January 28, 2010

Wednesday, January 28, 1931: Dow 170.82 -0.37 (0.2%)

Assorted historical stuff:

Washington report: Likelihood seen growing of huge veteran's bonus bill involving short-term payout of up to $4B; House Ways and Means Committee is to take up the subject tomorrow. If it comes to a vote, "it is a Congressional axiom that no pension bill ever failed to pass and this will be no exception ..."; Congress would also be likely to override a Presidential veto. Opponents will try to delay the matter procedurally so it can't be finished in the current session; advocates may then try to force extra session. White House says Pres. Hoover won't further clarify views on Wickersham (Prohibition) report. Senate and House unable to reconcile bill on proposed public Muscle Shoals power plant; question seen likely to be taken up again in next session, where govt. operation is likely to be more favored.

Senate committee holds hearing on Eugene Meyer, candidate for Fed. Reserve Board governor. Rep. McFadden hurls charges, including: “connivance” in getting two Board members to leave to allow appointing Meyer; that Meyer had a longtime desire to “sell the board to the country”; that his background was as a stock broker, not a banker; that his affiliations should be investigated, particularly those with J.P. Morgan; and that his NY banking house had an unethical relationship with the War Finance Corp. Witnesses and committee members defended Meyer vigorously.

Editorial by T. Woodlock: England has had plenty of corporate scandals, and the US has plenty of examples of conscientious corporate leadership. However, in general, both corporate governance and stockholder rights are perceptibly stronger in England. Some difference is due to stronger shareholder participation; annual meetings are much more lively in England, partly because shareholders have more power (declaring dividends and electing their own auditors). A more important difference is in the greater responsibility that directors in England generally feel to stockholders; while the ethics of this obligation are debatable, it is evident that the more strongly directors feel it, even to a "Quixotic" extent, the better are likely to be the results as far as stockholders are concerned.

British Chancellor of the Exchequer Snowden points out US stock of gold is $4.6B, more than combined holdings of France, UK, Germany, and Spain.

British Foreign Sec. Henderson convinced successful disarmament conference would do more than anything to restore European prosperity and political stability.

Navy League of US says effective navy of the US is 153,698 tons below London Conference limit and 160,674 tons below British navy. British are 20,874 tons below limit, while Japan is closest to limit.

New Laval Cabinet formed in France, made up of Right-Center group, largely associates of Tardieu and Briand.

Editorial: State and local operation of electric utilities seems increasingly popular; in NY, Gov. Roosevelt favors it as a "club in the closet" against exploitation by private cos. If this is done, accurate cost accounting is essential; the NY Appellate Court has implied fair play is required, i.e. power shouldn't be sold below cost.

Sen. Wagner (R, NY) says businesses should set up reserves against unemployment as they do against depreciation.

Editorial: NY State land survey proposed by Gov. Roosevelt is a sound idea, in spite of some criticism. It points at "the only 'farm relief' which legislation can ever offer," a redirection of current inefficient use of land, where some losing farms are maintained on marginal land while other definitely promising areas are unused.

Stock Exchange quotations broadcast by television at Chicago over radius of 150 miles in test by Chicago Daily News and Western Television Co.

Yacht from estate of J. Elverson, former Phila. Inquirer owner, built for $150,000, sold at auction to junk dealer for $2,000 although fully equipped and seaworthy.

More stories of prospectors dying poor: Trader O'Reilly, who picked up some pebbles in 1866 for a South African farmer's children to play with that later turned out to be the first diamonds found there, recently died poor; since 1866, over $2B of gems have been mined in South Africa. The man who found the first platinum in Africa made only $500 from his discovery.

Market commentary:

Market wrap: Stocks moved narrowly; trading dull with little outside participation as US Steel earnings report was awaited; little seen to encourage either bull or bear. Bond trading more active, prices irregular; new offerings continue heavy (over $500M so far in Jan.); US govts. lower; foreign dull, steady to firm; corp. irregular. Commodities strong; grains up substantially; cotton up moderately; eggs hit record low.

Conservative observers cautious, advise staying on sidelines until earnings reports, taking profits on further advances.

US Steel, other industrials stayed in small range through the session; Studebaker down on dividend cut; Auburn, Vanadium, and Warren Bros. were strong spots.

Brokers' loans are now so low that several firms can finance their customers without borrowing from banks.

Bulls still await confirmation by industrials of move up over previous range seen in rails and utilities.

Bank stocks have recovered sharply from Dec. 17 lows, with most rising 20%-35% in the intervening 40 days.

Broad Street Gossip: Wall Street is largely dismissing controversy over Bethlehem Steel bonuses; one banker says “Ninety-nine percent of the shareholders ... would vote in favor of bonuses to employes if the question was put to a test vote.” Brokers report better attendance in customers' rooms and satisfactory increase in new accounts. Short interest has been considerably reduced due to the recent rally, but still is large in many standard stocks.

Pask & Wallbridge anticipate good opportunities in rail securities; because US public, through savings banks and life insurance cos., holds $8B of these securities, it's likely public will demand proposed rail mergers go through promptly and without political interference.

A. Cutten, prominent grain dealer who recently took seat on Winnipeg Grain Exchange, says Farm Board operations have helped wheat growers dispose of 1930 crop, but can't work out in long term; believes Board must take huge loss to dispose of wheat holdings.

M. Taylor, US Steel finance committee chair., says co. has dealt with lower production by distributing available work equitably among workers and by advancing construction work as agreed in Pres. Hoover's Nov. 1929 conference. Discusses machine age in general; “not a cold-blooded and cruel thing which seeks to exterminate man, but is mankind's finest expression through which great forces have been revealed to him by the Divine Hand.” Only worthy objective is “to raise mankind in general - not the particular few, but the entire race”; while we may have overproduced for the moment, we've created the greatest prosperity in history.

Mme. Helena Rubinstein predicts 1931 will see increased volume for the beauty business, with 36M US women spending $2B on lipsticks, lotions, and other cosmetics. "Bibles, bread, and beauty are three commodities for which the demand is normal."

Economic news and individual company reports:

Rail freight loadings for week ended Jan. 17 were 725,938 cars, up 11,687 from prev. week, but down 121,217 or 14.3% from 1930 week, and down 205,923, or 22% from 1929.

US Steel Q4 net was $0.70/share, of which $0.27 was from operations and $0.43 from special items; Q3 net was $2.06/share and Q4 1929 was $4.14; full year net was $9.12/share vs. $21.19. Machine tool markets report continued better ordering and inquiries.

Recent trends from reporting Fed. Reserve member banks: Seasonal decline in bank credit much smaller than usual (attributed to Fed. Reserve easy money policy); total loans and investments are $22.603B, down only $353M from year-end vs. $907M decline in 1929. Liquidation of bank security loans started in earnest in early Dec.; on Dec. 10, they were $7.769B, only $49M below Dec. 11, 1929, but since then they've declined $344M and are $308M below 1929 level. Banks have shifted from non-govt. to govt. securities, selling $122M of the former while buying $193M of the latter since year-end.

Banks report recent bond issues well absorbed, plan to offer additional ones in coming weeks to take advantage of conditions. Street rumors are circulating of exceptionally large upcoming financing by bonds and preferred stock.

Refineries ran at 62.5% in week ended Jan. 24; stocks of gasoline increased 1.111M barrels to 41.495M; oil production was 2.111M vs. 2.094M prev. week, but down 505,000 from a year ago.

Overall electric output trend in 1930: at start of 1930, electric output was about 5% above 1929 level; this difference narrowed until, in spring of 1930, output fell below 1929 level; at end of year, output was 4%-5% below 1929.

Foreign govt. and corp. financing in 1930 was $1.275B vs. $1.096B in 1929 and $1.958B in 1928; biggest govt. borrowers were Canada $288.5M, South America $250.6M, Europe $146.2M, and Far East $72.5M.

Sen. Sheppard (D, Tex.) favors resolution calling for investigation of cotton prices: "The tremendous and unprecedented decline ... since 1926 cannot be explained on any reasonable basis connected with supply and demand. Evidently feverish , excessive speculative activities had much to do with these abnormal slumps.

T. Chadbourne reports good progress on sugar, predicts world's leading producers will sign agreement in March.

British gold drain to France expected to be heavy in next few days, but believed nearing end as bill rates rise to about 2 1/2% and sterling exchange rises.

Oklahoma independent oil operators continue testifying in favor of higher allowable production.

Chicago reports recent gains in retail and wholesale trade, production, and employment.

Tailors, shoe repaires, cleaners, and dyers are reportedly doing very well, as public refurbishes old clothes and shoes.

Amer. Art Dealers' Assoc. reports US public spent $250M on art in 1929, of which only a third was spent on old masters.

Last family member departs from management at Armour; co. was founded by Philip D. Armour, I in 1863; his grandson, Philip D. Armour, III resigned as VP.

A&P increases quarterly dividend from $1.25 to $1.50.

Paramount-Publix (movies) has been able to maintain earnings fairly well; Q4 1930 net will decline to about $5.1M from $5.8M in 1929, but business in Jan. is running ahead of a year ago. Co. is now following strategy of high quality films at relatively low cost; after some disappointments with $1M spectacles, it's now making films for $250,000-$350,000 each.

Companies reporting decent earnings: Best & Co. (chain store), Warren Bros. (pavement), Bangor & Aroostook RR (against industry trend), Bond & Mortgage Guarantee Co., A. Hollander & Son (furs).

At the galleries:

The Old Print Shop is showing lithographs and paintings by Louis Maurer, oldest artist in the US, who will be 99 on Feb. 21. Mr. Maurer is the last surviving member of the staff of Currier & Ives; he was born in Germany in 1832, came to the US in 1853, and has lived in NY for the past 63 years. He was also an expert horseman, musician, and rifleman. In spite of his years, he still sketches easily and with pleasing results. The New York Antiques Show is to run at the Grand Central Palace starting Feb. 27, with over 170 exhibitors and a record variety of items. New York University has just added to its world-class collection of almost 2,000 old watches and clocks a 130 year-old piece containing a miniature forerunner of the movies: once every minute, through an opening in the dial, a running deer appears, followed by a dog, followed by a hunter.


'When I hit a fella, he knows it.' 'When I hit a fella, he don't know it till a week later.'

"'That man wants me to lend him some money. Do you know anything about him?' 'Why, I know him as well as I know you. Don't lend him a bean, old man.'"

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