Friday, December 12, 1930: Dow 170.31 -3.67 (2.1%)

Assorted historical stuff:

[Note - late posting today due to work emergency.]

[As previously mentioned, the Bank of U.S. failure is commonly used to mark the first major banking crisis of the Depression.]

Bank of United States closed and taken over by NY State Banking Dept.; had about $202M of deposits, 400,000 depositors, and 23,000 stockholders. Despite size, “highest banking authorities” assure it is “isolated local situation,” closing is likely to eliminate recent uncertainty. Merger with stronger banks had been attempted for weeks, ultimately abandoned at 4 AM Thursday; a run on the bank developed, leading to closing. NY Clearing House (bank assoc.) admits Manufactures and Public (two banks in the aborted merger), announces it will loan depositors 50% of net balances at 5%.

Bank of U.S. was started in 1913 with $100,000 of capital, grew rapidly after the war. Rep. McFadden notes bank was incorporated in NY State, and is not connected with the US govt., though it is a Fed. Reserve member bank.

Editorial: Closing of Bank of U.S. was no surprise; bankers have been working for weeks to avoid failure. When failure became inevitable, leading banking interests worked strenuously over the past several days to smooth out the situation; the Clearing House assoc. of banks established a fund to lend depositors up to 50% of their claims, giving them substantial immediate relief. This action indicates the banks believe problem is isolated; otherwise they wouldn't commit such a large sum to help depositors in just one bank. Bank depositors in general should remember this is the first major bank failure since the 1929 market panic and not jump to false conclusions about other banks; in fact, this event may help by relieving the state of tension that has hung over the market for the past few weeks.

Washington report: House seen exerting check against some of the more extravagant bills passed in Senate. Wets pleased at dry opposition to national referendum on Prohibition. Farm Board more confident on ability to stabilize wheat at current level, believes price will then naturally rise due to supply and demand.

Farm Board chair. Legge says opposed to Sen. Capper's plan to give 40M bushels of wheat held by Board to needy families; says throwing that much wheat on the market would require Board to reenter market to keep prices where they are.

Editorial by T. Woodlock: Sentiment against short selling commodity speculators is misplaced; futures markets provide an essential insurance function at low cost (in fact, probably at negative cost since speculators as a whole lose money). The “wider and freer” the market is, the less the insurance will cost.

Oil deposits found in “Persia”; preliminary find in Bolivia.

Cuba declares martial law due to public disorder, clashes between students and police.

[Strangely familiar dept.] Mayor Mackey of Philadelphia asks landlords and mortgage holders for three month “moratorium” to help needy. Rep. Edward (D, Ga) introduces bill suspending Land Bank foreclosures for two years.

Monocles, onetime trademark of the stage Englishman, rapidly disappearing from Britain; now mostly worn by college youths using plain glass and a few old timers who acquired the habit in Victorian times. When asked why they wear monocles, most say they have one bad eye, but if pressed will admit “it is pure swank.”

Pines-Winterfront Co. now experimenting with device for rear of car indicating direction driver intends to turn.

[Sheer Genius dept.] Paul Napoleon-Rolnard, French poet, delivers his own eulogy by phonograph record. “Although they knew what was coming, it gave the mourners a creepy and uncanny feeling when they heard the voice of the dead man ring out in clear, unmistakable tones.”

Market commentary:

Market wrap: Market opened relatively calmly after Bank of US announcement, but selling picked up momentum as morning progressed, becoming heaviest since early Nov. Weakness began in rails, spread to other sectors. Rally started in early afternoon with US Steel again leading, but was insufficient to prevent new 1930 lows for all three Dow averages. Bond market continued liquidation; corp. declined with many new lows; US and foreign govts. mostly steady but S. American weak. Commodities weak; cotton at new season lows; Farm Board continued wheat support.

Stocks of banks involved in the 4-bank merger ended down sharply (Bank of US, Public Nat'l, International, Manufacturers).

Market observers still caution against going short, note market has acted quite well considering adverse news.

Today is 16th anniversary of re-opening of stock market during World War; exchange was closed between July 30 and Dec. 12, 1914. Stocks jumped dramatically on the reopening; GM closed up 27 1/8 points to 86, Bethlehem Steel 12 points to 42.

Number of stockholders in US now estimated at 10M - 15M (not including bonds) vs. about 2M in 1901; may account for large influence of stock market on public sentiment. Number has continued to grow this year as reported by major cos.; for example, at start of Nov. AT&T reported 555,794 stockholders, up 63,706 from Mar. 31; GM 261,500, up 43,108; GE 109,757, up 36,910.

“Trends of stock and bond prices this month do not encourage expectations of brilliant reports by investment trusts” [similar to mutual funds].

[Still doing pretty well considering dept.:]

Some rail shares are now nearing 1921 prices; on the average, rails now are financially stronger, paying higher dividends, and many will have earned their dividends in 1930, a highly unsatisfactory year.

Most major car companies are expected to be profitable in 1930, despite an expected poor fourth quarter. Showing seen as creditable in the circumstances; industry “now is emerging from the period of readjustment in the strongest financial and physical condition it has enjoyed for many years.”

[Wait 'til next year dept.:]

Steel industry closes the year with under 40% of furnaces active. This has happened 3 times previously this century; all 3 times, the industry showed pronounced improvement the next year.

L. F. Rothschild & Co. say prospects improved for rubber industry in 1931, as long as manufacturers can cooperate, avoid unfair competitive practices.

S. Insull, utility leader, says govt. relief activities shouldn't be carried too far; people can best work themselves out of the depression unaided.

Insurance interests report higher borrowing on policies in the past 12 - 14 months; a year ago the funds were needed because of the market break, but in recent months they've been used for necessities.

E. Reeser, Amer. Petroleum Inst. pres., criticizes proposals requiring oil cos. to divest pipelines; says this won't benefit rails, since better and cheaper transportation methods become established regardless of injury to older methods; compares to stage coach hostility to rails.

E. Filene, Boston department store owner, calls for “Sell Now” campaign to reduce unemployment; producers and distributors should make prices low enough on popular items to stimulate buying.

E. Walker, Transamerica pres.: While effects of depression are unlikely to completely disappear in near future, “it becomes easier, week by week, to find breaks in the clouds that signalize the approach of fairer business weather.”

Dow average of 40 bonds set a 1930 low at 93.28 vs. prev. low of 93.69 on Jan. 23.

Dow made new post-panic low. There were no new yearly highs and 204 new lows.

Economic news and individual company reports:

Electric output by US light and power industry for week ended Dec. 6 was 1,729 GWHr vs. 1,680 in prev. week and down 3.9% from 1929.

Fed. Reserve reports money in circulation Dec. 10 up $41M to $4.656B, total Reserve Bank credit outstanding up $26M to $1.134B. Member banks in NY City report brokers' loans down $12M to $2.099B vs. $3.425B in 1929; loans on securities to non-brokers down $4M to $2.041B .

Treasury $150M 6-month 1 3/4% certificate attracted $959M subscriptions, while $250M 1-year 1 7/8% had $517M.

French retail price index was up 10 to 647 in Nov., while wholesale index was down 15 to 504; since April, retail index is up 60 while wholesale is down 54.

British Nov. imports were 79.4M pounds vs. 90.9M in Oct. and 108.2M in Nov. 1929; exports 44.1M vs. 46.9M and 63.1M.

Chilean govt. raises tariffs on 447 articles, including many US exports.

Montana crude oil producers unable to dispose of their crude; some producers say they will have to pump oil out on ground when available storage is filled.

F. Perkins, NY State Industrial Commissioner, reports NY factory employment dropped 3% from Oct. to Nov.; index was 80.6, (avg. of 1925-1927 = 100).

A&P sales in Nov. were $79.8M, down 4.6% from 1929; first 11 months $980.9M, up 4.3%. However, Nov. weekly tonnage sold was 99, 935 vs. 95,277.

Companies reporting decent earnings: Dominion Textile (largest cotton textile co. in Canada, benefitting from new tariffs), Patterson-Sargent (paints, varnishes).

Theater:

The New Yorkers - “One of the gayest musical comedies ever to come to town. Swift, witty, resplendent,” featuring design by Peter Arno, songs by Cole Porter, talents include Hope Williams and Jimmy Durante “the plenipotentiary from the cabarets ... whose hilarious revels confound all the deep thinking the moment he unveils his proud 'schnozzle.'” While “many present on either side of the footlights” are unconscious of it, The New Yorkers does feature a plot, concerning the amour of a Park Avenue heiress for a racketeer trying to corner the caviar market; settings shift from the Club Toro on Broadway, to “a midnight restaurant where they name a sandwich for you after a third visit,” to Sing Sing, and finally to the racketeer's villa in Miami.

Mildly risque jokes:

“Husband - I should think you'd be ashamed to show your face in public wearing such a dress. Wife - Don't worry, dear, nobody will see my face.”

“First Gossip - They say every cent her husband makes goes on her back. Second Gossip - Well, he must be out of work, judging by what she had on at our club party last night.”