January 22, 2010

Thursday, January 22, 1931: Dow 164.76 -1.06 (0.6%)

Assorted historical stuff:

Editorial: The Wickersham commission report seems honest and unbiased; while favoring enforcement as long as Prohibition exists, it also "deals it a blow which is likely to lead to outright repeal or extensive modification." Enforcement conditions were found "bad, or in fact evil." Opinion on what to do was diverse; of the 11 members, 2 favored outright repeal, 4 revision, and 5 a continued period of testing, followed by revision if adequate enforcement fails. From this diversity, a consensus emerges pointing to unenforceability of the present law and its likely repeal or modification. Reaction to the report seems a bit confused; a surprising number of drys praised it, while quite a few wets criticized it for not advocating outright repeal. Sen. Tydings (D, Md.) introduced bill asking Wickersham to testify whether commission was influenced by non-members; says recommendations in report were so confusing that they puzzled members of Congress who might be called on to base legislation on it.

Red Cross contributions are reportedly down as Congress considers its $25M appropriation proposed in the food relief bill.

Dreaded extra session now appears more likely as Congress has gotten into a snarl that “seems hopeless,” with a filibuster active in the Senate. However, 6 weeks remain, which could be adequate time for things to get sorted out.

Elihu Root appears before Senate to urge approval of World Court protocol.

Commission on European union at Geneva drafts trade proposals; invites Russia, Turkey, and Iceland to future discussions.

Russia has reportedly approached Canadian officials on combining to stabilize wheat prices; grain trade skeptical.

Editorial by T. Woodlock: Recent [rather convoluted] decision by the ICC allowing some lines to lower rates illustrates current degree of competition between rails, which is keener than ever. Law on rates is somewhat contradictory, saying competition should be preserved but also that the entire national system should be run efficiently. The ICC should go for competition, allowing it even when it leads to some excesses and inefficiencies; curbing these should be up to the rails.

Farm Board chair. Legge says govt. shouldn't write rules for grain exchanges; instead, exchanges should write them, but in a manner acceptable to the govt.

Italy reports record population increase of 515,000 in 1930 (rate of 12.3 per 1,000).

The business of salvaging waste material, "started by an itinerant immigrant with his clanging bell," has grown into a huge industry; aside from hundreds of other junked materials, the US consumes over 30M tons of scrap iron and steel annually. The business also plays an important role in conservation of natural resources.

NY City Commissioner of Tenement House Dept. reports about 40% of Park Ave. apartments are currently unoccupied.

NY State Legislature calls for study of water supply problem; last summer many areas suffered from dried up wells and were forced to plead for barge canal water.

Federal govt. has spent about $8.5M to construct 15,000 miles of lighted airways throughout the US.

Detroit Aircraft to start work on planned $4.5M dirigible designed to act as flying air base for large fleet of airplanes. To have eight motors of 600-800hp each, top speed of 100 mph.

Work on the 465-foot tall heads of Lincoln and Jefferson cut into the granite face of Mount Rushmore has been completed; sculptors are now working on Washington, whose nose is to be 60 feet long; after Washington, Roosevelt is to be carved.

Market commentary:

Market wrap: Stocks opened with a spurt, and rails continued strong, but most industrials settled into a narrow range until after midday. A lower than expected US Steel earnings estimate was then followed by profit-taking across the list; many issues closed down, though rails stayed relatively firm. Bonds continue firm in quiet market, with investment grade issues rising to year's highs; general list steady. Commodities somewhat higher. Silver rallied to 30 cents.

Market observers now inclined to remain on the sidelines until reports of leading companies are out of the way; selling induced in standard stocks might then present scale buying opportunities.

Rail strength attributed to expected favorable ICC ruling on valuation.

Wall Street is now skeptical about news pointing to moderate business improvement. "Traders, who a year ago were decidedly optimistic, are inclined to be pessimistic now and disregard favorable straws when they appear."

Some interests have recently been borrowing time money for 3-4 months and investing it in standard bonds yielding considerably more than the time money rate.

Investment Bankers' Assoc. says investors need have no fear Germany will repudiate securities or breach reparations plans; budget problems are due to political conditions, not to inherent inability to balance finances.

Broad Street Gossip: If overproduction was main cause of the depression as economists say, the situation is improved now since in many industries production is running below consumption. Merchandisers have also been running inventories down, in some cases to the lowest levels in 10 years. Market observers say rally starting the year has failed to hold due to combination of "persistent hammering" by bears and lack of support by "big interests"; many big banking houses "admit they are doing nothing to support the stocks they are supposed to sponsor." A leading bear confirms high grade stocks "are getting very little support. We know what the specialist's 'book' is, and usually find few buying orders on the way down"; in normal markets, higher grade stocks have good supporting orders, usually every eighth of a point down.

E. Mills, Nat'l Assoc. of Book Publishers pres., says 1930 depression didn't affect book publishing as much as other industries.

E.F. Hutton notes many conflicting factors in current market, making it difficult to read. Investors must know if they're long-term or short-term. For long-term investors not insistent on recovery at a definite time, important signs suggest buying, including deflated market, extreme money ease, and low level of business. For short-term traders, market has presented trading opportunities to those "closely and constantly in touch with the market."

H. Alloway recalls the boom period half a dozen years ago "when all sorts of ... trouble were being courted by the ladies in multitude, out for a fling in the stock market." One “responsible” estimate is that in the years from 1927-1930, "it is within bounds to put the 'security' robberies practiced against women at a round billion of dollars."

H. Sinclair, chair. of Sinclair Oil, hits Oklahoma oil proration program: “working a great injustice to the people of this state ... a travesty on conservation.”

Guardian Detroit Bank suggests banks throughout the US give local auto dealers “a lift at this particular juncture” in order to do “something constructive for the whole business situation.”

H. Johnston, Chemical Bank pres., says believes “depression has about run its course”; sees recovery and return to sounder principles, “where wealth is created by work and endeavor, and not by the process of marking up values over night.” Says banks must operate conservatively, not “put the money of Peter into the speculations of Paul.”

Irving Trust monthly bulletin says business “skies are slowly beginning to clear,” sees possible end to “most drastic depression since 1875”; however, many unsolved problems remain, including decline in silver and farm commodities, gold distribution, and political unsettlement; hits US tariff.

C. Schwab, Bethlehem Steel chair., calls for every energy to be exerted to crush Communism; says more optimistic on next 50 years of US industry than on past 50 years; defends executive bonuses but says will be more open in future.

Economic news and individual company reports:

Total internal revenue collections from Jul. 1 - Dec. 31 were $1.396B vs. $1.503B in 1929.

BLS reports cost of living down 3.6% in second half of 1930 and down 6.2% in the full year; largest decliner in the half was food, 7.2%; rents were down 2.1%.

Total corp. financing in US markets in 1930 was $5.9B vs. record $11.0B in 1929, $8.5B in 1928, and $7.8B in 1927.

Fed. Reserve open market committee meets to discuss credit conditions; Fed. has purchased over $500M of US securities in open market since Oct. 1929 as part of easy credit policy.

Bank of US hearings continue to question various matters, including alleged misrepresentation by directors of the bank's condition, reporting a $10M surplus and $7M undivided profits when neither existed.

US Steel earnings estimated at $0.30-$0.40/share for fourth quarter; about $1.00 had been expected. This would compare with $2.06 in Q3 and $4.14 in Q4 1929; net for the year would be under $9 vs $21.18 in 1929. Steel production this week is about 46%, up about 2% over last week. However, buying is reported cautious, and inventory replenishment slower than expected; all indications point to gradual rather than rapid recovery. Machine tool buying notably improved.

US electric output for week ended Jan. 17 was 1,727 GWHr, down 5.4% from 1930.

Middle West Utilities Dec. 26 survey of business conditions in its territory finds trade generally slack; some improvement in New England, NJ, Penn., Texas.

Dec. output of cigarettes was 8.675B vs. 8.261B in 1929.

New life insurance bought in 1930 was $22B; payouts were $2.2B, $238M higher than in 1929.

Bond houses say market in sound condition after absorbing over $250M in new offerings in a week.

Mexican Finance Sec. Montes de Oca reportedly negotiating for modification of Mexican debt plan agreed to last July.

South African gold mine company shares selling at average yield of 12% in spite of generally favorable conditions; depression has relieved labor shortage.

French tax collections in Dec. were 3.629B francs ($145.2M), down 212M from 1929. French imports in 1930 were 52.3B francs, down 5.9B from 1929; exports were 42.8B, down 7.3B.

NYSE seat sold for $232,000, down down $18,000 from previous sale.

Companies reporting decent earnings: IBM, Lambert (toiletries and medicinals), National Biscuit, Chesapeake & Ohio (against industry trend), Amer. Bakeries, Chicago Towel.


Beau Ideal - a sequel to Beau Geste, starring Ralph Forbes and Loretta Young. Yet another depiction of life in the French Foreign Legion; superior to predecessors in photography but story is even more implausible and confused.

Illicit - "trials of a conventional young man who tried to reconcile his beliefs with those of a girl who fears marriage will blight their love." Girl capitulates to forces of of convention in the end.


A small merchant uptown needed a loan, and put up a valuable painting as collateral with a loan shark. The loan shark would only agree to lend 10% of the painting's price, and charged 15% for a 6 month loan. "But money is lower than it has been in years, down to 1 1/2% in Wall Street," said the borrower. "I know it," said the loan shark, "but 42nd Street is a long way from Wall Street."

A certain tabloid offered readers $1 each for "embarrassing moment" letters. One reader replied: "I work on an early night shift in a steel plant. I got home an hour early last night, and there I found another man with my wife. I was very much embarrassed. Please send me $2, as my wife was also embarrassed." The editor reportedly sent a check for $3, admitting the possibility that the stranger, too, might have been embarrassed.

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