Tuesday, September 22, 1931: Dow 110.83 -0.91 (0.8%)

Note: Sorry for the delay in posting, but as you'll see this day was a pretty eventful one with about double the normal quota of news, and I didn't want to skimp on the coverage because of the significance of the events. Also, I'd put this day as a whole in the Strangely Familiar Dept., although to do so you'll have to apply the [US now = Great Britain then] mapping that I proposed over a year ago:
I'm ashamed to admit ... it hadn't occurred to me that while the current situation might bear some resemblance to 1930, the countries might have to be shuffled around to really make things correspond ... Well, if China now is us then, then who then are we now? Let's see ... proud owner of the world's reserve currency franchise ... running sizable merchandise trade deficits ... I think I got it! (Hint: Baring Attire).
(Baring Attire was, of course, an anagram for Great Britain.) When you apply that substitution, the current brouhaha over the dollar's dramatic decline does have a familar feel ...

Momentous Event Followed by Curiously Reassuring Commentary Dept.:

Britain abandoned the gold standard for at least 6 months, suspending its legal commitment to sell gold bullion in exchange for sterling "to any person who makes demand" at the Bank of England; also raised discount rate to 6% from 4 1/2%. Sterling broke below $4 (from $4.85 on Saturday), but rallied to close at $4.33. Other currencies fluctuated widely, but with little actual trading; currency trading was suspended at many foreign centers. Most stock markets worldwide were closed, including those in London, Berlin, most of Europe, and Tokyo; markets remained open in NY, Paris and Vienna. Stocks in NY and Paris suffered "drastic liquidation"; NY rallied off early lows, but Paris market remained very weak, with leading shares off 12% to 15% and brokers limiting sales to 5% of holdings. Paris officials discussed closing the stock exchange there, indicating “possibility that the NY exchanges might have to bear the brunt of international liquidation.” Stock exchanges in Toronto and Montreal remained open, but restricted all trades to be at or above Saturday's close and prohibited short sales; this “had the effect of stagnating business.” London saw a small amount of stock trading in the “unofficial market held in the street” Monday; prices rose appreciably from Saturday's close. British banks in Paris temporarily stopped cashing checks drawn on London banks. Swiss banks in Geneva were “refraining from all foreign dealings.”

"Now that Britain's heroic but futile effort to maintain the pre-war value of the pound has come to a climax, the future of many other exchanges and even of the gold standard itself hangs in the balance." Other currencies "have been widely influenced in the past by sterling." Current British action seen as a temporary expedient to give Britain “a breathing spell” to put its “economic and political affairs ... in order.” However, next steps, including possible tariff and likelihood of eventual return to gold standard, are uncertain. Devaluation of sterling now seen by most as inevitable, though no one can yet say to what level and a minority still believes Britain should maintain sterling's value in order to keep its “primacy as a world money center.” "Sterling will probably be allowed to find its natural level, without artificial influence"; bankers believe sterling is unlikely to fall much below $4 unless “unduly depressed by speculators.” Britain may get some benefits as well as disadvantages from devaluation; NY bankers contrasted England's long efforts to maintain sterling's value with past devaluations by France, Italy, and many other countries, by which they reduced their internal debt burden and eventually brought gold back. Immediate effect on budget balance seen as adverse, but long-term effect probably favorable. Devaluation would cause some inflation, but “there is in England considerable opinion that inflation would be helpful,” and may even be necessary for economic recovery. Industrial leaders believe the pound should be reestablished substantially below the old value, arguing benefits to British industry won't be felt unless pound is below $4.40. International currency conference seen as inevitable; "out of such a conference may come a real solution to the gold problem which has finally broken history's most enduring currency."

British Parliament was in session Monday to ratify the govt. action taken Sunday. A bill was introduced for suspension of the gold standard, with passage assured. Chancellor Snowden said there would be no restriction on import or export of gold. Labor said it would not oppose the bill provided govt. answered questions on its operation. The House of Commons was quiet, with the recent “militant noisiness of the labor opposition” not in evidence. Editorial reaction in the British press was “virtually unanimous in calling the temporary abandonment of the gold standard one of the greatest blessings that could befall the country”; action seen stopping drain of gold from Britain and leading to improved business and higher security prices.

Editorial generally approving of the British action; "Protection of its remaining stock of gold from attack by apprehensive bankers in other countries is not only Britain's obvious duty to herself, but the measure best calculated to halt a disorderly and demoralizing transfer of gold and credits which was lately assuming the character of an international panic. Stripped of its dramatic and sentimental aspects, it is only what has been done before in emergencies." Action may persuade the US and France "to a more actively helpful cooperation for world stability then they have yet extended." Too early to say if measure will lead to revaluation of the pound "which it unavoidably suggests," but in any case reduction will "almost certainly be nothing like as severe" as those already performed on leading European currencies. Notes reassuring declaration by British govt. that "it has no intention of impairing ... the integrity of British obligations abroad"; since these are mostly payable in foreign currency, they "will presumably be so met as they mature."

Washington officials positive; “foresaw the action as probably having a salutary effect on British finances and trade after the first shock of the announcement had passed,” while not attempting “to minimize the momentous character of the step.” More intriguingly, officials saw the British action bringing a solution of the international debt problem nearer, since it clearly demonstrated the interdependence of financial conditions in different countries; while the British budget crisis and “recent naval troubles” contributed to the crisis, the main cause was London's inability to withdraw short-term loans from Germany after the crisis there; this in turn caused nervousness and capital flight from London. Therefore, the British situation indicates the need to overcome “political opinions in France and the US” and reach a “final settlement of the problem of reparations and inter-govt. debt.” US officials knew some “drastic action” would be needed at least 48 hours before the British announcement, but decided against the risky and uncertain alternative of “coming to British support in a large way, such as by underwriting her foreign obligations.” Having decided the situation would be handled by British action, US officials then “put up to bankers in NY the working out of means to cushion the effect here,” continuing meetings with them until late Sunday.

J.P. Morgan, "smiling and smoking a pipe," issued statement calling British action "a hopeful and not a discouraging event, and one which brings the great work of the government much nearer to completion."

Bank of France Gov. Moret says "France has no reason to become panic stricken. Her money is solid and her gold and dollar credits in NY render the franc absolutely unattackable." Points out recent French credits to England are repayable in francs. French bankers refuted official British statement charging major withdrawals of foreign capital from London, insisting this was true in June-July, but that recent withdrawals were mostly British.

There was some confusion on whether Britain would receive additional aid from the US and France. French reports stated that additional credits would be extended, but NY bankers said this was premature. Informed sources said French PM Laval offered Britain a new $156M credit on Friday when Chancellor Snowden called him and reported the gravity of the situation. However, Snowden declined temporarily, wishing for a larger credit with US participation.

Cotton and wheat prices rose sharply in Liverpool; some believe British decision to suspend gold standard will induce consumers to buy in anticipation of higher prices; London rubber and metal markets also advanced.

Canadian PM Bennett announced Canadian govt. proposed to maintain gold standard. Canada will ship $500,000 in gold to NY; current reserves are $70M, or 52.4% of notes in circulation (vs. 33.2% in Sept. 1929). Sir H. Holt, Bank of Canada pres., said Canada shouldn't be affected adversely by British action; Sir C. Gordon, Bank of Montreal pres., said he didn't expect any drastic consequences for Canada; T. MacAuley, Sun Life of Canada pres., said immediate effect might be disturbing but long-range one will be good.

Japanese financial leaders say effect of British financial crisis on Japan will be slight since she has almost no short-term credits outstanding abroad, though US reaction to the situation may have indirect effect.

Effect of sterling crisis on German economy “doubtless will be great,” but immediate danger to the mark isn't anticipated since current reserves and the existing agreement to maintain short-term loans should suffice for defense of the currency. “All authoritative circles have vigorously rejected the idea that Germany should abolish the present relations between the mark and gold.”

Argentina shipped another $5M in gold to the US yesterday, making a total of $25M shipped to help pay $50M in notes maturing Oct. 1.

NY banking scuttlebutt on the British crisis:

NY bankers “view the situation calmly”; note suspension of gold payments is not unprecedented in emergencies, and are apparently unanimous that “this was the wisest course for England under the circumstances.” At the same time, “none seeks to minimize the far-reaching adjustment that inevitably must follow in international trade and credit.”

NY bankers “see silver lining” in British action, particularly as regards position of NY banks; see “a tremendous opportunity for NY in financial leadership” as the world will now “look to America as the principal safe repository for banking funds and investments.” Since NY “is now the principal financial center on a gold basis, there is no reason to anticipate that foreigners will dump securities on this market. On the contrary, the present situation should now invite buying in American securities from all over the world.”

NY banking position seen as strong; banks have protected themselves over the past few weeks by withdrawing most balances from London and protecting the rest by selling forward sterling, so stand to lose very little by depreciation of sterling; situation is therefore different from recent German crisis when banks were unable to get out of short-term loans there. Paris banks, by contrast, are believed to still have large amounts in London. NY banks also have over $100M of “surplus reserves” with the Fed. Reserve, which is enough to expand loans and deposits b $1B; “such funds could be used, if necessary, to keep financial markets orderly.” “No doubt is felt as to England” fulfilling its obligations in gold in the US, including the recent US credits, which are payable in dollars.

NY bankers are "strongly opposed" to closing of the NYSE "under any circumstances"; believe extensive decline in securities over past 2 years has made "technical position of collateral underlying loans very strong"; with brokers' loans down to record low of $1.3B, "the NY banks can safely undertake to take care of the Stock Exchange situation."

"Bankers in a position to know declared that no banking pool to support stocks had been formed." However, before the market open officials of leading banks assured the NYSE they "were inclined to be lenient" on calling margin loans.

Possible inability of England to keep supporting sterling "has been hanging over the market for some time, causing general nervousness" worldwide.

England has "temporarily exhausted her liquid resources available for support of sterling" due to heavy withdrawals of foreign funds, estimated at 200M sterling since mid-July. It's believed England has virtually used up both the $250M and $400M US-French credits in buying spot and future sterling for support operations.

Assorted historical stuff:

Pres. Hoover addressed American Legion convention: "The world is passing through a great depression fraught with grueling daily emergencies alike to men and to governments." Attributes current gravity of depression to European situation, which in turn was caused by dislocations due to the war. "Our economic strength is such that we would have recovered long since but for these forces from abroad. Recovery of the world now rests ... in no small degree" upon the US. Warns the US govt. can't sustain additional spending without "grave risks"; asks veterans to defer demands. Says taxation of rich no solution; even if "taxed to the point of diminishing returns ... the deficit ... would not be covered." Accepts offer of Legion to help with relief for this winter, but asks for a "greater service" in maintaining stability of the US govt. by preventing "additional burdens on the government from any quarter whatsoever." Reception generally favorable, though shout of "we want beer" broke out as Hoover turned to leave, spreading "throughout the hall in a tremendous roar. ... Mr. Hoover ... appeared to take no notice of the beer cry."

A number of legislators are expected to try to enact export subsidy plans when the next Congress meets; possible plans include the "equalization fee" and the "export debenture." However, little possibility is seen of the proposals becoming law, as the Administration is firmly opposed to "measures which are intended to force products onto world markets already depressed."

War Dept. says will seek no increase in any part of the army, in line with Pres. Hoover's austerity policy.

Australian govt. debt as of June 30, 1931 was $8.041B (total Commonwealth and state) [note: a rather staggering number, considering the US, with a population about 20 times larger, had total Federal, state and local govt. debt of about $30B].

State Dept. says friendly toward any feasible plan to limit armament; ordered Hugh Wilson to participate in League of Nations discussion of proposal to halt all arms construction until disarmament conference.

State Dept. reports Japan-China difficulties have become more serious in past couple of days; widespread Japanese military movements now confirmed; Japanese army has seized strategic locations. "On the other hand, it has been confirmed through diplomatic channels that the Japanese cabinet has moved to stop hostilities." Chinese govt. at Nanking to lodge protest with League of Nations.

US Consulate in Mexico says many US workers and technicians are leaving Mexico for the US due to new Mexican labor code requiring 90% of all employees to be Mexican citizens.

Census of India reports population of 350.4M, of which Hindus number 238.3M and Muslims 77.7M [note: I assume this includes Pakistan].

US employees accustomed to bathing in the fresh waters of Gatun Lake, part of the Panama Canal, got a scare recently when a man-eating shark was caught in the lake. Lock operators speculated the sharks could have entered the lake from either ocean by closely following behind ships.

[Note: Sheer Genius Dept.] NY City's fire commission is considering abolishing sirens on all fire engines at night to avoid disturbing the sleep of thousands. As a substitute, the engines would throw powerful beams of lights on the streets ahead to stop traffic.

While London may be figuratively darkened by "lowering clouds of anxiety," the city at night is now in a "blaze of glory," thanks to the International Illumination Congress now taking place there; British electric cos. are staging the "greatest lighting exhibition ever. ... The joyous reaction of the British public ...is a cogent argument for the increased use of electricity for other than strictly utilitarian purposes." London may repeat the history of NY's Great White Way, where competitive movie advertising "has made that crooked street blaze anew" and created an "orgy of light."

Market commentary:

Market wrap: Stock market opened under "bewildered" conditions, with talk of suspending trading as in London and Berlin. "Drastic liquidation" broke out at the open, with 1.1M shares traded in first half-hour and many new lows, though conditions remained "fairly orderly" (total volume for the day was 4.4M). However, impressive support developed after the initial selling had been absorbed; brisk rallying followed, with sharp advances off the lows in leading shares; heavy short covering by leading bears including Bernard E. Smith reported; improvement was largely maintained to the close, despite some late setbacks. All classes of bonds fell after England's abandonment of the gold standard and the closing of many foreign stock markets. Foreign bonds fell sharply, particularly those payable in gold in the US. "The depreciation of fixed-income ... securities from countries and corporations in all parts of the world was enormous." Domestic rail, industrial and utility bonds averages hit new yearly lows, with the Dow average of 40 corp. bonds down 1.27 to 88.80, although there was some rallying in late trading. "Scared selling carried the best quality issues down with the weak," though US govts. resisted the general decline and closed with only small losses. Grains hit new lows, with wheat futures plunging over 3 1/2 cents; however, later rally recovered over 2 cents of the loss. Cotton fell to new lows in spite of rally in British cotton market. Copper buying small, price still at 7 cents/pound. Cocoa plunged to new record low. However, silver was strong, rising 1 1/2 cents to 29 1/4 [note: may be due to anticipation of Britain adopting monetary silver].

Dow industrial average closed at a new bear market low; there were no new yearly highs and 482 new lows.

Stocks have recently "entered the fifth period of convulsive liquidation" since Sept. 1929. The dramatic swings in the Dow so far include: decline from 381 to 198 (Sept. - Nov. 1929); rally to 294 (Apr. 1930); decline to 211 (June 1930); rally to 245 (Sept. 1930); decline to 157 (Dec. 1930); rally to 194 (Feb. 1931); decline to 121 (June 1931); rally to 156 (June 1931); decline to 111 (Sept. 1931). Declines through 1930 attributed mainly to domestic business downturn; this was supplemented by the numerous bank failures in Dec. 1930, and most recently by the British difficulties. However, given that "the news from London over the week-end constituted one of the severest shocks which the market has been called upon to withstand during this epochal readjustment," resistance shown by leading shares indicated "the world-wide economic unsettlement had been largely discounted by the decline in stock values over the last two years, which has been by far the most sweeping on record. With the worst phases of the British situation is now public ... strong groundwork has been prepared marketwise for an eventual upturn in anticipation of international improvement."

"Brokerage fraternity confused" after recent "rapid march of events in the finances of the world ... but all hands agree that there can hardly be any more bad news that can match with what the market has had to stand in past months. Wall Street believes that the big inflation in production not only has been eliminated, but that in many instances there are actual possibilities of the pendulum swinging too far in the other direction."

Wall Street opinion on the British action seemed to improve through the day, as reaction in Britain was positive and opinion was expressed that the action would end the recent severe strain on US financial markets from efforts to protect sterling.

Margin calls have reportedly been relatively light in the past couple of weeks in spite of the severe market decline.

Heavy foreign selling of US securities has gone on for some time; selling from Britain and Holland has been "continuous, particularly in the bond market."

British capital has been "jolted severely by its worldwide investments," particularly in S. American govt., rail and industrial issues; these have been sinking steadily.

While AT&T may not cover its dividend in Q3, "undoubtedly, the management ... would not consider any revision until it had been demonstrated clearly that it ... would not be earned by a fair margin for some time."

Former Sec. of State Kellogg returns from abroad; says "we are certainly not going to correct this depression by legislation"; calls for control of spending at all levels of govt.; blames depression on "heavy burden of taxation, undue inflation and the high price of commodities."

H. Doherty, Cities Services pres., says oil business could have ridden out the economic storm easily if sane methods of production had been followed; repeated earlier recommendation for unit (cooperative) development of each oil area.

M. Holland of the Nat'l. Research Council urges more extensive use of scientific research by industrial cos. as means of hastening business recovery.

E. Loomis, Lehigh Valley Rwy. pres., criticizes GE pres. Swope's proposal for stabilization of industry by govt. supervision as too drastic; asks "why Mr. Swope should urge that we engage in a frankly socialist experiment at a time when the state to which England has been brought by a similar indulgence in paternalism, is so prominently in the public eye." Says while US business men are hard-pressed by the depression, he cannot believe they are ready to give up and admit they cannot meet the situation.

Economic news and individual company reports:

Editorial praising "courageous" decision by the NYSE to remain open; this "was right, as the results already abundantly prove. ... Fortunately, the Exchange governors held to their fixed principal that the Exchange is the place for men to express their minds freely and publicly ... The result, so far as Monday's transactions register it, is a judgment from American financiers and investors that the British departure from a complete gold standard is something to which the world can adjust itself with comparative ease." NYSE pres. Whitney warned that in view of the "grave ... emergency created by the suspension of gold payments in England, the governing committee resolved that short selling" at this time would "tend to bring ... demoralization in which prices would not fairly reflect market values," and therefore would violate the NYSE constitution. Announced NYSE would "require all members to report in detail daily, beginning today, all short positions carried and for whose account." Following the NYSE warning against short selling, many lenders of stock [to short sellers] began calling in the certificates, leading to "a squeezing of shorts" that sent some issues "skyrocketing," particularly among the rails. However, "it soon became evident that this calling of stock loans did not meet with the approval of officials and the practice was promptly terminated."

M. Steuer, counsel for Bank of US depositors, asked Gov. Roosevelt's approval to sue NY State to recover depositors' losses on grounds of misfeasance on part of Banking Supt. Broderick in not closing the bank in June 1930. Attorney for Bank of US stockholders urges Broderick to delay action assessing stockholders for depositors' losses, alleging fraud in stock sales to “small trade people.”

Bank of Pittsburgh, N.A. closed; deposits $47M. Highland Nat'l. Bank closed; deposits $3.9M. Franklin Savings & Trust closed; deposits $2.8M. Capital Trust of Schenectady closed; deposits $1.8M. NYSE house of Schuyler, Chadwick & Burnham suspended for insolvency.

Nat'l. Surety Co. reports embezzlements by employees up over 17% in past 18 months.

Texas Railroad Commission's new order expected to reduce East Texas oil production from recent peak of 432,150 barrels/day to about 360,000; in near future, Commission may further reduce allowable production per well and limit new drilling, which has continued unabated. East Texas oil now at 68 cents/barrel.

ICC now hearing final arguments on 15% rail freight rate increase; decision expected around third week of Oct.

Editorial approvingly noting attacks by Maryland Gov. Ritchie [a Democrat] against “govt. ownership-operation theories” for public utilities advanced by Sen. Norris and Gov. Pinchot [both Progressive Republicans]. “Here at least there is no Democratic-Progressive alliance.”

Cuban Treasury Sec. assures Cuba will meet all obligations in spite of crisis.

Jersey City postponed sale of $4.4M in bonds scheduled for today "due to unsettled conditions in securities markets."

Quebec finances highly satisfactory; net funded debt in 1930 was $54.0M, up only 9.6% from 1921; has maintained an annual surplus of ordinary revenues over ordinary expenditures for the past 33 years.

NYSE seat sold for $168,000, down $17,000 from previous sale and lowest price since 1926.

Companies reporting decent earnings: Kansas City Power & Light, Montreal Light Heat & Power.

Jokes:

"So your husband tried to get a government post? What is he doing now?" "Nothing. He got the post."

Company Case Study 1

(Hopefully the first of a regular feature.)

Important note: None of this is intended as investment advice - please do your own due diligence and make your own decisions on all investment matters!

As a sometime investor, one thing of interest to me in doing this blog is discovering how different companies performed through the Depression. I don't believe the results are directly transferrable to today for a number of reasons, but I still think this gives some information that can usefully be applied to investing now.

Today I'll be covering a company in what I'd call the small luxuries sector - American Chicle, which made chewing gum (brands included Kis-Me, Beeman's, Adams and Chiclets; (deep inhale) later acquired by Warner-Lambert in 1962, which in turn was acquired by Pfizer in 2000, which then sold its candy brands to Cadbury in 2003, which was in turn acquired by Kraft in 2010 (whew)).

Getting straight to the nitty-gritty numbers:
1928 earnings $4.15/share
1929 stock price range 27 - 81 5/8; dividend $2.25/share (including extra)
- 15% “stock dividend” in Sept. 1929 (equivalent to a 1.15 to 1 stock split)
1929 earnings $4.22/share
1930 stock price range 35 - 51 1/2; dividend $3/share (including extras)
1930 earnings $4.42/share
1931 stock price range 30 1/4 - 48 5/8; dividend $3/share (including extras)
1931 earnings $4.18/share
1932 stock price range 18 - 38; dividend $3/share (including extras)
1932 earnings $3.60/share
1933 stock price range 34 - 51 1/4; dividend $3/share (including extras)
1933 earnings $3.62/share
1934 stock price range 46 1/4 - 70 5/8; dividend $3.50/share (including extra)
Earnings recovered rather explosively to $4.51/share in 1934 and $5.94/share in 1935.

All in all, an extremely creditable earnings performance - I haven't been through too many of these cases yet, but I'd venture to guess it's in the top few percent of companies as far as maintaining earnings during those years (while earnings finally slipped in 1931-32, if we take into account the substantial price deflation in this period, along with the 15% stock dividend in 1929, I think 1932 earnings remained substantially above the 1928 level).

At first look, this performance is a bit surprising - you'd expect people in a serious depression to concentrate spending on the absolute essentials, and as far as I know no one has ever died from a lack of chewing gum (or even suffered severe distress). It appears that, while people may cut out the big discretionary items in a depression, they might maintain the small comforts; in fact, they might even tend to use more of them.

It's also a little surprising that people stuck with name brand gum, which presumably charged a price premium - the explanation may lie in an observation Charlie Munger once made about another big gum maker:
“I may see Wrigley chewing gum alongside Glotz's chewing gum. Well, I know that Wrigley is a satisfactory product, whereas I don't know anything about Glotz's. So if one is 40 cents and the other is 30 cents, am I going to take something I don't know and put it in my mouth—which is a pretty personal place, after all—for a lousy dime?”

Another interesting thing to note is the two extremes hit by the stock price during the period covered above. First there was the eye-opening runup to over 81 during the 1929 euphoria; this brought the price-earnings multiple close to the “nosebleed” territory of 20. Second, there's the amazing drop in 1932, when the yearly low was 18. This brought the price-earnings multiple well below 5, and with an annual dividend of $3 including extras, the dividend yield obtainable at the 1932 low was 16.7% (gadzooks!) - all this for a company that had maintained earnings at close to record levels throughout the Depression (lest you think this can be explained by an unexpected collapse in earnings in mid-1932, the quarterly earnings per share that year were $.89, $1.05, $.90 and $.75; so the dividend continued to be earned through 1932 and was probably not in serious doubt at the time the low was hit in June; in my opinion, the explanation for the drop is much more likely to be found in the general sh*t-hitting-the-fan situation at the time).

Aside from these two interludes, the stock price held reasonably steady through the extremely severe economic downturn of 1929-33, more or less reflecting the steady earnings at a multiple of between about 9 and 12. The sweeping conclusions I draw from this sample of one (your mileage may vary):

• If, through careful analysis or sheer dumb luck, you find a company that can maintain or grow its earnings through a downturn, and buy the stock, it seems that you might most of the time be rewarded by a stock price that reflects that performance.

• That said, if you simply close your eyes and buy regardless of valuation on the theory that you should just buy good companies without trying to time the market, you may be vulnerable to painful losses - note what happened if you bought at the 1929 peak. What's a reasonable valuation is of course a tricky question, but working from this example and based on my belief that, in spite of all the serious issues and government blundering currently, things probably won't get as bad as in the 1930's, I'm going to go with around 10 to 12 times earnings as a workable starting point.

• While the stock price may usually reflect a good earnings performance, there may come a time when earnings seem almost irrelevant to the market; this might also be a time when the survival of the whole system seems in doubt. At this time, as in mid-1932, stock prices may drop to places you never thought possible. This may seriously challenge your stomach even if you managed to pick companies with stable earnings and buy them at reasonable prices. Or, looked at more positively, if by some miracle you have some investable cash left at that point and are able to act decisively, you could wind up making some very nice returns ...

Monday, September 21, 1931: Dow 111.74 -3.34 (2.9%)

Assorted historical stuff:

Editorial: While Americans are confident in men like W. Gifford and O. Young as the leaders of unemployment relief, “it is devoutly to be hoped that soon they will be able to speak out upon their plans in more easily understandable terms than they have yet used. ... to the skeptical, ... frequent use of overwhelming verbiage will present too tempting an opportunity to declare that the President's Organization expects to feed the hungry this winter with mouth-filling phrases.” While we are convinced Mr. Young has a solid basis for his statement that “there will be no suffering,” failure to candidly inform the public may “incalculably delay and hinder” the organization's task of relief. “The season for grandiose pronunciamentoes, accompanied by group pictures on the White House lawn, is about over.”

“Sentiment in Toledo is better than at any time since the bank failures.” It's reported that least one of the closed banks may reopen reasonably soon. “But the city is not without its humorous incidents. On a big sign in front of a restaurant on Huron Street, this writer noted the following: 'For God's Sake Eat Here or We'll Both Starve.'” Plan being considered in Kansas City to distribute 10,000 - 25,000 free loaves of bread daily; flour to be donated by mills and grain cos.

[Note: Strangely Unfamiliar Dept.] Sen. Reed (R, Pa.) advocates “very heavy” inheritance tax to allow cutting other taxes; says “a man should not be allowed to leave his son and other ablebodied relatives complete immunity from work.” NY Gov. Roosevelt and state Republican leaders reach compromise on unemployment relief measure.

US Atty. Gen. Mitchell charges states are abdicating some of their proper functions and asking Federal govt. to assume them.

Washington report: American Legion convention opening today in Detroit will be watched closely for its attitude on further veterans' payments. A campaign for full payment of service certificates has been waged since the last Congress passed the 50% loan program. Total face value of certificates is $3.565B, but $843M was loaned on the 50% program; together with earlier loans and payouts, this leaves a total of about $2.250B that would have to be paid out now to redeem all the outstanding bonus certificates. Administration is strongly opposed to full payment, as are some more conservative elements in veterans' organizations. Current “cry of cheap money” is not unexpected by Washingron officials, though it's interesting that “compared with the cheap money protagonists of the last century, even the most radical of the present day appear as conservative economists.”

1931 was an unusually active year for state legislatures, with 44 of 48 meeting in regular session. However, barring special sessions, the “legislative stages ... now will be dark” in all but 9 states for the next two years.

Fighting reported between Japanese and Chinese soldiers in Mukden, Manchuria. However, Washington believes the main issue is protection by Japan of its economic interests in Manchuria (total Japanese investment there estimated at $1B); “the Sino-Japanese dispute in Manchuria does not include a quarrel over sovereignty. Japan recognizes China's ownership of the province.” Sec. of State Stimson says State Dept. carefully following news, but fighting thus far doesn't appear to violate Kellogg pact [prohibited use of war except in self-defence; signed by US, Japan, Britain, France, Germany, etc.] although “the occasion may lead to something calling for invocation of the Kellogg pact.”

British House of Commons approves 10% cut in dole after sharp attacks from Labor. “Semi-mutiny” by the British Navy demonstrates the current high level of opposition to the govt.'s budget cuts.

Austrian austerity program, “outlined ... preliminary to granting international credits,” will involve severe govt. spending cuts. Sir A. Salter of the League of Nations will probably be appointed “temporary supervisor of Austria's finances.”

Editorial by T. Woodlock arguing that German reparations, in spite of amounting to only $7.50 annually per capita, are too heavy due to other factors including additional debt payments, current inability to borrow, and tariffs; “no doubt $7.50 ... is a little sum in itself, but a little, if too much to carry, is too much!”

Washington, DC will soon have the world's largest gas station to handle the traffic along Constitution Ave.; it will be 335 feet long and stand 6 stories high.

Farmers and merchants of Lewis County, Wash. dined on a huge omelet fried in an 8-foot skillet at their annual picnic. It required 10,000 eggs; to grease the skillet, the chef fastened large slabs of bacon to his feet and skated about.

Editorial calling for a moratorium on “steamer deck” interviews by returning “bankers, statesmen and other notorieties in which they tell us 'what I saw in Europe.' The trouble with all these is that those returning travelers who might have something interesting and important to say never say anything interesting or important, and those who have nothing interesting or important to say, say a great deal.” [Note: this is apparently a response to the statement by former Ambassador J. Gerard reported on Sept. 18, charging that Germany was “making money out of bankruptcy.”]

Market commentary:

Market wrap: Stocks suffered “steady liquidation” in the Saturday session on unusually heavy volume; however, “the decline was orderly,” probably due to low level of brokers' loans. Heavy selling in the final half-hour produced many new lows; “the kind of stocks under liquidation indicated that shares were coming out of boxes.” US govt. bonds steady while all other classes fell sharply, with many new record lows. Rail group again “disturbed” as all grades declined. High-grade utilities succumbed to the downtrend but showed smaller losses. Convertibles fell along with stocks. Foreign govts. came under heavy liquidation; British 5 1/2's, 1937 dropped 8 1/4 points to 93; German Int'l 5 1/2's fell 2 points to 38; French and Italian issues slightly lower; S. American issues pressured with many new lows. Grains sharply lower in spite of run of bullish crop news, including unprecedented drought in Southwest. Cotton fell to new season lows, hitting lowest levels in 32 years. Egg and potato futures hit new lows.

Dow industrial average closed at a new bear market low; there were no new yearly highs and 320 new lows. Dow industrials are at the lowest level since 1925, and the rails the lowest since 1897. US Steel hit a new post-1921 low. Volume of 2.438M shares was highest for a 2-hour session since Apr. 1930.

Considerable forced liquidation reported in the past week by individuals to pay off called loans.

Recent weakness in bank stocks has led to rumors of dividend cuts, though “leading banking quarters” say most important banks are still earning their dividends. Insurance stocks fell sharply Friday and Saturday. After holding firm for a long time, Woolworth succumbed to liquidation last week; no change in co. affairs to account for the decline.

M. Holland of the Nat'l. Research Council urged industrial cos. to more extensively use scientific research in order to stimulate industry and hasten recovery.

Opportunity seen in good bonds due to “hysteria of the moment resulting from the workings of mass psychology.” Bonds also expected to benefit from relaxation of rules requiring nat'l banks to write off all bond losses, which is expected to check one of the main sources of recent liquidation.

Nervousness over British situation came to the fore; as one banker put it, it's no longer a question of companies but countries, “and the situation must be one for govts. rather than individuals to take in hand.” Fears expressed by British leaders on stability of sterling have caused concern. Prospect of new general election has dispelled most of good feeling from formation of coalition govt.; uncertainty has caused heavy withdrawal of capital from England; this in turn has caused considerable nervousness that the recent $400M US-French credit may be exhausted in supporting sterling. “However, the combined financial intelligence of Great Britain, as well as of the US and France, is currently devoting its energy toward a solution of the English difficulties.”

Week in review:

Stocks worked steadily lower, picking up momentum later in the week; heavy foreign selling of US shares reported. Friday saw most severe market breaks since early June. Dow industrials fell to a new bear market low, confirming earlier signal by the rails “that another phase of the primary downward” bear market movement had started; utilities also hit a new bear market low. Lowest levels in many years hit by majors including Steel, GE, and GM.

Bond market “disturbed.” Railroad bonds sagged in both the high and second-grade departments. Convertibles sharply lower along with stocks. Industrial bonds soft, though oils held most of recent gains. Public utilities declined, varying from modest losses in AT&T and NY Edison to sharp reaction in Utilities Light & Power. Foreign bonds reactionary, with liquidation turning “acute” toward end of week; drops of 5 - 10 points frequent; record lows hit in German issues; most S. American bonds suffered severe declines. Among the few bright spots were a firm tone in US govts. and sale of NY State bonds at record low yield.

Stock decline attributed mainly to fears of another financial crisis in Britain, particularly after some British leaders expressed nervousness regarding stability of sterling. Domestic factors also were unfavorable, including absence of seasonal business improvement and further dividend cuts. Decline of trade was dramatically demonstrated by August US figures showing first deficit since May 1929; this was attributed to curtailment of foreign buying in US markets by credit difficulties abroad. Steel output recovered part of previous week's loss as rail and pipeline buying improved. However, automotive demand continues to disappoint, showing no signs of expected renewal, and rail inquiries are well below the normal seasonal increase. “More rumblings” heard of pending steel wage cuts; it's believed this question will be tackled before end of the month, and it's “generally agreed that a cut of 10% to 15% must take place.”

Sterling fell on Friday and Saturday, with forward months particularly weak; decline attributed to nervousness over possible return to power by Labor, flight of both foreign and domestic capital, and further gold losses by Bank of England. Holland took several large gold shipments from England, as well as a shipment of $550,000 from NY Friday, the first to Amsterdam in several years.

Stocks in Paris experienced a bad week, “requiring banking support Thursday and Friday to prevent panicky conditions.” Stocks in Berlin suffered considerable losses on the week, though turnover was light.

Money markets dull; Fed. Reserve statements showed small decline in currency circulation, possibly marking “an end, at least for the time being, of the spectacular hoarding of currency that has marked the past weeks.” Monetary gold holdings rose to a new record high of $5.015B. Acceptances outstanding fell during August to the lowest level in 3 years.

Grain prices showed better resistance, with wheat moving slightly up and corn fairly steady. However, cotton sagged steadily to new 32-year lows even as “various proposals to remedy the cotton situation were being considered”; Oct. cotton fell below 6 1/2 cents. Copper fell to new record low of 7 cents/pound, 2 cents below the record previous to 1931.

Economic news and individual company reports:

British Treasury reportedly withdrew its support peg in sterling Saturday after several weeks of maintaining it. It was also reported that the recent US credit was substantially drawn on that day, after two previous drawings of 20%. Speculators rushing to short sterling found NY banks refusing to accept their orders. However, sterling still broke sharply to $4.84 1/2 before support from NY banks rallied it to $4.85 at the close. Forward quotes are at discounts as high as 3 cents/month, with 90-day delivery at $4.75. Bank of England shipped 907,543 sterling in gold bars to Holland. Support for sterling in Paris has caused heavy selling of francs in markets where sterling isn't being supported; francs weaker against other European currencies and gold exports from France possible.

French Fin. Min. Flandin blasts speculators against sterling; “it is necessary for the world to understand how detrimental ... this assault is”; warns of possible “universal disaster” if British lose confidence; says French Treasury “already has intervened and will not hesitate to intervene again. It is in our interest that the pound remain as international money par excellence, guaranteed against all sorts of fluctuations.” Notes that speculators can short sterling without risk since losses are limited by gold parity. J.M. Keynes criticizes British govt.'s economic policy; says only 3 lines of policy now worthwhile. First and mildest is restriction of imports; second is “getting off gold parity without allowing the slide to go too far”; third is int'l. conference to give “gold standard countries their last opportunity, one that means business of a most definite kind, quite different from any conference ever held hitherto.”

Commerce Dept. reports European unemployment, after reaching record levels over the winter, had a disappointing spring recovery, leaving the June level at a record for that time of year. Even higher unemployment is expected this winter.

Treasury deficit for July 1 - Sept. 17 was $349.2M vs. $116.2M in 1930; income tax receipts were $243.7M vs. $335.3M; however, customs receipts rose to $92.0M vs. $77.2M.

Texas Railroad Commission cuts allowable production per well in East Texas to 185 barrels/day; this is expected to cut the area's production to about 370,000 barrels/day from 425,000. Oil prices strengthened, with almost all major buyers paying 68 cents/barrel. Radical actions in form of martial law shutdown in East Texas and Oklahoma oil fields were unprecedented. However, they are believed to have improved oil company results for the third quarter from the “demoralized” condition prevailing previously, with “production running riot in East Texas” and midcontinent oil prices falling as low as 10 - 22 cents/barrel.

BLS reports employment in Aug. fell 0.3% from July; wholesale commodity price index 70.2 in Aug., up from 70.0 in July but down from 84.0 in Aug. 1930; index of retail food prices in 51 cities 119.7 on Aug. 15 vs. 119.0 on July 15 and 143.7 on Aug. 15, 1930.

ICC will hear final oral arguments in 15% freight rate increase case today; decision likely in mid-October.

French govt. takes control of the French Line (France's leading shipper), increases annual subsidy to 30M francs from 4M.

Brazil says will stop making interest payments on external debt pending negotiations with creditors.

1931 Commerce Yearbook reports 1930 output of manufacturing industries about 19% under the record set in 1929, 13% less than the 1925-29 average, but 43% over 1921; sharpest decline was in auto production.

Fisher's wholesale commodity index rose 0.1 to 69.0, following three weeks of stability at postwar low of 68.9.

Ford Motor Co. has started placing orders for car parts again; other cos. also getting under way. Dealer sentiment improved, though buyers are reportedly delaying due to interest in upcoming new models; this will be “of inestimable value in 1932 sales,” but “temporarily has created an unfortunate situation.”

Movie:

The Mad Parade - Paramount film, at the NY and Brooklyn Paramount Theatres. “Paramount's much-touted film about the women's side of war, with an all-female cast, has finally arrived”; concerns a group of nine women working at a canteen during the war. While it's “a novelty to see a group of women ... workers facing the horrors of war unaided by men,” who are only indirectly referred to in dialogue, the result is “far less dramatic than the war atmosphere” in which the film is set. Too much of the film is devoted to a bitter struggle between two of the women; both eventually meet death, one through a hand grenade thrown by her enemy and the other in a heroic mission to get relief for her comrades trapped on the battlefield. “When the film is not dragging along slowly between bursts of temperament and shells, it is offering panoramic pictures of the horrors of war, or presenting long-winded sentimental tirades.”

The Hall of Forgotten Geniuses 1

(Hopefully the first of a regular feature.)

One of my favorite things about doing this blog has been coming across the amazing performers and artists of the time, many of whom are more or less forgotten these days. In many cases, I've found that good footage is available on Youtube or other internet video sites. So, I'm going to try to put together a more organized collection presenting some of these Forgotten Geniuses for your rediscovery. Our first Forgotten Genius is (drumroll) ... Howard Hughes.

Of course, Howard Hughes isn't exactly forgotten today, but I'd venture to guess that the vast majority of people know him mainly as a crazy billionaire. It's not as generally remembered that he was a great movie producer and director. One of his most remarkable efforts is the World War I aviation film Hell's Angels, which was released in Oct. 1930 after about three years of production at a cost of close to $4M (in 1930 dollars - the advertisements for the movie claim it's “The First Multi-Million Dollar Talking Film”, and some sources credit it as the highest-budget film until Gone With the Wind, though others say Fritz Lang's Metropolis was more costly).

In hindsight, it's tempting to say the production was an early indicator of Hughes' obsessive-compulsive tendencies. In any case, many factoids about the film's production are jaw-dropping even by today's squanderous Hollywood standards:

• Hughes shot 560 hours of film, so 99.64% of the film shot wound up on the cutting room floor - an off-the-charts ratio for a dramatic (non-documentary) movie, this set a record that probably still stands.

• The initial silent version of the film was previewed in March of 1929. However, in the interim sound technology had come along and Hughes eventually decided to redo the whole thing as a talkie. This involved not only scrapping much of the already shot film but paying off and dismissing the original female lead (Greta Nissen) because her strong Norwegian accent made her implausible in the part; Hughes instead settled on a 19-year old Jean Harlow, in what's generally considered her “big break.” (Strangely, the film contains the only surviving color footage of Harlow).

• Hughes used about 90 planes, 130 pilots, and 20,000 extras on the film. He bought many authentic World War I fighter planes and hired World War pilots to fly in the aerial scenes. However, one of the scenes Hughes wanted to shoot was so dangerous that the pilots refused to do it, warning it would cause a crash. Hughes insisted on shooting the scene, wound up flying the plane himself, and did crash it as warned, though he escaped with only minor injuries. Unfortunately, three other pilots and a mechanic were not as lucky, losing their lives in three other accidents during the film's production.

• Hughes appears to have gone through a number of directors early in production (various sources mention Marshall Neilan, Luther Reed, and Edmund Goulding). He then decided to direct much of the film himself, though he used James Whale for the talking scenes. (This was Whale's directorial debut, though the film took so long to complete that Whale's second movie - Journey's End - was released first; Whale, of course, went on to direct Frankenstein and other classics).

Curiously, I think it's the talking scenes in this movie that feel sort of awkward and stilted today (maybe partly due to the midstream change to sound). The aerial scenes, presumably directed by Hughes, still pack a wallop, and none more so than the beautiful and haunting sequence below in which a German Zeppelin tries to bomb London, and then is chased by British fighters.

Play "Hell's Angels Zeppelin scene" on Vimeo.

Just in case you think I'm kidding about the talking scenes, here's a surprisingly racy one in which Jean Harlow works her charms on a hapless Ben Lyon:

Play "Hell's Angels clip" on Youtube.

Here's a couple of fun clips from the stupendous movie premiere of Hell's Angels at Grauman's Chinese Theatre. In the first one, we see a parade of Hollywood luminaries on the red carpet with commentary from a slightly more masculine 1930 version of Joan Rivers. (When I compare the glamor of these stars with Lady Gaga or Colin Farrell ... it's enough to bring a tear to me eye ...)

Play "Hell's Angels premiere" on Youtube.

And in this one you get to hear a bit of what the stars were saying on the red carpet (including Dolores Del Rio and Buster Keaton), followed by the traditional guy-in-a-suit-reading-congratulatory-telegrams-the-morning-after.

Play "Hell's Angels trailer" on Youtube.

Finally, as one last bonus, the closing scene from one of Hughes' next productions, the original Scarface starring Paul Muni. It's not as gloriously over-the-top as the one in the 1980's Al Pacino “remake,” but it's close ...

Play "Scarface final scene" on Youtube.

(Note: These clips have a way of disappearing for one reason or another, so if you particularly like one I'd consider downloading it ...)

Sources for the above, aside from the 1930 Wall Street Journal:

http://www.tcm.com/tcmdb/title.jsp?stid=77738&category=Notes

http://en.wikipedia.org/wiki/Hell%27s_Angels_(film)

http://www.imdb.com/title/tt0020960/

http://www.biography.com/dead_famous/dead_episode_guide.jsp?episode=150016

Saturday, September 19, 1931: Dow 115.08 -6.68 (5.5%)

Administrative note: I had intended to maintain the day-by-day summary here until July of 1932 when (spoiler alert) the Dow industrials finally bottomed out at 41 and change. I still intend to continue the summaries until then, but due to heavy workload, I'm going to have to cut back to a more leisurely pace for a while - I'll only be able to post a summary every two or three days. I also hope to get to some other little projects that I've been meaning to tackle for a while - stay tuned ...

Assorted historical stuff:

Interesting editorial criticizing "rag money" proposal by one Dr. J. Commons, Univ. of Wisconsin economist. Commons proposes the Fed. Reserve issue "greenback, or fiat money" in order to restore the 1926 commodity price level. By his laughable reasoning, this would be sound since the Fed. Reserve would only inflate moderately and would have the power to deflate when things go too far. "In brief, we can take it and we can leave it alone. We can use it without abusing it. ... We have abundant strength of character (i.e., the Fed. Reserve system) to tell us when we have had enough ... When the right time comes we shall firmly refuse 'just one more drink' and go home in good order. ... Dr. Commons, of all men, should know his economic history; when was there ever an experiment in currency inflation that did not end with the patient in the gutter? When was there a case where the 'just one more' was refused? ... How 'old times' do come back, if one only lives long enough!"

Owen D. Young and W. Gifford, leaders of Pres. Hoover's unemployment relief organization, expressed confidence that local public and private funds would be adequate to combat distress of unemployment this winter. However, Young refused to rule out Federal funds and said the country could be assured that no one would suffer for want of food; this was interpreted to mean the Federal govt. would step in if necessary.

Rep. J. Byrnes (D, Tenn.), ranking Democratic member of the House Appropriations Committee, suggests increase in surtaxes and rigid govt. economy to balance the budget.

NY State Republicans pass own unemployment relief bill despite threat by Gov. Roosevelt to veto and call another extraordinary session of the Legislature.

Amer. Bar Assoc. annual convention officially opposes Prohibition by vote of 13,779 to 6,340. Finnish Interior Min. predicts early end to Prohibition in Finland; admits impossibility of preventing smuggling. Fleischmann Yeast pleaded no contest to conspiracy to violate Prohibition laws, in govt.'s first test of responsibility of large corps. for providing supplies to makers of illegal alcohol; was fined $3,000. W. Newton, Pres. Hoover's secretary, admits asking Census Bureau for number of people employed in manufacture of beer in 1914, 1919, and 1929, but denies he sought the figures for Hoover.

"Air pilots on scheduled transport duty must always be in perfect physical condition. Their health is taken care of as carefully as that of the most valued racehorse. Few jobs are so confining and permit so little exercise," which is considered one of the essentials to keeping a pilot fit for emergencies. The Boeing flight surgeon believes golf is the best exercise for pilots' particular needs; pilots on the Boeing system almost inevitably stow a set of clubs before takeoff.

W. Fullen, Transit Commission chair., says hopeful a plan for NY City transit unification will be ready for promulgation by the Commission before end of month. N. Amster says city has not abandoned unification plan, but, on contrary, is closer than ever to agreement with transit cos.

The Smiths now lead the Cohens in NY City's latest telephone directory, 1,916 to 1,636. However, if the Cohns, Smyths and Smythes are included, the Cohens retake first place as NY's leading family.

European special:

"Banking support" entered the Paris stock exchange Friday for the second day in a row, producing a strong rally after new lows were hit in the first hour of trading. Brussels suspended put and call operations to "curb speculation."

Stock market collapse in Amsterdam has accelerated gold movement there. US exported $550,000 in gold to Holland; first gold exported to Europe since Aug. 1930. Banking situation in Holland and Switzerland being watched.

British situation causing some concern. Bank of England lost about 1.750M sterling in gold to Holland; sterling weakened, while futures fell to a wide discount. Bank of England took steps to restrict withdrawal of small amounts of gold for “hoarding” by refusing to pay out sovereigns and restricting gold payment to bars (worth $8,000 each). British general election talk circulating; some fear Labor will make large gains among voters angered by govt. spending cuts. British politicians are demanding restrictive measures to prevent capital flight from London.

J.H. Oliphant & Co. attributes recent selling in "worldwide investment stocks" in the past two days to London; "minds of British investors are confused by their own specific troubles as well as by the American corporate situation." Many disturbing rumors circulating about measures British govt. might take on sterling, including borrowing private holdings of foreign securities, deflation of the pound, and adoption of monetary silver.

Possibility of abandoning the gold standard has now become a topic of conversation in the London financial district, though it is “minimized in responsible quarters who realize that such a course of action would be a catastrophe.” However, a tariff on imports to restore trade balance is now seen as inevitable, since balancing the budget alone won't be enough to safeguard sterling.

Considerable agitation in French commercial circles over possible British tariff on luxury items; England took half France's luxury exports in 1930, amounting to 3B francs. Lille district makes formal protest claiming possible ruin. Newspapers voice reprisal threats.

Agreement for extension of short-term German credits finally signed between German bankers, Reichsbank, and bankers' committees from numerous other countries.

Apparent failure of League of Nations to secure financial aid for Austria and Hungary has clouded outlook there.

Market commentary:

Market wrap: Stocks had one of the weakest sessions in months; "frightened and necessitous liquidation" combined with renewed short-selling and uncovered stop-loss orders, sending shares progressively lower through the day; selling continued right up to the close. US govts. the sole firm spot in the bond market, as all other classes declined; heavy selling developed in late trading, and "prices fairly crumbled away". Foreign list unsettled by sharp break in German govts.; S. Americans again suffered heavy liquidation. Dow average of 40 domestic corp. bonds reached new yearly low at 90.51, down 0.44; lowest since Sept. 1924. Cotton prices again hit new season lows. However, grain prices were relatively steady, showing a mix of small gains and moderate losses. Copper buying practically nil in spite of record-low price of 7 cents/pound, at which hardly any mines are profitable.

Dow industrial average closed at a new bear market low; there were 2 new yearly highs and 232 new lows [note: as usual, the yearly highs were in preferreds].

Conservative observers continued to recommend the sidelines. "Pessimistic views were heard on all sides after the close" due to the new lows hit in leading shares.

Considerable disappointment seen as various rumors of "some favorable development late Thursday" failed to be confirmed. Market also unsettled by foreign developments including break in sterling and in German bonds. Leading insurance stocks broke sharply, with volume much higher than in the past few months; Sun Life dropped 250 points to 650 bid, while most other leaders fell 5%-10%.

Over the past 3 months, investment trusts [similar to mutual funds] “have experienced one of the dullest periods in their existence”; changes in portfolios limited.

Q3 earnings estimates are generally being revised downward due to slow business in July and Aug., and little seasonal improvement so far in Sept. Uncertainty over earnings seen keeping many investors on sidelines until reports come out in several weeks.

R. Masson, Credit Lyonnais general dir., says US conditions depressed chiefly in comparison with abnormal 1929 boom; praises avoidance of starvation, disorders and public dole in spite of 6M unemployed.

A. Coleman, Asst. Postmaster Gen., says 15% increase in first and third class mail handled in larger cities forecasts return of prosperity. However, other postal officials disagree with Coleman and "this upturn has not yet appeared in postal figures."

Economic news and individual company reports:

August a disappointing month for chain stores and mail order houses; sales of 39 representative cos. down 6.15% in Aug. from a year earlier, vs. a 2.6% decline in July and a 2.2% decline in June. Business affected by banking troubles in certain sections, as well as prevalence of infantile paralysis. It's estimated the paralysis epidemic cost Woolworth $500,000 in August sales.

Texas Railroad Commission has drafted order reducing allowed oil production per well in order to bring total output back below 400,000 barrels/day. However, order is being held up by protests from oil operators.

Weekly trade reviews again divided. Bradstreet's reports unseasonably warm weather retarded trade throughout the country in past week. However, Dun's reports retail trade at current lower level of prices continues to enlarge as fall season advances; also reports adoption of five-day week in a number of large industries has substantially added to the number employed in various lines.

W. Atterbury, Pennsylvania RR pres., called upon company employees to join management in evolving plan for stabilization of rail employment and business.

Weekly banking reports gave first indication that perhaps the worst of the recent "currency hoarding" has passed, as currency in circulation declined seasonally by $5M. However, best estimates are that about $1B more currency is now outstanding than warranted by the current volume of business. Increase in security loans to non-brokers would normally be encouraging (indicating buying by "strong hands") but may be due to banks demanding security collateral on what are really commercial loans.

US cigarette output showed marked decline in Aug., with total of 9.521B produced vs. 10.578B in Aug. 1930. However, loose tobacco and cigarette papers showed increases.

Sales of electric washing machines in Aug. were up 8.5% over July and 6.5% over Aug. 1930.

New bond offerings continued more active; total for week ended Sept. 18 was $67.5M vs. $75.4M prev. week, $7.5M two weeks ago, and $80.9M a year ago.

French Treasury revenues in Aug. were 44M francs above estimates; first 5 months 200M above.

Company reports since July 1: 217 companies reported higher earnings vs. 1930 and 676 lower; 1,060 dividends unchanged, 24 increased, 196 cut.

Companies reporting decent earnings: British Columbia Power, Arundel (sand and gravel).

Theatre:

Singin' the Blues - black melodrama by John McGowan, at the Liberty Theatre. Police are closing in on Jim Williams, who has killed a policeman in a Chicago gambling raid and fled to Harlem with his pockets full of winnings. But Jim falls in love with night club prima donna Susan Blake and "tarries when it is in his interest to slip away to the South," spending much of the play a step and a half ahead of the police. Simple but entertaining; McGowan takes shortcuts in storytelling but actors are "more than competent and the staging is often picturesque."

Movie:

Alexander Hamilton - Warner film, at the Hollywood. Starring George Arliss in the title role, adapted from his play; least effective of his talking films since he's a much better actor than playwright. "Today, when history is being pretty thoroughly de-bunked by most writers," the film seems even weaker than the play did in 1917. Not that Mr. Arliss has made Hamilton a saint, for he treats "frankly, although rather unconvincingly Hamilton's affair with Mrs. Reynolds." However, film provides a "sketch portrait which lays too great emphasis upon the sentimental and grandiose side of the first Secretary of the Treasury."

Joke:

Timid Traveler - Has anyone ever been lost crossing the river here? Ferryman - No, sir. My brother drowned here last week, but we found him next day.