February 10, 2010

Tuesday, February 10, 1931: Dow 177.72 +4.82 (2.8%)

Assorted historical stuff:

Washington report: In spite of compromise on Federal drought relief, possibility of legislative logjam and extra session remains due to other issues including veterans's bonus, Muscle Shoals, and rail consolidation. Tentative bonus compromise, not yet in writing, would involve increasing amount veterans can borrow and lowering rate; total cost might be about $750M. Gov. Albert Ritchie of Maryland seen as potential Democratic Pres. candidate in 1932, appealing to “those who are reacting against interference of the federal government in too many things.” House Appropriations Committee reported bill reducing Navy's appropriation by $32.9M to $344.3M due to London Naval Treaty's reduction of competitive naval building. Senate Republicans vote to hold night sessions starting Feb. 10 for as long as needed. Judge O. Pagan tells Senate committee Eugene Meyer not involved in 1926 Chicago Land Bank indictments, or in any other cases he investigated.

Survey by Dow Jones of industrial and financial leaders throughout the country finds unanimous opposition to veterans' bonus; statements against it flood in from leading businessmen in Philadelphia, Boston, Chicago, Detroit, Cleveland, Cincinnati, Pittsburgh, St. Louis, Los Angeles, and even San Francisco.

Editorial by T. Woodlock: European industries are now cutting wages in order to cut labor costs and increase exports. In the US, by contrast, there seems to be an unprecedented consensus against reducing wages. However, for those still employed, real wages in terms of buying power are now at an all-time high thanks to price declines [Note: doesn't mention widespread reduction in hours worked.] In some cases, factory production costs per unit exceed selling prices; this amounts to a “dole” for workers, and it's a hard question how long this can or should continue.

Cuban Pres. Machado renews suspension of constitutional guarantees for another three months due to "Communist activities."

Spanish govt. lifts censorship on newspapers and telegraphs and calls for general elections; currency down sharply.

British PM MacDonald says govt. not considering any proposal for debt readjustment conference; debt revision has been subject of talk by US bankers and unofficial sources in Paris and London; official circles have refused to comment on principle Britain wouldn't ask for “charity” under any circumstances.

R. Whitney, NYSE pres., calls for upholding of NYSE principles of business conduct and ethics; "the uplifting of these principles is what we shall stand for as long as I have anything to do with the New York Stock Exchange."

Editorial: A recent study by Bond, McEnany tabulated the probable prices for cotton next season based on production ranging from 10M to 15M bales; largest cash return to farmers would be from a 10M bale crop. Farmers are now in the position of the proverbial mule who has been led to water but must decide for himself whether to drink.

T. Henry, Amer. Auto. Assoc. pres., blames current attempts to pyramid taxes on car owners to intense propaganda by railroads; says motor vehicle owners are now paying 180% of actual cost of state highway systems.

Flying has become so safe that major insurance cos. no longer hesitate to write policies; one national co. sells a $5,000 policy for $2, good for 24 hours on Boeing Systems San Francisco - Chicago route.

Pan American to start new air service across entire North coast of South America Feb. 1.

Manufacturers of geographic globes report increasing demand for their products as a decorative feature in modern homes.

[Origins of everyday expressions dept:] An enterprising California man has developed a new use for tin cans - he uses them to pack worms together with water and food, for shipping to customers from his worm farm.

Market commentary:

Market wrap: Stocks opened the week very strongly, with volume highest of the year and the ticker running several minutes behind at times. Large scale buying poured into leaders including GM, US Steel, American Can, GE; trading favorites continued sharp gains, including Auburn, Worthington, J.I. Case. Some profit taking in afternoon was easily absorbed and leaders maintained a strong tone, ending close to the day's highs. Bonds stronger in quiet trading; US and foreign govts. steady to firm; corp. generally higher, speculative and convertibles rally substantially along with stocks. Commodities mixed; grains up sharply in spite of reports of rain in drought areas; cotton almost unchanged; cocoa again touches record low at 5.05 cents, but closed up slightly. Silver remained at record low.

Conservative observers encouraged by break above trading range, favor buying standard stocks on reactions.

Traders cheered by strength in grains, and improved prospects of avoiding extra Congressional session. Ability of industrials to climb above recent resistance strongly suggests near-term trend is up. Entertainment shares were a strong feature of the last hour, with "Warner Bros. appearing on the tape in long strings." Oils were strong on Apellate court approval of large merger between Standard of NY and Vacuum Oil; this was considered as big step in recognizing the changed conditions in the oil industry since the Supreme Court dissolved Standard Oil; decision may still be appealed to Supreme Court.

Considerable attention was drawn by reports that, contrary to earlier rumors of steel price cuts, the next change would be upward. An advance within the next month to six weeks would be considered an important development both for the steel business and the stock market.

Short interest is still substantial, though action of the market has worried some bears, causing them to start covering. Bears have recently been unsuccessful in attempts to force liquidation; if they were themselves forced to cover the market could stage a spectacular rally.

Recent market strength may be partly technical, due to high short interest and decline in security loans. However, strength in the past few days seems too impressive to be just technical. While fundamental news has been mixed, one important factor may be the spread between dividend yields on standard stocks and short-term money rates; this spread is now over 3%. In the past, this situation has often brought a stock rally several months before business improvement.

Examples of gold-standard countries such as US, Britain, France, Germany, vs. non-gold-standard Spain, Argentina, Brazil, Japan, give a “striking illustration of the manner in which a free gold market maintains stability in a country's currency.”

Broad Street Gossip: A scarcity of oil was predicted a few years ago; now the world seems to have too much, with estimates the US supply is enough for several hundred years. Shortages were also predicted for copper, tin, and iron ore; little is heard about these now. "It is a big and resourceful country, and the present generation has little to worry about as far as early exhaustion of natural resources is concerned." The Old Timer: "You can always depend upon it that you will find a larger short interest when stocks are scraping the bottom than when they are hitting new highs."

Dominick & Dominick note world coal production has barely increased since 1913 due to increasing competition from other sources of energy; 1929 coal output was 1.591B tons, up 10% from 1913, while in the same period consumption of fuel oil was up 635%, natural gas 230% and hydroelectric output 300%; these are now equivalent to 170M tons of coal, 90M, and 117M, respectively. Competition between coal producers in different areas has caused depression in some.

A. Dickinson, Indiana Limestone pres., sees end of building slump assured by need for new building; reports residential is showing strength after a long slow period.

E. Weir, Nat'l Steel chair., condemns wage cuts as delaying recovery; believes worst of depression now past; “modern thought ... is that the standard of wages determines the standard of living.”

Motor industry seen poised for sharp gain. In contrast to the 1921 depression, car manufacturers and finance cos. are in strong financial condition. Weak link is dealer, currently short of credit; as a result, showroom inventory is extremely low; this is thought to be slowing retail sales, setting up a sharp rebound later.

Economic news and individual company reports:

State Banking Dept. announces Bank of US depositors won't be paid for at least four months; those in need can use Clearing House offer to borrow up to 50% of their deposits. M. Steuer investigation continues probing bank's loans to affiliates.

Fed. Reserve member banks report for week ended Feb. 4 shows continued increases in investments, both US govt. securities and other, and declines in loans, both commercial and on securities. Since start of year, total loans are down $962M to $15.668M, while investments are up $1.511B to $7.014B.

43 representative rails reported 1930 gross revenues down 14.8% from preceding 4-year average; net operating income was down 24.3%. Smallest drop in net was 6.0% by New England rails; largest drop was Southern rails, 33.8%. Only one rail had increase in gross (Bangor & Aroostook); only 4 had increase in net.

Capper bill under consideration to limit imports of foreign oil may be blocked by agreement made by US and 27 other nations not to embargo imports.

Canadian govt. ordinary revenue in 10 mos. to Jan. 31 was $303.5M vs. $375.5M prev. year; expenditures $309.5M vs. $288.9M; net debt $2.205B vs. $2.160B on Jan. 31, 1930.

Suez Canal income in 1930 was 1.044B francs vs. 1.123B in 1929.

Bolivia notifies committee of NY bankers that interest payment due Mar. 1 must be postponed.

Argentine manufacturers petition govt. to prohibit imports of all Soviet products as measure against current dumping of all kinds of goods. Argentine govt. will attempt to free farmers from control of foreign grain export firms by marketing wheat directly to European millers.

Western Canadian interests ask establishment of central bank due to continued banking consolidation concentrating credit in fewer hands.

NY State Industrial Commissioner Frances Perkins reports decrease of 2.5% in NY factory employment in Jan., lowering index to 75.5 (100 = avg. of 1927-29); decrease was larger than usual seasonal drop.

Goodyear 1930 net was $9.9M after $5M inventory writeoff, vs. $18.6M in 1929; reports 1931 starting slowly but anticipate gradual improvement over year.

Pennsylvania RR balance sheet in good shape in spite of earnings slump; likely to go through 1931 without new financing.

Companies reporting decent earnings: General Amer. Tank Car, US Tobacco, Mathieson Alkali.


City Lights - Welcome return to the screen by "Charlie Chaplin, king of motion picture comedians. ... Once again the beloved tramp may be seen expressing the heights of comedy and pathos in matchless pantomime ... The actors' genius is revealed in its most amazing magnitude in a tragic climax of surpassing beauty." While talkies are here to stay, it's doubtful whether the results would have been as good if Mr. Chaplin used dialogue; this might have interfered with the fantastic element of his comedy, which allows the audience an escape from earthly troubles. Film is again proof of the value of one man writing, directing, producing and cutting his own film, though such ability is rare.

Inspiration, starring Greta Garbo - "Belongs definitely to the class of movie scripts hastily thrown together to provide a 'star' with a vehicle until a suitable one can be conceived." The cost of "permitting the glamor of genius which surrounds an actress of Miss Garbo's magnitude to be dissipated, through exhibiting her in a mediocre vehicle ... seems to be relegated to secondary importance in Hollywood."


"'If you go first, dear, you will wait for me on the other shore, won't you?' questioned the fond wife wistfully. 'I suppose so,' replied the husband, with a sigh. 'I never went anywhere yet without having to wait for you.'"

A Kansas cattleman who had mortgaged his livestock to the local bank was called in and told the note was due to be paid the next day. "Were you ever in the cattle business?" asked the cattleman. "No," answered the banker. "Well, you are now," said the cattleman, and walked out.

No comments:

Post a Comment