy for everyone, even the character who would normally be the villain. "The play is full of the leisurely and wisely pointed naturalism of detail which has helped make Mr. Cohan famous." Louise Dale, former nightclub employee, is the mistress of Joe Townsend (Cohan) when the play opens. She "not only turns literary, but falls in love" with young writer Cecil Steinert, only to run into complications due to strict attitude of Cecil's family. Happy ending ensues as Mr. Townsend and Louise return to each other and plan to marry. Play features Broadway debut of Mr. Cohan's youngest daughter, Helen Frances.

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