January 10, 2010

Saturday, January 10, 1931: Dow 170.18 -2.86 (1.7%)

Assorted historical stuff:

Editorial: Pres. Hoover, recently said that the livelihood of 10% of the population was directly or indirectly dependent on the auto industry. In fact, if one follows up all the products the industry uses this may turn out to be a minimum figure; for example, the auto industry uses 85% of all rubber produced, 67% of plate glass, 19% of iron and steel, 18% of lumber, 15% of copper, etc.; it's also a huge railway customer. This shows the large influence of the industry on general business conditions, for better or worse. It's therefore heartening to note that the industry appears to be improving.

Washington report: Continuing controversy flares in Senate over Power Commission members appointed by Pres. Hoover. The three commissioners, immediately after confirmation, ordered dismissal of three old commission members; insurgents claim the old commission was dismissed for "protecting the public interest," and the new commission members are too friendly to the power companies. The Senate is now considering unprecedented action to reconsider confirmations. Prospects considered dim for large loan to China being discussed in Senate; necessary international and Chinese cooperation doubtful. Oil tariff and Mexican land purchase also considered unlikely.

Leading industrialists are discouraging statements of exaggerated optimism, pointing to the over-enthusiasm a year ago when business improved somewhat.

Soviet govt. official radio laboratory at Leningrad announces plan for chain of high-power radio broadcast stations to be used as powerful tool for dissemination of propaganda for home and foreign consumption.

General strike voted by 34,000 workers in Swedish textile mills following failure of govt. efforts at arbitration. Talks to settle South Wales coal miners strike break off. British Cotton Manufacturers Assoc. votes to close all mills starting Jan. 17; this will affect 1,500 firms and 250,000 operators.

Race between "the stork and the reaper" is subject of perennial interest in France. In 1929, French deaths exceeded births by 12,564; the newly published Census reveals that France is suffering falling birthrate, decreasing number of marriages, and increasing death rate, while neighboring countries Germany Italy and Spain all registered large increases in population in the past year.

Transit Unification Bill seen likely to be approved in NY State Legislature with few changes; contains several measures to aid unification under Untermyer plan, expressly specifies maintenance of five-cent fare.

NY Superintendent of Banks J. Broderick's proposal for additional regulatory powers over banks expected to meet opposition from legislators, upstate banks; Gov. Roosevelt's attitude uncertain.

H. Riegelman, counsel for NY Multiple Dwelling Law Committee, proposes cooperation between city, State Housing Board, and private capital to eliminate slums and construct in their place model tenements, parks, and thoroughfares over a ten-year program.

Market commentary:

Market wrap: Stocks were higher for the first few hours with rails particularly strong; trend reversed in afternoon on profit-taking and renewed short selling; however, scale support was evident in most leading shares. Bond market mostly firm on less active trading; US govts. steady around year's highs; foreign govts. firm; corp. mostly higher, speculative issues strong. Commodities irregular, with mostly narrow changes; copper down to 10 cents with little buying, major producers out of market; silver down 1/4 cent to new record low of 28 1/2 cents.

Stock weakness attributed to Pennsylvania RR pres. W. Atterbury's statement that it would take four or five years to realize benefits from Eastern rail consolidation, and to sudden sharp plunge in Allied Chemical attributed to weakness in soda ash prices.

Conservative observers more cautious; continue to recommend accumulating good stocks on reactions, but advise using stop-loss orders for protection.

Asian currencies very weak on decline in silver; South American also weak. British gold drain appears to be slowing. Some export of funds from Germany, but this appears due to year-end factors.

Decline in both brokers' loans and security loans to non-brokers was a surprise to obervers, who had looked for gains based on the advancing market; the declines may be due to year-end influences.

Short covering in the past two weeks has reportedly reduced the outstanding short interest.

Cuba has suffered most from sugar price weakness, but as low-cost producer is best positioned to benefit from stabilization.

Alaska Juneau Gold Mining is first active stock to cross its 1930 high.

Broad Street Gossip: A trader in a certain Wall Street house has taken some large profits since the New Year, but now is concerned that he won't be able to establish any offsetting tax losses this year. Copper shares have been stronger on reports that important developments are likely to take place this year. One big financier believes bankers are now supporting the market naturally, not as part of a pool: "It is the opinion of bankers that things have been thoroughly liquidated, and they are ready to put in supporting orders for stocks in which they are interested. ... I don't say that the market will not have reactions, but it is my honest opinion that the trend this year will be upward in sort of a see-saw fashion."

Comptroller of the Currency Pole says US banks less affected by 1930 depression than by any previous one; 95% of bank failures due to fundamental defects in rural bank organization; only a negligible number of larger banks have experienced any difficulty. Thanks to Fed. Reserve system, there has been no tightness in currency or credit, and business will have the ability to recover at the earliest possible economically favorable time.

C. Neill, Royal Bank of Canada VP, says depression not due to overproduction, stock market collapse, political unrest, or lack of confidence; these are effects, not causes. Root cause is central bank policies; high rates in 1928-29 cut off credit to borrowing countries. Calls for cooperation of central banks in stabilizing prices and assisting creditor countries - it's precisely these countries that could use investment; US must play the major role. Calls for reform of central bank system; “privileges and restrictions under which such banks now operate are based mainly on tradition”; notes countries with fiat currencies, including Argentina, Uruguay and Spain, aren't suffering nearly as badly as gold-standard countries.

Editorial: P. Warburg's fine analysis of the world depression and its causes yesterday contains this heartening statement: "I do not hesitate to say that I believe that a few years hence the level at which some of our security sell today will look as incomprehensibly low as the prices paid for the same securities seemed unreasonably high long before the crash occurred in Oct. 1929." While this opinion is common now, it has additional force coming from a man who publicly criticized stock prices months before the 1929 panic. It's also notable that Mr. Warburg sees no obstacle to recovery in low commodity prices; rather, they are the logical result of automation and the counterpart of high wages in increasing buying power.

Economic news and individual company reports:

F.W. Dodge reports new construction contracts in 37 states east of the Rockies in Dec. was $249.9M vs. $253.6M in Nov. and $316.4M in Dec. 1929. Total for the year was $4.524B vs. $5.751B.

Operating income in Nov. for all class 1 rails was $62.1M, down 28.3% from 1929; this was a return on property investment of 2.55%; revenues were $398.8M, down 20.2%. First 11 months operating income was $834.5M, down 30.6% and a return of 3.41%; revenues were $4.965B, down 15.7%.

Dun's weekly review notes some seasonal trade improvement following holiday dullness, though less marked than usual; Bradstreet's notes encouraging reports of increased industrial employment since the New Year.

NY Auto Show is wrapping up. Main topic of industry discussion was consensus that new models henceforth be introduced in Nov.-Dec.; "leaders in the industry hailed this move as one of the most forward-looking steps taken in many years." Executives reported generally satisfied with public reception and interest; larger amount of actual business developed in many lines than expected. Dec. increase in auto output is unusual, since Dec. is usually the poorest month in the fourth quarter. While partly due to change in new model timing by some producers, observers are encouraged by the upturn and believe it may mark the final 1930 quarter as the bottom in auto production; further improvement is expected in the first quarter, though output should fall well below the 1.070M in first quarter of 1930.

German unemployed Dec. 31 were 4.357M vs. 2.851M a year ago; Dec. increase was not large.

Oklahoma state legislator D. Logan asks Congress for immediate embargo on imported oil followed by a protective tariff; believes unrestrained and excessive import of foreign oil is principal cause of the industry's present plight, and has contributed to general depression.

Ford Motor to resume general operations in Detroit plants Jan. 12, returning over 60,000 to work.

Great Northern and Northern Pacific Rwys. abandon merger attempt after failing to arrive at plan to satisfy ICC requirement to separate the Burlington.

A. & P. sales for 4 weeks ended Dec. 27 were $81.3M, down 6.7% from 1929; however, sales by weight were 417,163 tons, up 2.4%. Sales for 12 months ended Dec. 27 were $1.062B, up 3.3%; sales by weight were 5.173M tons, up 9.8%.

Group of Bethlehem Steel stockholders forms protective committee to modify the corporation's executive bonus system, and to seek restitution.

Aviation Corp. of the Americas, holding corp. for Pan American Airways, has shown losses in 1929 and 1930. However, sponsors believe that with pioneering work of establishing South American routes complete, company is now in a position to show return on investment.

Company reports since Jan. 1: 14 companies reported higher earnings vs. 1930 and 44 lower; 92 dividends unchanged, 2 increased, 12 cut.

Companies reporting decent earnings: Equitable Office Bldg., Universal Leaf Tobacco.


Paid - excellent melodrama; Joan Crawford gives her finest dramatic performance yet in the lead. Story is "the familiar one of the poorly paid department store girl who is sent to jail for three years for a crime she did not commit." Upon release, she comes up with a scheme to take revenge on the department store owner using methods just within the law. [A short clip containing a rather disturbing prison shower scene from the movie.]


Mary Wigman, "foremost exponent of the modern dance in Germany," appearing at Jolson's Theatre and Carnegie Hall. Appearance here has aroused more interest in dance as art form than anyone since Isadora Duncan. Dancing characterized by robust force and genuine independence; "vigorous technique is founded on long years of work in the gymnasium ... varied bodily movements which have been partly acquired from the Orient ... attaches great importance to the hands." [And a short clip containing a rather disturbing witch dance by Wigman.]

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