Wednesday, January 21, 1931: Dow 165.82 +4.37 (2.7%)

Assorted historical stuff:

Wickersham report on Prohibition was "surprise of a decade" to Washington. Rumors in the past few weeks, based on hasty reading of advance confidential copies, indicated a dry stance. The actual report did emphasize need for better enforcement as long as Prohibition lasted. However, a majority believed adequate enforcement to be unobtainable and called for revision of Prohibition; some believed a further test with better enforcement should be made. A proposed alternative plan was for a joint Federal and state liquor monopoly to handle alcoholic beverages; states could then choose to be dry or wet. Report seen opening a loophole for Republicans to possibly take wet stance in 1932 election. Pres. Hoover backs call for better enforcement, but sees "serious objections" to revision.

Glass committee seen aiming strongly at regulation of security (investing) affiliates of large national banks. In the hearing yesterday, it was suggested to Currency Comptroller Pole that these affiliates be separated from the parent bank; he was non-commital in response. Panel is mostly composed of conservative Senators, and questioning so far has been friendly rather than using "the badgering tactics often employed by Senate committees." NY Fed Gov. Harrison testified, disagreed with Glass plan to prevent discounting member banks from lending for speculation.

Editorial: Issue behind the food relief bill is much more than short-lived politics; at stake is question of "establishing the dole as an American institution." All agree suffering should be relieved; question is whether to start down the "steep descent through successive and uncontrollable appropriations from the public purse for the temporary benefit of one after another group ... " It's now up to those opposed to the dole to contribute heavily to the Red Cross and avoid that national dishonor.

Editorial: A US embargo on import of foreign grains, currently supported by some Congressmen and the Farm Board, would be folly; it would threaten to isolate the US from all foreign trade, import or export, worsen unemployment, and damage the general welfare of the US people.

Sen. Hawley says has no plans to consider oil tariff.

Henry Morgenthau urges revision of European debts, tariff revision, and US guarantee of aid to France in event of unjustifiable invasion.

Denmark abolishes capital punishment. For past 38 years Denmark has not inflicted the death penalty, though official law provided for execution by guillotine.

Gov. Roosevelt says Commission report has removed all doubt on feasibility of St. Lawrence power projects, urges creation of power authority to carry out plan. Editorial by T. Woodlock: A recent study by W. Mosher comparing the public Ontario Hydroelectric system with the NY system found Ontario consumers paid somewhat less for comparable services. While this study was more careful than usual, differences in means of power generation may account for the result.

NY City 1930 expenditures were $1.334B, receipts also $1.334B, and bonded debt increased to $2.128B.

Bill introduced in NY State legislature requiring stock brokers and salesmen to be licensed and bonded.

Chemical industry is in rapidly changing state; aggressive research has lead to stream of new discoveries upsetting monopolies of older products.

A Paris bookstore has started a new tradition of launching books like ships. In presence of friends and admirers, the author breaks a bottle of champagne over the first copy to be formally placed on sale. Afterward, each buyer is given a glass with which to toast the author's health and success of the book.

61 years ago today, the first brokers' office operated exclusively by women was opened at 44 Broad St. The firm, Woodhull, Claflin & Co., was composed of two sisters, Victoria Claflin Woodhull and Tennessee Claflin. The New York World in 1870 describes the scene at their offices: "Outside on the walk there is gathered throughout the day an assemblage of men, who look anxiously in at the windows, ... and utter expressions of surprise and pleasure if they can but catch a glimpse of one of the members of the firm. Inside the office a doorkeeper has been placed who excludes those who have no real business with the firm." The door of the private office holds a sign saying "All gentlemen will state their business and then retire at once."

Market commentary:

Market wrap: Stocks up early (attributed to speculation on Wickersham report), sold off, then rallied impressively after steel production figures were released. Bond market strong on higher volume; US govts. firm at new highs; foreign steady to firm; corp. high grade active around yearly highs, rally in lower grade. Commodities mixed; grains down following Wickersham release; cotton up.

Conservative observers warn against reaching for stocks, advise buying on a small scale during reactions and taking profits on rallies.

Support again came in just as bears grew confident they could force prices through the mid-Dec. lows.

Considerable outside short selling reported in recent sessions by "traders who frequent customers' rooms"; as result, short interest is believed larger and weaker.

Decline in Gillette early this week said due to pool operations, though accounts are conflicting. General Railway Signal outlook considered encouraging; rails are continuing to install safety devices since since they reduce cost of operation.

Gillette seen likely to cut dividend, add to surplus reserves to fortify financial position after Autostrop merger. Steady earnings improvement seen likely, though it may take a year to realize full benefits from the merger.

Rail stocks have performed the best since year-end; may be partly due to Pres. Hoover's Eastern rail consolidation announcement on Dec. 30. This is encouraging to Dow theory adherents, who believe major upturns or downturns are indicated when both industrials and rails break into new high or low ground; this theory is believed to have forecast the major movements since the fall 1929 panic, including the Dow industrials' rally of almost 100 points after the panic.

Broad Street Gossip: Current market requires a lot of patience; decline has been more persistent and pronounced than any time in more than 25 years. As one broker advised: "If you haven't strong nerves, keep out of this kind of market." European newspapers writing of bread lines in the US might be surprised to read that in Dec., the worst month since the decline began, NY savings bank depositors added $75M; 90% of that money came from the worker.

A firm specializing in bank stocks points out total market value of 25 leading NY banks shrank from $10B in Oct. 1929 to $3B at the 1930 low, although “the banks ... are as strong as, if not stronger than, they were in Oct., 1929.” Bank earnings fell off markedly in 1930, particularly in the second half; attributed to recession, lower rates, decline in security prices, and need to maintain “unusual state of liquidity.” Following each panic year since 1905 (1907, 1914, and 1921), bank earnings have immediately returned to normal in the following year.

F.C. Goodenough, Barclays Bank pres., criticizes US hoarding of gold, calls for cancellation of war debts to US; calls for France to loan surplus funds or allow debtors to repay in goods; blames US boom and bust on tariff wall and accumulation of gold, allowing large credit expansion.

J. Farrell, US Steel pres., says opposed to wage cuts, would set recovery back two years; minimizes effect of tariff on manufactured exports.

J. Gorman, Chicago, Rock Island RR pres., believes depression starting to end; “People everywhere are feeling better, and that is a good sign. Things are at rock bottom and they certainly cannot continue that way. There is only one way out now, and that is up.”

Economic news and individual company reports:

Rail freight loadings for week ended Jan. 10 were 714,251 cars, up 98,869 from prev. holiday week, but down 148,210 or 17.1% from 1930 week, and down 200,187, or 21.8% from 1929.

Steel production in week ended Monday was at 44.5% vs. 40% prev. week, 37% two weeks ago, 69% in 1930, and 83% in 1929.

Refineries ran at 62.1% in week ended Jan. 17; stocks of gasoline increased 799,000 barrels to 40.384M; oil production was 2.094M vs. 2.085M prev. week, but down 567,650 from a year ago.

Money rates continue decline; acceptances, time money, and commercial paper rates hit record lows; commercial paper rates for best names 2 1/2% - 2 3/4%.

January liquidation of bank credit seems of about normal seasonal proportions, but is taking place mostly in security loans; loans to non-brokers have started to decline drastically for the first time. Leading banks still seem eager to strengthen already very liquid positions.

Survey of 21 trades in Eastern states finds 40 firms see outlook for business in 1931 as good, 92 as fair, and 21 as slow; first quarter outlook is seen good by 37, fair by 81, and slow by 48.

National City notes passenger rail revenues declined $414M from 1920 to 1929, while service actually increased; the business as a whole is now unprofitable.

In spite of 1930 decline in US construction, Sears home construction business has increased substantially; Sears lends lot owners up to 75% of value of house and lot, then builds house from plans supplied by owner or Sears architectural dept.

R. Lyons, Nat'l Chain Store Assoc. VP, notes chain stores throughout US have lowered price of bread to 5 cents/loaf while other retailers still charge 8-10 cents.

British exports in 1930 were 570.5M pounds, down 21.7% from 1929; imports were 1.046B, down 14.5%.

Italy's budget year ending in June likely to show 900M lire ($47.1M) deficit despite cuts in spending of $29.2M.

Total Canadian bond offerings in 1930 were $763.0M vs. $653.4M in 1929.

Total French casino profits for year ended Oct. 31 were 337M francs vs. 413M prev. year.

Companies reporting decent earnings: Warren Foundry & Pipe, Hudson & Manhattan Railroad (commuter rail), Brooklyn-Manhattan Transit (subway), Lerner Stores.

At the galleries:

The Metropolitan Museum opens a remarkable exhibition of Russian icons in spite of vigorous protests; Bergdorf Goodman is also showing a collection of icons purchased from the Soviet govt. by James Amster. Frederick Wight has an exhibit of 10 recent portraits of clipper ship captains; for those who have never seen one under sail, it's hard to believe there are still men alive who commanded them in the day of their prime The youngest captain was born in 1851, so is now 80. Two important letters by George Washington come up for auction, including one offering the portfolio of Secretary of State to Thomas Jefferson; other interesting items in the sale include the most complete set of the Kipling school paper ever offered in the US.

Jokes:

"Sam - the doctor says he will remove my appendix for $1,200. Louise - Oh, Sam, I'd much rather have a new auto."

The well-dressed and coiffed applicant asked the railroad chief for a position involving light work and a sizable salary. The grizzled veteran sat back and looked him over. "You bet," he answered. "I'll keep you in mind, and when I find two jobs like that, you can have the other."

New customer to broker: "When you are sure bottom has been reached, you can buy for me 100 shares of Steel." Broker: "When I know positively the market has reached bottom, I will gladly execute your order. And I hope you don't mind if I buy 100 shares for myself."