September 1, 2010

Tuesday, September 1, 1931: Dow 139.41 -2.67 (1.9%)

Assorted historical stuff:

A plan to aid real estate by "forming a corporation to finance and hold off the market for a time forclosed real estate properties" has reportedly been discussed in Washington. Both government officials and private financiers have shown interest, but no decision has yet been reached. However, any action taken will probably be by private initiative, "although Washington may indicate its approval and support. ... The feeling in well-informed quarters here is that the real state situation is one of the most disturbing factors in the present depression"; the proposed corporation could "act as a stabilizing influence, and ... in the long run it probably would conduct its operations at a profit ..."

US medical stats: 825,000 hospital beds, with operating costs of $1,500/year each, making total of $1.238B/year in hospital costs. 157,000 doctors, with average income $4,000, for total about $600M; total nurses income $300M; total cost of drugs and supplies $700M; total of the above $2.838B.

The international petroleum trade has grown remarkably since 1921. The world's largest oil producer, the US, is also the world's largest exporter of gasoline, at 63.2M barrels in 1930 vs. 6.5M in 1921 (the US also imported 16.9M); however, the US share of world gasoline exports has dropped to 49% from 72% in 1924. The US also leads in exports of other refined oil products. The largest gasoline importers are Britain (27.3M), France and Germany. Venezuela is the largest exporter of crude oil. US imports of crude oil in 1930 were only 62M barrels, a small percentage of domestic output and consumption (US oil production was running at about 2.5M barrels/day until recent shutdowns).

8,765 enlisted men deserted from the U.S. Army in 1929 or 4.59% of the total. This is a substantial decline from five years previously, when deserters numbered 13,760, or 7.39%. Largest cause of death in the Army in peacetime is suicide.

Underwood Elliott Fisher has introduced a "universal bookkeeping machine, capable of totalizing up to 30 vertical columns and up to seven cross computations."

"Gypsies, noted for centuries as horse thieves and originators of crooning love lyrics, are now being 'collectivized' in Soviet Russia." There are now several hundred at a collective farm in the North Caucasus; "they seem content."

J. Mannix, NY City Municipal Lodging House superintendent, says the House faces problem of providing 3M meals and 800,000 lodgings this winter. "Police prepare to check invasion of NY by unemployed from other cities."

Twelve leading US publishers say US book industry showing strong recovery from depression, see prospects for best fall season since start of hard times. Note greater public taste for serious books.

David T. Abercrombie, originator of firm of Abercrombie & Fitch, dead at 64. [Note: I always thought that was a made-up name.]

Interesting reminisce by H. Alloway concerning cost of building the NY subway. The initial construction cost $2M a mile; this has now ballooned to the astronomical sum of $14M. The Holland Tunnel was initially estimated to cost $15M; eventual cost was $47M.

Market commentary:

Market wrap: Stocks experienced good-sized setbacks in early trading after unexpected announcement of $1.1B Treasury offering; weakness attributed to prospect of higher taxes. Trading turned dull after early declines, but market worked lower in sluggish fashion for rest of the session. Dull bond trading featured firming in US govts. Rail issues continued improvement, particularly second-grade. Public utilities firm. S. American list disturbed by sharp break in Brazilian bonds after announcement of partial moratorium. British and German issues slightly lower. Wheat fell sharply to new season lows; Sept. wheat, at the day's low of 45 cents/bushel, set another record low for CBOT futures, though in 1852 cash wheat sold as low as 28 cents. Cotton down sharply. Copper remained at 7 1/2 - 7 3/4 cents with buying dull.

Some short sellers have begun to target tobacco stocks, which have held up relatively well so far in the bear market, based on decline in cigarette consumption and possible increased taxation.

Sears Roebuck and Montgomery Ward fell after abandonment of merger negotiations. Westinghouse was pressured on news dividends may be cut further. Lambert has drawn "quiet buying" on satisfactory earnings so far this year.

Trading remains largely professional; "some traders are satisfied at attempts to make the old-fashioned eighths, which they had considered as a thing of the past."

NYSE volume for August totaled 24.829M shares, an average of 954,943 shares a day; this was the lowest volume for August since 1924 (22.256M).

While last week brought some comforting developments in the foreign situation, "Wall Street still feels that conditions are far from settled in many countries, and that the best that can be looked for is a slow, laborious recovery over a long period, with more anxious moments from time to time." Britain and Germany still have a tough row to hoe, and smaller countries still face banking problems. "An opinion has crystallized" that, as the US suffered the first shock of the economic crisis in the stock market crash, it will also be first to show definite recovery. Many believe that due to the British situation, "the Old Lady of Threadneedle Street definitely has yielded her position as leader in finance to this country."

"One leading banker said that one of the best signs since the panic burst over us in 1929 is the fact that people in the US have entirely lost their complacent attitude toward the future. He said that most of economists, financiers and industrial leaders as well as the people at large spent much of their time and talk in 1929, 1930 and the early part of 1931 predicting just when things were going to turn for the better. First it was going to be in the spring of 1930, then the fall and later the spring of 1931. Now all concerned realize that times are really bad and have ceased predicting and are striving to improve matters both here and abroad."

J. Kurn, St. Louis - San Francisco Rwy. pres.: "Business is still poor, but we feel there is bound to be an improvement soon. The Southwest and Southeast have the greatest crops in history. Unfortunately they are not bringing good prices and are not moving. Practically all farmers are stacking their wheat."

Economic news and individual company reports:

Farm Board acting chair. Williams says the Board isn't considering purchase of cotton due to continued overproduction. Believes situation will improve without further aid as working of economic law will inevitably reduce cotton acreage next year. Louisiana Gov. Long's plan for one-year cotton holiday is running into some resistance; doubts are arising on its effectiveness if implemented, since world cotton producers would probably increase production in response; Oklahoma Gov. Murray opposes plan and won't call special session to consider it; Texas Gov. Sterling will probably call session to consider the plan but passage in Legislature is doubtful. Southern senators propose a rather complex cotton relief plan in which the Board would "sell" its cotton holdings to farmers, with no money changing hands, in return for acreage reductions. When the cotton is sold next year, presumably at a higher price due to the acreage cuts, the farmer would pocket the difference. Farm Board officials declined to express opinion on the plan. Another proposed plan by the Texas Bankers' Assoc. has been abandoned.

Guaranty Trust survey reports business activity remains at very low levels except for small seasonal gains in some lines; Guaranty index reached new low level of 68.3 last month vs. 69.3 in June and 83.9 a year ago. “Nevertheless, a number of favorable conditions support the belief that some expansion is likely to occur in the near future.” While commodity prices haven't maintained the strength shown last month, recent behavior still indicates “influences making for price recession have spent most of their force.” Retail volume has apparently increased, though dollar value of sales is down due to lower prices. Some consumer goods industries continue to recover, including textiles and shoes; this improvement may gradually work its way back into more basic industries. However, “enough obstacles remain to convince most observers that the return to prosperity, in this country as well as elsewhere, will be a slow and highly irregular process.”

Long-rumored merger between Sears, Roebuck and Montgomery Ward falls through as negotiations are terminated; main stumbling block believed to be valuation of Ward assets due to lack of earning power over past two years.

Monsanto reports interesting result of experiment in going against prevalent trend of wage cuts. In Q2 of 1931, the company increased hourly wages by an average of 10.4% over that paid in Q2 1929; instead of increasing, labor cost per unit of ouput fell 15.5%.

Labor Dept. reports "many manufacturing establishments in July continued on curtailed operating schedules and a large number of workers were employed part time." Labor Dept. says 103,000 children between ages of 14 and 15 were granted permits to drop studies last fiscal year, to take jobs which might have been available for older persons.

Martial-law shutdown of East Texas oil production estimated to have reduced rail freight loadings by 7,100 cars in past week. Number of new wells completed in East Texas area fell to 0 from 66 in previous week.

R.L. Polk & Co. reports retail passenger car sales for July were 194, 388, down 3.7% from June and 23.5% from July 1930; first 7 months 1.372M, down 28.1% from 1930 and 33.2% from the five year average. Commerce Dept. reports July passenger car production in the US and Canada totaled 186,078 units, vs. 214,538 in June and 230,385 in July 1930; first 7 months 1.554M vs. 2.184M.

Brazil announced a debt moratorium over the weekend, but clarified it applies only to "sinking fund" and not interest payments (sinking fund payments reduce the principal owed). Plan obviously designed to relieve pressure on currency; will save about $20M annually. Fin. Min. Whitaker says govt. expects to maintain interest payments without difficulty.

Companies reporting decent earnings: Diamond Match [Kreuger-associated], Brooklyn-Manhattan Transit.


The Dreyfus Case - British film version of the play by Herzog and Rehfisch. [Note: I believe this is a filmed version of the German play that was reportedly banned in France (see Apr. 17, 1931).] Film features fine performances, and the episodes involved in the case are well-portrayed. "Despite the excellence of the film as a whole, however, it has its weaknesses. In the first place, the anti-Semitic nature of much of the persecution of Dreyfus seems to be soft-pedaled." Also, the ending makes Dreyfus' exoneration following his pardon seem more automatic than it was in life.


Lawyer - We need to establish an alibi. Did anyone see you at the time of the crime? Client - Fortunately, no.

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