January 20, 2010

Tuesday, January 20, 1931: Dow 161.45 -1.44 (0.9%)

Assorted historical stuff:

Editorial: An avalanche of "tax reform" propaganda is spreading across all parts of the US. Everywhere, public spending is going up at the demand of the people who want the best of services ... until the tax bills come in. Opinion is so diverse in different locales, there seems little hope of a general formula, but two obvious remedies are often overlooked: consolidation of communities that have grown together physically, and repeal of Prohibition allowing absorption in taxes of the many millions of profits currently thrown to bootleggers.

Washington report: Pres. Hoover seen likely to take "one of the most politically courageous actions ever taken by a President" in vetoing the likely bill to provide relief from the Treasury for drought sufferers and the unemployed. This will be done knowing his enemies will charge he "lets abstractions stand in the way of relief of human suffering." The amount of money involved wouldn't strain govt. finances, but the precedent would be highly significant; Pres. Hoover is said confident the US doesn't want a dole even in emergencies. Public may support this stand by contributing privately to the Red Cross, particularly the wealthy. Sen. Reed (R, Pa.) warns against relief bill, says “we will have the worst shock of our history when we see the personal income tax returns in March.” House reapportionment seen likely to proceed; most state legislatures are dominated by rural members who will try to overcome the influence of growth in city population, but it won't be possible to do this completely. Wickersham report on Prohibition delivered to Pres. Hoover; weighs in at 90,000 words.

Farm Board chair. Legge says Board will sell commodities to Red Cross on interest-free credit basis.

Gifford Pinchot, Republican gov. of Pennsylvania, delivers blast to utilities in inaugural address, seen by some as opening salvo in 1932 Presidential run: utilities aim to be “invisible government to control the entire nation,” unjustly take many hundreds of millions each year from breadwinners. Reiterates stand favoring Prohibition.

Editorial: Recommendations of the Fish committee on US Communism are mainly sound, in spite of implication by Rep. Nelson (R, Maine) of overreaction. It's reasonable to deny aliens right to stay in the US if they're so profoundly dissatisfied they must advocate bloody revolution. However, Mr. Fish's proposal that the Communist Party be declared illegal is debatable, possibly bordering on government control over what the individual may think. Accuracy of the committee's estimate of 500,000 organized Communists in the US unimportant, since even a small fraction of that number, if fanatically devoted, commands serious attention.

Soviet rail conference orders all State enterprises to dismiss all employees with rail experience; employees must then report to labor exchange to get rail job or be sent where jobs are available. Hiding rail experience will be criminal act.

Editorial by T. Woodlock: US should not commit to any silver support plan requiring it to buy silver above normal coinage needs.

R. Brown, chair. of conference of Governors of oil producing states, urges limitation of imports by US of "blood-stained oil" from South America.

Agriculture Dept. reports per capita consumption of vegetables up 36% since 1915; sugar consumption up 33%, milk and dairy up 25%, meat up slightly. Consumption of grains for human food down 30% in past 5 years.

New Orleans to construct airport at cost of $1.5M.

Transcontinental & Western Air to immediately start air express service delivering coast-to-coast in 36 hours, soon to be cut to 24.

NY City Merchants' Assoc. committee approves legislation proposed by Comptroller Berry as step in clarifying the “intricate and incomprehensible accounting system of the city.”

Prof. Georges Claude, French scientist and inventor, to invest additional $2M for construction of plant in Santiago, Cuba to generate electric power using differences in temperature of tropical waters.

London buses end experiment with providing vanity mirrors for some seats. Patrons focusing on their reflections neglected to remain alert for sudden swerves or stops, and wound up being thrown on the floor. In the interests of safety first, no more mirrors are to be installed.

Market commentary:

Market wrap: Stocks sagged early on very dull trading; a number of leading shares hit new lows for the bear market, and some trading favorites broke sharply. Support came in around mid-day, followed by tentative rallies and retreats for the rest of the session. Bond trading quiet; US govts. firm, some new yearly highs; foreign steady; corp. mixed with higher grade firm but speculative irregular. Commodities quiet, little changed.

Weak spots included GE and Gillette; leading issues declined, and market was generally heavy at close.

Conservative observers now generally advise staying out of the market until something definite happens in either direction; most believe commitments can be delayed until earnings reports are out of the way.

Brokers that lend stocks privately to short-sellers report heavier demand than in some time, indicating short interest is extensive again.

Some traders believe banks will support stocks if they again approach mid-Dec. lows. This may be done since they banks have a great volume of bonds to distribute, and this would be more difficult if stocks are declining.

Stock valuations undergoing "realignment," with issues selling at a high earnings multiple coming down, while lower priced issues are holding better.

Caterpillar Tractor's 1930 net estimated at $4.25/share; at that figure, stock is about 7 times earnings and yields 10%.

Otis & Co. explain recent weakness of leading stocks - earnings in 1930 held up better for leading cos. than smaller ones; as a result their stocks were better supported while many smaller stocks were thoroughly deflated. Now, however, it's becoming apparent 1930 earnings may not be the bottom.

Broad Street Gossip: With production below consumption in many lines, prices are bound to improve; scarcity has never failed to correct a deranged price situation. The same rule may apply to stocks, since the floating supply of higher-grade stocks is smaller than it's been in years. Many traders are now looking to trend of steel production as indicating course of many industries. While many annual reports will show considerably lower earnings, balance sheets are generally as strong as ever, with better cash and working capital positions. This contrasts with the depression in 1921, when many corporations had to borrow money at exorbitant rates.

J. Klein, prof. of taxation at City College NY, opposes rise in US taxes; says reduction of rates and simplification would increase revenue; calls for legalizing and taxing wine and beer to increase revenue.

H. Bancroft, Wall St. Journal pres., says US govt. support of wheat “indefensible folly,” repeats past fiascos in support of rubber, coffee, sugar, and copper.

L. Liggett, Drug Inc. pres., meets with Hoover, says confident bottom reached and tide coming in; hits playing of politics during hard times.

Harvard Economic Society expects economic decline to end in first half, probably in first quarter; Dec. showed "less uniform tendency to decline" than previous months, with some areas improved; this isn't proof that decline has ended, but may be significant considering decline has approached maximum seen in past 50 years.

J. Farrell, US Steel pres.: “Let us recognize that the turn of this depression is here ... The low peak of the depression passed 30 days ago ... We are facing in this country a bright future, and as our conditions improve, so will those of the rest of the world.” General business improvement over past 30 days due not only to “national resources and confidence, but to steady, coolheaded thinking by the business men of this country, and to constructive efforts to avert panic and to avoid discouragement.”

Economic news and individual company reports:

Comptroller of the Currency J. Pole appears as first witness before Glass committee; advocates Federal board empowered to remove bank officials found guilty of “bad practices”; big city banks sound but rural banks suffering due to movement of deposits to larger centers; security loans generally safe but loans by banks to investment affiliates should be limited; advocates national branch banking system.

Bank of US bankruptcy hearings delve into complex transactions of Marcus-Singer “syndicate” with various Bank of US affiliates; syndicate included Manhattan Borough pres. S. Levy and Governor's Banking Commission member H. Pollock.

Fed. Reserve 1930 review estimates total corp. profits down 30%-40% from exceptional level of 1929. Total manufacturing payrolls declined almost one-third since June 1929. Over half the decline in total manufacturing production accounted for by drop in steel, auto, shipbuilding, and related industries. Fed. Reserve maintained easy money policy throughout year. Public works and construction increased substantially.

Farm wage index Jan. 1 was 129, down 21 from Oct. 1 and down 29 from Jan. 1, 1930; supply of farm labor was 113.8% of normal vs. 105.9% and 96.7%.

Sales of household electric refrigerators in 1930 were 770,000 units valued at $223.3M; number of families now using electric refrigeration about 3M, of total 20.4M wired homes. Electric Refrigeration News predicts 1931 household sales of 1M units valued at $286M.

Commerce Dept. reports Japan is third-largest US trading partner, taking 4.9% of US exports and supplying 9.8% of US imports.

French Budget Min. Palmade estimates 1930 budget deficit at 1.5B francs due to flood of extraordinary expenditures. Assoc. of French rail investors estimates total 1930 deficit of seven systems at 1.7B francs, demands increase in rate or cut in transport tax. Premier Steeg avoids proposed rise in wheat tariff.

British Labor govt. to propose requiring sale of farm commodities through large monopolies distributing directly from farmers to consumers. Between 150,000-180,000 Lancashire cotton weavers idle in labor dispute.

Canadian govt. ordinary revenues in 9 mos. to Dec. 31 were $285.2M vs. $351.3M; expenditures $280.7M vs. $265.1M; net debt on Dec. 31 $2.194B vs. $2.159B on Dec. 31, 1929. Business failures in first 11 mos. of 1930 were 2,163 with liabilities of $43.9M vs. 1,943 with $35.2M in 1929. Canadian life insurance cos. generally report better years in 1930 vs. 1929.

British drain of gold to France increasing once again. German marks weak due to persistent withdrawal of foreign credits.

Houses heading largest total bond offerings in 1930: J.P. Morgan($649.7M), Harris Forbes ($455.1M), Halsey Stuart ($435.3M), Chase Securities ($361.4M).

Chadbourne world sugar pact signed by major exporting countries.

Philadelphia Auto Show reports increased retail sales over 1930; demand was greatest in the higher priced $1,000-$5,000 class.

GE Q4 earnings were $74.2M, down 32% from 1929; full year $341.8M, down 23%. Auburn Automobile net for year ended Nov. 30 was $5.43/share vs. $21.23 prev. year; quarter ended Nov. 30 showed $0.97 loss vs. $3.80 profit prev. year. Grand Union sales for five weeks ended Jan. 3 were $3.373M, down 2.4% from 1929; full year $36.9M, up 10.5%..

Companies reporting decent earnings: Lincoln Printing (largest financial printer), Hygrade Lamp.


Anatol - A satisfying revival of Arthur Schnitzler's play about a Viennese playboy's affairs - a welcome surprise, since this kind of "sophisticated humor is not in the Broadway vein." Only false note is in the final episode, The Wedding Morning, which "descends to slapstick in an apparent effort of the producers to send the auditors out into the night with a typical Broadway finale ringing in their ears."


"Assistant - The lady over there wants to know if this woolen jumper will shrink. What shall I tell her? Floorwalker - Does it fit her? Assistant - No, it's too large. Floorwalker - Then certainly tell her it'll shrink."

"Preacher - Johnny, don't you want to go to heaven? Johnny - Not yet."

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