Tuesday, July 7, 1931: Dow 152.80 -2.46 (1.6%)

Assorted historical stuff:

Pres. Hoover announces debt moratorium proposal accepted in principle by all important creditor govts. French acceptance involved some technical changes that must be approved by other countries, but substance of proposal retained. Agreement "morally in effect as of July 1." Proposal means some sacrifices by US and allies to lighten load on Germany and Central Europe. Hails almost unanimous support in US as evidence of "sincere humanity of the American people." Plan is mainly economic, "yet economic means the swinging of men's minds from fear to confidence, the swinging of nations from the apprehension of disorder and government collapse to hope and confidence of the future."

Editorial: "Grandiose schemes of public works ... to pull the US up out of depression are steadily increasing in number"; while still vague, they "are gaining somewhat in the respectability of their support." The next session of Congress will certainly spend much of its time considering such measures, so an advance examination is in order. "It should begin with the fact that 5M or 6M workers are unemployed at present," most of whom are likely to remain so through winter; "next comes the justifiable assumption that these men and their dependents are going to be fed and sheltered, as they ought to be, by one means or another. Whatever the country can obtain from them in useful services ... will be net gain for all concerned." Therefore, supporting them through public works that produce "results of economic or social value is preferable to outright charity." However, financing such a program without creating hardship for existing private businesses "presents huge difficulties" that "proponents ... like Norman Thomas and William Randolph Hearst ignore. Bond issues and taxes mean the withdrawal from private enterprise of funds which would otherwise be available to it"; they also increase "difficulties which states and municipalities have already begun to encounter in balancing their budgets. ... Nor can the extremely slow pace at which all government machinery moves be overlooked." An AIA officer estimates $500M has been appropriated for federal buildings that won't be used "until the emergency is passed. ... Why talk of federal bond issues in gorgeous sums ... while the government has hundreds of millions ... authorized which it cannot get in motion in any quicker tempo than that of a glacier?" Proponents of a huge new program should instead try to cut "the red tape which binds what Congress has already tried to do" or concede that reemployment is a task govt. "should encourage and assist private enterprises to perform."

Indiana Sen. Watson, Republican floor leader, says most important legislation confronting next Congress will be bills to put trucks and buses under ICC authority.

Worldwide total of motor vehicles registered Jan. 1 was 35.805M, of which 26.697M was in the US; US has 4.59 people per vehicle vs. 200 in rest of world; Canada and New Zealand were second to US with 8, followed by Australia with 11; fewest vehicles per capita in Yemen, Oman, China, and Ethiopia.

[Note: Stalin - inventor of perestroika?] "Under the impetus of a pronouncement by Joseph V. Stalin," Russian industrial policy is making some important changes, including: 1) "obliging every Soviet enterprise to justify its existence by earning profits"; 2) giving higher wages to workers of greater ability, ceasing discrimination against efficient non-party workers in favor of Communists, and giving "wider scope ... to individual initiative"; 3) abandoning "unwieldy trusts" in favor of "smaller, centralized management." Soviet officials denied any compromise with capitalism, saying the proposals, on the contrary, were intended to complete more quickly the process of industrialization in order to form the basis of a real Socialist state.

M. Petsche, French Under-Sec. of State for Beaux Arts, announces annulment of French licensing plan for film imports and free entry of foreign films originating in any countries which impose no restriction on entry of French films.

Corn Products Refining Co. fined $5,000, in victory for Federal effort to penalize companies providing supplies for making of illegal alcohol.

The newest Army "single-seater pursuit plane," the smallest craft produced by Boeing, contains over 30,000 different parts. There are "519 different kinds of raw material and 813 different kinds of finished or semi-finished parts," not including engines and instruments.

One agricultural industry that seems to be on the upswing is sod. Many farmers in NY and NJ have recently switched larged acreages from grain crops to growing and selling sod for golf courses, cemeteries, lawns and parks; prices are 2 - 6 cents/sq ft, and some farmers claim to be making $500 - $1,000 an acre.

Pennsylvania RR broke all records for Fourth of July travel, carrying over 140,000 passengers to and from New Jersey resorts over the weekend; this more than doubled the total from last year.

Editorial: "The other day the British House of Commons staged a genuine rough-and-tumble row." This story was a welcome diversion from the grim run of everyday news; "few there are who will not wish they might have had ringside seats." On a deeper level, however, "this row should make us feel that the British are our brothers. They act just like us and even conduct their parliamentary proceedings much after the manner of our own Congress. ... It is true we have seen others act as we do; we have read of free-for-all fisticuff discussions in the French and Italian chambers. But of England, the country of the author of Martin Chuzzlewit, who could have thought it?" One of the 8-day around-the-world fliers "said that so far as he could see people were the same the world over regardless of race or nationality. That was a pretty hard thing for a great many Americans to understand who, perhaps from an inferiority complex, try to make themselves believe we are superior to all others. ... that incident in the House was ... of great benefit to American conceit, for if it did not raise us up it at least pulled the Briton down to our level of correct parliamentary procedure."

Market commentary:

Market wrap: Stocks again fluctuated along with progress of debt negotiations. Opening was weak on reported hitch in the talks; however, initial setbacks in first hour gave way to extreme dullness and then a recovery about 11 o'clock. Rally strengthened around noon after optimistic statement by Under-Sec. Castle; Chrysler and Woolworth were subject of bullish demonstrations. Unsettlement returned in late afternoon following sharp break in wheat markets, and market turned generally reactionary. Bond trading quiet, prices somewhat lower; foreign issues accounted for much of the trading and showed particular weakness, led by German bonds; US govts. steady; domestic corp. high-grade issues were fairly steady while second-grade were weaker, though second-grade rails held relatively strong. Commodities weak; grains off, with wheat hitting new season lows on heavy receipts of new winter crop - Chicago July wheat hit post-1895 low of 55 cents; cotton down substantially. Copper remained at 8 1/2 - 9 cents though it was reportedly "offered ... quietly at 8 1/4"; buying small. Silver fell 3/8 cent to 29 3/8.

"Conservative observers see little in the present market upon which to base new trading commitments." Market will apparently require "new stimulus" to continue recent gains; at the same time, customers are warned against short sales until business response to efforts to improve German situation is clearer.

Q2 earnings estimates are coming more frequently, and the first reports will appear within a week or two. These are widely expected to be unfavorable, and some traders are shorting stocks in anticipation. "However, there is a growing opinion that dismal earnings statements will not prove to be the shock bears expect" since stocks "have had ample time to adjust themselves to the outlook"; also, greatly improved sentiment in the past two weeks has produced "many potential investors ... anxious to acquire representative shares on price recessions." On the other hand, there is the disturbing example of Q1 earnings reports in April, which were followed by a selloff in spite of generally being no worse than predicted.

Trading was very dull, with total volume of about 1M the lowest since the 900,000-share session on June 17. Friday's session ended with good gains in rails and industrials, but both fell short of attaining new highs on the recovery since June 2; analysts believe a move beyond this level would indicate further general gains. Short interest appears considerably reduced; many traders who tried to pick the top of the rally apparently were discouraged by the market's good support and covered their commitments. National Biscuit broke to record low for current shares on expected unfavorable Q2 earnings.

Bears believe positive influence of the Hoover plan has been "fairly well spent" and market will sell off sharply on announcement of a final agreement. Bulls admit market may "sell off on the good news" but believe improved sentiment due to Hoover plan should be a continuing factor in helping to accelerate world trade.

Rather technical editorial by T. Woodlock on the rail rate decision facing the ICC; case is difficult with "room for infinite dialectics on both sides"; however, "heart of the matter" is "whether carrier revenues are not so far below a sufficient amount as to make it its duty under Section 15a to permit an increase in the freight rate structure" and "no amount of argument will avail to obscure or remove it" [Note: well, that clears that up!]

Letter to the editor asking "why, with an excellent decimal system of currency ... are stock and ordinary bond quotations given in whole numbers and eighths ... US govt. bond quotations in whole numbers and thirty-seconds, and foreign exchange rates in mongrel forums such as 4.86 11/32?" Calls for using straight decimal system to simplify records and computations. [Note it only took another 70 years to do this for NYSE stocks.]

Harvard Economic Society says Q2 had "brought some signs that the great depression had about run its course ... but in June the outlook was suddenly clouded by an acute situation which developed in Germany which has now led to Pres. Hoover's proposal for a moratorium." Believes the moratorium will "probably restore exchanges to a balanced condition for the coming year, check the inflow of gold into the US, remove pressure from commodity markets, restore confidence, and, finally, impress everyone with the need of solving permanently a major difficulty which for a dozen years has hampered the trade of the world."

Long-term effect of the Hoover plan is "likely to come chiefly from its firming influence on commodity prices" which is already apparent in many commodities and has caused increased activity in some lines. "Psychology has a tremendous influence on material purchasing. The spectacle of firmer prices is counted upon to have a cumulative effect on demand pent-up by the paralysis of fear that existed for so many months. Once the buyers' strike is broken, momentum should accumulate on the constructive side" as it did during the downward cycle. Increased credit for debtor nations may also improve demand.

Observers optimistic on world trade "contend that some measure of inflation, of necessity," must follow the debt moratorium, concentrated in "commodities with a worldwide market." Many economists believe "the signal for inflation has already been given in the increase in this country's national debt," pointing to the decline in commodity prices in 1921-30 "in sympathy with the new contraction of credit resulting from the Treasury's reduction in the war debt."

A. Robertson, Westinghouse chair., notes “paternalistic proposals that big business, or the government, assume many of the obligations formerly recognized by the individual as ... his own responsibility.” However, business, far from being immune to depression, is “just about as helpless as the employee.” Rights of stockholders are also in danger of being ignored. Country will weather the storm; “certainly the worst is behind us” and at least some lines have started to improve.

Nat'l Conf. of Business Paper Editors survey finds business now in "the condition that generally precedes an upturn"; replacement buying can't be delayed much longer; increase in production and distribution already apparent in some lines.

Economic news and individual company reports:

German capital flight intensified, with a loss to the Reichsbank of 60M marks ($14.4M) reported Monday; attributed to drawn out debt negotiations that harmed confidence both in and out of Germany. Reichsbank drew for the first time since 1924 on the $50M credit that its Gold Discount Bank subsidiary had with a syndicate of 30 US banks. Marks dipped close to the gold export point and pounds were soft while guilders and Swiss francs advanced sharply.

Drought in Western Canada has reduced wheat crop to not much more than half of normal. Some estimate population in dire need at 100,000 while others place it much higher; Federal assistance expected soon; discussions ongoing on “financial tangles” of wheat pools, which are near collapse.

Rogers Caldwell, formerly one of the South's leading financiers (as head of the large Caldwell & Co. investment bank that collapsed last Nov.), found guilty of fraudulent breach of trust in connection with $200,000 bond transaction; verdict carries sentence of up to three years.

Market value of NYSE-listed shares July 1 was $47.417B, up $4.883B from June 1; borrowings by NYSE members fell $43.4M to $1.391B or 2.93% of total share value, both record lows.

Col. Robbins, Amer. Life Convention pres., notes recent improvement in insurance business from early months of the year; "much lapsed business has been revived ... and many policy loans are being paid off."

East Texas oil producers generally dissatisfied with new Texas Railroad Commission order setting limit of 250,000 barrels/day with limits based on 20-acre units. Oil being sold as low as 8 cents/barrel, average about 12 cents. East Texas has favored the special legislative session to be called by Gov. Sterling, and oil men are confident of quick passage of a tougher curtailment law.

Fisher's wholesale commodity index rose for the third consecutive week for the first time in 1931, to 70.6 vs. 70.3 prev. week.

Following conference of almost 2 hours with Vice President Curtis and Sen. Capper, Farm Board chair. Stone says Board won't make any immediate sales of wheat at current prices. Curtis says not entirely satisfied, would have preferred Board name a minimum price of 85 cents or $1. Heavy rains in drought-affected areas of North Dakota and Montana arrived too late for crops but should help revive ranges and lessen emergency movement of livestock.

Swedish Board of Trade reports no sign of improvement in conditions in past quarter; position of some industries has deteriorated further. Industrial employment in Q1 fell to the lowest level since 1922. Export trades are main sufferers, but domestic industries increasingly affected.

Dow Service reports new building permits filed in NY City in first 6 months of 1931 totalled $194.6M vs. $162.0M in 1930.

NY Gov. Roosevelt says highway construction has been speeded up, and is providing work to thousands more than in previous years; state will spend about $58.3M on highways this year vs. $50.7M last year.

Alaskan mineral output in 1930 totalled $13.812M vs. $16.066M in 1929; gold was $8.476M vs. $7.761M.

450 employees of Northern Indiana Rwys. make voluntary request for wage cuts until company business improves.

Chase Nat'l Bank reports first-half deficit from operations of $14.8M.

Retail sales reports: Woolworth - June $22.0M, up 6.1% from 1930; first half $130.3M, down 0.8%. S.S. Kresge June $11.9M, up 4.3%; first half $67.2M, down 0.3%.

Procter & Gamble likely to report record earnings of about $23.250M or $3.50/share for year ended June 30 vs. $3.37 prev. year; sales will be about equal to prev. year's $203.4M; higher profit margin attributed to control of operating expenses and low raw material costs; increased dividend anticipated.

Household Finance likely to report record first-half earnings of about $2M, up 7% from 1930; has 295,000 loans outstanding, up 12% from a year ago; average loan size $202; collections continue at a normal rate.

Companies reporting decent earnings: Procter & Gamble, Household Finance, Alaska Juneau Gold Mining.

Joke:

"'I don't see what you find so attractive in that young man. He is neither handsome nor intellectual.' 'No, but he has the reputation of buying lovely engagement rings.'"

Monday, July 6, 1931: Market closed for Fourth of July

No Journal was published Monday, July 6, 1931, following the Fourth of July. I'm putting the week in review for last week in today's blog for consistency with other weeks.

Week in review:

Stocks opened the week lower on profit-taking and uncertainty concerning French objections to the Hoover debt moratorium plan. However, no liquidation was in evidence as volume declined from day to day, reaching a low of 1.3M Thursday. Improved prospects for the Hoover plan gave rise to better feeling later in the week, but “market interests were largely on the sidelines” awaiting definite news. Oil stocks rose on better sentiment concerning industry outlook.

Application of rails for a 15% freight rate increase may take longer than anticipated to be decided, though it's still expected they eventually will be granted some increase; it now appears the ICC won't rush to a decision and it's unlikely any increase could become effective before year-end.

Steel production continued seasonal decline to below the low of last Dec. (excepting the Christmas week), and further decline was predicted. However, sentiment is “definitely better” and producers expect slow improvement to start at end of this month. Scrap markets showed some improvement; finished prices were steady, with Dow steel products average showing first advance since Jan.

Bonds were “highly irregular,” particularly in the foreign list, fluctuating along with perceived progress of the French-US negotiations on the Hoover plan. However, German govts. rallied considerably toward the weekend, indicating confidence of a satisfactory settlement. South American bonds again fluctated widely. Offering of Taiwan Electric Power bonds guaranteed by Japanese govt. was successful. Trading in US govts. was unusually dull but prices were firm. Domestic corporate list featured encouraging rally in the industrial list, which had been relatively weak this year; oil company bonds were particularly strong; some lower-grade rails rose very sharply. Public utility bonds were firm in spite of heavy new issues. Municipal bonds continued gradual downtrend of past several weeks; Dow average of 20 long-term state and city bonds was at yield of 3.86% vs. 3.81% a week ago and 3.73% on May 29.

German capital flight continued, though on a smaller scale; marks fluctuated slightly, but the Reichsbank has thus far been able to prevent any serious decline. Bank of England unexpectedly postponed rate cut. Spanish pesetas fell sharply; although the Republic was secure after the June 28 elections, a serious rift between Republicans and Socialists was seen making stabilization unlikely. Argentine pesos improved, continuing rally since mid-June; attributed to improved trade position; first 5 months showed 20M gold peso surplus vs. 28M deficit a year ago.

“Outstanding development” in credit situation was continuation of aggressive new Fed. Reserve policy to expand outstanding credit by purchase of govt. bonds; Reserve banks bought $45M in week ended July 1, bringing 2-week total to $65M. So far result has varied by location. Member banks outside NY City reduced indebtedness to Fed. Reserve by $47M to “nominal figure” of $150.2M. On the other hand, NY City member banks increased loans and investments $223M, including $93M increase in business loans, the third consecutive week of increasing business loans. “Whether the expansion really indicates the return of confidence by borrowers and lenders remains to be seen, but the indications point that way.”

Grain prices broke sharply in midweek, on reports of better weather and higher crop estimates, though effect was mitigated by reports of further drought damage to spring wheat in Western Canada and the US Northwest; Canadian Premier Bennett said nation was threatened by worst natural disaster in its history. Farm Board announcement that it wouldn't sell over 5M bushels a month from its surplus was greeted with “disappointment in a few quarters” though it had little visible influence on prices. Cotton fell through most of the week before recovering some of its loss late; price movements appeared to be following stocks and the progress of negotiations in Paris rather than crop or trade news. Copper prices rose to 9 cents early in the week, but showed weak tone later.

The Irregular Blather July 5, 1931

The Irregular Blather July 5, 1931

No Journal was published Sunday, July 5, 1931. Special reader response and historical sleuthing edition!

Onlooker wrote asking if he was accurate in remembering reading a lot about big companies building up cash earlier in the blog - in short, I think that is accurate and I'll try and track down more on that tomorrow.

However, today I'd like to highlight some fine detective work by davidlefool who did an interesting historical search on a joke from June 30:
Amateur poet - Dear Editor, will you please read the enclosed poem carefully and return it with your candid criticism as soon as possible, as I have other irons in the fire.
Editor - Dear Sir, please remove the irons and insert the poem.

David remembered a version of this joke in Reader's Digest, and found another in volume 4 of “The Unitarian” from 1889. Searching a bit futher, the “Handy-book of literary curiosities” has not one, not two, but three versions of the joke variously attributed to Samuel Johnson, to Johnson's contemporary Samuel Foote (a British dramatist), and to "the 'Nain Jaune,' a French collection of bon mots" ( actually a French satirical newspaper which was published in 1814-15 - apparently the expression “irons in the fire” is also used in French).

So far it appears the origin of the joke is even more confused. However, looking carefully at the last reference, it does appear that the Foote and French versions of the joke are curiously nonspecific about the identity of the unfortunate author, while the Johnson version specifies an author and even a title for the unwanted work. Following the trail a bit further, davidlefool found that the story actually appears in Boswell's Life of Samuel Johnson! Of course, the possibility remains that Boswell made up or misattributed the remark, but as far as is possible at this late date, I believe davidlefool has traced this mighty Amazon of an anecdote to its ultimate source.

This whole theme (or I believe the fancypants intellectual word would be meme) of the poet of doubtful quality inflicting his creations on an unreceptive world seems to be surprisingly old and widespread. In fact, in what seems to be the true story, the work in question was not a poem but a play (“The Siege of Sinope”) but all the other versions of the joke have it changed to a poem. And, yet another of Samuel Johnson's contemporaries, the great artist and social satirist William Hogarth, has a pretty funny picture on the topic called “The Distrest Poet” in which a poet scribbles away, apparently dreaming of riches and oblivious to his wife, who is left to deal with a bare cupboard and an insistent bill collector. (Also check out the rest of the fine Hogarth gallery at that site - and, for those of you who may be in London in the future there's a great little museum which is actually in Hogarth's house there, but it unfortunately appears to be closed for renovations now).

Saturday, July 4, 1931: Dow 155.26 +3.78 (2.5%)

Assorted historical stuff:

"Despite reports of the rigid dietary privations engendered by the Soviet Five-Year Plan, evidence accumulates that the Russian's stomach needs are being amply provided for." On Oct. 1, 1929, the Union of Consumers' Cooperatives was serving 2.2M meals daily in its restaurants; a year later, this had increased to 11.7M, and was up to 17M at the start of this year; plans are now on to increase the number to 37M. [Note: the Soviet famine that killed millions, largely in the Ukraine, was under way about this time or possibly a little later - information is still in dispute on this.]

Editorial: While debt relief “is in the international air ... it may not be inappropriate to mention - again - that there are debt situations at home which press increasingly for consideration.” Decline in commodity prices and in wages has created hardships for corporate and individual debtors; widespread readjustment is a certainty, the question being how it is accomplished. One correspondent suggests a two-year postponement of principal payments on mortgages for borrowers with good records. Mass. State Treasurer Hurley advocates persuading banks to declare a 2-year payment moratorium for unemployed borrowers, and even proposes legislation to allow banks to lend up to 70% of value on first mortgages instead of 60% [note: 70% - radical!] There's a danger of well-intentioned legislation that would impair mortgage security, handicapping a resumption of building when it's most needed; the experience of NY with "rent laws" in the years after the war is a cautionary example of the dangers of interfering with economic laws. [Note: the annual NY City rent law hearings remain one of the best pieces of political theater around]. However, the problem is a grave one and will have to be met; it should urgently be taken up by bankers and real estate boards.

Grasshoppers have appeared in swarms not seen for 60 years covering parts of South Dakota and Nebraska. For many years, "a suggestion of humor has attached to mention of grasshoppers as a serious menace." However, in 1870 grasshoppers completely destroyed crops over a vast area in the West, and the swarms are now a big problem again. Three successive dry years have given the pests a big start; one expert estimated 100,000 eggs in a single shovelful of dirt. [Note: it's hard not to start feeling sympathetic toward Hoover - I mean, what's next? A plague of frogs?]

Commerce Sec. Lamont invites 25 coal mine operators to a conference on July 9 to consider relief measures for the industry, which has suffered particularly severely in the depression. Conference comes as result of move by Pres. Hoover to place situation in hands of Lamont and Labor Sec. Doak.

Loans to drought-stricken farmers in North Dakota and Montana are being arranged out of $8M remaining from $65M drought relief appropriation at last session of Congress; "loans are intended to provide feed for livestock and will be limited to $47.50 monthly for each farmer"; loans will mature Nov. 1.

Rather strange editorial condemning excessive nationalism; mention is made of tariffs, silly interstate disputes, France and Russia, but the main example chosen to criticize is that of "Chinese nationalists" who are closing "the sands of the Gobi Desert to the opening shovel of progress" by denying permission to Ray C. Andrews of the Amer. Museum of Natural History to make another scientific expedition there; a previous trip uncovered dinosaur eggs and the bones of the "Peking man."

Auto industry trends seen moving toward cars that are lighter, more comfortable and simpler to operate, offering high quality at a low price; "the pullman car idea is passing." Ideas under development include automatic gear shifting, moveable car seats, and a revolutionary tire combining the casing and inner tube into one unit.

"Dr. Stephen Moulton Babcock, inventor of method of determining butter fat contents of milk which revolutionized dairy industry, dead at 87."

Market commentary:

Market wrap: Stocks again seemed to follow progress of the US-French debt negotiations; while definite news was scant, optimism was widespread; stocks were generally strong, and, following under-Sec. of State Castle's optimistic statement, trading become more active and the rally strengthened in the afternoon; leaders ended with broad gains. Bond trading more active, prices generally higher; US govts. dull and steady; European issues advanced, led by German govts.; S. American bonds rallied sharply; domestic corp. mostly higher, featuring rally in lower-grade rail issues - these have advanced substantially from the lows of last month but still are trading at high yields. Commodities mixed; grains soft with wheat down substantially on rumors of bankruptcy for Canadian Wheat Pool; cotton up sharply in sympathy with stocks. Copper buying almost nil; some still available at 8 1/4 cents, with 8 1/2 more generally asked and large producers holding at 9. Silver up 1/2 cent to 29 3/4.

"It was the general opinion after the close that the market should be allowed to indicate its trend in the new week before positions are adopted." Some urged clients to take advantage of any sharp upturn to take profits. Conservative observers strongly warned against trying to pick the top and go short.

Many observers had expected the market to fall Friday on profit-taking before the holiday weekend; instead, bears apparently felt the need to cover due to fears that "something might happen over the three-day suspension to start the market sharply upward in the new week."

Nat'l Biscuit was a weak spot, down over 2 points to about 60 on reports earnings are running close to dividend requirements. IT&T was strong on optimism dividends will be maintained. Bethlehem Steel rose on adoption of revised executive bonus plan seen as more favorable to stockholders; merger rumors were also circulating. A bull pool has been operating in Amer. & Foreign Power, accounting for "the many optimistic rumors concerning the stock which have been circulated ..." However, conservative brokers are keeping customers out, and "interests in a position to know" say the earnings estimates have been much too high.

National Distillers interests admit Q2 earnings will be lower, but see better outlook due to "more liberal policy on the legal restrictions on medicinal liquor."

Some observers maintain "the market has indicated distribution at times recently. ... Pools that were active in a number of stocks are inclined to take profits and reduce their long positions on a good upturn."

Recent technical reactions seen as having strengthened market position after previous sharp upturn; "a period of profit-taking was considered necessary from time to time to permit stocks to consolidate previous gains and be in a position to respond to new favorable news."

Reichs-Kredit-Gesellschaft of Berlin semiannual report says depression lost momentum in first 4 months of 1931 in a number of important countries; however, European unsettlement in Q2 created danger of renewed recession, particularly the withdrawal of foreign funds from Germany. Price declines have continued, only partly caused by recession; blame price support efforts for delaying adjustments and making them more severe; also point to gold accumulation in a few countries. Capital movements dominated by fear and “mob psychology,” making the Hoover Plan's move toward international cooperation of “stupendous ... importance.” Difficult problems remain, but “it is highly probable that the more dangerous elements of the depression have now been eliminated.”

C. Nims of Harris & Fuller: "In financial history, 1931 will go down as the turning point year. Commodities are the fundamentals; and they manifestly cannot remain at prices below the cost of their production." When commodity prices move up definitively, business will certainly improve. "Apparently, the tide is already turning. Our government's move to suspend foreign debt payments for a year is a constructive inspiration without equal. Prosperity - clearly - is in the making."

Economic news and individual company reports:

Under-Sec. of State Castle said it was hoped to conclude a French-US debt agreement today, making a debt recess effective immediately. Foreign currencies were generally higher on belief agreement is near.

Capital flight from Germany, while below the “startling proportions” of June, has continued “in a quiet manner” with the Reichsbank losing about 120M marks since Saturday. Reichsbank reserve ratio on June 30 was 40.1%, barely above the 40% legal minimum, thanks to the $100M credit from the BIS and central banks of US, Britain and France. Seasonal factors are now expected to reduce currency demand, easing the situation, although this may depend on satisfactory conclusion of the debt negotiations. However, “in responsible quarters, there is not the faintest doubt regarding the Reichsbank's ability to defend the mark. It is stated that the institution is far from the end of its resources” including “important hidden reserves ..., enlistment of private holdings ... , rationing of credit and an increasingly higher discount rate.”

Weekly bank reports contained some positive items. Fed. Reserve banks continued expansion of credit by buying govt. securities, to the tune of $45M vs. $20M in the previous week. Increase of $73M in brokers' loans by NY member banks was first in 11 weeks and indicates renewed confidence by at least some of the trading public, although monthly report of security loans by NYSE members as of June 30 fell $43M to a new low of $1.391B.

Bradstreet's reports hot weather and the upcoming holiday stimulated retail trade throughout the country; wholesale was also improved, though many reports still showed it as unsatisfactory. Dun's reports first full week of summer weather stimulated interest in a number of seasonal lines; retail inventories in many sections were lighter at the end of June than for several years.

Chicago Mayor Cermack instructs department heads to cut at least 10% from annual expenses, including salaries; it's estimated spending cuts will save the city $5M out of its 1931 budget of $67M.

Tennessee two-year budget of $35M leads to estimated deficit of $12M due to repeal of property tax; legislature has also voted down issuance of additional bonds to meet the deficit.

NYSE sends letter to member firms asking names of employees permitted to trade on margin for their own account who traded over 5,000 shares in past 6 mos.

NYSE bond trading in June (including US and foreign, govt. and corp.) was $267.8M vs. $235.7M in May and $230.3M in 1930; most active month this year. New bond offerings this week totalled $26.9M, down sharply from $187.8M last week and $93.8M in 1930, as market awaited outcome of debt negotiations.

Texas Raiload Commission set allowable production for the East Texas area at 250,000 barrels/day for 30 day trial period. Texas Gov. Sterling says doesn't believe producers will abide by the Commission order; will call special session of Legislature next week; advocates conservation bill setting up one commission with authority over oil, water, and possibly soil; believes Texas Railroad Commission has hands full with transport.

ICC postpones its order of lower grain rates for Western railroads to Aug. 1; rails will appeal order to the Supreme Court.

Vice President Curtis and Sen. Capper (R, Kan.) will ask Farm Board to hold wheat off the market until price reaches 85 cents/bushel; price in Kansas City Thurs. was 49-50 cents. Very heavy movement of new crop winter wheat has gotten under way in the Southwest in past week. Report from Atchison Topeka & Santa Fe Rwy. territory (Kansas, Oklahoma, Nebraska, Texas panhandle, etc.) finds wheat yields good but prices low. Recent estimates of crop from main Canadian wheat provinces have declined steadily to as low as 200M bushels vs. 374M last year.

New coal bill introduced in British House of Commons in effort to prevent serious labor troubles threatening in mines; provides for continuation of 7 1/2 hour day and maintenance of existing wages as minimum scale. Bill was accepted by miners but opposed by owners.

US car production in June estimated at 250,000 - 275,000, vs. 349,396 in 1930; Q2 production about 940,000, down about 25% from 1930; first half 1.640M, down about 29%. Dealer inventories remain very low at about 300,000 or 5 - 6 weeks supply; average dealer stock is about 6 cars.

Cadillac-La Salle June shipments 1,409 units, up 39% vs. 1930; first half 10,981, up 9%. Produces 4 lines: La Salle V-8 and Cadillac V-8, V-12, and V-16. Oakland-Pontiac production in June was 8,780 cars vs. 6,500 in 1930; total first half production exceeded 1930.

Bulova Watch preferred is trading at a yield of about 16%; earnings last year covered preferred charges over 5 times; business so far this year satisfactory.

Caterpillar seen likely to cut Q2 dividend in spite of strong cash position due to immediate business outlook.

First half bank earnings: National City Bank $2.25/share vs. $2.89 in 1930; Bank of NY & Trust $10.28/share vs. $15.69.

Retail sales reports: Montgomery Ward - June $19.2M, down 19.9% from 1930; first half $107.8M, down 17.2%. W.T. Grant - June $6.3M, up 15.1%; first half $33.1M, up 10.3%. Grand Union - 4 weeks ended June 27 $2.762M, down 3.7%.

A&P will raise retail cigarette prices, clearing way for a widespread retail price hike by tobacco chains to 15 cents/pack.

US coffee consumption in year ended June 30 was a record high of 12.357M bags vs 11.166M in prev. year; per capita annual US consumption 13.2 pounds; US consumes as much coffee as rest of the world combined.

Company reports since July 1: 5 companies reported higher earnings vs. 1930 and 19 lower; 46 dividends unchanged, 1 increased, 8 cut.

Interesting historical tidbits dept.:

Entertaining list of nicknames of members of the NYSE when it merged into a unified organization in the boisterous year of 1869: William Wadsworth - "The Farmer Boy"; Mich Bouvier - "Mike from Gay Paree"; Charlie Harris - "The Milkman" (for "shocking habit" of personally opening office before breakfast); Addison Cammack - "Ursus Major" [I'm guessing he was a short-seller]; Billy Cross - "Piano Legs"; Frank Robinson - "Double or Quits"; John Slayback - "The Christian at Work"; Billy Pearl - "Dr. Smooth"; Robert Goodbody - "Turrible Things." Of the original crop of 1869 members, only two remain - Wadsworth and Bouvier.

Interesting description of rowing technique taught at Harvard by Col. Wm. Bancroft, who coached the team in 1882-84: "On the pull-through the men were drilled to lift their bodies with a violent heave at the beginning of the stroke, holding their slides rigid, ... the importance of uniformity in this regard was held to be so great that during several weeks of the early training of the '83 crew ... a rigid rod of hard wood was fastened to the sliding seats, so that all of the men should begin and end their sliding at the same instant and all slide the same distance." It was all worth it as Harvard beat Yale by 21 boat lengths.

Fourth of July special:

The famous painting The Spirit of '76 was painted a hundred years later in 1876 by Archibald M. Willard, "a wagon painter who had never received a lesson in art prior to the completion of this famous work." [note: color me skeptical]

“JULY FOURTH
Gather the stars of the midnight, And count them, one by one,
And hang them true on a field of blue, Ere the hours greet the sun.
Then take the clouds of the dawning, All splashed with the crimson morn,
That the word may go and the world may know, That liberty is born. ...
Si Tanhauser, Poet Laureate of the Long Island Railroad.”

Live theatre you could see in NY this week - if you only had a time machine:

The Band Wagon - Fred and Adele Astaire, Tilly Losch, Frank Morgan and Helen Broderick in "the most handsome and amiable of the revues"; book and lyrics by George S. Kaufman and Howard Dietz.

Billy Rose's Crazy Quilt - "Three incorrigibles of vaudeville, Phil Baker, Fanny Brice and Ted Healy, in energetic patch-work revue; frequently a bit rough, generally hilarious; reported revised after the premiere."

Ziegfeld Follies of 1931 - with Hal LeRoy, Helen Morgan, Ruth Etting, and "the usual impeccable Ziegfeld chorus" - see review yesterday.

The Third Little Show - "ingeniously and brightly staged revue, with Beatrice Lillie as deftly funny as ever."

Once in a Lifetime - "George S. Kaufman, collaborating with Moss Hart, in a sort of personally conducted tour of a consummately farcical Hollywood."

Also playing - Grand Hotel, Private Lives, The Barretts of Wimpole Street

Friday, July 3, 1931: Dow 151.48 -1.18 (0.8%)

Assorted historical stuff:

US and France positive on progress of debt relief negotiations; Under-Sec. of State Castle says “negotiations ... are continuing in an admirable atmosphere and we feel very optimistic as to the outcome”; note from Pres. Hoover reportedly makes good impression in France as leaving way open to compromise on disputed points. Editorial: The US and France seem to be talking in circles, each insisting that the Young Plan (for reparations) must be preserved while at the same insisting on their own modifications, and likewise insisting that the Plan must be resumed in a year. However, the US and French positions are so fundamentally similar that eventual agreement seems likely. Both recognize the Young Plan is currently unworkable; their next step should be to recognize that it's impossible to predict what will be possible in a year. Without a moratorium, the Young Plan “is already in the discard”; what's being negotiated isn't preservation of the Plan but salvage of as much as Germany is able and willing to support. The French seem to dislike the Hoover proposal because it so clearly modifies the Young Plan “and therefore opens the way to tampering with the Versailles Treaty.” However, Pres. Hoover has “wisely urged that the nations deal first with immediate necessities and leave the rest on the knees of the gods.” National City Bank supports Hoover plan as helping restore stability, which in turn will allow free flow of capital needed to reestablish prosperity; if one year isn't enough to restore normal conditions, “the purpose which has prompted the one-year moratorium will dictate the action then to be taken.” Another Woodlock editorial charging that France, while its people “have a desire for peace perhaps more intense than can be found elsewhere in Europe,” has attempted in the Versailles Treaty to continue the war by other means, in particular by reducing “her ancient enemy” to a permanent “condition of enforced impotence” and securing for herself “a perpetual superiority of military power.”

Census Bureau estimates annual US population growth rate has declined to 0.7% from 1.2% due to fewer births, more deaths, and much lower immigration. US population on July 1 estimated at 124.070M.

Chinese govt. will establish national economic planning commission patterned after Soviet planning body.

British Royal Commission, after 2-year study, attacks labor conditions in India; recommends limiting hours, eliminating child labor, and improving living conditions.

"All of Southern Peru reported in revolt."

Building railway locomotives larger and larger has finally made some of them too long to go around sharp curves. A British builder has now developed a new type of locomotive made in three sections, enabling it to "bend" around the sharpest turns.

Over 100 whales, "groaning mournfully," were recently dashed to death near the North Island of New Zealand, after being overtaken by a terrific storm as they moved down the coast. It will cost the New Zealand govt. over $2,000 to tow the dead whales out to sea.

Cafe Procope, the oldest cafe in Paris, recently closed after 246 years in business. Opened in the Latin Quarter in 1684, the cafe's patrons included Voltaire and Rousseau. Two years ago it became a vegetarian restaurant, but apparently was unable to survive on a clientele of "impecunious students."

A South Carolina bank has joined those trying to increase cotton use by adopting cotton stationery. The cotton-based "paper" takes writing and engraving sharply and clearly, but erasures are a problem; however, it might also have the advantage of being usable as a substitute handkerchief.

Ralph Budd, Great Northern Railway pres., attributes success of his railroad's board of directors meetings to their location - they're held on office cars while the board is out traveling on the railroad for up to a week.

W. Atterbury, Pennsylvania RR pres., on education: "The evolution of our race has been so closely associated with the development of the marvelous human hand that I think anyone who grows up without having acquired some degree of manual skill in a productive process has missed something. I do not think it makes the slightest difference that in the case of some particular boy, there is no likelihood he will ever have to make his living by manual work. In becoming proficient at a branch of manual work he gained something invaluable which I do not believe can be built into his character and personality in any other way."

Market commentary:

Market wrap: Stocks again fluctuated along with perceived progress of the US-France debt negotiations. After opening little changed the general list rallied sharply following optimistic announcement of French Premier Laval; buying may have also been due to shorts covering before "leaving the street for a prolonged week-end holiday." As the session progressed, volume dropped sharply and stocks lost most of earlier gains. Weakness developed in the fourth hour, and prices trended down, with rails particularly weak. Bond trading somewhat less active, prices steady to firm; US govts. dull and firm; foreign list somewhat higher, led by "rallying tendencies" in German issues; rails "crept upward"; industrials "displayed better tone"; oils continued uptrend; highest-grade issues benefitted from reinvestment demand. Commodities mixed; grains moderately higher on reports of frost in Canada; cotton down substantially. Copper buying very dull, with large producers still asking 9 cents but small amounts sold at 8 1/4.

Conservative observers advised staying out of the market today, and taking profits on long positions if stocks move up; predict stocks can be replaced at lower prices after technical reactions next week.

Rails were subjected to bear pressure on prospects higher rates won't arrive for some time. Preliminary reports indicate June car sales may have shown a smaller seasonal decline from May than in 1930. Sugar securities have rallied on improving prices and outlook; Chadbourne plan appears to be "drawn a little finer than former agreements of its kind."

Radio Corp. rose sharply on proposed consent decree setting up open patent pool and ending govt. antitrust suits. "Important interests have resumed activities in Woolworth"; rumors are circulating that "something special will be done for stockholders at a meeting next week, probably Wednesday or Thursday."

Bulls have been encouraged by "scale support" in evidence during recent market reactions.

It's believed interest and dividend payments now being received by investors may come back into the market in the next few days, particular with so many stocks selling at attractive yields.

Incorporated Investors [large investment trust, similar to mutual fund] believes it's a good time to buy sound stocks due to attractive prices, lowest interest rates in over a decade, and signs of approaching business improvement; added substantially to holdings in June.

Market observers point to diligent work by leading industrials on increasing efficiency and cutting expenses; this may result in Q2 earnings above the most pessimistic estimates, and, more importantly, may lay a foundation for higher profits when normal conditions return.

Demand for farm machinery has shown moderate improvement recently. J. Kurn, St. Louis - San Francisco Rwy. pres., expects record crop movement in 1931; sees more optimistic feeling in people along the railway's lines, which has led to a small improvement in buying.

Economic news and individual company reports:

Chicago Mayor A. Cermak writes letter to Lehman Brothers to combat the "tremendous amount of garbled, adverse publicity that the City of Chicago has been receiving in the public press for the past few years." Says financial status sound; current difficuties traced to effort in 1928 to correct obvious inequities in taxation by making a complete reassessment of all real estate; this took two years instead of the anticipated 6 - 8 months, putting tax collections for the following years way behind schedule. Argues tax warrants are safe based on anticipated collections. Points to reforms in budget law that should reduce spending; "it is the sincere and honest desire of this administration to decrease and not to increase taxes." "Gov. Emmerson of Illinois turns tax crisis situation over to 11 representative men in effort to avoid default on bonds in certain sections."

Farm Board announces new policy limiting sales of wheat holdings to 5M bushels/month over the next 12 months (current holdings estimated at 200M; sales "will be conducted in such fashion as not to depress the movement in prices"; limit excludes foreign sales). Vice Pres. Curtis and Kansas Gov. Woodring criticize policy. Texas Gov. Sterling telegraphed Pres. Hoover urging drastic action to prevent any Farm Board sales for at least 6 months, citing large crop in Texas. Editorial praises Farm Board policy as "doing now the right thing to get out of the results of a wrong thing." Approves of decision not to announce minimum price, since "immediately that would become the maximum price." Similarly, sometimes "social workers, distressed at bad labor conditions, have demanded a minimum wage fixed by law. These demands have come to nothing because of the realization that the minimum would become the maximum," leaving workers worse off. Farm Board chair. Stone lashes out at critics in the grain trade; says they had argued that a definite statement on policy would increase prices; “now that they have their statement, let them go ahead and raise prices, Mr. Stone said.” Charges “old wheat traders are trying to discredit everything the Farm Board does ... and behind that is that they don't want farmers to organize.” Says current world conditions should benefit wheat prices.

Canadian Premier Bennett says condition of grain in Western Canada threatens greatest natural disaster in country's history. Will take relief measures since at least 100,000 people are faced with lack of food for themselves and fodder for livestock. Forecasts of five private grain experts as of July 1 indicate a bumper US wheat crop of 881M bushels, 30M above 1930, in spite of extensive drought damage in the Northwest. Bureau of Agric. Economics estimated world wheat crop excluding Russia and China at 3.075B bushels, about 225M below last year; however, sees year of continued low prices due to large carryovers.

Western rails will appeal decision of Chicago Federal court in favor of ICC-ordered cuts in grain rates; rails claim the cuts would lead to large revenue losses.

More detailed estimates of Federal revenue in fiscal year just ended: total $3.317B, down $861M. Corporate income taxes $892M, down $226M. Individual income taxes $731M, down $330M, with collections in the 6 months ended June down $258M or about 49% (decline partly attributed to capital gains/losses). Customs duties $378M, down $209M. Misc. internal revenue and receipts $569M, down $59M.

Bank of England passed end of first half with little of the usual tightening in money markets due to "tremendous amount of short-term funds seeking employment in London plus the striking increases in gold reserves over the past few weeks." Bank of England, in a surprise, held rate steady instead of cutting it. However, it's believed the bank is just postponing action until the US-French negotiations are settled; it's feared that if the negotiations fail, France might make large-scale withdrawals of its foreign balances, and “the Bank of England might find itself in an embarassing situation.”

Banque de Geneve, with capital of 20M Swiss francs and founded in 1848, in difficulties; aid being arranged by consortium of Swiss banks headed by National Bank of Switzerland.

State of New South Wales again fails to make interest payments, with Commonwealth govt. meeting the payments as previously this year.

Hoboken demands return of $713,769 in city funds at the closed Steneck Trust Co., charging officials knew bank was insolvent when they accepted the funds.

Money in circulation July 1 was up $107M to $4.840B, total Reserve Bank credit outstanding down $10M to $950M. Member banks in NY City report brokers' loans up $73M to $1.479B; loans on securities to non-brokers up $7M to $1.733B. Fed. Reserve continued policy of expanding credit, buying $45M in additional govt. securities after buying $20M in prev. week; the Reserve banks had previously refrained from such buying “on the grounds that neither banks nor business has sufficient confidence to use more credit.” NY City banks increased loans and investments $223M, including a $92M in “all other” (commercial) loans; however, banks outside NY seem to have used the additional Reserve credit mainly to reduce rediscounts at the Reserve banks.

Dow average of 8 iron and steel products rose $.67 to $44.25, first gain since Jan. 14. Scrap markets showed definite improvement in the past week, though firmer tone was attributed more to technical factors than improved demand.

Chicago wholesale gasoline prices up 1/8 cent to 2 5/8 - 2 7/8 cents/gallon.

Operating income of 106 telephone cos. in first 4 months of 1931 was $94.0M vs. $91.8M in 1930 and $92.7M in 1929.

NY State commission for tax law revision continued conferences; main objective is to revise tax system "to bring about decreased taxes on real estate (which now pays 70% of the state taxes) without encouraging local extravagance."

Bethlehem Steel stockholders approve modified executive bonus plan; lawsuit against previous plan to be dropped. Unlike previous plan, new one deducts depreciation from earnings used as basis for bonus calculation; bonus amounts will be published in annual report.

Musical:

Ziegfeld Follies of 1931 - Presented by Florenz Ziegfeld, at the Ziegfeld Theatre. Twenty-third edition of the revue, and the first since 1927, "may not give off any one lasting ... impression," but is, by and large, entertaining and does offer "several individual effects that are by themselves highly meritorious." Hal LeRoy, "the lanky young dancer," follows up his showstopping debut on Broadway a few months ago with some more fantastic hoofing. Mr. LeRoy also debuts as an actor in an elaborate sketch entitled "Broadway Reverie," in which he's shot and mortally wounded in a hijackers raid on the Club Piccadilly, dying in the arms of Ruth Etting playing a "world-weary cigarette girl"; both of those performers can make a major impression unassisted on a large stage. Helen Morgan sings a Singapore song, "Half-caste Woman," by Noel Coward, and also appears as a bride in a "rather typically smirking" sketch entitled "Victim of the Talkies," in which she and her new husband, both movie actors, have to send for a director on their honeymoon. As usual, "the girls are many and beautiful," with a variety of costumes and "now and again very little at all." An ensemble dance with parasols "is one of the prettiest numbers ever staged in a musical show."

Jokes:

Physical Culture Expert - All these exercises must be taken in front of an open window. Student - That's rather awkward. P.C.E - Why so? Student - Well, I need the increased strength first so I can open the window.

Thursday, July 2, 1931: Dow 152.66 +2.48 (1.7%)

Assorted historical stuff:

France and the US continue wrangling over terms of compromise on the Hoover debt moratorium plan. Pres. Hoover warns that if negotiations fail Germany will "unquestionably" seek postponement of reparations as provided for in the Young Plan. Since France would be liable for war debt and guarantee fund payments, this would leave her worse off than under the Hoover plan by over $100M. Observers doubt that either the US or France is ready to risk a rupture over the plan. France has “received two blows to her pride” - First the much-praised decisive action of the Bank of England in stepping in to rescue Austria when “days of wrangling” for a French credit threatened an Austrian default, and now the Hoover proposal. “Painfully it is sought to save appearances by keeping a semblance of life for the Young Plan ... but the Frenchman is sore at heart. ... He begins to see that it is not all to his advantage to earn a reputation for prosperity and wealth in the middle of a suffering Europe, even though that reputation was acquired by sacrifice of four-fifths of the value of his money,” and by high taxes and hard work. “In particular he loves his neighbor across the Rhine even a little less than he did before.”

Editorial: When middle-aged men of today were boys, the popular work "Around the World in Eighty Days" seemed like extravagant fiction. The Graf Zeppelin went around the world in 22 days; now, Wiley Post and Harold Gatty have performed the feat by plane in a mere 8. When the telephone was first put into a Western Union office, it's said Jay Gould ordered it removed because "it would have no commercial value"; now Pres. Hoover uses it to talk to officials in Paris in trying to avert world crisis. When the first car came sputtering along, no man who saw it dreamed 30M of them would be in use within his lifetime. Similarly, this achievement "opens a new vista ... it gives a glimpse of what lies in the future with further development and perfection of the airplane, which even now seems to be but it in its infancy." Accord believed near between US, France, Britain, and Portugal to form group for development of first commercial seaplane route from NY to Paris and London; route would go from NY to Bermuda (740 miles), to the Azores (2,070 mi.), to Brest, France (1,250 mi.); flight time about 30 hours. Negotiations are proceeding between the major US air lines and the Railway Express Agency to reduce air express rates and expand the system nation-wide.

Justice Dept. and defendants in radio antitrust suit (including RCA, GE, Westinghouse and AT&T) are negotiating on a proposal to end the suit and create a patent pool opening use of their patents in radio and related fields to the public on reasonable terms to be fixed by independent trustees.

Pres. Hoover is embarking on campaign to cut $400M in spending for new fiscal year, in attempt to offset deficit of about $860M incurred in fiscal year just ended.

Sen. J. Davis (R, Pennsylvania) is formulating plan for rehabilitation of coal industry through consolidation of weak companies into a few strong concerns, a process similar to that in the steel industry 30 years ago; says plan would eliminate cut-throat competition causing the industry's troubles.

Treasury Dept. admitted shipment of Russian pulpwood held at NY pending investigation; labor and lumber organizations had argued shipment should be barred due to use of convict labor. Russian aviation program expected to carry about 30,000 passengers in 1931, vs. 11,700 in 1930; Russia claims can now produce own aircraft engines.

In an effort to check a growing Chinese crime wave, the Canton municipal govt. recently returned to the old system of death to all lawbreakers, or at least those with two or more previous offenses. The edict applies to "burglars, kidnappers, footpads, murderers," and other criminals; once convicted, they're "paraded to the old execution grounds, kept on public view until sundown, and then shot." This partially reverses the Western-influenced reforms of a decade ago, which treated criminals who stole less harshly than those who killed; the Western idea is still applied to first and second offenders.

A recent report to the French Parliament complained of the low quality of convict labor in the colony of French Guiana, which includes the notorious prison on Devil's Island [note: famous from the Dreyfus case and later from Papillon; closed in 1952]. It was estimated that five convicts can't do the work of one able-bodied free laborer. The colony has been unable to meet expenses in spite of rich natural resources.

The first truck just arrived in Canada's northernmost seaport, Churchill, Manitoba, near the Arctic regions. Churchill is to be officially opened in 1932; it's to be a "model city," with "central heating, fireproof public buildings and semi-fireproof residences, and boulevards, parks and squares"; there will be "wide streets for through traffic, ... and generous space for recreation such as tennis courts, football fields and golf links."

Article on the Osage hydroelectric project now nearing completion in the Ozark mountains of Missouri. Dam is a "monolithic giant of concrete and steel," standing 148 feet above bedrock and 2,543 feet long. Construction began Aug. 6, 1929; first concrete poured 8 months later; dam closed Feb. 19, 1931; first main unit of power station in operation about July 1. Lake of the Ozarks formed by the dam is largest artificial lake in US, 95 sq. mi. in area and with 1,300 mi. of shoreline. During construction, 72 cemeteries were moved to higher ground.

Market commentary:

Market wrap: Stocks fluctuated along with reported progress of US-French negotiations; Leading stocks opened weakly on news of continued difficulties. However, shares were well supported on the initial setback and bullish operations continued in Woolworth and J.I. Case. A sharp general rally started at mid-day after the French Premier's statement that US govt. wanted to continue discussions. Some hesitation came after news negotiations had been adjourned until Thursday night, but buying reappeared in the last hour and stocks closed at the day's highs. Bond trading active; prices rallied after early weakness; US govts. steady to firm; German govts. lower but other Europeans steady; S. American very irregular but mostly higher; rails slightly irregular; many strong spots in the industrial list. Commodities mixed; grains plunged on relief of hot weather and failure of the Farm Board to reach a satisfactory decision on selling policy; cotton closed substantially higher after recovering from early dip. Copper offered at 8 1/2 cents with buying sluggish; larger producers holding at 9 cents.

Conservative observers more cautious; advise using stop-loss orders, but urge against going short; some recommend customers be prepared to take most of profits during rally likely to follow announcement of debt agreement.

Some of the big bears who "caused many of the sharp declines in the market earlier in the year" are still holding out; "it is their intention to continue to fight the advance"; they contend the market can't rise much further without substantial business improvement. Traders active in the recent advance reportedly were actively taking profits late last week on concerns the advance was much more rapid than anticipated. "The profit-taking was widely distributed and well concealed."

GE continues to sell at a relatively high earnings multiple; earnings declined in 1930 and so far in 1931, but the company remains in a strong position in its field, and "accounting policies of the management are recognized as highly conservative." Hershey Chocolate seen benefitting from 30% increase in cocoa prices since the May low, since they bought a good quantity at lower levels. Vanadium is reportedly subject of a new bull pool operation, but "as far as can be learned, the group does not include interests close to the company" and leading brokers have been keeping customers out of the stock.

Reaction that developed at start of the week came at the expected point for a technical setback, as industrials had regained 48% of the losses on the previous decline from Feb. 24 - June 2. Bulls have been encouraged by good support during the reaction; ability of leading shares to push into new high ground would now be a strong bullish signal, while failure would suggest need to find a lower base.

Apart from the Hoover plan, an important factor in market's June rally has been expected improvement in Q2 earnings (compared to Q1) at some major companies including GM, Chrysler, Johns-Manville, Wrigley, Westinghouse, and Montgomery-Ward.

Investment trust [similar to mutual funds and ETF's] first-half statements should be materially helped by recent rally. Net asset values of investment trusts are gaining thanks to the rally, but many continue to trade at large discounts, as opposed to premiums two years ago. However, executives are confident that with continuation of the advance investor interest will spread to trust shares.

Despite small increase from prev. week, rail freight loading report was disappointing to those hoping for indications of a definite upturn.

Editorial: It's high time Eastern rail executives complete the unification plan supposedly all but agreed on 6 months ago. While ICC action on the plan will likely take close to a year, it's important for the rails to tell the ICC and public exactly how they propose to end "eight years of civil war over mileage control in the East." Rate increases are "only a palliative"; it's essential they be followed up by greater efficiency, technical improvements, and curbing of wasteful competition.

Sudden deterioration of Reichsbank position from one believed strong before the Creditanstalt crash, and still sustainable on May 31, attributed to two unexpected developments. First was heavy withdrawal of foreign credits and liquidation of foreign holdings of German securities; this was "entirely unexpected because it was not foreseen that the Vienna crash would cause a feeling of uneasiness about Germany as well as Austria"; bankers also believed reopening the reparations question wouldn't cause restriction of foreign credit "except possibly French." Second, June brought capital flight due to political uncertainty after the severe emergency tax measures.

Economic news and individual company reports:

Reichsbank successfully passed June 30, day of highest seasonal demand for credit and currency; use of $100M central bank credit enabled it to stay above the 40% minimum reserve requirement. Observers say situation was serious, but deny reports Reichsbank was within 48 hours of collapse before announcement of Hoover plan, pointing out it had emergency options including temporarily lowering reserve requirements and unused $50M credit from Gold Discount Bank; now believe Reichsbank has "weathered the most severe strain it will be likely to meet for some time." However, long term outlook remains serious; will depend on settlement of reparations question and political uncertainty. Continued German capital flight (15M marks Tuesday) is causing uneasiness. Reichsbank is "beginning to discriminate severely on paper offered for rediscount by private banks and contemplates a rationing of credit"; daily money in Berlin is 8 1/2% - 11% and monthly 7 1/2% - 8 3/4%. Situation will crimp economic activity already at a low level. "The BIS campaign for a levelling of interest rates and getting money from where it is cheap and superfluous to where it is dear and scarce has become ineffective."

Fed. Reserve of NY monthly review says money market conditions and volume of bank credit showed little effect from large gold influx in June. This is partly due to unseasonal increase of $100M in demand for currency, likely due to banking disturbances; however, the main NY banks held more excess reserves in June than in any month in recent years. Bank and trust condition statements as of June 30 generally showed substantially lower earnings in the first half compared to 1930; this had been expected due to low money rates and yields on high-grade securities.

Pres. Hoover's Emergency Employment Committee reports general improvement in business and employment conditions in the past week in regions across the US, including New England, NY City, Philadelphia, Chicago, Minneapolis, Kansas City, and Memphis; definite signs of improvement also reported in S. America.

Steel production for week ended Monday was 33 1/2% vs. 35% prev. week, 38% two weeks ago, 63 1/2% in 1930, and 93 1/2% in 1929; production this week will be lower due to Independence Day holiday. Weekly steel reviews report sentiment in the industry still improving. Seasonal production decline has continued and output has fallen below last Dec.; at least another month of very low operations is likely. However, improvement in general business sentiment due to Hoover plan has resulted in “sufficient revival of buying interest” to suggest adoption of the plan “might well mark the end of the long decline and possibly ... at least a moderate turn for the better.” Buying interest hasn't yet translated to improved orders but a number of projects are being revived and may lead to future demand.

US electric output for week ended June 27 was 1,593 GWHr, down 3.9% from 1930, vs. a 4.6% decline prev. week and 4.9% two weeks ago.

Views and figures on the East Texas situation presented to the Texas Railroad Commission varied so widely that the method of curtailment to be adopted by the Commission remains uncertain. Almost all interests now agree on need for a new law enabling the commission to enforce strict limits on production. Unconfirmed rumors have been heard of sales of oil at 5 cents/barrel in East Texas; current official price is 20 cents. Standard Oil of NY cuts wholesale and service station prices of gasoline throughout NY. Chicago wholesale gasoline prices up 1/8 cent to 2 1/2 - 2 3/4 cents/gallon.

Bank of England expected to lower discount rate today (was cut 1/2% to 2 1/2% May 14); in better position to lower thanks to recent buildup of gold reserves.

Prices in fall catalogs of large mail-order houses will be 3 1/2% - 5% lower than in the spring and 12 1/2% - 15% lower than last fall; however, officials of both Montgomery Ward and Sears Roebuck believe bottom prices have been reached.

Mastick Commission for Revision of Tax Laws in NY State recommends cutting over $200M annually from real estate taxes by spreading that sum over taxes on a number of luxury items including cigarettes, lipstick and rouge.

Rails in both the US and Europe are offering the best bargains to summer travelers in many years.

Amer. Radiator & Standard Sanitary Corp. conducting "build now" campaign urging taking advantage of current low construction costs and mortgage rates; C. Woolley, company chair. and Fed. Reserve of NY dir., notes "increased residential construction has led the country out of almost every business depression."

Int'l Shoe expects significantly better earnings in second half; continues to be lowest cost producer in the country.

Bristol Manufacturing of New Bedford, Mass. declared additional liquidating dividend of $2, bringing total paid to $41 since Jerome A. Newman and his interests took control of plant for $39/share. [Note: Newman's partner was Benjamin Graham, who later became mentor to Warren Buffett and many other investors. This transaction sounds like one of the "net-net" plays typical of Graham and of Buffett's early career, which are still occasionally to be found today.]

New books:

A fair crop of new investing books, including: "Arbitrage In Securities," by M. Weinstein, "Keane's Manual of Investment Trusts" by C. Keane, and "Twenty-Five Hand-Picked, Low-Priced Speculative Stocks," by J. Frederick.

Theatre:

The Pirates of Penzance - revival by the Civic Light Opera Company, at Erlanger's Theatre. The renewed fashion for Gilbert & Sullivan is like nothing that has happened in recent times. "It signifies something as to the popular taste. Last winter many producers of musical plays appeared to have decided that theatre-goers would not only prefer salaciousness, but demanded it." Instead, audiences are having a "thoroughly good time" at the G&S revivals.

Jokes:

Comedy Writer - This joke ought to be good, I've had it in my head for ten years. Editor - Ah, aged in the wood ...

Patient - Can you do anything about my snoring? Doctor - Does it disturb your wife? Patient - My wife? Why, it disturbs the whole congregation.