January 11, 2011

Friday, September 25, 1931: Dow 107.79 -8.20 (7.1%)

British crisis update:

Sterling continued to decline, opening at $3.91 and sagging to $3.81 (vs. $4.10 on Wed. and $4.85 the previous week); rest of the foreign currency list was unsettled, though francs and Swiss francs were strong. Reports from London state the govt. wants to prevent a sudden further fall in sterling, and may resort to further restrictions to “prevent bear speculation,” or even to intervening by “rallying sterling and squeezing the shorts.” Return to the full gold-standard value for sterling is now seen as impossible since “the monetary policy of recent years now stands condemned by its results and industry means to get every possible advantage from the exchange's depreciation.”

Stocks broke sharply in NY, largely wiping out Wednesday's gains; the Dow industrial and utility averages hit new bear market lows; bonds also fell but selling was better absorbed; commodities opened strongly but later followed securities markets lower. The London stock market was "strong, due to decline in sterling" while bonds were irregular; Paris was "independently firm." German stock markets will remain closed until next week; main reason for closure is "nervousness in banking circles" though official reason given is "uneasiness about the position of mark exchange" as sterling and other currencies become cheaper; German coal exporters are reportedly suffering from British competition.

The Fed. Reserve reported gold continued to be "earmarked" for the account of foreign central banks (in effect exporting it from the US); $64M was earmarked up to 3PM on Thursday, bringing the total in the past week to $185M. Foreign and local bill selling reached an "extraordinarily large" total of about $100M on Thursday; bill dealers "advanced their rates sharply in a spell of nervousness;" open market rates rose 1/4% on all maturities but the Fed Reserve maintained its buying rates for bills, and left its rediscount rate at 1 1/2%; this was seen as "a virtual invitation to banks and dealers" to sell bills to it. It's believed the Fed. would welcome a large increase in bill holdings and discounts, in pursuance of its policy of "making money rates extremely easy and increasing the volume of both Fed. Reserve and general bank credit outstanding."

[Note: What would we do without noted economists? Dept.] Sir Josiah Stamp, noted economist, says influence of a number of countries leaving the gold standard would be to release a large amount of the pressure to possess gold in order to back currency, automatically making it less valuable; predicts "this may stimulate a rise in the price levels" of countries remaining on gold standards, "with strange consequences in the exchange rates." Bank of Montreal notes that England's action has “deranged sterling exchange, but there is no reason to anticipate serious consequences to international trade, which in the past has flowed freely in like circumstance.” Regarding Canada, notes August external trade $97.2M, down 35% from 1930, continuing a steady two-year slide accounted for in most commodities by both lower prices and volumes.

Silver has moved higher since British abandonment of the gold standard (from 27 1/2 cents last week to 29 1/4); speculative buying has increased; "the market is generally unsettled and further fluctuations are probable." The silver market "will be watched with growing interest in the coming weeks"; past weakness in silver has been a disturbing influence on the commodity situation, and some interests argue improvement in silver would be encouraging. Some believe India may return to a silver standard, which might result in a sharp rise. It's reported "well posted interests" have been buying mid-1932 silver futures. Silver prices in Mexico have improved slightly for several days, though the increase isn't attributed to the British situation. The peso rose slightly; bankers "attributed the fluctuation to superficial reasons and misinformation concerning the true character of the suspension of the gold standard."

Washington officials indicated British proposal for international currency conference would be accepted.

Swedish Fin. Min. denies govt. has discussed suspending the gold standard; says spending cuts needed but "no reason for pessimism regarding the budget position ... foreign reports that Sweden's finances are in a precarious condition are entirely unfounded"; govt. is contemplating measures needed to restore trade balance. Bank of Sweden raised discount rate to 6% from 5%.

Cuban Treasury Sec. says Cuba will pay all external debts even if sacrifices are needed; can't understand drastic decline in Cuba Public Works bonds, which are trading at 38 in spite of guarantee backed by public works taxes.

Italy's trade deficit seen benefitting from depreciation in sterling since bulk of Italian trade is transacted in sterling. Bank of Italy reports 60% circulation coverage as of Sept. 10, of which 37% is gold and the rest gold-standard currencies.

European financial developments this summer "have caused the Chicago business community willy-nilly to take a much greater interest in what is going on across the Atlantic." The strong effect of European news on business in the "economic vortex of the North American continent" has "literally forced many business men to follow news from abroad closely, in order to protect interests which at first might seem purely domestic."

Wage cuts update:

AFL pres. W. Green, says he's not sure if Asst. Commerce Sec. J. Klein was quoted accurately as saying "there will be hell to pay throughout the US in the event of a general wage reduction," but that "it is my honest opinion, arrived at after deliberate and calm consideration, ... that it ought to be a logical outcome of the wage cutting policies pursued by the highly protected employing corporations of the nation."

An "insurgent" group of miners has called a strike against the Glen Alden Coal Co.; J. Boylan of the United Mine Workers said the strike was unauthorized and a "complete failure" with only a handful walking out; W. Inglis, company pres., said about 5,000 of the company's 25,000 workers were out; T. Malone, "insurgent leader," said about 10,000 were on strike. Officials of the Amer. Federation of Full-Fashioned Hosiery Workers said they were opposed to a strike called by their local in Paterson, NJ. The union's agreement last Saturday to 30%-45% wage cuts has been met by agitation for a general strike at local unions in NJ, NY and New England, but national union officials said they stood behind the agreement.

US govt. denies pleas of labor organizations to close bridge at El Paso in order to bar Mexican laborers.

Reports from Al Capone's headquarters in Chicago "indicate that he has sent out a wage cut order, similar to those of industrial firms all over the country." The amount of beer and liquor sold at saloons is reportedly down about a third from the days of prosperity, and gambling houses are also bringing in substantially less.

Assorted historical stuff:

Rather philosophical editorial calling for more US involvement in world affairs to prevent future war. The world is in the grip of two opposing forces. One, "the economic interdependence of the nations, has drawn us together in relations of the most intimate kind. The other, 'nationalism,' in an exaggerated degree, exercises a centrifugal force, threatening at all times to force us apart." A counter-force to nationalism is needed, but "all experience teaches us ... the mere dread of the material penalties that accompany war" is insufficient; "after a reasonably long armistice men quickly forget in prosperity the lessons that were so clear when taught by the now-forgotten war and the pride that prosperity has engendered readily grasps at new illusions." Instead a "spiritual" influence is needed; the first requirement is the "clear realization that we in the US can not live to ourselves alone" and must "recognize our share of the responsibilities of the family of nations and understand that upon discharge by us of that share depends our own safety and well-being."

The US Administration is reportedly "very keen" to have Premier Laval of France visit; US govt. observers at the recent Paris-London conferences "formed a very high opinion" of Laval, believing "his views on Europe are broad and liberal" and his leadership of the French govt. "a hopeful augury for the future." Officials refuse to comment on what might be discussed during the visit, "but point out that the sky is the limit." The French Cabinet has decided to accept the US invitation to Premier Laval to visit; Hoover-Laval talks in Washington are seen laying the groundwork for the world arms conference at Geneva in February, as the Hoover-MacDonald talks did for the successful London Naval Conference in 1930. Laval, the son of a butcher, also expressed hopes of visiting other parts of the US, commenting "The Champs Elysees isn't France, and I suppose New York isn't America. I represent the abbatoirs in the Paris Parliament and so I would be happy to visit Chicago if possible." Premier Laval will reportedly discuss with German officials "a scientific plan of emigration to cure Europe's unemployment problem." Noting that before the war Europe exported 2M-3M emigrants annually but since the war the US, Canada, Australia and Asia have closed their doors, the plan will propose studying "diverting surplus population to the African colonies and South America under sound economic conditions."

The USDA says direct reports from Russia are now arriving of trouble with wheat crops, confirming information the USDA obtained previously and reversing the optimism of earlier Russian reports. The Russian press has complained of work falling behind, blaming inefficient handling of machinery and "general slackening in the efforts of workers"; the importance of timely seeding of fall grains is stressed, noting that due to late seeding last year, many areas in the Ukraine experienced 20%-40% winter kill. Buyers are noting a lack of surplus spring wheat from this year's crop.

[Note: There are no free-marketers in foxholes dept.] C. Abbott, dir. of the Amer. Inst. of Steel Construction, called on Pres. Hoover to discuss steel industry problems and endorsed the plan presented by GE pres. Swope for control of industrial production, particularly to limit output of basic commodities to consumption; says suspension of antitrust law in current emergency would "prevent waste and conserve the profits that are essential to ensure employment." Editorial praising B. & O. RR pres. Willard's call to railroad managers and regulators "to come together in a new spirit of cooperation." Both rails and the public would "benefit immeasurably" if this were done rather than "pursuing individual theories, preferences and interests to the limit." Customers have been "too selfishly intent" on beating rates down by any means, while some rails have "been too intent on seeking company advantage" to help the ICC protect the industry as a whole. While an emergency rate increase is needed for the rails to carry on now, a better relation with regulators would be more important in the long run. W. Bennett, Continental Coal gen. counsel, presented new plan for stabilizing the coal industry similar to that recommended by the Administration to the oil-producing states as a solution for overproduction. The governors of several coal-producing states will appoint a committee of coal operators to study various plans; the committees will then report back to the governors. Pres. Hoover reported pleased.

Sen. Wheeler of Montana predicts nomination of Gov. Roosevelt for President in 1932. A statement by former Sen. Reed that he would consider it a "compliment" for Missouri Democrats to nominate him again will not help Roosevelt's candidacy; while Reed isn't expected to pursue the nomination country-wide as he did in 1928, he's not to be counted out at this stage; there's some doubt whether Roosevelt workers will even go into Missouri in view of Reed's statement.

The American Legion convention cast two notable votes; a resolution to petition Congress to loan veterans the full value of their bonus certificates was defeated by 902 to 507 in a calm vote, while a resolution opposing Prohibition passed 1,008 to 394 amid "wild disorder." Wets were encouraged by the second resolution, which asserted Prohibition had "created a condition endangering respect for the law and the security of American institutions" and called on Congress to resubmit the matter to the states. Wets agreed that the "first task necessary is to make inroads into the Congressional dry majorities. Despite prevailing Washington opinion to the contrary, they are not without hope that this can be done at the next session." Considering its past ability to "get pretty much what it wanted from Congress," the Legion's stand "will have a great influence" although it will meet more determined opposition in dry organizations than it did in its past work for veterans' benefits. Pres. Hoover was heartened by the Legion's vote on the veteran's bonus, but had no comment on the Prohibition matter. Agriculture Sec. Hyde announced he intends to investigate the economic possibilities of beer for farm relief, though he emphasized he wasn't instructed to make the study by Pres. Hoover.

New Navy dirigible the Akron, world's largest airship, successfully completes first test flight lasting 3 hours 47 minutes.

NY fall moving season likely to be quietest in several years; furniture storage increasing, with indications many are moving into smaller homes.

NYU's Graduate School of Business Administration opened this week with a graduate registration larger than last year.

NY Telephone uses a special operator just to give callers the correct time. The phone number for the service is Meridian 7-1212; callers hear the operator giving an updated time every 15 seconds. The peak number of calls comes in the 4 PM hour, averaging 3,000 callers; next busiest is 11 AM - noon; the rest of the day averages about 1,000/hour, and the total falls off rapidly after 6 PM. "Because of the monotony of the work, each operator is on duty only one hour at a time."

It takes 480 janitors to keep the Empire State Building in order, and that's without a single hand mop or broom in sight; all cleaning is done by machines. Although 50,000 people "trudge in and out of the building daily, they track in only one barrel of dirt."

Pres. Hoover will deliver a radio address at the opening of the Waldorf-Astoria Hotel in NY on Sept. 30. [Note: Hoover lived the final few years of his life in the Waldorf. He died at the age of 90 in Oct. 1964, and still holds the US Presidential record for longest lifespan after leaving office at 31 years and 7 months, though Jimmy Carter is approaching that mark.]

Market commentary:

Market wrap: Stocks reversed Wednesday's sharp rally. The market opened under selling pressure, and, after it was unable to absorb the supply, "liquidation, which halted on Tuesday, was resumed in large volume"; many stop-loss orders were uncovered by the end of the first hour. Declines were sizable across the list, but were particularly sharp for stocks in which bears had been punished in the previous sessions, including Union Pacific, Western Union and Auburn. Selling "was most persistent throughout the list"; the market could muster only a feeble rally off the bottom. Bonds showed early strength in some groups but later turned mostly lower; US govts. very weak with many new yearly lows; foreign list mixed with rally in S. American issues; rail bonds weak while utility issues showed “characteristic resistance.” Cotton rose early, influenced by "soaring prices" in foreign markets affected by sterling, but later fell off to close substantially lower. Wheat also strong early but pressured as the sharp reaction in securities broke out and ended fractionally lower. Copper remained at record low of 7 cents/pound but with more buying interest; large producers have withdrawn from the market. Silver fell 3/8 cent to 29 1/8, futures trading heavy.

Dow industrial average closed at a new bear market low; there were no new yearly highs and 102 new lows. Dow average of 40 corp. bonds closed at 89.25, down 0.60 but above the year's low of 88.56.

Conservative observers pointed to the market action as justifying their attitude in keeping clients away from the long side; believe liquidation likely to continue.

Prominent bears reestablished positions they abandoned Monday and Tuesday under NYSE pressure; while the NYSE again allowed short selling on Wednesday, the bears craftily waited to see how far the rally would carry, and resumed their "hammering tactics" when it became apparent it was exhausted; targets included Westinghouse, American Can and J.I. Case. While recent wage cuts should be positive in the long run, bears contended "the downward adjustment of values had not been completed," noting continued weakness in steel production, rail freight loadings, and electricity usage. With no signs of improved business, "they felt that the market was open to further tests of its ability to hold above the recent lows"; some "insisted that business still had many trying periods to pass through."

US Steel drew heavy interest, at one time falling 8 1/4 points to 75, close to its bear market low. Union Carbide and du Pont hit new bear market lows. High-priced rails were weak, reversing Tuesday's impressive gains. Public utilities experienced heavy selling; North American Co. was heavily targeted by short sellers although "it ranks as one of the strongest utility holding organizations ... and is noted for its conservative accounting methods."

Technical position of the stock market was weakened by Wednesday's "violent gains" as short interest had been substantially reduced. The market was also unsettled by renewed weakness in bonds, particularly in rails and foreign issues. Heavy short covering had developed in the rails at times earlier in the week, leading to "spectacular gains which were frowned upon by many of the conservatives."

Stock investors are giving the bond market "more significance ... than at any time in the past"; "several of the leading professionals will base stock market operations on the action of bonds"; further bond weakness may therefore delay operations in the stock market by "interests who have been credited frequently in the past with directing upward movements."

S. American bonds have generally declined to very low levels; even after the rally Wednesday, few closed at a yield below 10% and many $1,000 par issues are selling below $250. This, of course, reflects uncertainty due to defaults that have already occurred in Chile, Bolivia and Peru, along with the announcement Brazil will suspend interest payments. Commentary questioning absence of investment trust [similar to mutual fund] buying of foreign bonds that are now available at huge discounts; this is said to be just the type of profit opportunity the trusts were supposed to be ready for. Some trusts may reply they buy only domestic stocks, but there's no such restriction in their charters; the real explanation is that investment trusts are in general so heavily invested that they've been able to do little buying at current low prices.

NY City borrowed short-term funds at a record low rate of 1 3/8% for 3 months; the city has been able to attract funds at exceptionally low rates over the past year or more; a year ago its prevailing rate was about 2%. The city has also done very well at selling longer-term loans, most recently selling a $50M issue of 4-year notes at 2.99% in May.

Brokers report greater public participation early in the week; many customers who had sold stocks some time ago and stayed on the sidelines reentered the market. Buyers used "great care and discrimination," concentrating on stocks that were heavily liquidated and that had suffered from forced foreign selling.

B. Block of Benjamin Block & Co. believes "the American market is again a stable one"; its remarkable "ability ... to absorb a flood of foreign offerings and mount to higher levels" after Britain's abandonment of the gold standard "indicates that a definite change for the better has occurred both at home and abroad" and that "stocks of companies that have been able to earn money during these times of depression can again be bought with safety." Of course, buying should be "on a conservative basis and a due amount of patience exercised"; however, the US is strong in natural resources, manufacturing and financially, putting it "in a position to benefit as probably no other country will during the next few years."

Economic news and individual company reports:

Insatiable demand” for AT&T stock continues, with about 5,000 new shareholders added per month; over 600,000 stockholders are now listed on AT&T's books, not including over 200,000 Bell System workers covered under the employee stock plan. Average number of shares per holder is 31. While AT&T will probably not cover the $2.25 quarterly dividend in the seasonally weak Q3, first half earnings were $4.89/share (vs. $5.72 in 1930), and business is expected to improve in Q4; therefore, the $2.25 dividend will "undoubtedly" be maintained for the rest of 1931.

Treasury Secretary Mellon is likely to announce with a month whether the Administration will recommend a tax increase; Treasury has been "looking into various revenue sources" for the past few months.

Money in circulation Sept. 23 was up $77M to $5.164B, total Reserve Bank credit outstanding up $36M to $1.315B. Member banks in NY City report brokers' loans down $64M to new record low of $1.207B; loans on securities to non-brokers down $8M to $1.720B.

Dow average of 8 iron and steel products held at $44.25 vs. the 1931 range of $43.58 - $44.56. Scrap markets continued to feature little interest by steel producers in purchasing for fall, though some quarters expect steel activity may increase as a result of the recent wage cuts.

Gen. Wolters, commanding the militia in the East Texas oil field, reports daily production in the area declined to 363,423 barrels vs. a peak of 436,000 after the new Railroad Commission order limiting production to 185 barrels/day per well. Texas Gov. Sterling sent a telegram criticizing the "great amount of unnecessary drilling" being done in East Texas. While Oklahoma Gov. Murray has said oil fields there won't be reopened yet and he will still insist on a price of $1/barrel, conferences between state officials and oil operators are increasing and reopening is believed in sight. Oil operators cite agreement by the Public Service Commissioners of Texas, Oklahoma, and Kansas to allocate allowable production among the states "to keep the national total well below demand as a means of stabilizing the market"; Oklahoma would be allowed 546,000 barrels of daily production, Texas 902,000 and Kansas 110,000.

S. Carolina Gov. Blackwood signed a bill prohibiting planting of cotton in S. Carolina in 1932, provided 3/4 of the South's cotton acreage is similarly restricted.

Postmaster Gen. Brown says air mail deficit is $17M; estimates 1M passengers will be carried by air transport lines this year.

The Colombian Senate passed a law granting the President extraordinary powers for one year to deal with economic problems; powers include ability to restrict imports, either by raising duties or enforcing an embargo.

Merchants Savings & Trust of Pittsburgh closed; deposits $1.0M. Bankers Trust of Philadelphia, closed Dec. 1930, to be liquidated by order of Pennsylvania Sec. of Banking; will make preliminary distribution of 25% to depositors "as soon as possible after legal requirements are completed." Depositors of the Cheasapeake Bank of Baltimore, closed Dec. 1930, may receive some money due them in October.

The Baltimore Stock Exchange, passed a resolution fixing closing prices Tuesday as the minimum below which bids would not be accepted until further notice.

Procter & Gamble pres. R. Duepree says co. "has adhered 100% to its plan of guaranteeing year-around employment to its factory employes throughout the US and Canada, and will continue to do so"; calls the plan "one of the most productive moves our company has ever made."

Even in hard times, "the epicure is one purchaser who refuses to stomach anything but the best"; total Canadian shipments of live lobsters rose to about 12.5M pounds in 1930 vs. 11M in 1929 and 9.8M in 1928.

Companies reporting decent earnings: City Ice & Fuel.


The Breadwinner, a new comedy by W. Somerset Maugham. The author's revamping of Moon and Sixpence for the stage is generally unfortunate, though "not without its smiles." A husband repudiates his comfortable home and family, but, unlike in Moon and Sixpence in which there was at least "an illusion of positive purpose" as the protagonist felt he couldn't fulfill his artistic ambitions at home, in the play the reason for leaving seems to be simple boredom as "he has come to the conclusion that he does not want to do anything at all."


[Note: a couple of knee-slappers today.]

"Inspector - Got away, has he? Did you guard all the exits? Country Constable - Yes, but we think he must have left by one of the entrances."

Little Johnnie - I ain't gwine thar. Teacher - Listen carefully, Johnnie. I am not going there; he is not going there; we are not going there; you are not going there; they are not going there; thou art not going there. Do you get the idea? Student - Yessur. Ain't nobody gwine nowhar.

December 21, 2010

Some interesting ads

A commenter with the memorable ID of Pants-Happy recently asked to see a certain full-page Packard ad that I had referred to earlier. I find quite a few of the ads I come across from the 1930's to be noteworthy either for content or graphic design, which is why I put small images of some of them along the right side of the blog page. However, considering Pants-Happy's request, I thought it might be worthwhile to show larger images of some of the more interesting ads I've come across. To start, here's the requested Packard ad:

A DOLLAR FOR DOLE - OR AN HOUR OF WORK? Which do you prefer to give? Which do you think Labor would prefer to have? ... Why not put the unemployed dollar to work? It will, in turn, put men to work ... I do not counsel you to buy a Packard, or any other car, before you buy anything else. Ours is not that selfish attitude. I do believe that the motor car dollar will go more places, more quickly, and affect more people for quick relief than any other dollar and that it can well become the “self starter for better business and greater prosperity.

And an editorial cartoon that also mentions the strangely familiar “unemployed dollar” phenomenon:

A couple of ads giving some strangely familiar level-headed advice about how history shows prosperity will return, it's futile to try and time the market, etc.:

In 1907, shortly after the headlines above had appeared, the security market had started a long steady upswing. “History Repeats Itself” These 30 Super-Corporations are prepared for prosperity ...

Buy The Best near the Bottom ... Unquestionably the foundations of the great fortunes of tomorrow are being laid today. The shrewd evaluators of America are buying the best common stocks now - at prices which a few years hence will seem incredible ... The older Rothschild crystallized his experience in a single sentence when he said: “I made my money by never trying to sell at the exact top or buy at the exact bottom.”

An interesting ad about Chicago - I think this one could be subtitled “never mind about that whole Al Capone thing.” The ad is quite striking visually, though this reproduction doesn't do it full justice.

Dazzling lights accentuate their shadows. Too long and too well has the black side of Chicago been advertised. Far from offering excuses, Chicago is at death grips with these forces. But there is Another Side ...

Another nice graphic in this ad for United Engineers & Constructors, presenting the work done by the company in 1930 as an imaginary city:

Of course, no collection of ads from 1931 would be complete without an Empire State Building one:

As Freud observed, sometimes a building is just a building. And, another of my favorite building ads:

No word on whether the plane does a rooftop airmail delivery ... this building is still there, by the way, close to the main NY Public Library branch on 42nd Street.

Finally, a couple of ads in the Just Plain Weird department. No matter how many times I look at this next one, I just can't wrap my head around the concept of selecting Edgar Allan Poe to endorse your hospitality business:

And finally, the one and only Radiumator - 'nuff said:

December 11, 2010

Thursday, September 24, 1931: Dow 115.99 +6.59 (6.0%)

[Note: Sorry for the gap in posting the past month - have been busy on some other projects. Will try and get back on a more regular schedule this month.]

British crisis update:

Markets rallied powerfully worldwide, making their best showing in many months. The London Stock Exchange reopened after a two-day shutdown while the NYSE and the Curb Exchange rescinded their ban on short selling. The NY and London Stock Exchanges led the worldwide rally; major issues opened strongly, moved up sharply through the day, and closed near their highs. Stock markets in Paris, Milan and Amsterdam also gained, although the Berlin exchange will stay closed this week and the Tokyo Exchange reopened but was quickly closed again after a break in prices. Kreuger & Toll bucked the general trend, closing down sharply in Paris trading. Bonds and commodities were broadly higher.

Sterling settled into a narrow range between $4.08 and $4.145, closing at $4.10 [note: vs. $4.85 the previous week]. However, “business under the new regime is purely tentative” and the volume of currency transactions “has been kept deliberately within the narrowest limits, with banks, both British and foreign, fully respecting the Treasury's instructions, confidential and otherwise.” Canadian dollars rallied to a 6 1/2% discount vs. US dollars from a low of 9%; Italian lire and Swedish kroner also rallied; francs continued above the gold export point from NY; silver currencies rose; Argentine pesos fell sharply.

Confidence is expressed” that sterling will stabilize after settling to its “economic level.” “While a certain amount of inflation seems likely ... reliance is placed on British common sense to keep situation in hand.”

Some British circles hope abandonment of the gold standard will finally convince the US and France that the current combination of heavy war debt payments and high tariff walls is unsustainable. As one leading banker said, “we have tried to remain honest in a dishonest world, but can't any longer.”

British public absolutely calm”; no danger seen of runs on banks; risk of capital flight seen as small “since immediate rosy business prospects have introduced a general optimism.” British press is presenting the abandonment of the gold standard as “an almost unmixed blessing”; security and commodity prices have been rising, while higher wholesale prices for necessities haven't yet affected retail prices; in cases where inventories are large, it may take some time for retail prices to rise, particularly if the govt. acts against price increases. British corporations seen benefitting from higher internal prices and prospect of increased foreign sales and profits; will likely attempt to keep wages at current levels. “Wholesale foreign unloading” of British bonds seen unlikely since sellers would have to recognize heavy losses when converting the proceeds into their currencies; “besides, the Treasury has instructed bankers confidentially not to facilitate such exchange operations.” Financial circles uncertain how much international financial business England will lose, but believe it will “rely greatly on its unrivalled machinery and experience” to counter the shock to sterling; “competition from Paris is not expected to be serious and NY remains handicapped by distance.”

Bank of England Gov. Montagu Norman seen likely to leave office when his term expires, to be succeeded by Sir Josiah Stamp. It's reported that “differences of opinion over abandonment of the gold standard have arisen,” though rumors that Norman would resign shortly were denied. Stanley Baldwin, speaking for the govt., told questioners in the House of Commons the govt. expected no immediate rise in retail prices. Despite govt. insistence that leaving the gold standard isn't that serious since the budget has been balanced, this balance may now be endangered by uncertain prices and the greater weight of debt owed in dollars and francs. On the other hand, improved business may increase tax revenue and decrease spending for the unemployed. With “the attention of the whole world” concentrated on British developments, the govt. is expected to make every effort to maintain the budget balance. British Conservative followers of Neville Chamberlain reportedly plan to dissolve Parliament Oct. 7 or 8; determined that general election be fought under leadership of PM MacDonald and Stanley Baldwin.

Some foreign govts. took actions to adjust to the British suspension of the gold standard. Italy restricted dealings in foreign currencies in Italian markets, and the govt. interverned to support the lira. Austrian Nat'l Bank “is filling demand for foreign currency only when legitimate requirements are proved.” Sweden raised its discount rate to 5% from 4% on Monday, and a further rise is believed inevitable. The Swedish pulp industry is facing heavy losses due to the depreciation in sterling. Denmark prohibited export of gold. Bank of Finland said it would begin quoting currency prices in US dollars. Bank of Czechoslovakia raised its discount rate to 6% from 5%. Argentine banks “took measures to prevent gambling on exchange operations.”

British importers in Brazil are reportedly underquoting US interests due to the decline in sterling.

Leading retailers and banks in Buffalo, NY ended their past custom of accepting Canadian dollars.

The recent drastic decline in foreign dollar bonds has produced some eye-opening yields; at the lows this week few foreign govt. bonds were selling to yield less than 6%, and many issues are selling at prices below their calculated yield to maturity. A striking example of the recent buyer's market in these foreign bonds is seen in Norway dollar bonds; these now yield about 6.9% on average vs. 5.24% in June, in spite of Norway's "unblemished credit record, and ability to survive currency troubles in the past."

Wage cuts update:

The US Steel wage cut drew mixed reviews. AFL pres. W. Green issued a strong condemnation, calling it “morally wrong” and claiming “no greater blow ... has yet been struck against the forces which have been and are now serving to bring about a return of prosperity.” Reaction from the steel industry was generally positive, with many producers announcing their intention to follow suit. The White House released a statement saying Pres. Hoover's commitment to maintaining living standards was consistent and unaltered. However, the statement was again carefully parsed for signs of a change in the White House stand against wage cuts; it was considered highly significant that the statement referred only to living standards and not wages, since today's lower cost of living allows the same living standard at lower wages. It was also considered significant that the White House has shown a general disinclination to discuss wages for the past few months. Administration officials generally refused further comment, though Labor Sec. Doak said the Labor Dept. regretted the cuts.

Opinion seemed divided on whether the US Steel wage cut would be followed by price cuts on steel products. A front-page commentary said "the decks have been cleared for a recovery in the steel industry" since the impending prospect of wage cuts had "for a long time been a factor delaying placing" of orders. However, the recovery apparently will be due to "greater effort to attract tonnage and increase operations" rather than price cuts; "it is the view among leaders steel prices should be maintained ... it has been the experience in the industry that orders are not obtained through the slashing of prices." On the other hand, an editorial said it was regrettable US Steel didn't provide more explanation of the cuts, but that "the wage reduction unquestionably means that the Steel Corporation is putting itself in a position to make whatever further price readjustment consumers may effectively demand as a condition of expanding their purchases ... at some level or another prices must prove a stimulant to consumption in this as in every other field." On the other other hand, an item in Broad Street Gossip said some believe the wage cuts will be used to lower prices, but steel makers don't plan on this, pointing out "consumers cannot be attracted ... regardless of quotations [prices], until they have prospects of new business."

The steel industry's decision to finally make wage cuts was reportedly influenced by the disappointing failure of steel operations to show seasonal post-Labor Day gains; substantial improvement had been hoped for due to the very low rate of operations this year.

Wall Street had anticipated US Steel's wage cut announcement for some time; in fact, many believed "the cut was delayed longer than justified by conditions." The Street's generally favorable reaction to the cuts reflected "the sentiment in business and industrial circles that such a program was essential to trade recovery. ... With living costs substantially lower, and the return on capital notably reduced, it was inevitable that the liquidation of labor would have to be undertaken." The Street is now turning its attention to possible wage cuts by the railroads and other industries. While it's admitted rail wage cuts might be difficult because of "various brotherhoods" [unions], it's believed that with conditions still showing little improvement rail executives will be able to convince govt. officials and labor leaders of the need to lower costs. The positive reaction to steel wage cuts is reducing nervousness over expected wage cuts in other industries. D. Willard, B.& O. RR pres., says rails may eventually be forced to make wage cuts, but believes 15% rate increase would be a better remedy; notes current procedure for rail wage cuts could involve management-labor conferences, mediation, and arbitration, which could stretch over several months.

GM's 10%-20% salary cuts were their first cut in employee compensation during the depression; GM had already made large cost savings through improved efficiency, producing a relatively strong earnings perfomance in spite of lower sales. The cuts affect only salaried employees (about a quarter of GM's workforce); hourly wage rates remain unchanged. Corn Products Refining Co. seem likely to cut employee compensation for the first time by year-end; dividend cut also likely.

Assorted historical stuff:

Report on the German situation by the committee of experts meeting in Basel suffered from a certain “sacrifice of clarity” due to serious differences regarding the gravity of Germany's condition. France considers “the patient much less seriously stricken than the patient claims to be”; Germany “would convince the world that the patient cannot live long”; while Britain is somewhere in between. Nevertheless, agreement was reached that Germany needs new long-term loans to replace some of the capital that was suddenly withdrawn earlier this year, and that this would be difficult under current conditions due to a lack of confidence, in spite of the current German trade surplus and the German govt.'s commendable determination to improve its budgetary situation through spending cuts and tax increases. To restore confidence, it was recommended that France and Germany bridge their political differences and that trade barriers be lowered; the British govt. also managed to insert a discreet reference to the need not to burden Germany too heavily by required payments, in spite of the early threat by France to leave the conference if reparations or war debts were brought up. “The governments referred their problem to the experts. The experts have refered it back to the governments.”

Japanese forces finished taking control of the South Manchuria Railroad Zone and of Chinese railheads in Manchuria; Japanese casualties in the 5-day operation estimated at 200. League of Nations calls for peace between China and Japan; asks parley to arrange withdrawal of Japanese troops from occupied area. Tokyo's decision seen depending greatly on US attitude. Japan instructs representative an Nanking to accept proposal of Nanking govt. Finance Min. Soong for appointment of joint commission to investigate troubles between China and Japan.

Editorial calling for disposing of the Farm Board's large wheat surplus by selling it to China, whose rice crop has been devastated by flood. While China has already taken 15M bushels of wheat on long-term credit, the Chinese Economic Society estimates it could easily use another 135M; "China must have wheat or rice or else starve." The "white elephant" of wheat stabilization is evidently dead; this is a golden opportunity to bury the corpse. While "China's credit is not of the highest," wheat sold there will at least not oversupply the usual markets, as recent sales by the Farm Board did.

T. Macauley, Packard Motor pres., issues statement calling for giving the unemployed an “hour of work rather than dollar of dole”; says former enriches both the giver and taker, while latter may impoverish both; hits “the slacker dollar” that is “afraid to venture forth.” Notes particularly that dollars spent on motor cars would have wide impact across the US. Statement has drawn widespread support from manufacturers, bankers, professionals, and “members of the laboring classes.”

NY Gov. Roosevelt signed three bills inaugurating his $20M unemployment relief program for NY State. Relief will be administered by a three-member independent panel with broad powers. The program will be paid for through a 50% increase in the state income tax. NY City spending on unemployment relief estimated at $40M in fiscal year ending Oct. 31.

About 34 states have officially said they will participate in the 1933 World's Fair in Chicago. Several large fair buildings have been completed or are under way, but about $25M of construction remains to be done.

The population of ancient Rome reached a maximum of 312,000 in 585 B.C. The latest census, taken in May, shows a population of 1,003,881, up 250,000 since Mussolini assumed dictatorship of Italy and 7 times the population in Caesar's time. [Note: can't vouch for the accuracy of these figures.]

[Note: Sounds like my last checkup.] "An English surgeon has come out with the statement that Shakespeare's death 'resulted from complications of fever, typhus, typhoid paralysis, epilepsy, apoplexy, arterio-sclerosis, oversmoking, chronic alcoholism, gluttony, angina pectoris, Bright's disease, pulmonary congestion, and locomotor ataxia.'"

Market commentary:

Market wrap: Stocks staged a broad and vigorous advance. Buying was widespread at the open, with US Steel a leader; the advance picked up momentum as the morning progressed; rails were a strong spot. Stocks gained further at mid-day after news of gains in European markets. Considerable profit-taking in late afternoon caused some irregularity though the selling was generally well absorbed; however, US Steel suffered a good-sized setback from the day's high and Anaconda broke to a new bear market low. Bonds also staged a strong and wide rally. British 5 1/2s due 1937 opened at 99, up 7 from the previous session's record low, and later reached par; European issues joined the rally, with many showing sharp recoveries; Japanese issues also recovered lost ground. Rail issues experienced the widest and sharpest rally of the year, particularly in recently weak lower-grade issues. Public utility bonds were in strong demand. Trading in US govts. was inactive but prices remained steady to firm. Grains generally higher on dull trading. Cotton rose sharply in spite of good weather reports. Copper remained at record low of 7 cents/pound, though buying is reportedly better. Silver rose 7/8 cent to 29 1/2. Cocoa rose sharply the day after hitting record lows.

For the first time in the past 5 sessions, and only the second time in the past 10, the Dow failed to close at a new bear market low.

Market sentiment was improved, though conservative observers advised watching the market for another session "on the theory if new liquidation is to break out it will make its appearance shortly."

Positive factors affecting sentiment included yesterday evening's announcement of 10% wage cuts in the steel industry, optimism over an early decision on the rail rate increase, firm performance of European markets, and the strong market performance after restrictions on short selling were lifted.

The NYSE removed its restrictions on short selling; this was "looked upon as indicative of confidence on the part of the banking leaders that conditions were nearer normal again." Many observers were more optimistic on the immediate market outlook, though few were willing to buy "for more than a technical turn." Short covering was heavy at times after the removal of the short-selling ban; some bears had reportedly held their positions through the ban since they were unwilling to leave the market, but were now covering "with the idea of putting out short lines again when the rally appears to be reaching its culmination."

R. Whitney, NYSE pres., issued statement saying the NYSE's ban on short-selling was “not a reversal of its long established policy” but “purely ... an emergency act” taken after British suspension of the gold standard “as a temporary expedient and has therefore been rescinded.” However, says the NYSE Governors “will continue to scrutinize short sales to ascertain the intention behind them.”

Large drop in rail car loadings for the week of Sept. 12 (down 91,796 from prev. week to 667,750, and down 30.8% from 1930), while partly accounted for by Labor Day holiday, was "greater than seasonal ... and is a continued reflection of the lessened business activity in many lines."

There was reportedly a “rather widely held theory that a period of inflation for commodities is getting under way.”

Rise in silver prices seen benefiting mining cos. whose ores have silver content, particularly copper miners.

American Woolen and International Shoe are reportedly experiencing heavy demand and operating at high capacity.

M. Sloan, NY Edison pres., predicted a repeat in the next two decades of the electric industry's remarkable growth in the past 18 years; while growth from new customers is slowing, a large potential for growth remains in new uses for electricity and increased usage by customers.

An abundant supply of low-cost meat is predicted for next winter and spring. With wheat and corn at extremely low prices, many farmers are interested in buying thin livestock believing they can do better by using their grain as animal feed; drought conditions in the Northwest have also stimulated sales of "unfinished" livestock.

Economic news and individual company reports:

Steel production for week ended Monday was about 29% vs. slightly over 30% the previous week, 28 1/2% two weeks ago, 60% in 1930, and 83% in 1929.

Weekly steel reviews report steel demand has slipped back to the August level; demand in public construction is still promising, but automotive outlook, instead of showing expected improvement, has become "increasingly obscure." Rail inquiries are very weak, and may be delayed until the wage question is settled in that industry. However, the steel trade believes "abandonment of the gold standard in England and a reduction in steel wage rates here have helped to clear the atmosphere," and "prices are holding surprisingly well, though not subject to severe tests." Machine tool market "very uneven," with increases in some sections offset by "continued dullness elsewhere."

The President's organization for unemployment relief reports that 10 of 42 locations showed improvement in some lines of business over the past week; generally, little change is reported from week to week.

Report from Wilkes-Barre: Dime Bank Title & Trust closed, deposits $2.7M; Heights Deposit Bank, taken over by state, deposits $1.7M; Wilkes-Barre Clearing House Assoc. announces local depositors will be required to give 60 days notice before withdrawals; several million dollars in currency received from Philadephia Fed. Reserve Bank for local banks; officials of the clearing house say situation here “satisfactory.”

Fed. Reserve Sept. Bulletin stresses strong position of Fed. Reserve system, notes gold held by Reserve banks is now $2B in excess of the requirement of 40% against notes and 35% against deposits; this is about $400M larger than two years ago. US monetary gold stock reached $5B in early Sept., the highest in history. Reserve bank holdings of govt. securities at end of Aug. were $728M, close to a record.

Report by the experts committee in Basel puts total German foreign debt at 25.5B marks in Dec., vs. 23B in July.

Agriculture Dept. reports official estimates for wheat production in 31 countries for 1931 totals 2.720B bushels, down from 2.861B in 1930. However, prices worldwide have continued to be depressed by large carryovers from last year, by large crops in countries with early harvests, and by heavy Russian shipments.

Texas Gov. Sterling signed cotton acreage reduction bill, asked Governors of nine other cotton states to enact similar laws; opponents expected to challenge Constitutionality of the law.

The ICC heard arguments against the proposed 15% rail freight rate increase from Sen. Brookhart (R., Ia.), representing farmers, and from shipping, coal and lumber interests.

Cicero R. Murray, “generalissimo of military forces enforcing the shutdown of Oklahoma oil fields,” denied reports Gov. Murray had agreed to reopen the fields Wednesday, but said an effort was being made to reach a solution to the shutdown. Gov. Murray had previously threatened to keep wells closed until oil reached $1 a barrel. Texas Railroad Commission's order cutting allowable production per East Texas oil well to 185 barrels/day from 225 has had a beneficial effect, reducing total East Texas production to 366,000 barrels/day from 425,000. However, spot gasoline in the Chicago market was lower as reports of possible reopening of Oklahoma production "is causing some disquietude."

US electric output for week ended Sept. 19 was 1,663 GWHr, down 3.4% from 1930.

US shoe output in Aug. was about 31.3M pairs, up over 9% from 1930; first 8 months 219.1M, up 3.8%.

Announcement by Transamerica Corp. that it intends to divest its bank affiliates has created considerable local speculation on the fate of Bank of America, N.A.; there have been reports from time to time that this bank might be merged with a local (NY) one.

An old Court of Claims decision is seen as a bar to plan of M. Steuer for $30M lawsuit by Bank of US depositors against NY State.

Companies reporting decent earnings: Southern Calif. Edison, Perfect Circle (automotive piston rings).


The railroad examiner was giving a candidate for engine driver his final examination. "You're driving an engine down a steep hill and your speed becomes excessive. What do you do?" "Apply the brakes." "They aren't effective." "Put brake handle into emergency position." "Doesn't slow you down enough." "Reverse the engine and turn on steam." "The wheels fail to grip the metals." "Pour sand on metals." "Sand is damp and won't pass through the pipes. Now what do you do?" "Why, let her rip. We must be back on the straightaway by now."

November 10, 2010

The Lighter Side of Utter Catastrophe, and Stock Market Poetry

After writing my recent note on Eddie Cantor, I did a search on Amazon and was delighted to find that “Caught Short: A Saga of Wailing Wall Street,” a book by Cantor about the Crash, was available. Ten bucks and a week or so later, I was holding said book in my hot little hands - see pics to the right (note to those considering purchase of the book - it does contain some offensive humor).

All in all, the book isn't up to Cantor's top standards, but I've taken the liberty of editing a few of the best jokes into a Tonight Show-style monologue:

The night of the worst crash, I was too scared to go back home, so I went to a big hotel in the city and asked for a room. The clerk looked at me and asked “What for? Sleeping or jumping?”

But that's not as bad as the two fellows who jumped from a bridge together. Seems they had a joint account ...

But seriously, the crash has had some terrible consequences. Here's a few detailed statistics we gathered afterward.

- 150,207,904 new nickels are being produced by the US Mint in 24 hour shifts - for customers who never took the subway before.

- 48,286 nightclubs throughout the country are now catering nightly to 263,679 people - unfortunately, all of them are employees.

- 3,795 women bought certain investment trusts because they had Goldman-Sachs appeal. [Note: interesting that people were making sarcastic jokes about GS even back then ... ]

- 87,429 married men in New York City had to leave their sweethearts ... and go back to their wives.

A little note on the book - this was a quickie small hardcover rushed out after the initial “Great Crash” in 1929. I was amazed to look inside the front cover and see that the first printing was in November, 1929. As all of you no doubt remember from my special commemorative summary last October, the initial Great Crash was roughly a week-long affair starting about Oct. 23, 1929 - so, this book was printed a month or less after the event. Meanwhile, with all our modern technology it now seems to take at least 3 months after a catastrophic event or scandal before the first crappy quickie books start appearing ...

And, another humorous bonus - from time to time the Journal published little poems about the stock market. For some reason, I can't get enough of these ... so here's a little collection for your reading pleasure.

Wednesday, Nov 1, 1929: Dow 273.51 +15.04 (5.8%)
The Trader's Lament:
[Note: This appeared a couple of days after the initial Great Crash. The Dow, after hitting a peak of 381.17 on Sept. 3 (not reached again until 1954) had declined to 325.51 at the open Tuesday, Oct. 23. The Crash took place over the following week, ending with a drop of 30.57 points to 230.07 on Oct. 29, AKA Black Tuesday, on which 16.410M shares traded (not reached again until 1968).]
They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive!
I wriggled like a frightened eel from out the avalanche of Steel.
'Margin!' 'Hold on, I'm nearly broke; Sell Pennsylvania Coal & Coke.'
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”

Wednesday, July 9, 1930: Dow 219.08 +0.75 (0.3%)
“In stocks of wood no longer should one bear incarceration,
but hand and foot are many put 'in stocks' for long duration.
At each 'new low' as the markets go locked up in stocks securely -
for a long time yet some folks will sweat bound hand and foot most surely. - Gordon Price”

Wednesday, September 10, 1930: Dow 244.29 +1.45 (0.6%)
Ode to the new high-speed stock ticker
“A clever contraption within its black box -
Its figures flash out swift and sure on all stocks;
No matter how hectic the trading may get,
what millions it mounts to, its pace shall be met.
Ah, had we but had it last fall 'neath glass bell -
Twelve million, sixteen - whole world wanting to sell -
those agonized hours when the truth none could know -
the old ticker smothered because 'twas too slow.
This dainty swift prodigy, blithely abreast
of any big market, such fears sets at rest.
And yet this great boon - human nature is such -
at moment of getting it doesn't seem much.
Like Flora McFlimsy of Washington Square,
(that worthy young lady with nothing to wear)
this nifty speed marvel that's just come on view,
has cause for complaint - it has nothing to do.”

Wednesday, February 18, 1931: Dow 179.55 -3.33 (1.8%)
Poem by F. Caverly
... A thousand dollars send by check, your margin with us to protect.
With faith in Steel I held the stock; more margin sent from cash in sock.
A 10 point loss I took in Steel, again to try the gambling wheel.
Bought Woolworth, Can and Brothers Burns; To beat the game one never learns ...
As traders will, bought Radio, but picked it high and sold it low ...
I tried again; good rails I bought; they, too, went down and havoc wrought ...
The fool I was! I stayed and played; Put up more cash - more tips I played.
But now I'm wise. Of stocks bereft, all profits gone - no margin left;
Without a penny to my name, I'm off for life that market game."

Thursday, February 26, 1931: Dow 190.72 -3.64 (1.9%)
Poem by A. Ellard
"Out of the gloom that covers me, dark and dank as grave's grim sod,
I thank what lucky stars there be, For my imperishable 'wad'. ...
It matters not how fares the soul, So sorely tried by Wall Street's god;
I am the master of my 'Roll'; I am the captain of my 'Wad.'"
[Note: This is an improved version of the Victorian poem 'Invictus,' by W.E. Henley:
"Out of the night that covers me, Black as the Pit from pole to pole,
I thank whatever gods may be, For my unconquerable soul. ..."]

Monday, April 27, 1931: Dow 151.98 -3.78 (2.4%)
Poem by F. Caverly

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

Monday, May 18, 1931: Dow 142.95 -1.54 (1.1%)
Poem by F. Caverly

"You hear it said, where men powwow, 'The finest stocks are cheap;
A man should really buy 'em now, if he'd a fortune reap.
Across the Board the best blue chips are yearning to be bought.'
And then they all have further dips to fret a mind distraught.
That frequent urge harasses me: 'Man, buy - get on the job.'
As if I were, perhaps, J.P., or Henry Ford, or Schwab.
Four times have stocks seemed at their low, (some say this is the fifth),
While men cried 'Buy, you dumb bozo,' but failed to say what with."

October 30, 2010

Wednesday, September 23, 1931: Dow 109.40 -1.43 (1.3%)

British crisis special:

Great Britain's second day off the gold standard, as far as the man in the street was concerned, found the country carrying on under the war-time slogan 'business as usual.' Everyone was pursuing his normal vocation and so far there had been no popular manifestations or demonstrations. Retail prices for the ordinary necessities of life had not increased. Movie theater audiences were not diminished.” Public has apparently heeded appeals of PM MacDonald and Chancellor Snowden not to “rock the boat.” British govt. is reportedly promising prompt action “to prevent excessive retail price increases and profiteering.” PM MacDonald, “fatigued by the recent critical developments, plans to rest in the country several days.” British Treasury restricted purchase of foreign currency by British subjects, other than for normal trade or to fulfill existing contracts. British business with foreign connections was hampered by the inability to transfer funds even for normal trade, since quotes couldn't be obtained on some currencies. London department stores held off on placing orders for US goods, while US wholesale buyers in London increased their purchases, since British goods were about 15% cheaper. S. African gold was not offered in London Tuesday as producers held it back for a higher price.

Foreign currency market in NY “continued in a disorganized condition, although it was possible to get bid and offered rates on most leading currencies.Sterling settled into a narrower range in NY trading, ranging from $4.10 to $4.225. Movement in other currencies was “bewildering.” Francs were a lone strong point, rising close to the gold export point from NY. Italian lira plunged; Italy, along with Germany and other European countries, is on the “gold exchange standard,” giving central banks the option of paying out sterling or other gold currencies rather than gold, and so depend on holdings of sterling and other foreign currencies to back their own currency. Scandinavian and Canadian currencies broke sharply, to the lowest levels since postwar stabilization. Swiss francs and guilders were “lower but fairly strong, all things considered.” Silver currencies fell back slightly after a sharp rally Monday.

In "one of the greatest gold transactions in history," several European central banks reportedly "earmarked" $116M in gold (in effect exporting it from the US) with the proceeds of liquidated US investments. This is the first substantial loss of gold by the US since the summer of 1930 when about $100M was exported to France and Canada. US exports this year up to Sept. 16 were $75M vs. imports of $500M, bringing US gold holdings to the record high of $5.015B on that date. Demand for gold may be due to serious effect of British crisis on many central banks which carried large amounts of sterling as reserves or held balances in London; Bank of France particularly exposed. France, Switzerland, Holland and Italy “probably involved” in the earmarking transaction.

Stock markets reopened in Amsterdam and Brussels; trading continued in Paris, Rome and Milan; substantial improvement reported in leading shares, while prices also rose in unofficial London trading; NYSE trading calmer; foreign govt. bonds generally higher. Stocks of British cos. trading on the Curb (later Amex), as well as those of US cos. doing business in England, recovered from Monday declines “almost without exception.” “Assurances from leading financiers, both here and abroad, that England's action should prove an aid to world recovery, served to lessen nervousness.” London stock exchange to reopen today; Berlin will remain closed. Bond trading resumed in Tokyo; prices sharply lower.

US investments in Britain are believed relatively small, and are largely direct investments such as branch factories rather than in securities. Total long-term US investment in Britain estimated at $640M vs. $4B in Canada; US holdings of British bonds about $140M.

Mexico sees possibility of considerable trade now going to the US being diverted to England as a result of England's suspension of the gold standard. Mexico is showing keen interest in the British move since it's seen as paralleling her own earlier action in making silver pesos legal tender and demonetizing gold.

High Administration officials optimistic on effects of British suspension of gold standard; seen increasing British exports but without great effect on US trade since US and British goods don't compete much in other markets. Action has resolved major uncertainty that had been looming for many months, causing various complications. Action seen improving general British situation, which will benefit the US.

"Important banking interests expressed considerable optimism over the outlook for American securities, voicing the belief that the present British policy would bring gradually increasing demand into Wall Street from all parts of the world." Bankers predicted US markets "would be the repository of the world's investors to the greatest degree in history in the next decade." Several favorable developments seen following the dramatic British action: First, stocks listed on the NYSE were "able to absorb the world's frightened liquidation, not only without collapse but actually on a rising scale of prices." Second, with England temporarily off the gold standard, the US dollar "becomes the outstanding gold standard of the world"; Brazil has already adopted the dollar as a basis for exchange instead of the pound, and Chile is considering transfer of reserves from London to NY. Finally, benefits to the US won't be at the expense of England; on the contrary, British exports are expected to be stimulated by a lower sterling level, and "inflationary tendencies resulting in Great Britain from abandoning the gold standard" will probably result in higher commodity prices throughout the world, as indicated by immediate jump in silver.

Editorial noting predictions that NY can now "succeed to London's age-old leadership in world finance." While the British crisis unquestionably gives the US a great opportunity, this transition has been prophesied before without materializing - for example, following the world war. Whether it happens now will depend on some unanswered questions. First, there must be "a restoration of America's confidence in herself." On this score, the NYSE's performance Monday was splendidly encouraging, but the weakness in "domestic bonds, which could not conceivably be adversely affected in their intrinsic worth" by the British crisis, "was a refusal by much of the investing public of its part in leadership." Second, there must be "some sort of reconciliation ... between business and politics"; it's particularly to be hoped that the "economic debris of the war" can be tackled based on "present-day realities rather than ... bogus tradition." “Without a doubt we shall have to replace nervousness with a sane self-confidence if we are to accept even temporarily the leadership of world finance. As a matter of fact, signs are beginning to appear that that replacement has begun.”

Wages, wages, wages:

Announcements of cuts in employee compensation came from three leading industries. US Steel announced general wage cuts for the first time in the depression, averaging about 10%; other steel makers indicated they would follow suit. This follows US Steel's action in late July cutting salaried employees by 10%-15%. GM announced salary cuts of 10%-20%; hourly wage rates weren't affected. US Rubber adopted a 5-day week, cutting salaries by one eleventh.

There was no official Washington reaction to the US Steel announcement, though "it is known that the attitude of the Administration is still for maintenance of high wages where possible"; Labor Sec. Doak refused comment.

Rep. W. Wood, House Appropriations Committee chair., proposes reducing annual salary of members of Congress to $8,000 from $10,000, for annual savings of $1.062M.

Over 3,000 members of the Amer. Fed. of Full-Fashioned Hosiery Workers revolted against new national agreement between union and manufacturers cutting wages by 30%-50%; seven mills idle.

Two letters to the editor on the wage question. One argues that lower wages would allow lower-priced goods, which would stimulate industry. The other calls for a comparative table of wages paid by major industries, making it clearer if "certain groups were demanding excessive wages."

H. Firestone, Firestone Tire & Rubber pres., recommends five-hour day and five-day week as temporary measure to meet the depression.

Soviet Supreme Council of National Economy announced 30% wage increase in all branches of coal and metallurgy industries in order to increase productivity and quality; also instituted system of bonuses enabling administrative and technical personnel to double their earnings.

Assorted historical stuff:

Pres. Hoover's appeal to the American Legion convention drew support from prominent Legion officials; sentiment among delegates reportedly also moved toward his position that the US can't at this time afford large new spending, such as cashing in the full value of veterans' bonuses, without prolonging the depression.

Under-Sec. of State Castle says US govt. determined to bring about “real limitation and reduction” of armaments; notes “competition in armaments is one of the greatest of war breeders and all wars leave an aftermath of depression which brings suffering into every home.”

Editorial noting recent Japanese-Chinese clashes in Manchuria, and general "equanimity" with which the world has greeted them. While this is partly due to pressing troubles elsewhere, it's also because the current situation is a logical continuation of recent history, in which Russia and Japan have alternated attempts to undermine the "nominal and weakening Chinese national authority. ... It is in no way surprising ... that the outside world refuses to excite itself over an affair, which, though it seems to reveal pretty baldly Japan's intention eventually to make another Korea of Manchuria, is absolutely consistent with her activities there for the past 20 to 30 years." [Note: Japan occupied Korea in 1905, remaining there until after World War 2.]

Editorial by T. Woodlock quoting recent speech given in Scotland by Ambassador Dawes, who observed that "it was not at times of adversity that mankind made its mistakes, but in times of prosperity." Times of crisis have the benefit of teaching "people that they are absolutely interdependent" and making "compromises and sacrifices ... 'politically' possible." The current distress will silence "demagogues who ... by promoting international prejudices for internal political purposes, ... delay ... sensible and constructive agreements of mutual self-interest among the nations." However, Woodlock says this hopeful observation may not apply to the US since "we know little of the 'common hardship' that is the fate of the Old World today ... our 'good times' are far 'better' than the Old World's 'good times' and our 'hard times' much less 'hard.'" The 1932 election will be a test of whether the US can resist "the demagoguery of today." It will be the first Presidential election held in hard times since the 1896 campaign. While there was demagoguery then too, "it was of a simpler and more robust type," with "not a little of the pioneer spirit. The men who led it ... believed in something, even if it was only silver." By contrast, the "demagoguery of today ... talks in 'scientific' terms, and the essence of its doctrine is an all-corroding skepticism as to the worth of ... individual strength and individual responsibility. ... It has a consuming hatred of individual success ... and its aim is to wrest from the hands of the competent and place in the hands of the less competent the power to manage the social, political and economic affairs of the nation." If the current crisis hasn't taught us "enough to ... hold the main road, ... we may confidently expect that our schooling will continue until it does."

Interior Sec. Wilbur says pleased with progress of oil states in lowering production to bring it more in line with demand; particularly pleased oil states have recognized conservation is a local problem; good progress made in unit (cooperative) production in California field of Kettleman Hills.

Assoc. Against the Prohibition Amendment reports to Congress that so far in 1931 it has raised $410,769 and spent $391,658; about a third of contributions came from the du Pont family; J. Raskob contributed $40,000.

Radio Corp. (RCA) is working hard on television, and will reportedly be ready to market a set in 1932.

"Obelisk Illumination" - When the Washington Monument was erected about 50 years ago, it seemed unlikely that it would ever impede traffic. Now, however, the structure has become a hazard to aviators, and officials have just completed successful tests for lighting the monument at night to minimize the danger.

The last Presidential team of horses and carriage disappeared several years ago, but the White House stables remained standing until recently, when they were ordered demolished to make room for the new Public Health Service building.

The economic downturn will reportedly be reflected in wage cuts for big league baseball players next year. However, "from the size of pay checks some of them draw they will still be able to make a pretty fair living after the cut." Highest salaried players: Babe Ruth of the New York Americans, $80,000; Hornsby of the Cubs, $40,000; "Hack" Wilson, also of the Cubs, $35,000.

C.V. Whitney to dispose of “about 60 of his best thoroughbred mares and several young stallions”; 25% of proceeds to go to the unemployed.

Market commentary:

Market wrap: Tuesday's stock trading provided considerably less excitement than the extreme swings seen on Monday, as "a noteworthy degree of confidence" appeared to replace the initial "general feeling of dismay" following British suspension of the gold standard. Prices firmed after a weak opening, with leading issues rising above Monday's closing prices. "Considerable irregularity" developed at mid-day, but "the general list continued to give a satisfactory account of itself. Moderate setbacks in the principal stocks attracted prompt support, and reactionary tendencies proved unable to gain headway." Bond trading irregular. Major foreign bonds mostly moved higher, but volume was much lower than in Monday's session and price moves showed unusually wide variation, ranging from sharp gains in some issues to sharp losses in others; German and British bonds rallied; Italian weak. US govts. moderately higher. Corporate issues continued lower; Dow average of 40 corp. bonds closed at new post-1924 low of 88.56, down 0.24. Grains mostly firm, though Sept. corn broke to a new season-low under heavy deliveries by "Thomas M. Howell, the leading spot corn holder," who accumulated 8M bushels while orchestrating a short squeeze in July and hedged by shorting Sept. corn. Wheat market here ignored further sharp gains at Liverpool as merely reflecting a lower sterling value. Cotton up moderately. Coffee fell sharply; cocoa hit new record lows but rallied to close flat. Silver fell 5/8 cents to 28 5/8, retreating from its sharp rise Monday.

Dow industrial average closed at a new bear market low; there were no new yearly highs and 207 new lows.

"There was talk in the Street" that the ban on short selling might be lifted by the NYSE in the next few days. A number of stocks have experienced sharp runups as shorts found it costly to exit, including Reading and Western Union.

Several leading bears have reportedly switched to the "constructive side"; believing that with the British situation coming to a head, one of the most powerful negative factors has been passed, some have been buying stocks they believe likely to benefit from a market turn.

An increasing number of brokers favors the purchase of stocks and bonds that have declined to levels that are obviously too low based on earnings or outlook.

Movie companies have declined sharply, considering their "large earning possibilities"; Loews, which has the smallest debt and highest earnings per share in the group, is selling to yield over 10%.

An increasing number of rails is expected to follow NY Central's lead in borrowing directly from banks instead of attempting to sell bonds.

Some skeptics dismissed the impressive resistance shown by the stock market Monday as artificial, pointing to the "virtual prohibition of short selling. However, the best opinion was that the market had given a remarkable demonstration of technical strength in face of extremely troubled circumstances." While early support may have been due to short covering, the continued strength throughout the day was seen as indicating that "genuine demand for stocks was greater than the forced liquidation from every part of the world, a development that created growing confidence regarding the immediate future of the market."

The bond market has recently suffered from "almost complete lack of interest ... on the buying side ... broad declines are shown when any holder of bonds finds it necessary to dispose of even a small block. Investors show no interest in yields, although in multitudes of cases these are so large as to satisfy the most extravagant desire. Their attitude toward obligations seemed to be governed entirely by fear," at least regarding foreign govt. bonds and corp. bonds both domestic and foreign. As one example, German international 5 1/2's due 1965 are available at about 40, giving a 13 3/4% direct annual yield. Bankers say there's a large amount of money "awaiting investment in bonds" but staying on the sidelines due to fear; therefore, "any indication of price stabilization would bring heavy buying, which ultimately would start bonds on a violence advance." On the other hand, "present sentiment ... it is unlikely to prompt such buying as long as prices continue to sink."

Economic news and individual company reports:

Radio Corp. of America settled a large number of lawsuits with independent radio manufacturers, involving a total of $60M in claims; will pay $1M to the DeForest Radio Corp. and cross-license patents with it; other mfrs. will drop antitrust suits and obtain licenses of RCA patents. D. Sarnoff, RCA pres., praises the amicable settlement as freeing radio industry from the litigation that has burdened it; the settlement will allow radio makers to concentrate on developing new products, and should stimulate business as a whole. This leaves the govt. antitrust suit against RCA, GE, Westinghouse and AT&T as the only major litigation facing RCA.

Income tax revenue is down sharply from a year ago; income tax receipts for July 1 - Sept. 19 were $296.6M vs. 488.8M; for the period, Treasury reported a deficit of $358.1M for the period vs. a surplus of $14.0M a year ago.

Pres. Hoover's organization on unemployment relief reports state highway construction employed 370,000 workers in Aug., up from 325,000 in July.

Rail freight loadings for week ended Sept. 12 were 667,750, down 91,796 from prev. week, down 30.8% from 1930 week, and down 42.0% from 1929. Declines vs. previous years were exaggerated due to Labor Day falling in the Sept. 12 week this year.

ICC is expected to issue its decision on the rail rate increase with "unprecedented dispatch," possibly within the next month. Rails are anxiously awaiting the decision; favorable action by the ICC is expected to result in advances in many rail bonds from current low levels.

Weekly bank statements showed "continuation of the general deflationary tendencies that have been in progress for months." Loans, which ordinarily rise in early Sept., have fallen $147M in the past two weeks, in spite of $80M in new British loans. Holdings of non-govt. securities fell last week by $41M, bringing the total about $300M below the April peak and down to the lowest level since Jan., while govt. securities rose by $227M; this continued reduction in non-govt. securities partly accounts for the recent weakness in bond prices. Demand deposits at member banks are down sharply; current total of $13.134B is $700M off from the year's peak and the lowest at this time of year since 1928; "these deposit drops, which are non-seasonal and drastically large in extent, clearly indicate that there are still no signs of returning confidence, or expanding trade."

BLS reports US building permits totaled $127.1M in August vs. $112.1M in July, but down 10.3% from Aug. 1930. Compared to 1930, residential construction fell 22.6% while nonresidential increased 1.5%.

NY Cotton Exchange estimates world consumption of US cotton for the 1930-31 season at 11.1M bales vs. 13.0M in 1929-30.

Argentina accepts $25M US loan negotiated by Brown Bros. Harriman; matures in 6 - 9 months, at 6% interest.

Suez Canal traffic payments will henceforth be payable in francs rather than sterling.

The European art world showed “hardiness and courage” this summer in spite of the depression; exhibitors “provided both quantity and quality” in the summer's art events; auction houses generally refused to postpone important sales and, in several cases, their optimism was more than justified.

Airplane and engine production (commercial and military) for the first 7 months totaled $21.8M, down 5.1% from 1930; sales were $22.9M, down 2.2%.

Companies reporting decent earnings: Canadian Hydro-Electric, Federal Water Service, Brooklyn & Queens Transit.


Karamazov - Tobis Klangfilm of Germany has followed the example of its rival UFA in taking over a US theatre to be devoted entirely to its releases - the Vanderbilt on 48th St. The first offering, unfortunately, is this film, "ostensibly based on the famous novel" but converted to a "garbled, incoherent, blood-and-thunder script" that "might pass for an Edgar Wallace mystery thriller"; "the ironic contrast of Dostoyevsky's subtle characterizations with the mechanical antics of the stock characters of melodrama makes the picture ridiculous."

The Squaw Man - MGM film, at the Capitol. Cecille B. DeMille remakes his earlier silent film; Warner Baxter stars as Jim Carston, a wealthy Englishman who comes to the American West to forget his cousin's beautiful wife; Lupe Velez plays the Native American girl who saves Jim's life and wins his love. Effort to bring the theme up to date by adding current-day scenes doesn't work, but film succeeds as "the old-fashioned melodrama that it is." DeMille has "made a beautiful motion picture ... the Western scenes are entrancingly photographed and directed."


Teacher - Johnny, how old is a person born in 1890? Johnny - Man or woman?