Monday, January 12, 1931: Dow 171.71 +1.53 (0.9%)

Assorted historical stuff:

Washington report: House Banking and Currency Committee to consider proposal to suspend foreclosures by Federal Land Banks in drought stricken areas for 12 months; considered very unlikely to pass. Wickersham Commission seen less likely than ever to advocate modification of Prohibition. Philippine independence likely to come before Congress in the foreseeable future, though possibly not this session.

Sen LaFollette (R, Wis.) reports results of questionnaire distributed to 303 cities with total population of 16M shows 15.8% of workers unemployed.

Editorial: The Senate's 44-37 vote to call upon the President to resubmit his nominations to the Federal Power Board indicates they are willing to "wrench the machinery of government out of its constitutional shape to gain a single immediate end." It will necessarily provoke a fight to the finish over the constitutional powers of the President and Senate. There's no real issue of public interest here, since the Senate can regulate the power industry in any way it sees fit; as Sen. Dill tacitly admits, the purpose of the motion is to raise the power issue for the 1932 election and inflict an early and conspicuous defeat on Pres. Hoover.

Senate passes Jones bill providing $1M annually for maternity and infancy welfare work by Federal Govt. in cooperation with states.

AP Moscow reports G. Grinko, Soviet Commissar of Finance, presents plans for 1931 budget of 31.750B rubles, or more than $15B, largest national revenue that a government has ever known.

St. Lawrence Water Power Board appointed by Gov. Roosevelt recommends distributing power generated by public plants there through existing private utilities.

The Confederacy of the Iroquois, formed in the 16th century, "is said to be perhaps the best example of a representative form of government ever evolved by uncivilized man." Confederacy was made up of five nations - the Mohawks, Oneidas, Onondagas, Cayugas, and Senacas; it was formed for defense against the Algonquin Indians, who at the time surrounded the Iroquois on all sides.

A popular form of summer vacation in Central Europe is the cross-country tramp; rich and poor alike put on heavy walking shoes and carry knapsacks containing a toothbrush and other toilet articles; moderately priced hotels cater to this trade across the rural regions of Germany.

Much trouble is caused at the start of every year by legal documents inadvertently dated with the old year. Even wills are sometimes wrongly dated, causing endless trouble at the maker's decease.

US air travel fatalities decline; only two people were killed in scheduled airplane flights in the second half of 1930, vs. 22 in the first half; the number of passenger miles flown is estimated to have gone up slightly. US had 1,782 airports and landing fields on Dec. 31 vs. 1,657 on last July 15.

Market commentary:

Market wrap: Stocks opened with heavy selling on accumulated orders; volume then dried up but a rally began under leadership of US Steel; improvement continued almost to the close, when some irregularity came in. Bond market active but irregular on profit-taking; US govts. quiet, narrowly mixed; foreign irregular; corp. mixed with speculative relatively better. Commodities narrowly mixed; corn weak.

Week in review: Unlike a year ago, businessmen are being notably conservative in their forecasts; examples included recent statements by W. Atterbury and P. Warburg. Stocks over the past week likewise improved but in cautious fashion; notable weak spots in industries facing uncertainty, including chemicals, rubber, and copper. Money continue to ease following year-end irregularity. Bonds advance sharply in unusually active market. British gold drain appears to be slowing. Plunge in silver concerns market, is reflected in Chinese currencies. Steel operations rise; grain prices firmed through most of the week; cotton in narrow range.

Market observers concerned about increased volume on breaks, believe is warning a technical reaction might develop. Also concerning some observers is the persistent upside resistance encountered by industrials in the past few sessions as rails have rallied into fresh high ground. Yet another concern is recent price declines in silver and in some industries including copper, chemicals, and tires.

Decline in silver attributed mainly to Chinese situation, though general commodity weakness, overproduction, demonetization, and sales by other countries are also contributing. Large silver loan to China being considered by Senate Foreign Relations Committee for stabilization is seen having dim prospects.

After a recent lull, bear traders reportedly consider time right for resumption of aggressive selling; expected poor earnings reports should create opportunities to subject leading stocks to tests of Dec. lows.

Some bull traders are now favoring issues that have been thoroughly liquidated, including fertilizers, sugars, and textiles.

Among specific industries, steel is expected to have poor Q4 earnings, while amusements are expected to hold up relatively well; some observers expect rails to give a relatively good showing in the first half due to expense cuts. Long-range forecasters now see continued unfavorable earnings in Q1, look for a moderate increase in Q2 and a good gain in Q3 that could carry through the final quarter.

Steel observers are encouraged by stronger scrap prices in some districts, although several false starts were made in scrap markets last year.

Broad Street Gossip: Brokers' loans have declined from $6.804B on Oct. 2, 1929 to a recent total of $1.879B. Bankers see this as indicating the strongest brokerage position in Wall Street history. Many houses report more credit balances than in 25 years; while most traders are bullish, they are cautious and either own stocks outright or on small margin. Many lines of industry have had to go on a diet thanks to overproduction, but should now be in a fair way for recovery. One banker's opinion: "Industry has learned its lesson, and I feel that hereafter there will be greater stabilization in production. Overproduction is our greatest economic evil, bad for the manufacturer, the wage earner, and everyone else."

W. Head, former Amer. Bankers Assoc. pres., sees "strong reason for believing that business will be on the upgrade throughout most of 1931," although earnings reports to be received in the next month or two will be poor.

W. Everts, Boston lawyer and Harvard graduate, sharply criticizes "ill-timed optimism" of Harvard Economic Society, questions whether Harvard might be wiser "to discontinue its role as prophet and stick to education."

A. Wiggin, Chase National Bank chair., recommends reduction of capital gains tax rate to 7.5% to help market; unsure of recovery timing, but believes we're near bottom, next important move will be upward; policy of maintaining wages and prices together with easy money has failed, markets and prices should be freed.

T. Watson, IBM pres., optimistic on 1931: "the new year cannot fail to be better generally ... if we will all have optimism, tempered with sound business judgment, we shall be moving forward at a satisfactory rate within a reasonable time."

Economic news and individual company reports:

Leading sales executives generally satisfied with results of NY Auto Show as reflected in actual orders booked and in dealer interest; attendance was somewhat below a year ago, but floor salesmen described visitors as a “buying crowd” rather than a “curiosity crowd.”

934 banks failed in 1930 involving $908.2M in liabilities vs. 437 for $218.8M in 1929. General business failures totaled 26,355 with liabilities of $668.3M vs. 22,109 for $483.3M.

J. Fairchild, Kings County Trust pres., gives principles that have guided the bank through 41 stable years: no overexpansion, no buyouts or mergers, money invested for clients impartially, with no securities of their own to sell.

Fisher's wholesale commodity index declines for 5th week in a row, to 78.3 for week of Jan. 9, vs. 80.7 for week of Dec. 5.

Fed. Reserve reports department store sales increased 50% from Nov. to Dec., but decreased 12% from Dec. 1929, adjusting for number of sales days. Sales for the full year 1930 were down 8%.

US Steel unfilled orders as of Dec. 31 were 3.944M tons, up 303,960 in the month, more than expected. Buying since Dec. has been higher than expected; while US Steel officials would be satisfied with a 50% production rate by end of Feb., some observers believe 55%-60% could be reached by end of Jan.

$2B steel merger rumored among Bethlehem, Republic, Youngstown Sheet & Tube, Jones & Laughlin, Corrigan-McKinley, and Otis; company interests deny rumor as "a figment of the imagination."

Large chemical companies have stopped price cutting by withdrawing from the market and announcing new price levels above the lows reached; however, the new price level is 15%-20% below former prices, and a large volume of business was booked at lower prices.

Editorial: A tentative sugar stabilization plan involving export quotas has been arrived at by the world's producers. In view of the importance of the industry and its current precarious position, with a huge surplus inventory being added to each year, this attempt will be watched "with anxious and sympathetic interest." If the plan doesn't work, "there is an economic law, cruel as it is inexorable, known as survival of the fittest, that must come into action ..."

Cuban govt. revokes 30% salary cuts to avoid severe drop in national income.

British govt. expected to borrow further $200M to maintain dole.

NY Real Estate Securities Exchange completes first year of operation; year's total trading volume $3.887M.

Two large meat packers, Armour and Swift, had a total 1930 gross of $1.8B; net was about $17M, or less than 1% of gross.

Total construction permits in 22 West Coast cities in Dec. were $18.6M vs. $13.0M in Nov. and $12.3M in Dec. 1929.

Nebraska is one of five states with no bonded debt.

Price of NYSE seat has rallied from low of $186,000 on Dec. 31 to $290,000 on Saturday, one of the sharpest changes ever.

Firestone announces cuts in tire prices of 6.5%-12%.

Paris report:

The holiday spirit lingers on after the New Year in Paris; visitors en route to the Riviera or Egypt pause to enjoy it. Streetcorner stalls are piled high with purple violets from Northern Africa; chestnut vendors have this year modernized by adding American peanuts. Street singers are in fashion, mixing the latest American musical hits with songs from Brittany and Provence. Theaters mostly feature revivals of French plays, including Topaze and Apres l'Amour. Although the tourist season hasn't started yet, US entertainers are well represented; Josephine Baker is the star at Casino de Paris, playing to packed houses in spite of controversy; the Marx Brothers are appearing at the Pantheon, together with their film Cocoanuts; No No Nanette is playing at the Mogador.

Joke:

"Sergeant - Did you give the man the third degree? Constable - We browbeat him, badgered him, threw him down the stairs, and asked him any question we could think of. Sergeant - What did he do? Constable - He dozed off, and merely said, now and then: 'Yes dear, you are perfectly right.'"