Saturday, January 3, 1931: Dow 169.84 +5.26 (3.2%)

Assorted historical stuff:

Rep. McFadden, House Banking and Currency Committee chair., says recent reduction of New York Fed's rate rediscount rate to 2% will not help industry and employment, but instead stimulate "artificial business" and start new era of speculation in stocks. Fed. Reserve officials deny cut will lead to orgy of speculation, say easy money due to natural economic conditions.

Editorial: This year's crop of year-end forecasts has been more conservative than that of a year ago, which was dominated by false hopes for quick and painless recovery. While we appear to be well on our way out of the worst phase of the depression, we must as in previous depressions follow a gradual and realistic path out of this one.

Coal strikes threatened in Welsh (British) and Ruhr Valley (German) mines.

Premier Mussolini, in radio broadcast to US, says Italy has no desire for war but is interested solely in peace and prosperity.

Editorial by T. Woodlock: US should grant debt relief to Europe not out of altruism or to create goodwill, but because it's in our interest. Combination of intolerable poverty and unstable political units is likely to threaten peace. Unlike previous wars between kings, modern wars between peoples "must go to the bitter end, the complete vanquishment of one party by the other." The peace that follows is usually imposed and, unless victors are very generous, breeds a new war.

New Yorkers began a new era of telephone dialing Dec. 16, the two letter-one number era (MUrray-hill-2 instead of MURray-hill). It's claimed this system can support the present rate of telephone expansion for 154 years. On the first day, only 12.1% of verbal calls and 21.7% of dialed calls were handled correctly. This improved to 20.4% and 29% on the second day; on the third day, dialed calls continued improving to 31.3% but verbal calls suffered a relapse to 17.5%.

Vatican establishes monetary system with unit of gold lira.

Greenwich, Conn. takes first place from Brookline, Mass. as world's richest town per capita after upward revaluation in property value to $192.4M.

New census figures show Juneau, Alaska has nine single men to every single woman.

NYSE sends out New Year's greeting to its members containing idiomatic Latin phrase "Sursum Cauda," free translation of which is "Keep Your Tail Up."

Market commentary:

Market wrap: After irregular morning, "stimulating behavior" in leading stocks gave rise to urgent short covering; upturn gathered momentum in midday and was maintained to the close; strength in leading industrials, oils, autos, rails, banks; chemicals weak. Bond market rallied strongly on increasing trading; almost all parts of the list higher. Commodities strong; grains up sharply.

Improved market tone attributed to drop in call money rate and end of heavy tax telling.

Positive market factors at start of year include easy credit, drastically deflated securities, and high dividend yields; negatives include continued weakness in commodities, likely bad earnings statements, and uncertain timing of business improvement.

Period of extraordinarily low interest rates expected in coming months, seen benefiting bonds. "Dominant banking interests" apparently feel most of the necessary deflation has been accomplished, and time has come to "furnish every inducement to business revival."

Broad Street Gossip: A “large operator” intends in 1931 to switch from selling on rallies and buying on breaks to buying on breaks and selling on rallies. Total shrinkage in all NYSE and Curb listed stocks from 1929 peak estimated at $55B, or about 1/7 of total US wealth. However, “there has been no depreciation in actual value of mine, mill, factory or railroad”; in fact, there has been appreciation because of new construction and improvements.

Hornblower & Weeks note similarity between Fed rate increase to 6% in Aug. 1929, which came close to signaling top of market, and current rate cut to 2%, signaling bottom is near. Deflation in security values has reached "amazing" proportions; deflation in brokers loans has been even more dramatic; oversold condition makes it safe to predict first quarter of 1931 will see at least a "substantial intermediary recovery movement."

National City Bank criticizes capital gains tax as having inhibited selling of stock during the boom, and increasing selling now.

W. Rankin says depression will cause closer tracking of advertising results, benefitting newspapers and localized media.

Frazier, Jelke believe annual New York Auto Show opening today may be positive for motor stocks due to large number of new models and better atmosphere.

H. Firestone, Firestone Tire pres., says tire industry adjustment to lower commodity prices probably complete by end of first quarter, industry entering 1931 in a much healthier condition.

A. Erskine, Studebaker pres., calls for price stability; "continuous liquidation of property at sacrifice prices" has been debilitating to almost everyone; "We have been liquidated to a frazzle. Confidence awaits the pulmotor of stability in present price levels and our national psychology needs a doctor."

A. Robertson, Westinghouse chair., and A. Lehman of Lehman Brothers see reason to expect general improvement some time in 1931, though recovery is likely to be gradual. E. Walker, Transamerica chair.: Prosperity will return if "businessmen of America will apply themselves with renewed energy." W. Kellogg sees 1931 as bringing “the most exceptional rewards to virtually all sound and aggressive lines of business”; says Kellogg Co. has gone after business aggressively and will spend even more in 1931 on production, advertising, and sales. E. Beatty, Canadian Pacific Rwy. pres.: Canadian business declined this year but held much of gains made in past 5 years; sees signs of improvement now, has no doubt they will strengthen as year progresses. J. Speyer of Speyer & Co. says recovery will come as in the past if “we continue to work and save”; recovery may have been delayed due to worldwide weakness; warns against “'investigations' and short-term remedies”; notes problems of gold imbalances, overly severe antitrust laws, rail situation, tariffs.

Economic news and individual company reports:

Fed. Reserve reports money in circulation Dec. 31 down $125M to $4.889B, total Reserve Bank credit outstanding down $52M to $1.373B. Member banks in NY City report brokers' loans up $6M to $1.926B vs. $3.424B in 1929; loans on securities to non-brokers up $13M to $2.117B. Call money dropped to 1 1/2 percent, lowest since Sept.; attributed to return flow of year-end interest and dividend payments.

Leading NY bank and trust year-end statements show "exceptionally liquid condition," indicating "essentially sound" position in spite of disturbing events of late 1930, though earnings are generally down due to depression.

Total loans applied for by Bank of U.S. customers under 50% loan plan was $38.1M as of Dec. 28. D.A. Crain to begin investigation Jan. 5.

E. Goldenweiser, Fed. Reserve statistician, says best indicator of local bank conditions is level of indebtedness to Fed. Reserve. Reviews banking figures for year ended last Sept.: member banks reduced loans to customers $2.5B while increasing securities $1B and loans bought on open market by $1B.

Editorial: Commerce Dept. survey of trade among 62 countries for the first half of 1932 shows decline in total trade of 14% to $27.3B. The countries suffering the worst are those that have indulged in government price-fixing, as tried for coffee, rubber, etc. These plans “boomerang” against those who try them.

Farm Board calls for drastic and permanent cuts in acreage by cotton growers to avoid continued low prices.

Iron Age reports steel industry capacity only increased 845,000 tons in 1930, well below the 4.690M projected at start of 1931. However, work is far along on some new furnaces, and capacity will increase substantially early in 1931.

B. Flynn, VP Travelers Insurance Co., reports insurance policy payouts of all kinds in 1930 were $2.8B, a record total and up $300M from 1929.

US new investments abroad in 1930 estimated at $1.550B, up 5.74% over 1929; investments outstanding at end of year $17.528B.

Survey of expected financial advertising budgets for 1931 finds 38% expect an increase, 51% no change, and only 12% a decrease.

Oklahoma Att'y Gen. announces inquiry into reasons why retail price of gasoline hasn't gone down along with crude oil price.

Major oil producers raise wholesale price of gasoline to 7 cents/gallon on East coast, increase of 1/4 - 3/4 cent. Prices in the Chicago market remain at 4 - 4 1/2 cents.

Chemical manufacturers drastically cut prices as they compete to line contracts up for the new year. Soda ash cut from 1.32 cents/pound to 0.70-1.00, believed below cost of production; chlorine from 2.75 cents a few months ago to 1.80.

World's main diamond producers agree to cut output by half to maintain prices.

Bank of France cuts discount rate 1/2% to 2%; attributed to desire to stop inflow of gold and retail inflation.

Bolivia says unable to meet Jan. 1 bond payment due to worldwide depression; representatives in NY negotiating new arrangement.

Argentine provisional government prohibits import of yerba mate tea from Paraguay to protect domestic yerba mate industry.

Theater:

Five Star Final, a newspaper play by L. Weitzenkorn. "Many may find in the play an echo of the lively newspaper comedies of two years ago. But it is clear that Mr. Weitzenkorn intended his play to be less of an echo than an answer. ... [his] especial target is a tabloid press whose reporters are porch climbers. But it is impossible not to recognize in the play an indictment of tendencies in news-gathering methods that are affecting all papers to a certain extent."

Joke:

Restaurant proprietor: "I can't see what them epicures has got to complain about with this soup." Waiter: "They wouldn't have no grouch coming, sir, if only the cook would admit it's soup. He says it's coffee."