January 29, 2010

Thursday, January 29, 1931: Dow 166.84 -3.98 (2.3%)

Assorted historical stuff:

Treasury Sec. Mellon comes out strongly against veterans bonus plan; would require govt. bond issue of up to $3.5B, put a great burden on taxpayers, retard business recovery, and not be in the best interests of the veterans. Current public finances far from satisfactory, estimate of $375M deficit for current fiscal year ending June 30. Bond issue would mean increase in taxes and much higher interest charges; would also "kill the [non-govt.] bond market." Issue that large could also lead to inflation, followed by a drop when the stimulating effect of inflation wears off, and eventually a deeper depression. Leading govt. bond dealers report heavy selling by banks of long-term govt. bonds, reversing recent trend; attributed to fear of large new issue.

Washington report: Veteran's bonus would turn tax increase from possible to certain. Confirmation of E. Meyer as governor of Fed. Reserve Board now considered certain. Appearance of Owen Young before Glass committee sure to attract attention; Mr. Young looms large as Dem. Pres. candidate in 1932.

Editorial: A. Wiggin's testimony before the Glass committee made some interesting points. He made convincing arguments against "drastic and disturbing legislation" to try and direct credit or prevent unwise banking. He also suggested meeting emergencies by allowing clearinghouse certificates to be rediscounted at the Fed. This suggestion is somewhat shocking since these certificates in the past were identified with major panics, and it was hoped the Fed. Reserve system would make them unnecessary. However, it's now been demonstrated the Fed. has its limitations when it comes to supplying credit in emergencies; half the current collateral for member bank loans is not eligible for rediscount. Perhaps a better alternative to the old clearinghouse machinery would making stocks and bonds eligible for rediscounting - of course, this would be "only under very special regulations and restrictions, and at high rates."

Editorial: M. Taylor, US Steel finance committee chair., believes employers can minimize suffering of depression by distributing available work fairly; he speaks from experience. There are some obstacles to doing this; the employer loses the ability to retain only the best workers, while in many industries workers with seniority believe newcomers should bear risk of unemployment. However, in practice it may be the best solution; employers are finding workers more diligent now when millions are out of work, while workers should realize that large numbers of unemployed in their industry are a menace to wage stability and job security.

Farm, labor, and lumber interests advocate law to ban imports of Russian goods produced by forced labor.

Red Cross says will not accept $25M appropriation from Congress, would defeat organization's purpose and interfere with work. NY Gov. Roosevelt issues proclamation asking people of NY to support $10M Red Cross drive.

AFL pres. W. Green says unemployed in first part of Jan. totalled 5.7M vs. 5.5M in Dec.

Editorial by T. Woodlock: A good way to provide lower rates to utility consumers would be to give utility companies a chance to profit as the public does, i.e. to split the benefit from lower costs between public and utility. This would give utilities a strong incentive for efficiency and lower cost. A practical experiment along these lines has been done in Washington, DC; this has lowered consumer costs from 10 cents/KWHr seven years ago to about 4.2 cents today.

French Premier Laval's govt. adopts Tardieu program for national development involving $200M in public works to combat unemployment.

Extensive new oil fields found in East Texas.

Ford Motor Co. says will continue to concentrate airplane development on tri-motor aircraft; also developing single-motor slower freight airplane, and four-motor 38-seat passenger plane.

Chicago brokers now get weather report each afternoon. If it's good, securities can be sent airmail to NY, arriving the next morning and saving a day's interest.

Largest amount of life insurance taken out by one person is $12M, to Walter P. Chrysler; second largest is $7M to Pierre S. du Pont.

Sightseers wanting to get a close look at African wild animals can take an observation train through hundreds of miles of the Sabi game reserve. The train travels at about 20 mph, often within yards of elephants, lions, zebras, and buffalo; there are lookout balconies at each end of the cars.

Reminisce by H. Alloway: Readers of today's newspapers, “their lucubrations howsoever turgid,” get little idea of how different things used to be. In the 1870's-1880's, “When it came to a corporation in the news how the public then could suspect and how the papers then could insinuate and the orators hector.”

Broadcasting of stock quotations by television from Chicago may become daily program of about 15 minutes; principal backer of Western Television Corp., maker of equipment used, is Clem F. Wade, originator of the “Eskimo Pie.”

Market commentary:

Market wrap: Stocks opened weakly and worked downward gradually for most of the day on slower trading; weakness extended across the market; decline slowed in the afternoon. Bond market unsettled, mostly lower, on decline in US govts.; foreign issues hold steady to firm. Commodities down; grains weak, with corn down sharply; cotton down moderately. Copper buying weak; some chance seen of decline from current 10 cents to 9 1/2 cents or lower.

Market weakness attributed to poor US Steel earnings, Sec. Mellon's statements, and declining grain prices.

Selling broke out in some rail stocks, particularly Wabash issues after passing preferred dividends.

Conservative observers more cautious; strongly advise reducing long holdings on favorable opportunities, believe market technically weakened due to smaller short interest. Short interest believed to have declined significantly based on smaller borrowing demand for many leading stocks.

Recent strength in rails considered significant, possibly representing buying by "well-informed interests ... taking a long pull position"; it's considered particularly significant that buying has continued in spite of poor Dec. rail earnings reports.

A number of bull pools are said to be operating, mainly in medium and low-priced shares; they haven't been able to attract much of an outside following yet.

Relatively stronger recent performance by low-priced shares vs. the usual market leaders is attributed to greater pool activity and to outside buying; precedent shows that low-priced stocks often gain more proportionally coming out of bear markets.

Broad Street Gossip: Street veterans note successful traders always keep in mind there are two sides to the market; in 1929 many traders forgot stocks could go down, while until recently many bears had forgotten they could go up. An Exchange floor specialist is only doing commission business and has foresworn trading until he learns how to take a loss and give up his "mania for holding." One banker feels the decline in public buying power is overstated; in a good year, total income in the US is about $85B; even if this is off 25%, it still is large at $65B, while the amount that can be bought with that money is in many cases more than 25% higher than in 1929 due to price declines.

Business leaders remain cautious in spite of the stronger stock market. Feel satisfactory economic progress has been made since start of the year, though pace has been moderate, but await developments in coming months before taking definitely optimistic stand; recall "spurt of greater proportions petered out a year ago."

J. Darling, Midland Bank dir., attributes world economic crisis to decline in silver, reducing buying power of half the world; suggests raising silver price by, in effect, backing it with gold.

Russell, Miller & Co. see talk of a new high in the industrials as premature; "It is difficult ... to support a sustained rally which has behind it mainly technical strength, and lacks the basis of a sound and strongly improving business situation."

W. Chrysler sees definite "very distinct change in the mental attitude of the buying public"; sees business following a slightly upward trend from now on, becoming more apparent in spring, and return to normal level in 1932.

Economic news and individual company reports:

Steel production in week ended Monday was at 46% vs. 44.5% prev. week, 40% two weeks ago, 73% in 1930, and 84% in 1929. Analysis of US Steel earnings report indicates they won't be able to cover dividends in the current quarter unless a radical improvement occurs. Steel reviews this week were less optimistic; pace of improvement has slackened; while this is natural as year progresses, there had been some hope production would go higher before stabilizing. Continued stability of prices is encouraging.

Bankruptcy hearings of four Bank of US affiliates continue. Two of the affiliates have $13M of claims filed against them, with $7.5M of real estate assets and $36M of “doubtful” assets. S. Rosoff, large Bank of US stockholder, testified he bought bank stock under a verbal repurchase agreement with S. Singer, chair. of the bank's executive committee; Singer repeated statement he had never authorized a repurchase agreement. J. Rosenberg, attorney for Irving Trust, says it appears Marcus-Singer syndicate was unloading its Bank of US stock at same time as bank was selling stock to depositors and employees under repurchase agreement.

Dec. production of cars and trucks in US and Canada was 161,223 vehicles vs. 141,159 in Nov. and 125,502 in 1929; full year 3.509M vs. 5.622M.

Total 1930 individual income tax receipts were $1.090B vs. $1.238B in 1929; corporate income tax receipts were $1.243B vs. $1.265B. State with largest income tax payments was NY, $791M; next largest Penna., $215M.

Total new or additional NYSE listings of domestic and foreign stocks and bonds in 1930 was $7.813B vs. record high of $15.668B in 1929, $7.762B in 1928, and $5.548B in 1927.

Prof. J. Palmer of Univ. of Chicago points out US has about 1.5M retail stores, sees opportunity to cut marketing costs if this number can be reduced.

Ethyl Gasoline Corp. [makers of tetra-ethyl lead gasoline additive, jointly owned by GM and Standard Oil NJ] reports record 1930 year, with gasoline sales of about 2B gallons, up 48% over 1929; about one in five gasoline pumps now uses their product.

Lloyd's Register reports merchant ships launched in 1930 totalled 2.889M tons vs. 2.793M in 1929, and highest since 1921; US was second largest with 246,687 tons, up 120,624 from 1929.

Withdrawal of foreign capital from Germany reported in spite of high money rates; leading German banks paying 4.5%-5% for 1 to 3 month credits; attributed to foreign distrust of conditions there. British loss of gold to France slowing down as sterling strengthens.

Met. Life Insurance Co. produced $3.305B of life insurance in 1930, only 2% below 1929 record high.

Sears sales in the first 28 day period of 1931 were down over 10% from 1930; however, this was much improved from the last two periods of 1930, which were down over 20% from the previous year.

American Chicle (chewing gum) 1930 net was $4.42/share vs. $4.22 in 1929; Q4 was $1.02 vs. $0.96.

Companies reporting decent earnings: Woolworth, American Tobacco, Liggett & Myers (cigarettes), Arundel Corp. (sand and gravel), Childs Co. (restaurants), Engineers Public Service, Standard Gas & Electric, Twin City Rapid Transit, Cumberland Pipe Line, Dresser (pipe fittings and couplings), Hollinger Consol. Gold Mines.


Bill [Bojangles] Robinson is now appearing at the Palace. More than a tap dancer, he's an accomplished story teller and interacts freely with the audience, taking requests that the patrons in the balcony are never shy about making. This week, Mr. Robinson “repeats his stair-dance, gives an imitation of Pat Rooney, and performs an amusing dance to the ... currently popular 'Peanut Vendor' music.” Also appearing is Cardini, the magician. [Note: Peanut Vendor (El Manisero) was the first great Latin hit in the US, and launched the rumba craze. Over a million copies of the sheet music were sold, and it's been recorded over 160 times. Here's the 1930 recording that made it really take off, by Don Azpiazu and the Havana Casino Orchestra; this record also probably sold over a million copies. And, here's a little of it by Cary Grant (!) and Jean Arthur.]


"Doctor - Did you put a mirror in front of the patient's face, to see if she is still breathing? Nurse - Yes, and she blushed and asked for her vanity case."

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