Wednesday, June 10, 1931: Dow 132.97 -2.95 (2.2%)

Assorted historical stuff:

German-British conversations apparently only resulted in decision to seek international collaboration to solve world economic crisis; possibility of joint presentation to the US seen. Meeting seemed overshadowed by upcoming European trip of Sec. of State Stimson, which has raised high hopes in German govt. quarters that he will advocate using US power to reduce war debts in exchange for European arms cuts.

Washington report: Administration appears to have settled on strategy for handing war debt revision: "sitting tight awaiting developments." US seen as interested but passive observer to current developments; will become active participant if debtor nations propose revision of their debts to the US. However, in this case Congress and not Administration would have final authority on debt revision. Therefore, "natural procedure ... for the present is one of sitting tight"; meantime, govt. officials will stay informed on conditions in debtor countries so they can make recommendations. Attitude of Congress seems likely to be problematical, particularly on linking war debts to reparations.

Editorial: Reticence has its place in public life, but the Administration is carrying it too far. Even the most astute observers seem to be hopelessly unclear about the Administration's stand on debt reduction; reports from three NY dailies give wildly different impressions, with Hearst's NY American saying the Administration was dead set against debt revision, the Times saying Pres. Hoover has been "shouting from the rooftops" that a substantial cut in arms might bring a positive US response on debts, and the Herald Tribune occupying a rather confusing middle ground. It's time for some clarity and "preparing the public mind for what is to come" on this essential issue. "It is impossible to believe that men like Mr. Hoover, Mr. Stimson and Mr. Mellon content themselves with such vacuities as 'hoping for the best and preparing for the worst'" or that they don't realize "the importance, in the present state of world financial strain," of US initiative to restore "confidence in the closely woven fabric of international credit."

British and French authorities disputed reports Pres. Hoover had made any remarks implying US willingness to reduce war debts in exchange for European arms cuts; while Hoover did stress the need for arms cuts, he made no mention of debts. French Foreign Min. Briand says govt. strongly opposed to any international debt conference as outgrowth of recent British-German conversations.

Editorial by T. Woodlock questioning how long business can maintain wages in face of possible bankruptcy, particularly in the case of railroads: "We all grant that the wage-earner has first claim upon industrial revenues [Note: Strangely unfamiliar dept.]; he holds a prior lien obligation. But, when after satisfying his lien the capital employed cannot get a new dollar for an old one, how long must it continue to operate before it asks the wage-earner to take less? Or, if the wage-earner will not take less, before it may cease to operate?"

Soviet industry reportedly threatened by serious coal shortage due to rapid growth of industries. Average coal production before the war was 29M tons; this fell to 8.5M in 1920; scheduled production under the five-year plan is 74.5M tons this year and 130M in 1933.

Interesting history of electric utilities and copper wire. First practical commercial use of electricity was in 1844, with Morse's telegraph line. This created demand for copper wire and hastened development of wire-drawing process, which came in handy when Edison's incandescent lamp arrived about 33 years later. First central power station, Edison's small plant on Pearl St. in NY City, supplied 220V direct current over a few blocks using copper wire; it had 500 customers in its first year of operation, 1882. The electric industry now consumes about 65% of total copper production; the two industries have developed hand in hand.

On June 15, final link will be made in international airway connecting Canada and Mexico.

E. Paine, sugar executive, says the industry recently received its "most encouraging news ... for many years." After 9 years, a process has been developed to turn sugar into "a new plastic substance" that can take forms of "a hard insoluble glasslike mass, white transparent rubber, ... and transparent package material."

The USDA estimates soil erosion each year removes 20 times as much "plant food" from the farms as is consumed in actually growing crops. Irreplaceable top soil washing out to sea is gradually reducing usable farmland; over 17M acres of land formerly cultivated has been eroded so badly that farmers can't afford to reclaim it.

Many of the big old New England hayfields have disappeared, and with them switchel, a traditional drink used by field workers to wash down dust and hayseeds on hot, dry days. Recipe was a mixture of molasses, ginger, water and a dash of vinegar; the jug was cached in the shade or a spring hole to stay cold.

P.G. Wodehouse recently spent a year in Hollywood, for which he was paid $104,000. However, he's not sure exactly why he was hired, since he was given little to do; he "polished the dialogue" on two completed scripts, and worked for 3 months on a musical script that his employers then decided not to use.

Market commentary:

Market wrap: Stocks opened strongly, extending Monday's gains on a broad front with rails and oils particularly impressive. Market fell sharply around 1 o'clock after reports of Chicago bank suspensions and Western Electric dividend cut; AT&T broke about 5 points and other majors sold off. Trading lightened in afternoon but no rally appeared; action in last hour "nervous and uncertain." Bond prices improved in many parts of the list; US govts. dull and steady near recent highs; foreign list featured rallies in German and Brazilian issues with other countries steady to firm; domestic corp. showed encouraging improvement in some recently weak issues, though convertibles fell late along with the stock market; oils, rails, and NY tractions showed particular strength. Commodities weak; grains soft on reports of Canadian rain; cotton closed down sharply after losing early gains. Copper buying moderate at 8 1/4 cents.

Conservative observers say market will be sensitive to developments, but warn against taking the short side since they still believe the market will reach a higher range before any important downtrend takes place; see "intermediate rallying movement" continuing with interruptions. Recommend stop orders for protection.

Brokers report customers "both in the metropolis and in other cities" have been more inclined to pick up stocks on dips since the recent rally. Bears have evidently been fighting the rally and probably will continue to resist further upturns. While many traders reportedly have deserted the bear ranks, some important operators continue to maintain their positions; huge profits in the past 20 months have given them confidence to contest rallies. "It must be admitted, however, that their efforts to hammer stocks have not been nearly so successful recently as during the period of necessitous liquidation." A change in sentiment has apparently taken place, and reactions seem likely to attract buying support in the immediate future. Market seen in stronger technical position to anticipate fall business improvement, thanks to extensive liquidation of brokers' loans.

Oil shares benefited from improved sentiment in the California oil industry, with producers apparently lined up to curtail daily production to target of 427,500 barrels/day (excluding Kettleman). Rise in crude prices is expected shortly. However, situation in East Texas remains "in a muddled state."

Being a corporate director isn't always "the enviable job ... often popularly pictured." R. Babbage was recently elected to the Board of Directors of the Missouri-Kansas-Texas RR; he has since attended one meeting, receiving a $20 fee, but has a paper loss of $1,500 on 100 shares of "Katy" he bought when elected.

US Steel report on unfilled orders as of May 31 will appear at noon. A substantial decline is expected, as is normal seasonally; a "slightly better than anticipated" showing might have a beneficial effect.

W. Alton Jones, Nat'l Elec. Light Assoc. pres., points out stability of utility industry in depression; in comparison of Q1 earnings with 1930, total of 259 industrials was 54.8% lower, total of 171 rails was 39.3% lower, but total of 76 light, power and gas cos. was only 1.6% lower.

Conflicting factors make local bank earnings hard to predict; profits are likely to decline due to poor business, low money rates, and "unusually liquid condition" but should benefit from marking up of high-grade bonds so far this year.

D. Friday, economist and Treasury advisor, predicted US business will reach normal by 1932 and continue progress to new era of prosperity in 1933; "Production cannot continue at a level of 35% below the peak if it is to meet the demand of consumers."

Interior Sec. Wilbur says economic conditions look to be in a state of convalescence. However, "Dr. Wilbur said there are factors in the economic situation that go beyond our present powers of accurate measurement and definite diagnosis."

Amer. Bankers' Assoc. says continued subnormal industrial activity in the past month is disappointing, but after adjusting for seasonality general trend now appears to be up; retail trade is gaining and consumption of many commodities is being maintained well above output. "Without attempting to prophecy the future, it may be safely said that the likelihood of continued, though slow recovery, seems much stronger than the possibility of a renewed declines to still lower levels of depression."

Economic news and individual company reports:

Investment Bankers' Assoc. committee decries real estate bond situation as one of the "blackest spots in our present financial outlook." Estimates total volume outstanding at $8B-$12B; about $400M in foreclosure in Chicago alone, similar conditions in most large cities. Rough breakdown of overall market condition: about $2B in good standing, $2B likely to work out without loss, $2.5B likely to foreclose with losses of 10%-25%, $3B with losses of 25%-60%, $500M with larger losses or should be entirely abandoned. Warn sharp curtailment of building possible until present situation has cleared; important to reestablish confidence in real estate securities so investing public would be willing to finance sound projects; suggest consideration of forming mortgage guaranty companies. J. Tyler of E.G. Tillotson & Co. said this type of bonds had suffered from the long-term public conviction that real estate is the safest form of investment; also blamed too much reliance on well-intentioned appraisals of value and called for greater margin of safety.

Bain group of 12 banks in Chicago closed due to "frozen real estate credits." Leading bankers "in close touch with the situation" said closings of 18 small Chicago banks in the past 2 days were not of great significance, and that settlement of the Foreman Banks' difficulties through merger yesterday eliminated the only major sore spot in the Chicago banking situation. The six banks that closed yesterday had total deposits close to $25M, while the 12 closing today had $13M.

Continued contraction in bank credit outstanding is disturbing, particularly since it's against normal seasonality; this indicates no early increase in business activity is likely. Security loans have been heavily liquidated; “all other” (commercial) loans are lowest since 1924; bank holdings of non-govt. securities have declined in spite of very low money rates.

Reichsbank has lost an estimated 200M marks of reserves so far in defending marks, but position still strong and seen able to avoid rate increase for some time.

Conference of Australian govt. and opposition leaders agrees all spending must be cut substantially to avoid national default; sacrifice must be shared by all; owners of internal bonds will be asked to accept cut of 22 1/2% in rate, to 4%; "suggestion that recalcitrant bondowners be coerced with threats of penal taxation was abandoned in favor of voluntary methods." Australian trade balance improved to surplus of $84.4M in 9 mos. ended March, from deficit of $163.8M in 1930.

Chicago school teachers' organizations fighting proposal to save about $1.5M/year by cutting school expenses and eliminating automatic pay increases. Mayor Cermak and Gov. Emmerson are in Springfield conferring on legislation to relieve Chicago's financial emergency; Cermak proposes to replace the elected Board of Assessors with an appointed committee of 3 experts to take charge of the tax situation; only 58% have paid 1929 property taxes with many protesting assessments.

Defense rests in Bank of US trial after 4 weeks and 13 witnesses; prosecution begins rebuttal.

Tennessee House clears Gov. Horton of impeachment charges.

Western Electric cut annual dividend rate to $3 from $4; 98% owned by AT&T. Sinclair Consol. Oil omitted dividend.

National conference of rail executives to be held in NY June 11. Southern rails apparently have decided to back Eastern and Western rails on any decisions on asking for rate increases reached at the conference; this is seen strengthening the rails' case before the ICC. Of 42 representative rails reporting earnings for the first four months, only 3 showed an increase in net operating income over the two preceding years. Rail freight loadings for holiday week ended May 30 were 710,931, down 44,137 from prev. week, down 17.3% from 1930 week, and down 28.9% from 1929.

Refineries ran at 68.8% in week ended May 30; stocks of gasoline fell 570,000 barrels to 44.225M. Crude oil production in week was 2.475M barrels/day, up 12,800 from prev. week and down 113,100 from a year ago.

USDA estimate of winter wheat crop based on June 1 conditions was 649.1M bushels, 25M below the average of private forecasts; low forecast came as distinct surprise to the grain trade. No estimate given for spring wheat, but condition of 67.9% was lowest June 1 figure ever reported. Permanent committee of wheat exporting nations to meet for the first time this month; breakdown of the cordiality established at May wheat conference feared. "All countries are agreed as to the causes of the present depression in the wheat market but differ widely on how to dispose of their huge surpluses."

Fertilizer Review reports usage in the US in 1930 was record of 8.110M tons vs. 7.975M in 1929.
International tin committee will meet in Paris June 16; will consider forming pool to withdraw important quantity of tin from the market.

Commerce Dept. reports seasonal upturns in a number of foreign countries in the past week, including France, Czechoslovakia, Japan, and Argentina.

Structure of Canadian newsprint industry seen threatened if bondholders refuse to go along with reorganization plan for Canada Power & Paper; one of the largest producers, it's now "on the brink of liquidation and dissolution."

US film producers open negotiations to relieve restrictions on French imports of US films; under current agreement, US producers must buy heavy percentage of French films in order to export US films to France. Negotiations await return of M. Petsche, "undersecretary of state for beaux arts."

D. Lawrence, publisher of the US Daily, reportedly negotiating for purchase of the Washington Post at price around $3M.

International Match [Ivar Kreuger-associated] earnings so far in 1931 reportedly "holding at record levels in the face of the world business depression." Woolworth earnings so far this year reportedly ahead of 1930; pres. Parson says expects June to almost make up the sales decline reported so far in 1931. Oakland-Pontiac enjoying one of finest years in its history; Pontiac 1931 business expected 50% over 1930, and Oakland 25% over. Glidden reports retail paint division increased May sales 15% over 1931; sees increase as encouraging indication general business is improving.

Companies reporting decent earnings: Novadel-Agene (products for bleaching wheat and flour).

Jokes:

A New Yorker "whose Western view had for years been obscured by the Hudson River recently was forced to make a trip to Chicago." He asked the Pullman porter what his average tip was. "About a dollar, sir," was the reply. The Gothamite obligingly handed out a dollar bill. "Thank you, sir," said the porter. "You're the first gentleman ever came up to my average."

"My husband and I find it's more economical to balance our budget in the evenings." "How's that?" "By the time we've finished it's too late to go anywhere."

Tuesday, June 9, 1931: Dow 136.40 +6.01 (4.6%)

Assorted historical stuff:

Editorial: The Breuning govt. in Germany has staked its survival on making progress toward reduction of reparations, without which it can't hope to get popular approval for its austerity program. What would follow collapse of the Breuning govt. is impossible to predict; "A Teutonic brand of fascism would be little less troublesome for the world than a Germany going communistic." The US and France have been skeptical on the urgency of Germany's predicament, but it may soon be demonstrated; while the Breuning govt. is operating with emergency powers, it can and no doubt will be called before the Reichstag in extraordinary session to report on the results of their London meeting and defend their austerity decrees. It's clear that the course of German politics will now depend on the attitude of other European govts. and in turn on Washington's attitude on war debts. If the Breuning cabinet can survive until Secs. Stimson and Mellon arrive in Europe, a British-US attempt should be made to bridge the reparations crisis.

Interesting editorial by T. Woodlock on current US feeling regarding Europe. “Our national psychoanalyst readily would discern a 'superiority complex' ... We feel that we have rid ourselves of the out-worn ideas that still plague Europe, of which its troubles are the just and natural consequence ... So we gather our skirts around us and declare that we will have nothing to do with these unseemly squabbles, and we look askance at all things 'international' - particularly bankers! ... Whence the complacence and self-confidence? It is something more than the ordinary national pride ... It is a settled mental conviction rather than an emotion.” Explanation is greater space available in the US. “We never have been crowded. In the Old World, there long have been two men after each job, ... a man at one's heel and a man at each elbow. Here, we could always move on into open spaces ... Nor have we ever known what Europe ... calls 'hard times.' What we call 'hard times' are no worse than the normal routine of life for most of Europe, year in, year out.” Calls for introspective common sense, humility and sympathy; “as a practical matter the 'isolation' on which we so earnestly insist for ourselves” may eventually prove “the worst kind of 'entanglement.'”

Editorial: The menace of Russian wheat exports to North American farmers may be exaggerated. Spring wheat seeding is reportedly late, particularly in the Ukraine and Lower Volga; outlook for yields is not good; while nature may help Russia as she did last year, "Lloyds would hardly insure the chance." Russian officials are giving estimates of production far higher than 1930, "but paper statistics are not always the same as wheat." Russia exported about 95M bushels from the last crop; this is a significant amount, but reportedly led to bread prices as high as $1.25 a loaf in Moscow and recent bread riots there. "Russia may temporarily disturb the wheat market but she cannot for long disturb it when obliged to starve her own people."

AFL pres. Green says rumors AFL would agree to 10% wage cut "positively untrue." Labor Sec. Doak repeats support of existing wage scale.

Over 1,600 employees of Empire Steel, who struck against wage cuts 3 weeks ago, marched en masse to company officials and said they wanted to help during the company's financial crisis (now in "friendly" bankruptcy); volunteered for 3-month 5% wage cut.

Navy Dept. anticipates savings of $25M as result of plan worked out in weekend conference between Pres. Hoover and Navy officials.

Treasury Sec. Mellon to sail for Europe; will spend 6 to 8 weeks in France. Sec. of State Stimson also travelling to Europe.

Rep. La Guardia asks War Dept. to refuse deliveries from Wright Aeronautical Corp. until it reestablishes prevailing rate of wages in the area.

Dr. C. Pabst, chief dermatologist at Greenpoint Hospital, estimates annual loss of 200,000 working days caused by sunburn, in many cases deliberate.

New Canadian tariff of 15 cents/pound on US publications likely to be relieved on case-by-case basis after publications satisfy the Fin. Min. "that they do not carry cheap sex or crime stories. ... It is said that the Canadian govt. has no desire to prevent entry of the better class of American publications."

Canadians hold distinction of world's most talkative nation, at least measured by telephone usage. In 1929, Canadians held 257.7 phone conversations per capita; the US was next with 231 and New Zealand with 212. In cities of over 50,000 Canada had 23.3 phones per 100 people; US was next with 22.9.

Increased popularity of foreign beers in Belgium has caused Belgian brewers to spring into action. Brewers have recently organized a research bureau to improve their products. A school for master brewers was started in Brussels in 1925; last term there were 45 pupils, of whom 12 graduated "with grand distinction."

The advertising medium of matchbook covers, once largely restricted to makers of nationally advertised products, is becoming more widespread; users include hotels, musical comedies and nightclubs, and even charitable institutions; covers have appeared in Dutch, Swedish, and other languages.

Market commentary:

Market wrap: Stocks opened under pressure as sell orders accumulated over the weekend and bears renewed operations; prices worked generally lower, with sharp declines in major rails. However, liquidation dried up after first hour setbacks and support came in on reactions; pressure was lifted from the rails toward noon and better tone spread across the list; NY Central staged a robust rally and major industrials joined in, with American Can particularly strong; rally carried on up to end of session. Bond trading very quiet, prices irregular; US govts. steady; S. American mostly higher; European generally steady but German lower; highest-grade corp. steady but lower-grade rails and some other sections that rallied sharply last week turned lower. Commodities mixed; grains heavy, with wheat down substantially on reports of some Canadian rain and good French crop; cotton closed up moderately after rallying from a new 16-year low. Copper buying quieter, price remained at 8 1/4 cents.

Market sentiment cheerful; observers who had predicted further recovery and advised buying were encouraged by resistance shown to reactions; some favored using stop-loss orders to protect accounts, raising limits as the rally extends.

Bears have been confident that the market will have a secondary reaction to around last week's lows after the recent sharp rally; this would follow precedent. However, after the recent rally investors now seem willing to step in on setbacks and pick up stocks with "well-fortified" dividends and high yields; this should provide "more ammunition to fight the bears than ... for many months." Short covering and buying by the public were reportedly heavier. Many believe that “floating supply” of stock has been shrinking; investment demand around recent lows was likely heavy, and buyers removed stock from the Street.

"Interests close to the bankers" say there may still be some "liquidation overhanging the market" since there are "still a few situations remaining to be cleaned up." However, this liquidation was not as urgent, and those with the securities to dispose of could wait for a good technical recovery to get well under way before selling.

Rail strength in recent sessions attributed to "growing belief that a demonstration will be made in the carrier group" after application for a rate increase is filed.

Early weakness in NY Central reflected nervousness on dividend cut at Wednesday's meeting. Pennsylvania RR also weak after report of Q1 loss. Chrysler is trading about 17, with net working capital over $15/share; had Q1 loss but is seen making a good showing this quarter.

Although recent pressure carried Insull Utility Investments down to the low 20's, it is still trading at one of the highest premiums over breakup value of any holding company; breakup value at end of 1930 was $4.55/share and is now likely to be considerably lower.

Calif. oil industry more optimistic than in several months due to recent production cuts; expect rise in crude oil prices within a few days.

Harvard Economic Society says "latest evidence justifies the view previously expressed that we are approximately at the bottom of the business depression," notwithstanding unsatisfactory developments in May. "Cyclical decreases in business have limits, both in extent and duration, and the limits of a major (but not exceptionally long) depression have now been reached." Note widespread gains in manufacturing activity since last Nov., when seasonally adjusted. Very unfavorable conditions in other countries may prolong US depression, but they haven't prevented an improvement in business volumes this year.

D. Friday, economist, predicts by this coming Jan. US production will be 25% higher than last Jan.; this won't mean a return of boom times, but will be proof of an upturn. "In fact, business is on the way up now. Production as measured by the Federal Reserve index" has been rising since start of the year. "Investigation has shown that during depressions the income of the people as a whole falls only 15% to 18% from the high levels. Income from dividends this year will be within 15% of the biggest year we have had, 1929."

Interesting ad calling for optimism by North Amer. Trust Shares: “I believe in the ability of the American citizen to swim upstream, hit fast ball pitching, break out of a half-nelson and have a pretty good time in the bargain ...”

Economic news and individual company reports:

Creditanstalt losses to date estimated at over 300M schillings; gains additional 100M schilling credit from B.I.S. and central banks. French govt. reportedly close to agreeing to discount half the recent 150M Austrian Treasury bond issue. Marks were steady, but this was attributed to active support by the Reichsbank; heavy withdrawal of British funds was reported due to the Creditanstant difficulties. Stocks in Paris broke sharply, losing all the gains of last week's rally; fall attributed to German demand for revision of reparations.

After a conference of leading bankers lasting 40 hours, two Chicago bank mergers were announced, producing two of the country's largest banks. First National absorbed Foreman-State, with $200M in deposits, which had run into trouble; to insure against loss, Foreman stockholders raised a guarantee fund of $2.550M and the Chicago Clearing House contributed $10M. First National will now have about $770M in deposits. Also, Central Trust Co. and Nat'l Bank of the Republic merged to form Central Republic, with $295M deposits. Business at the merged banks went on normally but six smaller "outlying" banks were closed.

I. Kresel, chief defense witness in Bank of US trial, denies his own grand jury testimony regarding $8M transaction of Jan. 1930; judge had to admonish him several times to avoid sharp comments when answering cross-examination questions. Committee of Bank of US stockholders and depositors asks NY State Supt. of Banks to sue for recovery of $25M from directors and discontinue bank branches. Banking dept. points out suit now would endanger reorganization plans.

Leading chain retail systems in May continued impressive showing; dollar volume was behind last year but it's likely tonnage was ahead due to price reductions. First 17 chain store and mail order cos. to report showed May sales of $142.3M, down 6.2% from 1930. However, most of the decline was due to a 25.9% drop in Montgomery Ward sales because of liquidation sale in 1930; excluding Ward, sales were only down 2.4% and 3.1% in the first 5 months.

Texas Gov. Sterling says will decide soon on calling special session of Legislature to deal with East Texas oil situation. "Some of the brainiest man in the industry say they don't know the solution or what should be done, so what can be expected of a poor governor ... Everyone might as well go fishing for a week for it appears no decision be reached until then."

It's become evident the proposed rail freight rate increase will be strongly opposed before the ICC; the Nat'l League of Commission Merchants, representing shippers of 1M carloads of produce yearly, said freight charges are already excessive and announced a program of "strenuous opposition."

Spanish Fin. Min. Prieto attributes fresh rise in banknote circulation to hoarding; proposes new stabilization loan and agreement with France by which Bank of France will discount commercial bills; also sees possible agreements with US regarding imports of oil and other merchandise. Peseta futures are now trading at a discount, and banknote circulation is "rapidly mounting," now reaching 5.293B pesetas vs. low of 4.604B on Mar. 28.

Canadian report: New Canadian tariff seen having mixed effect; will benefit some industries but, together with general tax increase, certainly increase living costs. Canadian Bank of Commerce estimates industrial output about at 1927 level, but output sold at abnormally low profit; this "may seem discouraging, but ... we find that such a degree of retrogression is less than in most other countries." New Canadian building awards in May were $36.9M, largest monthly total this year and 62.5% over April; first 5 months were 28.3% below 1930.

Three US and one British oil co. have almost completed negotiations for loan of over $10M to Mexico to be used for govt. payments in arrears due to heavy revenue decline. This is first financial transaction between the oil companies and the Mexican govt. since Doheny interests loaned the Obregon administration $10M in 1923 to suppress the De La Huerta revolution.

Revised NY City transit unification plan prepared by S. Untermeyer was announced; contained no important revisions in price to be paid for traction [mass transit] company properties. NY City traction shares and bonds rallied; securities are all selling considerably below figures to be paid in the plan, although final action is unlikely for several months since plan must go through several approvals. It would be very desirable for the plan to go into effect by Dec. 1, when the new city subway will be ready for operation.

Chicago and Cook County local govts. will be forced to reduce 1931 spending by $30M or 15% as banks won't lend more than 60% against anticipated taxes.

American Can pres. Phelps says sales so far in 1931 about 8% under record 1930 level, but expects to make up decrease; urges co. salesmen to buy stock.

R.H. Macy reports unit sales in past week were up 42% over 1930 in response to “their campaign to cure the depression.”

Companies reporting decent earnings: Hufvudstaden Real Estate (largest owner of city real estate in Sweden, affiliated with Kreuger & Toll).

Movie:

Never the Twain Shall Meet - "somber South Seas offering" starring Leslie Howard, at the Capitol. Audiences will highly enjoy the live revue starring Ted Lewis and his "orchestra and a bevy of entertainers ... quite the best revue now appearing off the legitimate stage." Once the movie starts, however, the quality drops off considerably. Mr. Howard is the vacillating Daniel Pritchard in this remake of a decade-old silent film; he woos and wins Tamea, a "South Sea passion flower," becoming a beachcomber in a "rather silly" sequence, but ultimately realizing that East is East, West is West, etc., and returning to his fiancee. "Conchita Montenegro, a Spanish newcomer ... has the role of Tamea, which Anita Stewart played with half the wiggles and twice the success in the original silent version." Karen Morley plays Daniel's long-suffering "cool, lovely fiancee Maisie Morrison" to whom he finally returns.

Jokes:

Matrimonial Agent - You don't like any of these photographs? I'll show you one more, and if that's not suitable I can do nothing for you. Now, how about this one? Client - Yes, that is just the type of lady I like. Agent - Then what about an interview with her? Client - Unfortunately, I already divorced her.

Monday, June 8, 1931: Dow 129.91 -3.42 (2.6%)

Assorted historical stuff:

German Chancellor Breuning, arriving in England, says German reparations burden has increased $600M in past 14 months; moratorium provided for by Young Plan not adequate for relief; calls for international cooperation, impartial review of German condition, and revision of postponable part of reparations. Says relief is needed by Sept. when unemployment will again rise and suffering become so great as to make revolution almost inevitable. Official German declaration marks “at least a break” in the third attempt to settle reparations after the World War, starting with the Reparations Commission in 1921, then the Dawes Plan in 1924, and finally the Young plan in 1929. The Reichstag may reconvene to debate the govt. austerity decree; govt. stability seen depending on result of British conversations on reparations relief. US Sec. of State had no comment yet on German developments; implies US hasn't changed position that there is no link between war debts and reparations. Observers believe allied countries unlikely to accept revision of reparations without corresponding relief of their war debt to the US.

Stock market in recent months "undoubtedly has operated as a restraining influence on business activity. Fresh enterprise has been choked by fears invariably arising from persistent declines ..." Complaints about harm the market was doing to public demand have come particularly from the steel industry; experts estimate current rate of production is several million tons below yearly replacement needs. It's therefore hoped the recent upturn will "exercise a stimulating psychological effect on commerce and industry." The upturn may also prove "the best tonic that could be administered to the market itself. Just as declining tendencies gain momentum from the nervousness they engender, a sustained rally receives impetus as it proceeds from the confidence that firmer prices create."

Editorial: The NY Chamber of Commerce recently adopted a resolution condemning all trade with Russia due to their aim of destroying the political institutions of Western Europe and the US. An earlier resolution last Nov. called for the US to protect its political and economic interests against Russia, acting together with all friendly govts. While Congress could probably cut off all US trade with Russia if it so desired, a realistic appraisal shows that this would now have little impact on their 5 year plan. Prospects for an international anti-Soviet alliance have dimmed as countries including Germany, Italy, and Britain have reached trade agreements which include financing of exports to Russia. "Americans, therefore, must think of the Russian problem primarily as one of defeating attempted dumping of goods on our shores to the injury of our industries and labor. We must expect to look out for ourselves and to do it single-handed."

Immigration to the US of "working class of aliens" has almost stopped due to enforcement of "likely to become a public charge" provision directed by Pres. Hoover; only class now entering are alien relatives visiting people already here. Visas issues in April were 96% below normal.

Editorial by T. Woodlock: The calculations behind Gov. Pinchot's charges that US public utilities are plundering $500M annually through overcharges "have one quality in common with those of Prof. Einstein. There are probably not a dozen people in the world who understand them." Detailed analysis reveals implausibility of the figure (total revenue from home consumers in 1930 was only $668.5M). Meanwhile, Sen. Norris also may be using unorthodox mathematics in endorsing Pinchot for President: "the Senator says ' ... I am for him five hundred times more than I am for Pres. Hoover.' How much is five hundred times zero? It seems as though the 'square root of minus one' must play a large part in 'Progressive' mathematics these days."

Postmaster Gen. Brown notes Post Office is now spending $17M more for airmail than received in postage, but says expenditure is a matter of national security.

Pan American Airways carried 12,842 passengers to the Caribbean and Central and S. America in the first quarter, an increase of 2,510 over 1930. A record of 100% was established for reliability, with every trip completed on or ahead of schedule. Recently added two Sikorski 41-passenger amphibians, largest planes ever made in the US. With initial development work completed, company is reportedly operating profitably this year.

Daily mileage of airmail flown in US is 74,000 as of today, with inauguration of service between Washington DC and Pittsburgh.

Sparks-Withington Co. to shortly sell first home sound movie machine, the Visionola; several film cos. including Universal to furnish films.

Forest planting by US agencies was 139,970 acres in 1930, up 24% from 1929; total planted is 1.798M acres, though planting has never kept pace with losses from wasteful cutting, forest fires, and erosion.

Receipts from observatory and promenade at top of the Empire State building running so far at rate of over $1M per year.

Construction cost of Grand Central Parkway through Queens estimated at $6M-$8M.

Chase National, largest bank in the world, uses an entirely different name for its Chinese subsidiary: Dah Tung Ning Hong, or Great Universal Silver Bank.

Week in review:

Stocks, after a weak start, "engaged in their most extensive recovery since Nov. 1929" after lowering of margin requirements by leading banks and brokers and decision of govt. to stop fighting the Vacuum Oil - Standard Oil of NY merger. Stocks in Paris rallied sharply in the last 3 days; stocks in Berlin hit lowest levels since 1925 early in the week but improved somewhat toward the end. Bond market also experienced a hectic week, starting "panicky" with many new record lows but staging a quick reversal in midweek with good recoveries in many issues; rails in particular saw "record breaking rally"; public utility bonds were relatively firm throughout and closed the week near record highs. Treasury's smaller than expected offering of $800M 3 1/8% bonds due in 1949 drew huge oversubscription of $6.3B and bonds sold in the market at 1 1/8% premium. Enormous Treasury financing of over $5B this year has apparently not disturbed US govt. bond prices. European issues were irregular, with German weak on talk of reparations revision. S. American govts. rallied, particularly Brazilian, although Peruvian broke after govt. default. Money markets quiet. Call money remained at 1 1/2%. Fed. Reserve member banks in NY continued liquidating security loans but “all other” (commercial) loans rose slightly; holdings of govt. and non-govt. securities rose. Foreign currencies irregularly lower; marks weak near gold export point, with Reichsbank exerting active support; pesetas gained on Spanish govt. decrees but outlook seen doubtful; Brazilian milreis firmed on rumored agreement with British bankers on solution for debt service. Steel production continued slow decline; no change anticipated before late summer; construction demand held up while automotive again fell slightly. Prices were generally steadier, with producers apparently more determined to avoid price cuts. Wheat hit new lows at midweek with July hitting 56 5/8 cents, lowest quote since 1896; prices then turned up after Canadian drought reports and rally in stocks. Cotton fluctuated near long-time lows, with July trading as low as 8.27 cents, lowest price on the futures market since March 1915.

Market commentary:

Market wrap: Bears renewed operations in the short Saturday session, while bullish element was not as aggressive and small traders appeared to withdraw; extensive setbacks from the rally highs took place in active stocks. Rails experienced profit taking; major industrials including Steel, Can, and GM pressured; reaction spread throughout the list and various trading favorites broke sharply, with Auburn 30 points off its recent high. Trading relatively light, but market closed with heavy tone. Bonds moderately active, prices slightly irregular; US govts. firm; foreign somewhat irregular with German bonds down moderately after govt. statement on reparations but issues of most countries relatively steady; highest-grade rails firm, second grade slightly easier; convertible issues down moderately following stocks. Commodities weak; grains soft on late reports of some Canadian rain; cotton down sharply near season lows on news of good weather.

Caution is favored in many quarters, but conservative observers favor gradual "accumulation of the standard stocks on reactions," and completing of long positions if resistance is shown when previous lows are approached; don't foresee long advance, but believe market could work substantially higher after technical reaction.

Stock market weakness attributed to "uncertainty over domestic trade prospects," doubts over staying power of the recent rally, nervousness over German demands for revision of reparations, and prospect of poor US Steel unfilled orders report for May. Filing of application for rail rate increase in the near future seen likely to benefit sentiment on rail securities. Eastern roads have already drawn up a rough draft of their reasons for requesting a 15% increase, and expect to have transport companies throughout the US convinced within a reasonably short time. Railroad authorities are optimistic on chances for getting the increase before year-end. Oil industry merger rumors are reviving due to govt. decision to allow Standard - Vacuum merger.

Recent heavy liquidation in AT&T attributed to "fright on the part of many small holders discouraged by the stock's persistent decline." Buying is said to have developed from "important sources." A leading broker says US Gypsum is likely to cover the full years dividends in the first half, a remarkable performance in view of current conditions.

Heavy oversubscription to new Treasury long-term bond issue seen indicating "investment capital has been piling up rapidly." This capital may "eventually ... find its way back into securities," first bonds and then dividend paying stocks, though "latter development ... may be delayed until much later in the year."

Rail freight figures in coming weeks expected to improve vs. 1930 due to heavy crops in many sections, particularly in the Southwest, and due to easier comparisons as general business began to fall sharply in mid-1930.

Editorial: The Royal Grain Commission in Canada recently found that trading in grain futures not only helps provide a liquid market, but "actually gives the farmer a distinct price advantage." We can't expect this to convince US critics of grain exchanges; "those who are hacking at them have political axes to grind." However, it may "lessen the submissiveness" of farmers who "are called upon to turn the grindstone ... when they learn that they are working against their own financial interest."

French Fin. Min Flandin rebuts criticism of govt. economic policies. Says French tariffs overall lowest in Europe; influx of gold not desired and due to abnormal world conditions; points to 4.2B francs in loans to Central Europe that France recently subscribed to.

Financial district is hearing reports of "some cooperative action toward temporary reduction in wages in certain industries." This would be considered favorable by groups believing one of the final steps in economic readjustment would be "liquidation of labor costs." Independent sheet-steel producers in the Midwest reportedly will get together in the next few days with object of stabilizing prices; many producers say current sales are unprofitable.

US exports in 1930 fell more sharply than some other countries (down 26.7% from 1929 compared to a 10.5% decline in Germany and 18.6% in Italy) but this was attributed to the fall in raw material prices rather than losing export markets to competition; the US held its share of markets in its major "customers," but those customers, including Canada, Australia, Argentina, etc. are heavy producers of raw materials and so suffered most from the price declines.

Economic news and individual company reports:

Creditanstalt situation possibly not solved after all. League of Nations control committee authorized Austrian govt. to issue 150M schillings of Treasury bonds, but there was difficulty selling them. Govt. forced Austrian private banks to take 100M of the issue, while German banks granted a 50M 6-month credit to the Creditanstalt to take the remainder. However, definite announcement by foreign creditors of "prolongation of credits" is needed to stop withdrawal of deposits, which has now reached 500M of a total 1.5B schillings. Austrian central bank holdings of foreign currency were 517M schillings on May 30 vs. 641M on May 7. Austrian central bank raised rate 1% to 6%. “Considerable unsettlement” seen in foreign currencies in coming days due to increasing seriousness of Austrian situation together with the reparations crisis. European capital markets continue to show heavy transfer of funds from Central Europe, “with anxiety tending to shift from Austria to Germany.” Central banks said cooperating to prevent export of gold from Germany.

Upturn in stock prices this week was reportedly an "electrical stimulant" to car sales. Contrary to numerous rumors, Ford reportedly is planning no radical changes to their car lineup this summer or fall.

New state and municipal long-term financing seen likely to set record high close to $2B by end of year as local govts. take advantage of strong municipal market; annual amount in past decade has usually been between $1.2B and $1.4B.

Market value of all NYSE-listed stocks June 1 was $42.534B, down $5.936B from May 1; average price of listed share $32.58 vs. $37.23. NYSE bond trading in May totaled $235.7M vs. $227.8M in Apr. and $227.2M in May 1930.

Despite cuts in dividends on rail stocks, 12 of 27 major rails failed to cover their current dividend rate in the 12 months ending in April; 3 more have already omitted dividends.

Investment Bankers Assoc. takes stand in favor of NYSE recommendations on investment trusts [similar to mutual funds and ETF's], including disclosure of holdings, care when buying securities from affiliated companies, methods of reporting profits and past performance, etc.

US Steel report of unfilled orders as of May 31, to be issued at noon June 10, is expected to show decline of 250,000-300,000 tons; operations dropped steadily in May but new orders fell more rapidly. Youngstown district steel output to rise 1% to 42% this week, first rise in 13 weeks, due to pipeline demand.

Interior Sec. Wilbur says no relief in sight for midcontinent oil industry until East Texas production is brought under control. Drastic curtailment seen necessary to achieve new California production limit of 427,500 barrels/day (excluding Kettleman Hills).

Canadian wheat condition reported most critical in 29 years; no improvement in conditions; urgent need for rain. US spring wheat still in need of rain in some sections, but overall US wheat crop seen large unless something unforeseen happens.

Fisher's wholesale commodity index hit another postwar low of 70.0 vs. 70.3 prev. week and 71.0 two weeks ago.

Total gross income for 105 telephone cos. in March was $98.5M vs. $99.5M in 1930; operating income $69.2M vs. $67.8M

Italian Premier Mussolini says govt. has decided on immediate measures to help domestic wheat growers, including requirement to use domestic wheat in flour.

Assets of Kansas City Joint Land Bank, which went into receivership in 1927 with charges of mismanagement, sold at auction for $26.750M to West Coast financier A.C. Stewart. Union Trust of South Bend, Ind. closes; deposits of $4.5M.

Detroit index of employment May 31 was 80.4 vs. 83.5 on Apr. 30 and 109.2 on May 31, 1930.

9 of 21 W. Virginia coal mines affected by United Mine Workers strike have signed closed shop agreements with the union; 2,700 miners will return to work.

Westchester County foreclosures in May were 77 vs. 94 in May 1930.

Companies reporting decent earnings: Firestone Tire & Rubber (showed improvement over poor 1930 earnings).

Electric utility special:

While market value of 19 important utility and holding companies has declined about 30% in the past 2 1/2 months, they have still been more resilient than the general market due to greater earnings stability. As of June 5, the companies traded for 14.2 times earnings for the year ended Mar. 31. Public utility bonds have found strong favor with investors seeking safety, being among the strongest classes of bonds in the current depression. In the case of holding companies, which have no property other than controlled subsidiaries, debentures are the instrument used, which offer “numerous advantages” over separate financing by subsidiaries.

Unlike other industries, electric light and power is seen as not close to saturation, with large potential demand remaining in both homes and farms. Current total of US wired homes is about 20.4M; during 1930 they used an average of 518 KWHr, at an average price of $.06 per KWHr.

Public utility activities have been investigated for the past 2 or 3 years by various branches of govt. including the FTC, but the next session of Congress is expected to take further steps including investigations into holding companies, possible regulation of interstate power movement, etc. Proponents of govt. control of utilities are exerting widespread efforts to build up public sentiment, including underhanded tactic of mailing out speeches using Congressional franking privileges.

Muscle Shoals has been “political football” for over 100 years, during which “Congress has wrestled ... trying to find some legitimate and reasonable excuse to convert it into an agency for govt. operations.” By contrast, Gov. Roosevelt's signature on the Cornaire bill ended a mere 20-year controversy on development of St. Lawrence River power, which will now be done under control of a state Power Authority.

Capsule histories of Middle West Utilities by Martin J. Insull, pres., and of recent utility industry developments by John J. O'Brien, Standard Gas & Elec. pres.

Detailed looks at individual electric utility and holding companies, including United Corp., Stone & Webster, United Light & Power, The North American Co., Pacific Gas & Electric, American Water Works & Electric, United Gas Improvement, Niagara Hudson Power, Commonwealth Edison, Edison Electric Illuminating of Boston, Connecticut Electric Service.

Britain, a pioneer in the electrical industry, is nevertheless seen offering good opportunity for expansion due to per-capita usage only about 1/3 that in the US.

French cinema report:

The talkie has caught on in France beyond expectations. The first theatre installation, by MGM, was little more than two years ago; 1929 saw 6 talking screens, a year ago it had increased to 120, and now it's more than double that, including such landmarks as the Moulin Rouge, “where once the can can attracted the curious and adventuresome.” Production studios have also been wired, and the native French sound film is thriving, using the talent readily available in Paris. “Unlike the American film, which has accustomed its public to squanderous standards of production, to great singing and dancing choruses ... and to all costly paraphernalia with which Hollywood packs its films, the French film sonore has leaned heavily upon its plays.” Productions tend to modest budgets, “fine plays adequately cast but without star emphasis,” with dialogue “written by master craftsmen.” For now, the US film industry has “forfeited to native producers the great middle bulk of its sales,” but the French appetite for talkies is ultimately expected to offer good opportunities for US producers; some have set up branch production units at Joinville, Billancourt, and Nice to make multi-language films for the whole European market.

Jokes:

"Tourist - Was that one of your prominent citizens? I noticed you were very respectful and attentive to him. Garage Man - Yes, he's one of our early settlers. Tourist - Early settler? Why, he's quite a young man yet. Garage Man - True enough. I mean he pays his bills the first of every month."

Reporter - How did you know to raid that barber shop? Dry Agent - Well, it struck me as odd that so many people were buying hair restorer from a bald barber.

Theater Producer 1 - There are a hundred ways of making money in show business. Theater Producer 2 - Yes, but only one honest way. Theater Producer 1 - And what is that? Theater Producer 2 - Ah, I thought you wouldn't know it.

The Irregular Blather June 7, 1931

No Journal was published Sunday, June 7, 1931.

Yes, it's another Larry King-style stream of consciousness column. (Note: That link is not an actual Larry King column but an Onion homage that I think captures the flavor even better than the original - contains some bad language).

One of the more uncanny coincidences that I've come across writing this blog is the almost-to-the-day timing of all hell breaking loose in the banking world thanks to a crisis in a small European country (Greece now, Austria then - see the Creditanstalt stories starting May 15). Even more eerie is the strangely familiar way the Creditanstalt affair was reported at the time. I had previously heard of the episode, but only as a straightforward bank failure that turned out to be one of the Depression's turning points. However, as you can see from the blog, the initial set of stories is more along the lines of what we're hearing today - government and central bank bailouts, all is well, wait a minute, maybe it's not ... These credit crises really do seem to be like mattress fires. I mean, you fall asleep smoking, the bed catches fire, you wake up and douse the flames and all seems well - but just as you lie back and light up another cigarette the darn thing flares up again ...

And another thing ... about those uncanny bank trading results last quarter - all those banks that pitched a perfect quarter, making trading profits every single day. Am I the only one who thought of Madoff's uncanny succession of positive months when I read about that? Or Long Term Capital's? Or Bill Miller's streak of years beating the S&P 500, after which he promptly gave it all back and them some in the past few years? I guess what I'm saying is, a preternaturally consistent investment record, if not a red flag, is at least a blinking yellow light. For some reason, this quality of consistency is very attractive to people (probably why Madoff chose to fake it), but almost all great investors I know of have bad months and bad years, and a conversely a curiously large proportion of the investors that report few or no bad periods eventually, if not they don't turn out to be frauds, at least experience some major trouble.

And one more thing ... about those occasional big up days we've been having in the past few weeks - you've probably seen some cautionary commentary like this, but here's one with a very nice chart to boot. Moral of the story being, I don't think big up days are very strong evidence one way or another, but if anything they seem to be more typical of bear swings than bull ones - you can see another example in the daily Dow industrial quote in the blog, which during during the recent severe decline showed quite a few explosive up days (+3.3% on June 5, +7.1% on June 4, +3.7% on May 9, +5.3% on May 1).

Saturday, June 6, 1931: Dow 133.33 -1.40 (1.0%)

Assorted historical stuff:

“Scarface Al” Capone indicted by Federal grand jury on income tax evasion charges.

Editorial: While Sec. of State Stimson's upcoming European trip is for rest and recreation, we hope he'll take the opportunity to inform himself with an open mind on political and economic conditions there. The depression has advanced to a severity that calls for "honest, fearless recognition of existing facts" and demands that "corrective measures [be] taken even if they make necessary some concessions on our part." Some of the best US business minds believe the major cause of world depression "is found in the treaty of peace with Germany, which substituted for a military war one of politics and economics." It's time for us to admit the link between German reparations and allied war debts and to recognize that a restored Europe is necessary for our own welfare.

German Chancellor Breuning, at a press conference, makes clear he will bring up revision of reparations at Chequers meeting June 6. Says Germany has tried 4 times in past 14 months to cut spending, introduce taxes, and do everything possible to maintain sound financial condition. However, political difficulties and radicalism are increasing; “It is not possible for us to solve our economic problems single-handed. A solution requires the friendly cooperation of all the world.” German Pres. von Hindenburg signs decree that will reportedly produce 1.8B marks ($429M) through a combination of tax hikes and spending cuts; this should leave a surplus of 560M marks after closing the budget deficit of 1.240B.

Russia plans 136% rise in tobacco planting to meet domestic and export demand; conditions in Ukraine most suitable.

Boeing gets orders from the Navy for 30 "fighting planes" valued at $494,415, bringing total 1931 military contracts to 165 planes and parts valued at $2.036M.

Police in several cities have recently adopted a "gas rifle" to quell riots without bloodshed. It squirts a gas that affects the mucous membranes, putting victims out of action for about half an hour; it works indoors as well as out.

The new 50 story RCA building, made possible by scientific advances in radio over the past decade, nevertheless bows to superstition in having no 13th floor.

The huge and rapidly growing California prune industry got its start from trees imported a generation ago from France.

Market commentary:

Market wrap: Stocks experienced a day of fluctuations that was on the whole encouraging regarding strength of the rally. Market opened under pressure from profit-taking and bear forces; however, powerful support appeared after the first hour and buying resumed throughout the list around 11 o'clock. Rails developed particular strength, with majors including NY Central, Atchison, Union Pacific and B.&O. substantially higher; strength broadened to major industrials and volume increased. Profit taking set in again during the afternoon, bringing some setbacks in leaders, but renewed demand developed in the final hour; some weakness near the close. Rails closed higher on the day, though industrials and utilities were lower. Bond trading slowed but prices generally improved; highest-grade govt., rail and utility issues were firm close to yearly highs, while many recently weak issues rallied, in some cases sharply; speculative and convertible bonds rose in response to the rally in stocks; foreign list featured sharp rallies in Brazilian and Australian govts. and strength in Italian. Commodities mixed; grains firm with wheat up sharply on unfavorable Canadian and Pacific Northwest crop reports; cotton down sharply. Copper held at 8 1/4 cents; domestic sales small but foreign heavy; report for May expected to show large rise in inventories.

Conservative observers rather cheerful; say technical reaction was to be expected and advise clients inclined to go long to gradually buy their favorites.

In the bear market since Sept. 1929, initial rallies after long periods of decline have invariably been short-lived, giving way to secondary dip before sustained recoveries several weeks long. However, close examination of the rally this week gives some encouraging signs of breaking away from this pattern. On the second day of the rally (Thursday) volume was well maintained and the industrials closed near the day's highs; stocks also traded in higher ground yesterday (Friday). When the 1919-21 bear market ended in Aug. 1921, a rally several months long ensued without a range-bound accumulation period; this has caused Dow theory students to be alert for signs the current recovery might be able to continue without a secondary dip, though Dow theory would be more positive if market tests brought strong resistance by either the rails or industrials.

It's become apparent that short interest in the rails was much larger than realized; NY Central was a recent target, bears apparently had to bid prices up to cover during the recent rally. Brooklyn-Manhattan Transit reportedly being accumulated by informed interests who say it will benefit from NY City transit unification.

Recent period of liquidation seen making “considerable progress ... in lowering the market to what many consider a 'saner' level”; high-priced shares that were overvalued based on current earnings came down sharply, while those “thoroughly liquidated and deflated previously” acted better. It may now “be possible to realize long-range stability, and then establish a base for a good recovery late this year, when there should be seasonal improvement in general business.”

A. Macauley, Packard Motor pres., says auto manufacturers in strong position to survive depression, but dealers and distributors endangered by “destructive trade practices” including excessive trade-in allowances due to buyer's market.

Editorial: a recent report attributed to the British Labor Party said Germany is seriously considering suspension not only of reparations payments but of interest on all foreign loans. However, German spokesmen have repeatedly emphasized that Germany has no intention of defaulting interest payments to private bondholders; a recent statement by Dr. H. Schacht, former Reichsbank head, was absolutely clear on this point, and this principle “has guided all nations jealous of their honor and credit.” While Dr. Schacht was speaking as a private citizen, “his standing and previous official connections undoubtedly made him fully aware of the German national sentiment on such a vital matter - and his remarks were received with that significance in responsible banking quarters here.” “Authoritative circles” in London said there was absolutely no foundation to the Labor Party report of a German moratorium on bond payments. German marks fell to a new yearly low, close to the gold export point to NY; Reichsbank is defending currency through sales of foreign currency and gold held abroad.

S. Vauclain, Amer. Locomotive chair.: “After passing through panics as an individual since 1873 to date, I can say that each panic has been followed by a period of prosperity greater than ever before, and the present period of depression will prove no exception.” Says one of greatest problems facing the country is lack of confidence; “Instead of worrying let us think up ways of getting out of mire and our duration there will be short.”

Economic news and individual company reports:

Bank of US trial continued with cross-examination of chief defense witness I. Kresel; focus was on Kresel's generally sharp memory of long-past events; by contrast, Kresel has been able to recall curiously little about crucial transactions involving cancellation of an $8M debt by two bank affiliates. A. Mobley, Georgia State Banking Superintendent, sued Philadelphia Fed. Reserve Bank for libel, charging notations made on checks payable to the Citizens-Floyd Bank & Trust of Rome, Ga. caused a “quiet run” on that bank and forced it to close in Nov. 1930.

NYSE modifies previous questionnaire on short positions to only ask for statistical information rather than names of short sellers.

Chicago financial situation seems unchanged in spite of conferences with bankers; School Board unable to meet payrolls Friday and is now $5.145M in arrears. H. Steffens, former Detroit Comptroller, hired by bondholders' committee for Asheville and Buncombe County to survey situation and help local boards create budget for next year; state local govt. commission will cooperate.

Texas Gov. Sterling is in extensive conferences daily with independent East Texas oil producers in effort to induce them to agree to curtail production; tentative offers were made by producers to accept quota of 300,000 barrels/day but this was rejected as so high it would be valueless. Texas Attorney Gen. says Texas Railroad Commission has no authority to prohibit rails from transporting oil produced in violation of curtailment.

Eastern rail president's conference agrees 15% freight rate increase is needed to add 10% to gross income and maintain properties adequately; will ask Southern and Western rails to join in request.

New bond offerings in May were $287.9M vs. $440.3M in April and $630.9M in May 1930; first 5 months were $2.140B vs. $2.765B in 1930 and $1.562B in 1929; May total was dominated by public utilities and municipals.

Increase of $52M in Fed. Reserve credit outstanding in June 3 week likely due to holiday and first of month credit rather than credit stimulation of business or Fed. Reserve easy money policy. Liquidation of security loans continued, but some encouragement seen in $4M increase in “all other” (commercial) loans and purchase of $14M in non-govt. securities by NY banks. However, govt. securities remain favored, rising $20M to new record of $1.525B. US gold holdings fell $2M last week, first weekly decline in over 8 months; decline attributed to exports to Mexico as part of commercial bank plan to remedy currency situation. US gold holdings represent cover for money in circulation of over 103%.

Condition of Western Canada wheat crop on May 31 poor; at 75% of normal vs. 96% in 1930; drought area includes over 80% of wheat belt; disastrous situation will result unless generous rains come in next 10 days, though substantial improvement is still possible given sufficient rain.

French Labor Min. reports unemployment has shown gradual decrease indicating it will be wiped out by next autumn.

Report of Royal Grain Commission headed by Sir Josiah Stamp to Canadian House of Commons finds grain futures dealings beneficial on the whole.

Ecuador will embargo foreign crude oil and products to aid domestic producers.

Sen. Pittman, (Nevada) in Shanghai, predicts world silver conference within three months despite Sen. Smoot's announcement of foreign govt. opposition.

Massachusetts legislative committee reports on exhaustive investigation of “extent of penetration of 'outside' interests into the New England railroad field.” Recommends unification of all but 2 New England lines into one system to avoid “future foreign control.” [I think foreign here means outside New England].

Florida legislature approves bill enabling counties to allow pari-mutuel betting at racetracks after referendum; seen as tourist boon.

Bangor & Aroostook RR earnings continued to hold up better than other class 1 rails, covering dividends more than twice over in year ended April.

Chris-Craft experiencing heavy demand for new $795 motor boat (runabout seating up to 6, driven by 43 hp motor giving "flashing acceleration and smooth speeds" up to 30 mph). Los Angeles formed first power boat association; held first regatta on Memorial Day.

Company reports since Apr. 1: 202 companies reported higher earnings vs. 1930 and 733 lower; 802 dividends unchanged, 13 increased, 164 cut.

Companies reporting decent earnings: Irving Air Chute, Equitable Office Bldg, Alaska Juneau Gold Mining.

Movie:

Daybreak - adapted from the novel by Arthur Schnitzler, starring Ramon Novarro. [Note: Schnitzler was a doctor turned controversial writer, branded as a pornographer for his play Reigen, later made into the film La Ronde; works were cited as "Jewish filth" by Hitler; Kubrick's last film Eyes Wide Shut was based on Dream Story by Schnitzler]. Novarro again plays a dashing lieutenant, this time Willi of the Austrian Emperor's Guards. Conducts many love affairs. Has rich uncle who gets tired of paying his debts and insists on his betrothal to a rich girl. Falls in love with Laura, a poor music teacher, but explains he could never get permission from the Emperor to marry a commoner and offers her money; she bitterly refuses and becomes mistress of Herr Schnabel, a money lender. Attempts to win enough money at chemin de fer to win Laura back; loses to Herr Schnabel but is saved from an honorable suicide by his uncle, who finally relents and allows him to resign from the Army and marry Laura.

Jokes:

He - Use miniature in a sentence. She - The miniature asleep you start to snore.

Isn't it strange the business depression has lasted so long when everybody you meet knows what caused it and how to end it?

Mark Twain observed that in New York people always seem to talk about money. "Now in Hannibal, Missouri, where I was brought up, we never talked about money. There was not enough money in the place to furnish a topic of conversation."