January 30, 2010

Friday, January 30, 1931: Dow 168.87 +2.03 (1.2%)

Assorted historical stuff:

Editorial: Veterans and their Congressmen have a choice: they can either "burn down their houses and perhaps the town in order to suck their fingers for a moment [i.e. get an immediate payout through a bonus bill], or they can retain and use the advantage they already enjoy in the wise insurance for old age and bankable collateral provided by the presents structure of Veteran Relief."

House Ways and Means Committee continues discussing veterans bonus; Treasury Sec. Mellon repeats strong opposition. Two avenues are seen to defeat the bonus: it could be bottled up in committee, or the House could fail to override a Presidential veto. There are seven or eight proposals circulating, some involving lower immediate payouts of less than $1B, but any bill reported by the committee is likely to be amended in the House and/or Senate to the full payout of $3.4B - $3.5B. If a bill gets to a House vote, it's certain to pass; the question would then be if there are enough votes to override a veto.

Washington report: Melvin A. Traylor, Chicago banker, being touted as possible 1932 Dem. Presidential candidate; would avoid "complications which inevitably attach to a New York Democrat." Drys seen becoming more moderate on questions of Prohibition enforcement and possible referendum. Sen. Glass hits State Dept. assertion of authority over foreign loans and Fed. Reserve foreign connections; believes Fed. Reserve banks have authority to deal with foreign central banks.

Col. H. Cooper, Russian-Amer. Chamber of Commerce pres., sees potential $1B Russian market for US exports; Rep. Fish (R, NY) counters that US faces loss of $1B in exports thanks to a Russia organized using US men and machinery obtained on credit.

Melvin A. Traylor, Chicago banker, gives statesmanlike speech calling for cooperation with business, particularly rails and public utilities, rejects both govt. antagonism toward business and industry interference in politics.

Editorial: The Senate Judiciary Committee's decision to move the fight over Pres. Hoover's Power Commission nominees to the courts is being done for the sake of drama, in order to advance the cause of govt. ownership of power plants. While they have little chance of prevailing in court it will help "keep that skillet on the fire of agitation against what potential third-party leaders love to describe as the all-devouring Power Trust."

Editorial by T. Woodlock responding to claim waterway development may have benefits in controlling floods, increasing forestation, and reducing erosion. Blasts three die-hard "superstitions" held by US public: that waterway transport is economical, that water-generated power is cheaper than fuel-generated, and that rails got huge free land grants from the US (govt. got lower transport rates in return).

Farm Board chair. Legge says US farmer has no chance at all to produce wheat profitably for world market. Says Board doesn't intend to support new wheat crop, although Board had the same intention last year and conditions forced it to act. Board member McKelvie says operations should not be compared to efforts made by other countries to fix rubber and coffee prices; board doesn't intend to "fix prices or accumulate large supplies of any commodity."

Soviet govt. orders railroads reorganized, wages increased, rewards offered for efficiency, death penalty for malicious interference with transportation.

British Labor govt. wins test vote.

A recent survey of London finds average Londoner drinks only half as much beer as 40 years ago, but smokes twice as much; ten times as many people are being killed on the streets, but 40% fewer die natural deaths. [Note: those stats seem highly dubious.]

Former NY Police Commissioner R. Enright indicted by federal grand jury at Oklahoma City for fraudulent oil stock promotion.

Lehn & Fink contract with Paramount to continue using new advertising medium of talkies; films to feature Pebeco Toothpaste, Hinds Honey and Almond Cream.

House committee presented with plan to establish biweekly transatlantic dirigible service using two ships of 7.5M cu. ft. capacity.

Strassburger Foundation to award $1,000 annually to the book that best promotes good relations between the US and Germany. Jury includes scientist Albert Einstein and novelist Jacob Wasserman.

Market commentary:

Market wrap: Stocks weak early, with leaders declining across the list; trading slowed down after initial selling and prices steadied; a recovery developed in late afternoon. Bond prices moved down most of the day, led by high-grade but with weakness across the list; a rally started in the afternoon but most classes closed with substantial losses on the day. Commodities stronger; grains close up after early weakness; cotton up slightly.

Conservative observers still advise staying on sidelines, and putting in scale buying orders at lower levels that might be reached in a sharp break.

Markets' afternoon recovery attributed to continued vigorous Treasury opposition to veterans' bonus, and to recovery in grain markets.

Sentiment improving toward investment trust cos. after some 1930 reports showed declines in holdings not as drastic as expected.

Auburn Auto. continued up sharply, causing pain for "locked-in short interest." Montgomery Ward strong on renewed buying by "Chicago interests close to the group which sponsored Ward's sensational upswing in 1928."

Farm machinery cos. including Deere and Int'l Harvester are coming under bear pressure based on increasing receivables and reduced farm buying power. However, these cos. faced similar conditions in 1921, only to have their stock prices rally 550% from the 1921 low in the next 8 years.

Some leading brokers report continued tax loss selling in Jan.; a few firms have recommended this on theory stocks are likely to be materially higher by end of year.

Broad Street Gossip: NYSE specialists (market makers) reportedly took heavy losses in the last part of 1929 and in 1930. Six brokers interviewed say "necessitous liquidation" by customers has completely ended; customers are carrying less margin than ever. Liggett & Myers and Woolworth 1930 reports show substantially strengthened balance sheets, particularly in cash on hand. US Steel earnings expected to remain low in Q1, but production trend from now on is very likely to be up, based on urgent consumer needs and current backlog.

Twin City Rapid Transit stock is about $12; net for 1930 was $4.32/share vs. $4.75 in 1929; D. Emil Klein (cigars) stock is 10 1/4 bid - 15 ask; net for 1930 was $3.10/share vs. $3.44 in 1929.

Many on Wall Street fear Congress will pass a veterans' bonus bill; bankers now advise waiting for outcome before buying investment bonds. Street also fears an extra session as possible unsettling factor.

R. Whitney, NYSE pres., speaks about the Exchange. Made up of 1,000 members subject to same emotions as anyone else. Attributes rapid stock decline since June to liquidation of bank loans, not rumors or bear raids; NYSE has extensively investigated sources of harmful rumors, hasn't found they were circulated for sinister purposes; on the lookout for “bear raiding” as opposed to “legitimate” short selling. Calls for giving more information to investors so judgement can be based on fact; security prices will then be “governed by the changing conditions of business and not by unreasoning hopes and fears.”

Palmer & Co. say fixed trusts (similar to ETF's) laying firmer foundation for stock market since almost none of stock they buy comes back on the market.

IBM shareholders were up about 20% in 1930, to over 4,000; T. Watson, pres., expects foreign business as large as domestic in a few years; believes “we can look forward to a satisfactory rate of improvement in the US within a reasonable length of time.”

Bank of France Gov. Moret says capital flow into France is due to low money rates abroad, stability and security of French currency. Pledges support for efforts to develop international long and short term lending.

A. Austin, Dominion Bank pres., says believes business will improve, not sure when; worst already behind us. C. Bogert, VP, says Canada has suffered less than almost any other country in past 18 months, will recover more quickly.

British banks hold annual meetings. R. Beckett of Westminster Bank and H. Goschen of Nat'l Provincial Bank blame depression on overproduction, artificial price fixing schemes; call for cuts in govt. expenditures and production costs. J.M. Keynes sees crux of depression in “behavior of creditor countries in pursuing a course of action which is calculated to bankrupt debtor nations”; calls for joint action to stop deterioration of debtor nations' credit, or to “find some outlet for home investment” in creditor countries, providing relief to debtors by increasing demand for their products.

Economic news and individual company reports:

Fed. Reserve reports money in circulation Jan. 28 down $49M to $4.544B, total Reserve Bank credit outstanding down $64M to $956M. Member banks in NY City report brokers' loans down $23M to $1.734B; loans on securities to non-brokers down $25M to $1.935B.

Dow steel and iron average remains at $44.56/ton. Scrap markets somewhat weaker after "failure of important consumer demand to materialize."

Leading dealers raise rates on bankers' acceptances 1/8% to 1 1/2% - 1 7/8% for 30 - 180 days; attributed to higher British rates and govt. bond unsettlement.

First 67 rails report Dec. net operating income $39.6M, down 30.1% from 1929; gross was $284.7M, down 19.7%. 103 telephone cos. report Nov. operating income $22.4M vs. $23.4M in 1929; first 11 months $248.9M vs. $254.2M. 95 public utilities (non-telephone) report Nov. net $88.3M vs. $92M in 1929; first 11 months $923.8M vs. $906.5M.

Indications seen gasoline prices will be raised 1 cent/gallon shortly in NY and New England territories.

Reports of Western trust and mortgage cos. show most were forced to increase holdings of farmland they had loaned on, while sales of such property were minimal; the land speculator is practically out of the market.

Sanford, Florida reaches compromise arrangement with bondholders after State Supreme Court ordered drastic tax rise to pay accrued and current bond interest.

Four Oklahoma oil cos. hit with citations for overproduction; one small independent was cited 26 times for one well, said to have overproduced 215,000 barrels.

Amer. Cotton Shippers' Assoc. Testifies before Senate committee against further appropriations for Farm Board; say Board is "promising to aid only 8% of the cotton farmers" and "rapidly destroying the American cotton export market."

British gold flow to France near standstill as sterling firms due to higher bill rates and possibly support by other central banks; effect of Labor victory uncertain.

Nat'l Broadcasting Co. revenues were over $22M in 1930 vs. $14.3M in 1929.

Schulte stores restore normal cigarette pricing of 25 cents for 2 packs, ending 11 cent/pack offer that had raised fears of price war.

GM Q4 net about $0.32/share vs. $0.53; full year about $3.17 vs $5.49. Bethlehem Steel Q4 net $0.17/share vs. $2.75; full year $5.26 vs. $15.50. Sears-Roebuck 1930 net $3.01/share vs. $6.62. du Pont 1930 net $4.64/share vs. $7.09. S.S. Kresge 1930 net $1.90/share vs. $2.68. Canada Dry Ginger Ale Q4 net $0.39/share vs. $1.47.

Beneficial Loan Corp. reports very low defaults in small-loan field; 1930 had only 1/40% surrenders by borrowers out of over 400,000 loans.


Private Lives - Play by Noel Coward, directed by Noel Coward, starring Noel Coward and Gertrude Lawrence, at the Times Square Theatre. Successfully produces feeling "something is taking place which never took place before and never will again." Main feature is "quick, restless but fastidiously precise theatricalism." Notable scene is "hair-pulling, face-slapping, furniture-smashing brawl" between Coward and Lawrence. Dazzling and very humorous, but a little too flippant and irreverent, possibly striking a good many as jaded.


Patient - My nerves are worn to a frazzle. Doctor - Stop thinking about yourself - lose yourself in your work Patient - Gosh! And me a cement mixer!

Interior Sec. Wilbur has a large index on his desk to keep track of progress on the Hoover Dam, one of the largest projects ever undertaken. While showing it to reporters the other day, he remarked "Yes, everything is fine about the book but its name." And he turned it over to show the cover "Dam Progress."

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