January 6, 2010

Tuesday, January 6, 1931: Dow 170.71 -1.41 (0.8%)

Assorted historical stuff:

Washington report: Congress back in session, "with the usual fanfare of oratory, insurgency, resolutions, inquisitorial proposals and denunciation." Renewed talk of extra session; Pres. Hoover said ready to appeal to country to avoid this. C. Dawes mentioned as possible new GOP chair; would indicate an intention to deal with insurgents aggressively.

300 armed and hungry farmers demonstrate in Arkansas Saturday, threatening to seize merchant supplies. Ark. Sen. Caraway will introduce a bill to increase $45M drought relief funds by $15M to be used in supplying food and clothing.

Editorial: Farm Board chair. Legge has just issued a long defense of their operations against criticism from J. Simpson of the Farmers Union. The Board's operations "apparently appear to him to be worthwhile, but to others look like simply temporary expedients that later will prove to be worse than the ills they were meant to alleviate." Said operations require accumulating large stockpiles of wheat and cotton. What is to be done with these stockpiles? "It is easy for the Board to store up commodities, but to get rid of them may baffle its best efforts."

Editorial: Striking British miners are again asking the Labour government to intervene and, effectively, help sell more expensive British coal to Europe. This is similar in principle to our Farm Board situation. Some British mine problems, such as antiquated equipment, are not the fault of the miners. However, political intervention won't help connect buyer and seller but will impose new barriers between them. "If British mining ... had not been subsidized at any time, it might by now have accomplished its rationalization and modernization and be on something like equal terms with its competitors."

US Circuit Court of Appeals decides, contrary to earlier decision by Fed. Judge Clark of Newark, that Prohibition was adopted constitutionally.

Editorial by T. Woodlock: Financial statements issued by the [govt.-supported] Inland Waterways Corp. understate expenses, since they don't include taxes, maintenance, and requirement for return on investment; even so, they show an operating deficit. This is therefore an unfair government subsidy of railway competition.

Sen. Ashurst (D, Ariz.) introduces bill authorizing negotiations for US to purchase Lower Calif. peninsula and 10,000 sq. miles of Sonora from Mexico.

A West Coast man has tackled a neglected niche by opening a junkyard for old planes.

Breaking news: Agriculture Dept. reports honeybees can fly at a top speed of 25 mph, though they seldom go above 15. Loaded bees often fly as fast as unloaded ones, though they sometimes stop to rest. Average bee load of nectar is 40 mg, or about half the bee's weight.

Auto Show had over 25,000 visitors Sat. night and Sunday afternoon, considered a good showing. Studebaker hosted 800 at its banquet Sat. night; Notre Dame was well represented by Father Cavanaugh, Knute Rockne, and several former football players who are now Studebaker dealers. Toastmaster was the genial Studebaker VP Hoffman, who exercised his talent for humorous remarks at the expense of the visiting clergymen and the sparsely attired actresses.

New Yorkers bequeathed a total of $36.985M to altruistic interests in the year ended Dec. 15; this was up $10M over 1929.

NY freight terminal served by 12 railroads to be built on block bounded by 15th and 16th St. and Eighth and Ninth Ave.; to cost $13M.

Market commentary:

Market wrap: Stocks opened week with considerable selling; however, enough scale support came in to prevent sharp declines. Bond market active, strong; US govts. firm; foreign generally strong; corp. firm, with high-grade up moderately but sharper rallies in many lower grade and recently weak issues. Commodities weak, except for wheat futures supported by Farm Board. Silver falls 1 cent to record low of 29 7/8 cents/ounce; Hong Kong and Shanghai currencies follow.

Conservative observers quite cheerful, not disturbed by selling yesterday, favor accumulating standard stocks on reactions; most look for gradual uptrend until "something happens to give the market its needed impetus in either direction."

Stock selling was attributed to profit-taking and renewed bear operations; weakness was pronounced in stocks that led the recent recovery, and in tires and chemicals; meat packing shares and banks and trusts were relatively strong.

Market observers tend to believe recent advance was largely due to technical factors, not business improvement; look for further advance to about early Dec. level of 185; best authorities believe trading should be highly selective, though "investment purchases could be made with the assurance of ultimate profits."

Some recent buying said coming from short-sellers who waited to the new year to realize profits.

Auto industry is being watched closely for clues to business trend. Car makers are large consumers of other products, and the industry was an early indicator of the depression in 1929. Much depends on public reaction to new models.

Brokers report private long-range forecasts received from various industries have been encouraging.

Broad Street Gossip: In view of tendency toward overproduction, a new system may develop to regulate production to match requirements. Steel industry is closest to doing this; as a result it's been doing much better than in past years of "cut-throat competition." Fourth quarter earnings reports are likely to be poor, but will be ignored if business starts to show definite improvement in the next few weeks. Editor: “I was in Los Angeles 20 years ago and some of the pessimists said 'growth of the city has been too rapid, the bubble is likely to burst anytime.' I have been out there almost every year for the last 20 years and pessimists have been saying the same thing.”

R. Stephenson, Amer. Bankers Assoc. pres., urges public to disregard "baseless rumors"; says elimination of weaknesses in banking structure by "curative conditions" of 1930 will result in strongest banking situation in history of country.

W. Butterworth, US Chamber of Commerce pres., calls for halt to new regulations imposing burdens on business, praises US business for showing strength in 1930 by keeping decline gradual and orderly when it might have been so sudden as to lead to panic.

Sir Josiah Stamp, noted economist, doesn't believe there's hope of immediate business recovery, though bottom may be hit in April or May; even if an uptrend occurs, a year would probably be needed before any "material recovery."

W. Joyce, Nat'l Surety chair.: depressions, though disagreeable, are necessary, and in fact it would be better if they would occur more frequently, i.e. every 2 or 3 years instead of the current 7 or 8. Periods of excessive optimism and pessimism alternate; calls current pessimism overdone. "I have just returned from California, and it looks to me as though 90% of all the pessimism is located on Manhattan Island and the other 10% is distributed over the balance of the country."

Economic news and individual company reports:

90 leading economists endorse $1B prosperity loan proposed by emergency committee for Federal public works chaired by H. Buttenheim.

Administration said concerned about possibility of wheat imports, may seek quick preventive measure from Congress through embargo or raising tariff.

NY Grand Jury begins hearing on affairs of Bank of U.S.; D.A. Crain outlines results of his investigation. Bankruptcy proceedings also continue. I. Kresel, Bank of U.S. counsel and director, says proper disposition of Bank of US assets will yield more than enough to pay depositors in full.

Manufacturers Trust gets new management: H. Gibson appointed pres. Manufacturers has lost $109M in deposits since Sept. 24, due to heavy withdrawals following collapse of four-bank merger and Bank of U.S. failure.

Final Dec. income tax receipts were $496.8M vs. $516.5M in 1929, and about $12M over earlier estimates; for year to Dec. 31 receipts were $1.107B vs. $1.185B, almost exactly as budgeted. Total ordinary receipts in Dec. were $717.1M vs. $742.9M.

Bond Buyer reports state and local govt. borrowing in 1930 was $1.382B vs. $1.442B in 1929 and $1.390B in 1928.

Venezuela said planning to wipe out last of foreign bond obligations by repaying less than $5M outstanding in London.

German financial circles generally praise govt. regarding its new budget, which cuts spending to 10.4B marks vs. 11.6B in 1930, 10.2B in 1929, and 8.8B in 1928; budget is seen as conservative, unlike previous over-optimistic ones. German Federal Railway System 1930 revenues were about $1B, down $190M from previous year.

European steel cartel prolonged to June 30; directors hope to make it a powerful organization again when depression passes; further cut needed in current output.

World sugar producers' negotiations with German producers seen continuing for some time, though prospects of agreement are thought lower.

Canada index of employment was 108.5 on Dec. 1 vs. 112.9 on Nov. 1 and 119.1 on Dec. 1, 1929. Canadian wheat acreage this year is expected to increase at least 1M acres over the 22M acres planted in 1930; yields are also expected to improve by better fertilizer usage.

US meatpacking companies win significant victory as DC Supreme Court modifies Consent Decree; still not allowed to enter retail store field, but now able to enter other businesses aside from "meat and allied products," including cereals and canning.

Alaskan minerals produced in 1930 were valued at $13.6M vs. $16.1M in 1929; reduction largely due to lower prices.

Companies reporting decent earnings: Middle West Utilities, Travelers insurance companies, Altorfer Bros. (electric washing machines).

F.W. Woolworth Dec. sales $42.3M, down 4.1% from 1929; year's sales $289.3M, down 4.5%. Sears-Roebuck Dec. sales $39.1M, down 22.4% from 1929; year's sales $390.4M, down 11.4%. Montgomery-Ward sales from Aug. to Dec. ranged from 16%-20% below 1929, reflecting poor rural buying power; year's sales $272.3M, down 6.6%.

Swedish Match [an Ivar Kreuger co.] declines after announcing it will raise over $52M by issuing new stock and bonds.


Night Birds, a British mystery. Faster pace than usual in British pictures; maintains interest to the final scene. All elements of a thriller present: gunmen, Scotland Yard detectives, pearl neckaces, hold-up men in dress clothes, and night club girls.

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