Monday, January 5, 1931: Dow 172.12 +2.28 (1.3%)

New York Auto Show special:

[This one is kind of sad.]

US car and truck exhibitors at the annual New York Show include:

GM - Buick (20 models, sees long hold-off in buying leading to greater rebound), Chevrolet (sees 1931 as return-to-normal year), Oldsmobile (over 40 new features including beautiful bodies), Oakland/Pontiac, La Salle, Cadillac.

Ford - Lincoln (new low-slung chassis and 120hp engine), Ford trucks (23 new body types for specialized commercial needs).

Others - Chrysler, Dodge (latest models are lower and longer), Plymouth, De Soto (nine-stage rustproofing process), Auburn (new features include silent-mesh synchronized transmission and "free-wheeling"), Peerless (new de luxe line, wide variety of colors, only existing co. that exhibited in 1900 NY show), Pierce-Arrow (extended line now featuring "free-wheeling"), Reo (now in 26th year), Hudson/Essex (in 23rd year), Franklin (advanced airplane inspired design), Stutz (new 20th anniversary models, up to 145 inch wheelbase), Studebaker (set new world record last year by climbing Mt. Washington in 14 minutes 23 seconds), Hupp (adds noise eliminators and "free-wheeling"), Marmon (three entirely new lines), Duesenberg, Packard, Graham-Paige, De Vaux-Hall, Mack Truck, Checker Cab, Nash, Willys-Overland.

Auto industry slowed substantially in 1930, with production down about 38% to 3.5M, and the downtrend worsening later in the year. However, auto executives including A. Sloan (GM), W. Chrysler, C. Nash, and L. Miller (Willys-Overland) are more optimistic on 1931. Sales in 1930 are seen below replacement demand, so should increase. Auto companies have adjusted well to changed conditions; their financial condition is strong, with low inventories, high cash on hand, and almost no bank debt; efficiency has increased and prices have been lowered on new models; overhead has been cut to allow profitability at lower production levels.

Assorted historical stuff:

Washington report: Talk of extra session again springs up; only 8 weeks remain to pass appropriations bills. Controversies flare on Eastern rail consolidation, Power Commission, and Sen. Norris [Republican insurgent]. Action uncertain on World Court and Muscle Shoals. Some Senators expected to renew opposition to US occupation of Nicaragua after killing of Marines there.

Editorial criticizing Sen. Couzen's skeptical stand on Eastern rail consolidation and insinuation that "high finance" is behind the recent agreement; the Senator's stand may "prolong the existence of a handicap upon the transportation and industrial development of nine states, including his own."

Wickersham commission's report on Prohibition nears publication; conclusion uncertain, though it's thought unlikely to recommend legalization of beer or wine. Most logical guess is that it will recommend remedies for previous abuses, more efficient enforcement. General dissatisfaction with report expected.

H. Stevens, Canadian Trade Min., initiates project for granting of $1B loan to China in order to "place China on her feet as a huge and profitable market for British, Canadian, and American goods."

Yet another editorial by T. Woodlock against “social” [public] control of business and for “individualism” [selection of business leaders by competition]. “We confront sooner or later the fact of human inequality. To most of us, who fill the middle class and lower brackets of the scale of competence, the fact is not pleasant.”

Reichs-Kredit-Gesellschaft of Berlin attributes much of current world crisis to "uneconomic movements of capital ... being driven from centers in which it is scarce to places where it is abundant." Considerable interest drawn by reports of meeting between French and British Treasury officials, reportedly to lay groundwork for later meeting to discuss gold problem.

Communist leaders call strike of 40,000 Ruhr coal miners despite plea by other parties to wait for arbitration negotiations.

Gov. Roosevelt's commission presents plan for development of about 2M hp of electric power on the St. Lawrence River.

Impasse persists in NY transit unification negotiations on price city is to pay for independent transit cos.

Dr. H. Eckener, Graf Zeppelin commander, will sail for NY to negotiate for use of helium gas on his proposed transatlantic dirigible line.

White House has had telephone communication for 45 years, the first one being installed by order of Pres. Grant.

Viennese chemist invents match capable of lighting up to 600 cigarettes, although no longer than ordinary; US and Japanese syndicate said to be negotiating for rights to the invention.

Stock clerks at Studebaker factory increase efficiency 50% by using roller skates to fill orders for service parts.

Universal Pictures will make no more films in Germany and close Austrian branch as result of German and Austrian ban of "All Quiet on the Western Front."

Market commentary:

Market wrap: Stocks continued upward in short weekend session; rails, leading industrials, and utilities were strong; chemicals remained weak. Profit taking caused come irregularity toward the close. Bonds continued strong on moderate volume; US govts. firm; foreign mixed; corp. strong across the list. Commodities firm; cotton, grains up moderately.

Week in review: Stock market reversed direction and rallied on New Year's Eve. Bond market showed pronounced strength throughout the domestic list, though foreign loans were irregular. Interest rates had year-end flurry but quickly eased again; period of very easy money seen. Bank of France matches NY Fed rate cut to 2%. Steel production rises. Grains up sharply, cotton up moderately.

Bears convinced the recent rebound was technical indulged in considerable short selling, but this was absorbed easily.

In the recent rebound, both rails and industrials have broken through the upside resistance encountered on Dec. 20; this is believed to indicate "further early progress on the upside."

Predictions for a stronger market around the new year have been borne out, though there have been few business developments to base the advance on aside from progress on Eastern rail consolidation.

Almost $1B has been paid out in the first of the year in interest, dividends, etc.; this should be a potential backlog of money to be invested in securities.

Broad Street Gossip: Developments continue to indicate floating supply of stock has been reduced greatly. There were no new stock offerings in Nov. and only $35M in Dec.; this contrasts with 1928 and most of 1929, when new stock offerings were running at $300M to $500M per month. Also noteworthy is the large increase in shareholders of record at most big corporations. Ability of stocks to decline to new lows in face of this shrinkage in floating supply is "strange, indeed."

Brokers report a large number of clients switching funds from bonds into stocks they believe are cheap, and likely to appreciate more rapidly when the turn comes.

Managed investment trusts [similar to mutual funds] face difficult period after a trying year. Efforts to cultivate investor goodwill have suffered from the severe market decline and loss of confidence; the situation has been aggravated by careless promises made by some sponsors that “with their supervision the investor's worries ... were at an end completely. In some cases investors complain that their worries really only began with that investment.”

Amusement stocks appear to be selling at a price that more than discounts somewhat lower earnings this year. For example, Paramount will earn over $6/share in 1930, down about 15% from 1929; its annual dividend is $4, for a yield over 10%. Loews earned $9.90/share in its 1930 fiscal year, also down about 15%, and has an annual dividend of $3 for a yield about 6%.

G. Putnam, Incorporated Investors pres., expects recovery in 1931; "The very extent to which the depression has gone is one of the strongest factors making for recovery." R. Ballard, So. Cal. Edison pres.: “insofar as California is concerned, there is no question that there will be an early return to normal conditions.” F. Merrick, Westinghouse pres., notes worsening industry downtrend in past year and poor short-term outlook, but believes business fundamentals “are working themselves out as must ever be the case ... This is too large and too fundamentally prosperous a country to stand still for any long period.” C. Nash, Nash Motors pres.: “That we are well past the valley of depression and are definitely on the economic upgrade can hardly be questioned by the most gloomy of our alarmists.”

Economic news and individual company reports:

Most recent weekly banking statements show some encouraging trends. Decline in money in circulation of $123M was partly seasonal but also indicates bank run situation is quieting down. Banks have begun purchasing non-government securities again, possibly accounting for some of recent bond market strength. Fed. Reserve continues easy money policy, bringing portfolio of open-market holdings to record high of $1.093B.

Successful Eastern rail consolidation would be expected to jumpstart important construction that has been deferred for many years, with estimates of expenditures ranging up to $500M.

Total current wheat crop in 41 countries excluding Russia and China is 3.650B bushels, up 9% over 1929; Argentina's crop is up 66% to 271M.

Signs of improvement in steel; Youngstown district operations are at 39% this week vs. 37% last week and 23% two weeks ago; automotive steel demand has increased substantially in past few days.

Some improvement in gasoline price situation reported; while there has been no general rise in prices, "dumping" at distress prices had stopped in many areas.

US motor vehicle exports in 1930 were 561,000, down 43% from 1929 and lowest since 1924.

Chevrolet Dec. production of cars and trucks was 64,018 vs. 26,000 in 1929, and a record Dec. output. Company has 32,101 employees at work and expects to advance to normal level of 40,000 employees in Jan.

Three companies operated by S. Insull offer stock to public on 10% down, 9-month installment plan.

F.W. Dodge reports NY metro area construction started in Dec. was $62.3M vs. $56.7M in Nov. and $106.1M in 1929; year's total was $938.7M vs. $1.242B.

Rumored major biscuit merger comes to pass: Wheatsworth directors approve plan for acquisition by National Biscuit Co.

New orders for yacht construction in 1931 have already passed the total of $20M built in 1930.

Jokes:

"'Now,' said the college man to his dad at the football game, 'You'll see more excitement for two dollars than you ever saw before.' 'I don't know,' replied the old gent; 'that's what my marriage license cost me.'"

"Shaw - How's business with you, old man? Pshaw - Oh, lookin' up. Shaw - What do you mean, lookin' up? Phaw - Well, it's flat on its back, isn't it?"