Wednesday, April 29, 1931: Dow 147.95 -1.83 (1.2%)

Assorted historical stuff:

H. Bancroft, Wall St. Journal publisher, returns from 30-day, 10,000 mile US trip covering 27 of the 48 states. Wall Street "easily the bluest spot in the country." East and West Seaboards have fared relatively better in the depression than the middle region between Alleghanies and Rockies. New England brightest spot in the country. Drought on West Coast is serious; industry at low ebb due to conditions in oil and lumber; however, people "manifest plenty of courage" and unemployment not as serious as in the East or Midwest. Farm conditions east of Mississippi look fine, though in areas where drought was most severe last summer there has been "normal rainfall, but no excess, and if the coming summer should be a dry one, it would make things uncomfortable, although just at present there is nothing to worry about." Crop conditions "all right" in Missouri, Kansas, and Southwest, but "not so good" in Iowa, Nebraska, Minnesota, and Dakotas.

Editorial: British Chancellor Snowden's budget closes the deficit without major new taxes, but by using a number of "admittedly temporary expedients and the hope of reviving industry." For example, shifting income tax dates to collect a year and a quarter's worth of taxes in a year "is a trick which will work only once." However our ability to criticize him for not tackling fundamental problems is weakened by the prospect that we're likely to "take refuge in a similar opportunism." In fact, "Mr. Snowden's deficit of $115M ... is a shabby little affair compared with the magnificent gap of $800M across which Americans face the federal Treasury this year."

Rep. C. Ramseyer (R, Iowa) advocates gift tax and increased estate and inheritance taxes to make up Treasury deficit.

Editorial: The Farmers Nat'l Grain Corp. (subsidiary of the Farm Board to support cooperative grain marketing) annual report is regrettable; although it shows a profit, "officials studiously avoid reporting any details upon which a judgement can be formed" on success of cooperative marketing, particularly costs to handle grain and prices paid to farmers. "The people of the US have invested $500M in an experiment designed for the benefit of agriculture. That experiment rests upon cooperative marketing ... Those who provided the money have a right to know what kind of service is being given the farmers ... How can the public know whether its $500M experiment is a success or a failure?" Another opinion piece by the [fortuitously named] D.C. Harrower covers much the same ground.

Editorial by T. Woodlock disputing charges against electric utilities made by Pennsylvania Gov. Pinchot in his weekly radio address; one concerned cost of building lines and the other overall cost of providing power.

J. Mooney, GM VP and manager of exports, says Russia "is an excellent customer of the US now" and trade can be "remarkably expanded." Calls for abandoning "economic absurdity of being willing to ship goods ... with the presumption that they can be paid for in anything but goods or services we accept from them." Russia and Italy sign renewal of commercial treaty with new clauses expected to double trade during remainder of 1931; Italy to export 350M lire in next 8 mos. Metropolitan-Vickers Electrical of London contracts with Soviet government to provide technical assistance in manufacture of electrical equipment.

NY Gov. Roosevelt dismissed charges of "misfeasance" against NY Mayor Walker that had caused the City Affairs Committee to petition for his removal. Gov. Roosevelt signed Cornaire bill setting up state power authority for development of St. Lawrence River power.

The recently enacted Watres airmail law fixed a curious situation in which airmail contractors were paid more than postage, providing incentive for a contractor to repeatedly airmail himself the heaviest possible items back and forth from New York to San Francisco.

Largest oil-burning locomotive in the world, built by Canadian Pacific Rwy., will be ready for service in the Rockies soon. Combined weight of engine and tender is 785,000 pounds; overall length of the two is 99 feet 3 3/4 inches; this is an increase of 44,800 pounds and 1 foot 2 inches over the largest previous locomotive.

Market commentary:

Market wrap: Stocks were highly irregular most of the day; trading was quiet as many awaited the US Steel report after the close. Firmness in some spots, including US Steel itself on belief dividend would be maintained, was offset by new weak points, including Allied Chemical and Union Carbide; liquidation by public continued. However, leading shares firmed as the session progressed and a fairly broad recovery took place in the last hour. Bond market tone improved after Fed. Reserve cut in bill rates; US govts. firm at close to 1931 highs in spite of record Treasury financing; European steady but S. American slumped, sharp break in Chilean; corp. highest-grade strong, readjustment in lower-grade issues continued but selling was less urgent. Commodities mixed; wheat up slightly but other grains mostly lower; cotton little changed. Coffee down sharply. New record or long-time lows in lead, crude rubber, silk, butter and eggs.

Dow industrial average closed at a new bear market low; there were 4 new yearly highs and 208 new lows.

Although US Steel maintained its dividend, earnings report was much worse than expected; this is seen likely to depress the market today.

Loan market (in which short-sellers borrow stock) was active, with US Steel loaning at a record premium of 1/16 (indication of high demand); other issues in demand were Coca Cola, Eastman Kodak, and various rails. Brokers in the loan market reported increasing short sales by smaller traders and public. While reports recently circulated of covering by large bears, the loan market doesn't indicate this; total short interest is estimated at 3M-7M shares and there's a record number of stocks "loaning flat" (indicating high demand by borrowers). Bears seem to be confident in their position and not inclined to cut their positions. On the other hand, some contend the short interest, while large, isn't as large as thought, since some sellers have actually been liquidating stocks that they later delivered from “strong boxes.”

Based on precedent, a period of dullness without much headway in either direction is expected when current liquidation ends.

Some of the more suspect railroad bonds, though still paying interest, are selling to yield from 7% to as much as 27%. A considerable amount of selling has affected relatively high-grade rail bonds that are feared to be in danger of losing legal status as allowed investments for savings banks.

Observers believe GM may be able to cover first-half dividend requirement of $1.50/share after reporting $0.61/share earnings in Q1; some divisions including Chevrolet and Frigidaire have been doing well. Allied Chemical weakness attributed to withdrawal of Nichols family from prominent connection with company. American Chicle, going against prevailing trend, is drawing talk of a possible dividend increase; Q1 earnings were $0.97/share vs. dividend requirements of $0.50. American Cigar was strong on anticipated success of low-priced Cremo cigar, though another operating loss is seen this year due to record advertising.

Report of decline in building contracts for first half of April has drawn attention, since it contrasts with usual rise at that time.

R. Holmes, Texas Corp. pres., says in favor of interstate compact among oil states to limit production.

Economic news and individual company reports:

US Steel reported Q1 earnings of $0.05/share, vs. $0.70 in prev. quarter and $3.44 a year earlier. Regular quarterly dividend of $1.75 declared.

Failed broker Pynchon & Co. sued by Chicago brokers to prevent the use of assets delivered shortly before the failure. Federal Grand Jury indicts Charles V. Bob, bankrupt former runaway stock promoter, for mail fraud and conspiracy; charges carry maximum penalty of 52 years.

NJ Gov. Larson signs Reeves bill to protect municipal bond investors by giving a state commission wide powers over municipal finances in case of default. Bill was passed in response to North Bergen troubles, but seen as constructive step for investors in general. Florida Senate and House receive bill providing first step in relief plan for local govts.that defaulted on bonds; would permit refunding of bonds for up to 60 years.

Weekly bank statements showed continued decline in loans, increase in non-govt. securities. Arkansas state banks report total deposits Mar. 25 of $87.3M, up $2M from Dec. 31 but still $30M below last Sept., prior to series of bank failures in the state.

Rail freight loadings for week ended Apr. 18 were 760,002, up 22,068 from prev. week, down 14.8% from 1930 week, and down 24.4% from 1929.

Refineries ran at 68.1% in week ended Apr. 25; stocks of gasoline rose 67,000 barrels to 46.451M. Crude oil production in week was 2.423M barrels/day, up 600 from prev. week but down 167,500 from a year ago.

BLS reports fewer manufacturing wage cuts in month ended Mar. 15 than in prev. month (175 cos. in 38 industries vs. 228 in 43 industries).

Machine tool market trends mixed, with buying restricted to absolute needs.

European countries including Germany, Britain and France are attempting to lower wages and cost of living to match the collapse in wholesale prices. Germany took the lead in these efforts, while France has only recently realized the “necessity of cheaper production in order to maintain her export trade.” However, even in Germany, the 8% decline in cost of living over the past 15 months was far begind the 15% decline in wholesale prices.

Sharp gains in sterling vs. francs over past few days has made the long-awaited movement of gold from France to Britain appear imminent. It's also believed that this might be followed by a round of discount rate cuts in Britain, the US, and Germany.

Registered British unemployed Apr. 20 were 2.514M vs. 2.561M on Apr. 13.

Berlin Municipal Committee refuses to accept sale of city's electric utilities agreed to by city representatives, German, and foreign buyers including US group.

US supplies over 46% of German oil imports; these reached a record high of 23.5M barrels in 1930 vs. 18.9M in 1929.

Rumania suffering from overproduction and low prices in two most important industries, wheat and crude oil.

New South Wales passes law providing for payment of depositors in the closed Govt. Savings Bank of N.S.W. pending its absorption by the Commonwealth Bank. Australian Premier Scullin says govt. will make bond interest payments for N.S.W., which they will then owe the govt.

Farm Board wheat sales abroad since Feb. 26 estimated at 8M bushels out of proposed 35M to be sold by July 1.

Hog prices at Chicago for week ended Apr. 25 were $7.04/100 lb vs. $7.37 prev. week and $9.89 a year earlier; beef steers were $7.67 vs. $7.72 and $11.97.

NY City plans to sell 52M in 4-year loans, taking advantage of excellent condition of municipal market for high-grade issues.

Edsel Ford denies rumors of summer Ford shutdown; may take a vacation shutdown, but this isn't certain yet; sales improving.

Sales of Lucky Strikes continue to boom; March sales increased 530M vs. increase of 637M for all cigarettes combined.

Eaton-Otis interests were reelected to board of Youngstown Sheet & Tube in spite of their previous actions to block merger with Bethlehem, leading to speculation they may be ready to drop opposition to the merger and come to an amicable settlement.

Illinois Central cut annual dividend rate to $4 from $7 rate effective since 1917; new rate is lowest since 1877. Dividend reductions also made by Commonwealth & Southern (utility), Inland Steel, Jones & Laughlin Steel, and American Radiator.

Goodyear increased tire production to 56,500/day from 53,000, second increase this year; sales higher than expected; Apr. sales will exceed those in 1930.

Lima Locomotive stock is about 23; has no bonds or preferred outstanding; book value $63.79; cash and govt. securities per share $32.18; 1930 earnings $7.18/share. However, earnings this year look unfavorable as orders on hand at start of year were $1.046M vs. $13M a year earlier.

Companies reporting decent earnings: Price Brothers & Co. Ltd. (lumber, pulp and paper), National Standard (wire products).

At the galleries:

"Diminishing ranks of exhibitors point to ... unusually early close" of the art season. While "general quiet was punctuated here and there with outstanding high figure sales, ... the art season was disappointing." Kleinberger Galleries, "last stronghold of the old masters," has finally given in and gone modern with current show "Corot to Picasso," which also includes works by Matisse, Modigliani, Renoir, Bonnard, Dufy, Vuillard, Redon, Lautrec, Degas, and Cassatt; many of the pieces are outstanding examples of the artist's work. The American-Anderson Galleries are auctioning many interesting items from the library of the late William P. Clyde of NY City, including an important letter by Thomas Jefferson on constitutionality of the Louisiana Purchase, a presentation copy of the Lincoln-Douglas debates autographed by Lincoln, and a third edition of "The Canterbury Tales."

Vaudeville:

Appearing at the Palace: Henry Busse and his orchestra from the Hotel New Yorker - music is "pleasing contrast with a good deal of vaudeville jazz ... more tuneful than ostentatious"; Mr. Busse mixes conducting with trumpet solos and amusing dance steps. Helen Morgan sings a few sad songs, "in a manner that is growing a bit too affected to bear imitation ... breaks for breath-taking in the middle of lines are overused and musically unsound." Also appearing - Bert Lahr and Joe Laurie, Jr.

Political humor:

The Gridiron Club, made up of Washington newspapermen, held its annual Spring dinner with Pres. Hoover and many public figures present. One of the skits involved a policeman and a pushcart peddler talking about the strange disappearance of General Prosperity. "I don't know anything that's kept more people guessing since Coolidge said he didn't choose to run. ... Every now and then someone reports seeing him. He hadn't been gone a month till the White House said he was just around the corner, behind the Washington Monument. ... but something detained him. The next heard of him was when Roger Babson reported seeing him in a barrel of statistics in the Pacific Ocean. John Raskob felt sure he was hiding in a keg of homebrew in North Carolina. Senator Wheeler said he'd gone to Russia to work ten years on the five-year plan. Carter Glass said he was locked in a vault of the Federal Reserve Bank in New York. ... Anyhow there's ten men to tell you why he went to one that'll tell you how to bring him back." [Note: cleaned up hard-to-read accent transliteration.]

Jokes:

"Lady - Have you ever been offered work? Tramp - Only once, madam. Aside from that, I've met with nothing but kindness."

"Floridian (picking up a melon) - Is this the largest apple you can grow in your state? Californian - Stop fingering that grape."

"One reason Gandhi in a bath towel is so trusted by the Indian masses is because everybody can see he has nothing up his sleeve."

Tuesday, April 28, 1931: Dow 149.78 -2.20 (1.4%)

Assorted historical stuff:

Letter from an Oklahoman to his banker: "It is impossible for me to send you a check in response to your request. My present financial condition is due to the effects of federal laws, state laws, county laws, corporation laws, by-laws, brother-in-laws, mother-in-laws, and outlaws ... These laws compel me to pay a merchant's tax, capital stock tax, income tax, real estate tax, property tax, auto tax, gas tax, water tax, light tax, cigar tax, street tax, school tax, syntax, and carpet tax. The government has so governed my business that I do not know who owns it. I am suspected, expected, inspected, disrespected, examined, reexamined ... boycotted, ... held up, held down, and robbed until I am nearly ruined; so the only reason I am clinging to life is to see what the hell is coming next."

Ford Motor, thanks to absolute stand by Henry Ford, has refused to consider any wage rate cuts either in their own plants or in any of the roughly 3,500 manufacturers that regularly supply them. Ford wage scales continue at just over $1/hour vs. about 92 cents in 1929, highest in company history. Employment and days worked at the large Rouge and Highland Park plants have been gradually increasing in recent weeks. The Fords are also spending huge sums to sponsor scientific, educational, and charitable enterprises employing several thousand, including the Edison Institute of Technology investigating use of agricultural products as industrial materials, an experimental farm, and various historical projects.

Col. A. Woods, resigning chair. of President's Emergency Employment Committee, will leave for two-month trip to Europe soon. Says "there has been a perceptible improvement in conditions, not enough, however, for the discontinuance of the emergency committee." Much of the committee's personnel, on loan from outside organizations, will also be leaving, though they'll continue to assist in an advisory capacity. President's Emergency Committee on Expenditures reports on survey of major family relief agencies in 100 cities; need for relief lower; most improvement in North and South Central states, most need for continued relief in mid-Atlantic and West Coast. Sen. Moses (R, NH) tells Pres. Hoover convention votes and electoral votes needed for his nomination and reelection "are in the bag."

Sen. Glass is revising banking bill based on financial inquiry last winter; wants to regulate banking affiliates and curb use of Fed. Reserve credit for speculation.

Sen. Couzens recommends assorted tax measures, including reinstatement of 1924 surtaxes and reestablishment of gift tax, but no increase in normal taxes. Asks Chamber of Commerce to announce whether it favors cutting, increasing, or maintaining current wage scales.

Russia to curtail purchases from US due to need for long-term credits and belief US is "rapidly passing from neutrality to active hostility." Russia mobilizes all sea and river transport workers to meet one of outstanding difficulties of five-year plan - weakness in transport facilities, particularly in Northern rivers.

Settlement of Arab share of Palestine development loan ran into delay when Arab executive commission refused to talk to British High Commissioner unless govt. agreed talks wouldn't imply Arab acceptance of Zionist clauses in Palestine mandate.

Mexican Congress convened in extraordinary session to take up urgent pending problems.

Tokyo boosters now say their city is the third largest in the world, surpassed only by London and NY; official estimate of Greater Tokyo population is 5.193M; area is 223 sq miles vs. 299 for NY City's five boroughs, and 693 for Greater London.

Long, confusing historical tale by H. Alloway about deal for Liggett & Myers involving Bernard M. Baruch and James B. Duke (father of Doris and the Duke in Duke University). Anecdote about construction of Flatiron "skyscraper" on 23 St. about 30 years ago (Frank Munsey, of the magazine co., called the building "double insanity" before moving in to the top floor several months later).

New all-air 8 hour service from NY to Chicago to start May 1; fare will be $56. Group representing US, British, German and French interests investigating opening new air route from N. America to Europe via Greenland and Hudson's Bay. Postmaster Gen. Brown points to growth in air mail while other departments' revenues are declining; says airmail can potentially be profitable; makes plea for increased public use of passenger airlines, citing improved safety; says development of aviation is also essential part of preparedness for war.

The humble Irish potato exhibits some of the same postmortem regenerative powers seen in snapping turtles and snakes; a freshly picked potato, if kept in a humid atmosphere above 60 degrees, will grow a new skin to cover cuts or abrasions.

Market commentary:

Market wrap: Stocks showed some early relief from pressure; announcement of Continental Shares reorganization stopped heavy selling of their holdings including Goodyear and Republic Steel. However, "a fresh selling wave" broke out at end of first hour, before announcement of West & Co. suspension; heavy selling in leading shares intensified as prices worked lower; prices broke sharply around noon, with new bear market lows in US Steel, GE, and NY Central; utilities also pressured, though most held above Jan. lows. Support came in during final hour, with good-sized recoveries in leading shares. Bonds continued to show firmness in US govts. and highest-grade corporate issues, but heavy liquidation continued in rest of the corporate list, with convertibles particularly hard hit by slump in stock prices; bond market has also had to absorb heavy selling from brokers that have failed or are in distress; foreign list was weak, with both European and S. American issues declining. Commodities mixed; wheat up substantially on active trading but other grains narrowly mixed; cotton down sharply, with May selling below 10 cents for the first time this year. Copper buying remained quiet at 9 1/2 cents. Zinc declined to new 31-year low of 3.40 cents/pound.

Dow industrial average closed at a new bear market low; there were 2 new yearly highs and 284 new lows.

US Steel to report quarterly earnings and declare dividend after the close; traders believe a technical rally may be sparked by better-than-expected results.Coca-Cola subject of some optimism; seen benefitting from lower raw material prices. Woolworth has been holding up relatively well during recent reactions, leading to speculation it could become a leader in a market recovery.

Recent reports of widespread liquidation by long-term investors should be confirmed or disproven by upcoming second-quarter shareholder lists from the likes of US Steel and GM. One buyer of stocks during the past week reported that, of 12 certificates delivered, all showed the previous buyer had purchased the stock between Aug. and early Oct. 1929. Market students say important support still lacking; "with liquidation in progress, it is apparent that the big interests are not ready to enter the market." Recent buying has been from short covering and small-scale public accumulation.

Decline in scrap iron and steel prices in recent weeks has been discouraging, since many believe this forecasts conditions in finished steel. Optimists on copper base hopes on control of the industry by just two groups, associated with Anaconda and Kennecott. Rail car builders, "as usual at such times," are asking why railroads buy no equipment when it's relatively cheap, and rush into the market to buy at higher prices when traffic revives.

Editorial: As May approaches, interest in the cotton market centers on the crop outlook, which at present looks favorable. The price farmers get for their cotton is of national importance, affecting the welfare of the whole South. The outlook on this is uncertain; it's doubtful if acreage has been reduced much, and attempts at supporting prices "by political methods have been a disaster"; the dominant factor now will be the weather. D. McCuen, Amer. Cotton Shippers Assoc. pres., attacks Farm Board; loss of foreign markets appalling; cotton quality must be improved; farmer education must be extended; markets must be freed. "Let the government continue in the business and the farmer is doomed." C. Williams, Farm Board cotton member, says several factors point to increased world use of US cotton at expense of foreign cotton in the 1931-32 season.

Guaranty Trust survey says usual early spring peak has passed without definite signs of improvement; expansion in most industries no more than seasonal; April reports indicate usual spring recession; business will probably remain low for time being, with “distinct possibility of recovery at the end of the summer.”

Sir G. Parish says world on eve of greatest trade expansion it has ever seen; advocates removing all obstacles to trade to revive it.

J. Cohen of Baar, Cohen sees forces "working in the right direction for at least five years of trade expansion, business prosperity and rising security and commodity prices." Important step in recovery would be adjusting wages downward to increase profitability and employment; this would be "bullish on the country as a whole."

B. Hutchinson, Chrysler treasurer, hits "sunshine talk" and "wishful thinking" by US business leaders that "took us up too high and down too low in 1928-29." Advocates elimination of waste in govt. and industry, tariff policy that develops markets instead of antagonizing customers, and increasing security of banking system.

Economic news and individual company reports:

Shakeup in Continental Shares, a large investment trust co. with commanding stakes in several major corporations; Eaton-Otis interests were replaced as directors by heads of four Cleveland banks. Street was surprised at absence of a NY bank with which the co. had a $30M loan. New pres. G. Bishop says has reviewed Continental's balance sheet and found it sound; “no reason for ... shareholders to be apprehensive as to the entire solvency of the corporation.” NYSE firm of Otis & Co. transferred their commission business to E.A. Pierce & Co., keeping their investment business. NYSE and Curb Exchange firm of West & Co. suspended for insolvency; founded in 1901. Will "cooperate in every way with our customers and other creditors to work out the best possible results in their interests." Editorial: Relative equanimity with which market received unfavorable developments Monday is due to realization that “suspensions and readjustments of the past week represent the clearing away of old debris.” Almost 19 months have passed since the peak; market appears to be approaching period of hesitation and false starts typical after “a prolonged decline of major proportions.”

Col A. Little, Bank of US dir., testified minutes of some meetings showed him approving loans when he wasn't present. NY Att'y Gen. Bennett to investigate whether Pynchon & Co. violated any state laws prior to its failure.

Fed. Reserve lowered buying rates on bills for second time in six days, to record lows of 1 1/4% for bills up to 45 days and 1 3/8% for bills of 46-120 days. Action was taken after sterling and francs failed to hold most of improvement after earlier cut. Possible cut in rediscount rate seen if necessary to support sterling, prevent gold imports from France, and "turn away the enormous volume of funds glutting the NY market".

British Chancellor Snowden presented balanced budget with no major rise in income tax, but new tax on land values; claimed continued reduction in national debt. Reaction was generally favorable; sterling led strong day for European currencies.

A. Whitney, head of rail union: "agreement we drew up with railroads is still in force and we will keep it in force. We're not going to be even approached for a wage reduction. ICC revises allowable rail freight rates on tomatoes, string beans, green peas, carrots, beets, onions and turnips originating in Mississippi.

A number of important dividend announcements are due over the next few weeks, including US Steel (today), Illinois Central, GM, Bethlehem, and Union Pacific.

Veterans' bonus loan applications declined sharply in past week.

F. Godber, Royal Dutch-Shell managing dir., hits recent introduction of low-quality gasoline by some marketing companies to meet "bootleg" competition; says this will increase production that's already too high and require heavy unproductive investment. Says company is in accord with oil states' curtailment program.

Canadian report: March exports $55.0M vs. $89.6M in 1930; exports to US $26.9M vs. $43.3M. Bank of Montreal reports little change in trend of Canadian trade and employment other than seasonal spring increase. Since Turner Valley oil area appears to be waning, other areas in Alberta are being explored for oil.

German March exports were 662M marks vs. 591M in Feb.; imports 584M vs. 884M in Mar. 1930; unemployed on Apr. 15 were 4.628M vs. 4.980M on Mar. 15 (highest since the war), and 2.787M in Apr. 1930. Dr. E. Wagemann, dir. of German Federal Office of Statistics, estimates world unemployment at 20M.

Argentine corn crop estimate sharply reduced after farmers refuse to harvest over 2M acres of corn (about 15% of planting) due to low prices.

Corn Canning Institute recommends to all canners that 1931 acreage be cut 25%, citing decline in canned food consumption and forced selling of substantial inventories of canned goods below production cost.

NY City Transit Commission instructs S. Untermeyer to sue B.M.T. alleging improper accounting of $6.5M in declared losses; seen as indication of difficulties standing in way of transit unification.

Sears seen benefiting from expense cuts; in spite of lower sales, first-half earnings expected to equal 1930 level.

General Mills stock about 41; annual div. $3; earnings in year ended May 31, 1930 were $4.83/share vs. $4.57; earnings for following year expected to increase.

Companies reporting decent earnings: Pacific Lighting, Wm. Wrigley, General Printing Ink, McCall (magazines).

Movie:

Gun Smoke - Paramount film, starring Richard Arlen and Mary Brian. City gangsters invade the wide open spaces, assuming control of a Western town; "joining of the gangster theme with the traditional Western furnishes situations that possess both novelty and humor."

Theatre:

Much of European theatre has its roots in the street fair; Paris now features two of the most venerable. The Foire du Trone, also known as "the spice fair," started in the 15th Cent., is now filling the Place de la Nation with the smells of ginger bread, cookies, and "that rubber-like and enduring substance which the French affectionately call pain d'espice"; the fair is also crowded with merry-go-rounds, lotteries, performing dogs, and tiny electric cars; weaving in and out are street singers, sometimes carrying a guitar but "more often a wheezing and mournful accordion." On the other side of Paris, the Foire du Saint Germain is being prepared. This fair harkens back to the 11th Cent.; it was built around open-air theatres, and was the incubator of half the most celebrated theatres in France. The old theatrical productions are still faithfully reenacted, giving a "'flash-back' into medieval times."

Joke:

"Fair Damsel - Where do you think I'd be if I had a million dollars? Male Escort - On my honeymoon."

A well-driven golf ball leaves the head of the club at 135 miles an hour. This is only slightly faster than a golfer leaves the office. - Life

Monday, April 27, 1931: Dow 151.98 -3.78 (2.4%)

Assorted historical stuff:

[Strangely familiar dept.] Amer. Bankers Assoc. says banking situation should be corrected "within banking itself ... along lines of good bank management rather than through any drastic legislative measures." [Strangely reversed dept.] Points out severe problem of banks too small to succeed: during 1930, there were 1,345 bank suspensions with total deposits of $868M, so suspended banks had average deposits of $643,000; by contrast, US as a whole started 1930 with 24,630 banks with $55.3B deposits, or average of $2.245M deposits per bank. Many smaller banks, though good management, avoided problems by merging into larger units, but some "blindly hung on," leading to failure.

[That's crazy talk! dept.] Letter to the editor asking if the Journal, to be consistent, shouldn't favor relieving part of debts held by US citizens. Also presents intriguing proposal: “Would not legislation making the gold dollar one-half of the present weight and fineness accomplish the results you apparently endorse?”

Washington report: The Farm Board continues to maintain its actions were worth their considerable cost since they prevented a financial disaster. "Apparently the board is still set upon covering its past mistakes and concealing the facts about its past and present operations." A movement appears to be afoot to select Calvin Coolidge as the 1932 Republican candidate, and "it may have gone somewhat further than mere conversations." However, opinion here is almost universal that this won't happen, both because Coolidge wouldn't consider it and because Hoover shows no indication of withdrawing and it's unlikely the party would allow a nomination fight. Republican and Democratic party chairman are trading charges of "failing to tell the entire truth, which goes to show just how unbelieving and cynical politics can make hitherto trusting souls." At least the unemployment situation is being helped, considering the writers and delivery boys required.

Editorial: International money markets are in a "rather curious situation." After a period when France accumulated the second-largest gold reserves in the world, the trade balance is now turning against it. However, instead of flowing where it's needed, France's gold is perversely going "to New York, the last place in the world where any more gold is wanted." The Fed. Reserve would like to change this, but its tools are limited. Rediscount and bill rates are already at record or near-record lows (2% and less than 1 1/2%). Flotation of new foreign loans is a dubious prospect. "Maldistribution must continue to be a fact so long as the present static condition in the international money markets lasts."

Editorial: Brazil now adds to a long list of emergency remedies for its "chronic and recurrent malady - coffee." It started with "'valorization,' which is Portuguese for farm relief" between 1905-1914. The war relieved matters, but there was a relapse in 1923, which this time also put the Brazilian govt. in the coffee business as "nursemaid to the growing surplus." In April 1930, foreign bankers forced change to an "orderly liquidation" program for which they lent $97M (after loaning $300M to finance crops). Through it all, coffee prices declined, reaching a record low Apr. 16. Latest prescription is an export tax, with proceeds to be used to destroy some of the surplus. This has caused a rally in coffee, but in the end will prove to be "temporary economic adrenaline until another surplus accumulates." Producing a commodity and destroying it doesn't create wealth. Brazil should diversify (coffee is almost 80% of exports) and the govt. should withdraw from the coffee business.

Commerce Sec. Lamont, in reply to "numerous inquiries" on wage cuts, says: "I have canvassed the principal industries and find no movement to reduce the rates of wages. On the contrary, there is a desire to support the situation in every way."

Another very technical editorial by T. Woodlock registering bitter complaint on issues related to rail valuation and recapture of "excessive" profits (for more on this, see the Woodlock editorials from Mar. 2, Feb. 5, and Jan. 27).

Depression-proof dept: The Institute for Mortuary Research reports there were 417,611 US deaths in Q1, up 8%, over 1930; populous industrial regions are also spending more on funerals than last year. Recently, one car maker reported that its only profitable division last year was hearses and ambulances.

A well known restaurant chain is experimenting to see whether people order according to taste or price, particularly during depressions. After breakfast, every meal is 60 cents regardless of choice (meals include appetizer, main dish, and dessert). Statistics will be compiled to determine what people will order when price isn't a consideration. Incidentally, business at that restaurant increased 60% on the first day of the experiment.

In two years since smaller sized paper money went into circulation, counterfeiting has declined. The new design and paper make imitation difficult even for master counterfeiters. "Chief Moran of the Secret Service forsees the time when, with further improvements in the currency, anyone may detect a counterfeit at sight."

Oscar Bodenhausen of St. Joseph, Missouri started a "travel fund" 27 years ago to realize his dreams of seeing the world. Each night he would take any dimes he found in his pocket and add them to the fund. The total last fall reached $3,700. He has just returned from a seven month tour of the West Coast, Hawaii, Japan, China, the Philippines, India and Europe, with $350 left as seed money for his next fund.

Estimate of estate of Joe Leblang, "Broadway cut rate theatre ticket operator," reduced from $20M to $12M-$15M.

Considerable confusion has been caused by the "cabalistic letters" BYOL at the end of the invitation to the third annual outing of the Monday Long Table Syndicate (bond men's organization). None of the members was apparently able to decipher them, though Everett Bacon, former treasurer, cryptically observed "Some do and some don't. And those that don't stick closest to those that do."

Week in review:

Stocks sold off sharply; Dow industrial average hit a new bear market low, while the rail average declined to a post-1924 low. Selling attributed to poor earnings reports and discouraging business prospects; steel production and electric output declined, although March rail earnings appeared to improve and the steel decline seemed likely to level off. London stocks suffered a dismal week, but the Paris and Berlin markets rallied toward the week-end, largely wiping out earlier losses. Bond market featured strength in highest-grade issues, but readjustment in lower-grade. US govts. continued strong, and European steady. However, other areas provided excitement, with sharp break in Australian, Uruguayan, and Bolivian issues but rally in Brazilian. Corporate highest-grade issues steady, including utilities and highest-grade rails; NY traction issues firmed after Gov. Roosevelt signed unification bill; other corp. issues weak, particularly amusement, cement, and oil issues. Foreign currencies featured strength in sterling, weakness in franc; Fed. Reserve of NY cut bill rates to cut off gold shipments from France and influx of funds from the US and foreign centers; cut in rediscount rate seen possible; call money "went begging" at 1% most of week though official rate was 1 1/2%; US gold holdings hit new record. Grain prices sagged, with corn particularly weak; cotton fluctuated in a narrow range.

Market commentary:

Market wrap: Stocks were under pressure again in the short weekend session, with sharp breaks in weak spots including issues sponsored by the suspended Pynchon firm, various independent steel producers, and Goodyear; selling spread across the list to major industrials including Westinghouse and GE; only buying appeared to come from short covering; closing tone weak. Bond trading continued recent trend; US govts. and highest-grade corp. issues were strong while the general corp. list underwent continued "readjustment of prices"; foreign issues were mixed, with rallies in Uruguay issues after govt. announced dollar bonds in the US would be paid, but rest of the S. American group irregular. Commodities weak; grains down sharply, with part of selling attributed to closing of suspended Pynchon co. accounts; cotton down moderately. Copper buying remained quiet at 9 1/2 cents, with larger producers out of market. Some price shading of zinc reported below 30 year low of 3.50 cents. Coffee continued rally.

Dow industrial average closed at a new bear market low; there were 3 new yearly highs and 104 new lows.

Conservative observers extremely cautious; recommend sidelines, using rallies to reduce long holdings.

The Street felt a technical rally was long overdue, but now believed it would be postponed until "repercussions of the Pynchon suspension had been exhausted." On the other hand, some were relatively optimistic, seeing the suspension as "bad news out of the way." While the Bank of US failure in Dec. was followed by continued decline, "at present, the bear cycle is in a much different phase." Forced liquidation by margin accounts is at an end, and selling now seems to be from discouraged investors (as seen by brokers' and non-brokers' loans figures). This is similar to the bear market bottom in 1921; movements of the industrial and rail averages are also similar. On yet another hand, some still expect a “selling climax.”

While some believe new lows in the rail and industrial averages indicate still lower levels, it's clear “averages cannot continue in either direction indefinitely.”

Relatively stable brokers' loans in face of stock declines may be due to non-stock market factors including income tax payments and bond flotations.

Amer. States Public Service had a wild two-day ride, dropping from 19 to 3 on Friday after the suspension of its sponsor Pynchon & Co., but recovering to 9 on Saturday. Reported earnings in 1930 were $1.71/share, though company has large amount of debt. Texas Corp. has been weak on dividend doubts in "well-informed quarters." Vacuum Oil dropped to 43 1/4, lowest since 1925; stock is trading about 14 points below its exchange level in proposed merger with Standard Oil of NY, though court decisions on the merger have so far been favorable. Chicago & N. Western Rwy. is yielding 13% at current price, reflecting dividend doubts, though it has reported relatively good earnings. Paramount-Publix seen likely to cut dividend due to committment to rebuy stock at 80 that was given as payment for property in the past year.

A number of companies made reassuring statements on dividends, including Sherwin Williams, Electric Auto-Lite, and Bendix Aviation.

Prospects for Q2 automotive profits seen better after rise in April production that is expected to be maintained in May.

E. Lee, Pennsylvania RR VP, says railroad physical plant still most important and valuable means of transport, and likely to remain so indefinitely, but rail companies should be freed to provide any form of transportation service for which there is demand.

R. Leffingwell of J.P. Morgan attributes world depression to waste of life and wealth in the great war, to other consequences of the war in debts and transfers of sovereignty, and to ongoing tariff wars.

E.F. Hutton notes one market theory that became widely popular in 1928-29 but seems likely to lose many followers now is paying for earnings rather than dividends. In the bull market many stocks were bought at 12-20 times earnings, even though less than half of those earnings were distributed to the stockholders. The theory was that earnings that remained in the company would eventually benefit stockholders by being invested to increase future earnings and by being used to maintain dividends in poor times. It hasn't worked out that way; much of the surplus has been invested in unproductive assets or in "maintaining the corporations on a bull market basis as regards salaries, bonuses, wages, etc."; in many cases this has actually hurt rather than helped stockholder interests.

J. Raskob (GM exec., Democratic Nat'l Committee chair.) says believes bears are now overdoing things as bulls overstayed the market in 1929; corporations including GM and US Steel selling well below "real value ... We should be courageous now and not fearful. The time for fear was 1928 and 1929 ... Generally, on the business situation, I am thoroughly bullish. I believe we are practically through all the liquidation necessary to establish business on a real rock foundation." Believes wage cuts shouldn't be made now.

Economic news and individual company reports:

Treasury deficit through Apr. 22 was $801.2M, largest in peacetime history, though it hit $900M during the Civil War and several billion during the World War.

Federal grand jury investigating bankrupt Prince & Whitely brokerage to question partners next week.

Rep. Lewis of Palm Beach, Fl. introduces bill allowing defaulted local bonds to be used as legal tender for payment of local taxes.

Rates raised for transport of French gold to US; attributed to Anglo-US pressure on steamship cos., as further measure to keep French gold in Europe. US gold holdings still rising rapidly; gold imports this month total about $59M.

Fisher's wholesale commodity index continued decline to 74.0, vs. 74.6 prev. week and 90.2 a year ago; this was a new postwar low. Fairchild Composite Retail index reports 5% decline in retail prices from Jan. 1 - Apr. 1.

Youngstown district steel output to remain unchanged at 43% this week.

First 22 rails reporting March earnings showed a decline of 17.6% from 1930, a sharp improvement from the 51.8% decline reported by those roads in Feb.

Copper consumption held up relatively well in 1930; total of 958,850 tons was down 17% from 1929 and only 3 1/2% from 1928. However, the price picture was much less favorable, "all efforts to maintain the metal at a price that would assure a favorable margin of profit having failed." This was partly due to depletion of "invisible supplies" in the manufacturing system; because of this, decline in deliveries of copper for 1930 was a much higher 27% vs. 1929.

Air mail transported in Feb. was 642,484 pounds, up 15.3% from 1930; revenues were $1.294M, up 18.1%.

US wheat exports from July 1, 1930 to April 11, 1931 were 101.9M bushels vs. 125.5M a year earlier.

British markets anxiously awaiting Chancellor Snowden's budget speech, possible proposed tax increases; rise in income tax believed unlikely.

Manchester cotton market quiet; demand from India and China disappointing.

Uruguay instructs diplomats to arrange for suspension of amortization payments on bonds in order to balance budget.

NY State confronted with "increasingly serious financial situation" as it's now estimated state income tax receipts will decline 50% vs. earlier estimate of 40%, creating a shortfall of $5M. Gov. Roosevelt has so far cut about $7M from spending appropriated by the legislature, and it appears the state surplus will be about $1M; this isn't too secure considering chances of further revenue shortfalls. Unless situation improves, there's prospect of a new tax "to safeguard the state's depleted treasury"; what form this would take appears undecided, but increase in income tax seems unlikely.

Hearing on NY Central's request for 40% rise in commuter fares in and out of Grand Central continued.

Sears was profitable in Q1 in spite of sizeable sales decline. Montgomery Ward reported a Q1 loss as sales fell below expectations; ability to show profit for remainder of year will depend on sales, since expenses have been cut as far as possible.

Hershey Chocolate reported Q1 net of $2.95/share vs. $2.29; profit margin was a record 33% vs. 24% a year ago.

Joseph P. Kennedy resigns as chairman of Pathe Exchange (movies).

Companies reporting decent earnings: Hershey Chocolate, Consol. Gas of Baltimore, New Orleans Texas & Mexico Rwy., Sharp & Dohme (drugs), Bickford's (low priced restaurants), A.M. Byers (wrought-iron pipe), Bon Ami.

Theatre:

Brass Ankle - by DuBose Heyward (Porgy and Bess), with Alice Brady and Ben Smith, at Theatre Masque. Title refers to a "lost tribe" that originated during the Civil War when the father of a light-skinned black family was admitted to the desperate Confederate Army as a white man. Afterward, his family and their descendants were unwilling to return to black status, yet not accepted as white, and therefore lived as a 'tribe' apart. [Note: The above version of the origin of the Brass Ankles is apparently poetic license. They are one of a surprising number of small Southern populations that are of disputed racial origin, and, in the segregated South, often fought for and won a status intermediate between white and black, sometimes with their own schools and other institutions; another is the Melungeons.] The Leamers, Larry, Ruth and daughter June, live in a Southern town. Larry leads the town's segregation movement which is fighting to have the Jackson children expelled from school for being partly black. However, when a second child is born to the Leamers it is dark-skinned, it's discovered that Ruth herself is a Brass Ankle. Larry, despite his devotion to Ruth, can't recognize the child as his own. Ruth, in an attempt to preserve her husband and daughter's white status, claims the baby is a product of infidelity; enraged, Larry kills her and the baby. Larry and Ruth are depicted sympathetically, not responsible for the deep prejudice that creates their dilemma but victims of it; this is human tragedy on a personal, immediate level. Performances are excellent, and the writing powerful. However, while this is "the worthiest effort made on Broadway in a good while," it somehow falls short; "some strictly dramatic pulsation is absent." [Note: this play was also mentioned in The Afro-American, a black-run newspaper, on June 6 and Jul. 11; opinion there is that the play brings in the "thoroughly exploded theory of atavism" to explain a white couple having a black child instead of the "far more logical assumption" that the father is black; play is contrasted with the more realistic scenario and comic treatment of the subject of "race mixing" in the French film "Blanc et Noir."]

Film:

The Public Enemy - Warner Bros., with James Cagney, Edward Woods, Joan Blondell, and Jean Harlow, at the Strand. "A graphic picture of the rise of two city hoodlums from petty thievery to a commanding position in the beer-running racket of a contemporary metropolis." Cagney's portrayal as the tougher of the two "is strikingly real and filled out with a variety of convincing detail." Film "sketches the changes of city life from the saloon days of 1909 to the night club and speakeasy days of 1930 with an accurate knowledge of atmosphere ... presents not only a character study of two gangsters but a social study of a criminal system." Story is "intensely moving and often brutal ... an avowed preachment against gangsterism, a driving, dramatic attack upon an outstanding evil of contemporary American life." For this reason the climax is uncompromisingly gruesome and without "romantic glamor. The picture as a whole is worth anybody's while as entertainment or as sociological case material." [Note: launched Cagney to stardom; Woods was originally cast in the lead, but the roles were switched mid-production.]

Views of sports:

Account of the rip-roaring final match of the indoor (!) polo national open championship, in which Winston Guest's undefeated team "The Optimists" was upset by the "Los Nanduces" team organized by Lt. McD. Jones, US Army, in a thrilling come-from-behind 8-5 victory.

Poem by F. Caverly:

Now isn't it a funny thing That tips are all bologney?
I started once with that 'shoe string' To swell my patrimony.
When I was told some stock to buy -- Tip, hot as the equator --
I rushed right in and bought it high; That's what they told me later.
They told me next 'twas best to sell; Short, that's the market patter;
Good news came out my stock rose --- hell! To you it doesn't matter.
With just two ways for stocks to go -- Up or down, or rise or slump --
Why doesn't some one really know One in which the cat will jump?

The Irregular Blather Apr. 26, 1931

No Journal was published Sunday, Apr. 26, 1931. A lengthy blather on a matter of Some Considerable Importance.

Over the past week or so, the discussion of new financial regulation seems to have reached some sort of fever pitch. I of course feel compelled to weigh in on some of the more blatant errors I see, many by otherwise excellent writers, and even (gasp!) to put forth a modest proposal on the single thing that will decide whether we see a rerun of the 2008 fiasco.

One analysis that seems to be increasingly popular is that the big problem was the lack of personal risk assumed by the bankers (AKA moral hazard, AKA perverse incentives). Or as James Grant put it:
To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits.

This is also the argument made by Michael Lewis in The Big Short (p. 258):
No investment bank owned by its employees would have leveraged itself 35:1 ...

This analysis has the advantage of tapping into the prevailing (justified) anger at the insanity of spending public money to grant immense bonuses to bankers while the rest of the economy suffers. It also has the advantage of fitting into the still-prevailing view of market participants as mostly rational; the problem must simply be that they have the wrong incentives. And, I agree, by all means, it would be a fine thing to make bankers assume more of the consequences of their bets; the Brazilian system that Grant cites approvingly sounds fine to me:
In Brazil -- which learned a thing or two about frenzied finance during its many bouts with hyperinflation -- bank directors, senior bank officers and controlling bank stockholders know that they are personally responsible for the solvency of the institution with which they are associated. Let it fail, and their net worths are frozen for the duration of often-lengthy court proceedings.

The only problem I have is with the idea that this would prevent the next blowup. This is demonstrably false; to see this, look no further than Long-Term Capital. Meriweather and his Merry Band of extremely smart traders leveraged themselves up, not 35:1, but around 100:1 (not counting derivatives!). Did they do this because they offloaded the risk? Quite the contrary, they were so sure of themselves, they gave back the limited partners' capital (pissing many of them off in the process), so that they could make a more concentrated bet of their own money! And when the blowup came, they in fact lost the vast majority of their net worth. When traders are on a roll, it's the height of foolishness to expect them to be restrained by a sense of their own mortality.

Another thing that has me scratching my head is all the noise about too-big-to-fail and breaking up banks that get too big. For some reason this reminds me of those gambling books you see in the Las Vegas airport that advise you to manage your money by only taking a certain amount to each session. The problem is the crappy bets that were made, not the number of piles they were divided into! Or, in other words, if we had a bank with ten trillion dollars in assets, but all it did was use modest leverage and loan money to carefully checked borrowers, I don't think such a bank should cause regulators to lose a minute's sleep. On the other hand. having a bunch of small banks that all made dubious bets, as would tend to happen in a bubble, would be absolutely no improvement over the current system.

Yet another head-scratcher is the idea that more regulation and more regulators will prevent the next blowup. Again, I'm all in favor of trying to make regulators more effective. Regrettably, though, this seems to be a losing battle. While parts of the crisis can be laid to deregulation, others took place under the noses of regulators at the Fed, SEC, and OFHEO; depending on these same regulators to head off future crises seems like that old definition of insanity.

So, that said, let me argue for a single modest but iron-clad regulation that I believe would, while not preventing the next crisis, make it manageable rather than system-threatening. Let's consider past bubbles and economic crises, confining ourselves to the really infernal ones where the entire economic organism appears threatened. One pattern that clearly emerges is that the most severe crises always involve two idiocies acting in sequence. To loosely paraphrase Tolstoy, the first idiocy is always different but the second is always the same.

Examples of the first idiocy run the gamut of human imagination, from trading your house for a tulip bulb to giving out mortgages without checking on trivialities like the capacity of the recipients to fog a mirror. But, the second idiocy – the one that transforms an unpleasant but treatable illness into a metastatic disease that threatens the whole organism – the one the degree and type of which anticipates with uncanny accuracy the severity of the crisis – is, in a word, leverage, broadly defined to mean the total amount of obligations taken on by the actors on the economic stage divided by the amount of assets they own.

The problem with the regulatory reactions to past crises is that they usually are addressed to the first idiocy, being designed in ornate and exhaustive detail to prevent that exact same idiocy from recurring in the future. For example, in the case of Enron the problem was partly caused by executives giving misleading financial reports, so we got the pointless Sarbanes-Oxley ritual where executives must sign a statement saying that they really, really mean the financial reports this time. Doubtless in the current case, we'll get laws strictly requiring that all loan recipients be capable of fogging a mirror; for that matter, the tulip madness in Holland was probably followed by a law fixing the future maximum price on all bulbous plants.

Human ingenuity being what it is, however, it is inevitable that a new idiocy will be developed in short order that lies outside the set of laws painstakingly constructed to prevent past idiocies. It will gain momentum, and in an amazingly short time we'll be off to the races again.

A far more promising angle for preventing future financial catastrophes would be to attack the second idiocy. To do this, it would simply be necessary to restrict the leverage that all all entities can take on to some reasonable multiple of their assets. Simple, but not easy - this would have to be an ironclad rule applying to all, not one to be applied by friendly regulators at their discretion, and leverage would have to be broadly defined to include all obligations that might cause risk, whether it be loan, derivative, or contract written in monkey blood by the light of a full moon (which I understand from my recent reading is Goldman Sachs' preferred method).

Saturday, April 25, 1931: Dow 155.76 -1.67 (1.1%)

Assorted historical stuff:

In major address on "Business Honesty" at the Chamber of Commerce, NYSE pres. R. Whitney laid down the law against misleading and unnecessarily delayed corporate earnings reports, and deceptive behavior by fixed investment trusts [similar to ETF's]. Security frauds are as rampant as any time in the past, costing hundreds of millions annually. For listed stocks, NYSE will adopt strategy of issuing public warning when it discovers unsound accounting or other issues; this will give stockholders opportunity to force correction; immediate delisting would punish innocent stockholders. Regarding the now-popular fixed trusts [similar to ETF's], points out a range of deceptive practices that hide charges to investors; while these trusts aren't NYSE-listed, the Exchange is planning to take some action against them. [Note: Interesting on a couple of levels. Whitney was later convicted of embezzlement by the up-and-coming Thomas E. Dewey, who later went on to defeat Truman. Also, some of the issues related to deceptive mutual fund and ETF expense accounting in particular are still very much with us today.]

Editorial: A subscriber from Paducah writes in asking why, if we are in favor of canceling inter-government debts, we don't want to grant the same relief to debtors at home. We're in fact not in favor of cancellation or reduction of inter-government debts, but merely discussing readjustment of those debts to nations "willing to admit and able to prove that they are threatened ... with impoverishment amounting to virtual bankruptcy. A wise creditor never insists that his honest debtor become a bankrupt before he will consider ... a mutually advantageous" readjustment. In other words, we're suggesting treating private and public debts similarly.

Editorial: Closing of the large Govt. Savings Bank of New South Wales (1.6M depositors) in Australia shows the consequences when "political leaders become careless of the country's credit standing." Premier Lang's talk of default wound up directly affecting his "own people's pocketbooks"; the bank was weakened since it was a large holder of the state's bonds; govt. moves to reduce interest rates also caused depositors to withdraw funds. The whole thing was an unnecessary "grand-stand play," since the Commonwealth Govt. would have been willing to help, as it did later. "In Australia, as elsewhere, chickens come home to roost."

Czechoslovakian Foreign Min. Benes opposes Austro-German customs union as first step toward political union rather than toward solution of European economic problems. [Note: If I was the suspicious type, I might think this had something to do with the $45M loan France just arranged ...]

San-Val Oil reports its wildcat well on Ventura Boulevard in Los Angeles has uncovered presence of helium gas according to preliminary tests by Dr. Cartwright, fellow in astrophysics at Calif. Inst. of Technology.

The electric refrigerator is now the top revenue generating appliance for utilities, replacing the electric flat-iron for that honor. As of the end of 1930 there were 2.6M refrigerators in the 20.4M wired homes. In terms of number of appliances, however, the refrigerator still ranks low; most common are the aforementioned electric flat-irons, radios, washing machines, vacuum cleaners, toasters, percolators and electric fans.

Origin of the steeplechase: a party of English hunters, 150 years ago or more, were still enthused following the day's hunt. Spotting a church steeple in the distance, they decided to race to it. The sport caught on at once; in the original version of there was no course, and riders found their own route to the goal.

14,000 heads of lettuce, 7,700 pounds of ripe tomatoes, 3,500 cucumbers, 6,000 bunches of radishes and 500 pounds of green peppers are required every month for the "Salad Bowl" a dining car delight originated by the Southern Pacific RR as a means of promoting widespread use of the West's truck garden products. During the fresh fruit season the "Salad Bowl" is switched to a fruit salad, also "of towering proportions."

Market commentary:

Market wrap: Bears piled back on after covering yesterday on erroneous report NY Fed. would cut rediscount rate; targets included Westinghouse, Texas Corp., and Anaconda; trading picked up sharply in the afternoon after announcement of Pynchon & Co. suspension; issues sponsored by the firm including Fox Film A sold off, while industrial leaders declined abruptly under heavy selling. However, selloff was checked in late afternoon and rallying tendencies developed near the close. Bond market continued trend of divergence between highest-grade issues and others; US govts. strong close to record highs; foreign generally steady though Uruguay bonds dropped sharply in spite of report May 1 interest payment was made; corp. highest-grade held firm near year's highs, but price readjustment continued in most of the list, particularly in industrial issues facing poor earnings and declining stock prices. Commodities mixed; grains down substantially, corn particularly weak; cotton up moderately. Copper buying quiet; small amounts available at 9 1/2 cents, large producers out of market. Lead down 0.10 cents to 4.25, lowest since 1921. Silver down 3/8 cent to 28 1/2.

Dow industrial average closed at a new bear market low.

Bulls discouraged by lack of resistance when Dow industrial average approached the 1930 low a few days ago; lack of support at that level convinced many the market was going lower and discouraged buying. “Brokers who have been credited with doing a substantial business for the so-called 'important interests' declare the latter have not been supporting stocks they are supposed to sponsor. They have been allowing the market to take its own course.” This is causing pessimism, since it's the general opinion on Wall Street that the market won't turn definitely up until these “so-called important interests rally to its support.” While most of the selling when the recent decline began in March was by shorts, in recent weeks a substantial amount has been due to liquidation. Brokers report little of that liquidation has been forced by margin calls, but much of it has been “scared liquidation” by traders.

Market observers disappointed at last week's decrease of only $5M in brokers' loans in face of sharp declines in stock prices. This was taken as evidence much of the liquidation was from discouraged long-term investors, and so didn't represent a healthy cleaning out of marginal accounts that would improve the technical situation. As a result, many observers feel present decline may "burn itself out rather than run into a definite climax that would be followed by a sharp technical recovery"; historical precedent also indicates bear markets end not "under exciting circumstances, but rather in a series of dull, dragging declines." It was therefore argued that "a period of tedious quiet in the market would be an encouraging sign."

Weekly bank reports featured sharp $46M decrease in loans to non-brokers; this appears similar to the end of the bear market in 1921, when brokers' loans stabilized while loans to non-brokers continued to decline sharply through most of 1922. This differs from the usual pattern in which a decline in loans to non-brokers predicts a market decline. It therefore appears that at the end of long and very severe bear markets this pattern is likely to be reversed.

Foreign currencies continued strong, though sterling reacted slightly. Opinion is gaining that NY Fed. may lower 2% rediscount rate in near future; this would help Bank of England, which is having difficulty keeping open market bill rates up due to influx of US and French funds.

GM Q1 earnings, while falling slightly below dividend requirements, were considered encouraging in the circumstances; a substantial increase is anticipated in Q2.

W. Holliday, Standard Oil of Ohio pres., says oil industry facing difficult economic problems due to overproduction of crude oil; adds that new East Texas fields will have potential daily production of 5M barrels by year-end, vs. total US demand of less than 2.5M. Oil industry generally “seeks to avoid all possible legislative interferences,” as US law is based on competition and “survival of the fittest. State assistance, however, has not proved as bad as feared ... and it does seem not improbable that as an industry we will seek further govt. assistance in the control, not merely of the production of oil, but of the drilling of wells.”

C. Snyder, NY Fed. economists, argues against overproduction as cause of this or previous depressions; asserts industrial production has grown fairly steadily over past 50 years. Also disputes idea war stimulated overproduction; on the contrary, estimates world production lower by about $400B in past 15 years due to war.

Economic news and individual company reports:

Pynchon & Co., NYSE members since 1895, suspended for insolvency after margin call by a bank; about $38M in loans outstanding. Originally a Chicago grain house reputedly associated with Benj. Hutchinson, said to be the only man who ever successfully cornered the wheat market. Firm moved to NY in 1895; in recent years, it had concentrated on issuing new securities. Firm attributed the suspension to "sharp decline in a number of securities in which this firm and its customers actively dealt"; hopes and believes "suspension is temporary, and that with the return to anything like normal values of the securities ... no creditor of the firm will suffer any loss ... every effort will be made for a reorganization of the firm with new capital at the earliest possible date."

Pres. Hoover estimates spending for the next fiscal year (starting June 30) will be $4.119B, vs. $4.435B for the current one and $3.944B for the previous one (figures don't include veterans' bonus payouts, which now stand at $912M with another $140M of applications in hand). Spending may be reduced further through continued drive for govt. economies, provided Congress doesn't interfere.

Dun's weekly review: recent trends continued; business slower due to seasonal factors and "unusual conditions of the present readjustment"; some gains but restricted in scope; "evidences of the concrete progress made in bolstering the commercial foundation are not to be minimized, but the surface movements are fitful and indicate a lack of the desired stability." Bradstreet's: wholesale trade slightly up; retail and industrial remained “quiet to fair”; some reports “undeniably drab.”

Weekly bank reports showed $29M increase in non-govt. securities, continuing recent trend. Fed. Reserve credit outstanding increased $16M, indicating continued policy of very easy money.

New bond offerings this week were $11.7M vs. $37.8M last week, lowest total of the year. Decline attributed to bond market conditions; while demand has been strong for highest-grade issues, including govts., municipals, and corp., there has been severe weakness in lower-grade bonds.

Auto parts industry in March continued improvement; index of shipments was 113 vs. 93 in Feb., 84 in Jan., and 155 a year ago; increase from Feb. to Mar. was 21% vs. 12% in 1930.

State directors of the US employment service, after meeting for several days, have been instructed to make minute surveys of conditions in their sections and plan for expansion of the service.

J. Broderick, NY superintendent of banks, sues 8 directors of the closed World Exchange Bank to recover $600,000 for depositors and stockholders.

Amer. Mfrs. of Toilet Articles complain Hawley-Smoot tariff too high, has led to "retaliatory walls" thrown up by foreign nations.

Chicago motor boat show, opened April 24, to exhibit 20% more boats and motors than a year ago; space has been expanded to 100,000 sq feet. Mayfair Marine has opened a permanent boat show in its showroom on E 57 St. Registered boats over 16 feet in the US on Dec. 31 were 248,448, up 7,408 or 3% from a year earlier, though this was the smallest gain for the past 11 years. US exports of motor boats and engines in 1930 were $3.048M, down 40% from 1929.

Chrysler swings to Q1 loss of $979,927 vs. profit of $180,717 in 1930; however, sales improved every month this year; revival "may be something more than seasonal."

Q1 earnings/share: McGraw-Hill $0.62 vs. $0.89; International Cement $0.65 vs. $1.34; Corn Products Refining $0.77 vs. $1.07.

Company reports since Apr. 1: 90 companies reported higher earnings vs. 1930 and 318 lower; 179 dividends unchanged, 5 increased, 42 cut.

Companies reporting decent earnings: Standard Oil of NY, Kansas City Power & Light, New England Tel. & Tel., International Salt, Ward Baking.

Theatre:

Company's Coming - farce by Alma Wilson, at the Lyceum. The Janney's are hosting a card game but have no funds. They do have the tennis club's championship cup on their mantel, though Mr Janney needs to win the championship final tomorrow to gain full title to it. Of course, they embark on a madcap plan to pawn the cup, use the funds to play cards, and redeem the cup before the final match. A series of misadventures follows involving a misplaced pawn ticket, a real and fictitious robbery, etc.; Mr. Janney expresses alarm and embarassment throughout. Play contains "painstaking elaboration and complication,” but “little attention has been given to the general amenities of the trade of playwriting"; dull conversation and painfully obvious plot remove all entertainment value. [Note: Rosalind Russell had one of her first Broadway roles in a minor part; closed after 8 performances.]

Jokes:

"'If laid end to end,' says a statistician, 'the persons registered in New York hotels in 1930 would not quite reach around the globe.' The enterprise, therefore, has been reluctantly abandoned. - Life"

“Old lady in 'Ampstead 'Eath” - It was nice of the new vicar to call. Daughter - But Mumsie, that wasn't the vicar; that was the doctor. Lady - Oh ... I thought he was a little familiar for a vicar.

"She was the kind of woman who could be relied upon to say the wrong thing wherever she was. At a recent dinner she turned to her neighbor and said: 'Doctor, can you tell me who that terrible looking man is over there?' 'I can,' replied the medical man. 'That is my brother.' There was an awkward pause while the woman racked her brain for something to say. The doctor was enjoying her discomfiture. 'Oh, I beg your pardon,' she stammered, blushing. 'how silly of me not to have seen the resemblance.'"