February 18, 2010

Wednesday, February 18, 1931: Dow 179.55 -3.33 (1.8%)

Assorted historical stuff:

Editorial: Congress appears delusional about current state of the nation's finances; Rep. Bacharach, author of the veterans' bonus compromise, says it won't require a bond issue, while Sen. Harrison said it won't require raising taxes. Simple calculations show appropriations for next fiscal year more than $800M above revenues for the current year, while revenues are likely to be down; therefore Congress must either raise revenues about $1B or Treasury must increase borrowing by that amount. Administration remains opposed to smaller veteran's bonus passed by House, but Congress likely to override veto. Senate debate on liberalizing the bill may still cause complications, including outright failure of bill; in particular, Pres. Hoover may have chance at pocket veto if it's delayed long enough.

Prohibition debate in Congress has picked up again, probably due to impending Democratic Nat'l Committee meeting on Mar. 5.

British Chancellor Snowden speaks at Labor Party meeting, defends “economy speech”; says budget deficit will be $200M-$250M; reportedly welcomes anyone who thinks they could do a better job to try it; left wing of party said planning campaign to oust Snowden. Conservative leader Baldwin advocates British protective tariff to preserve employment and wages.

Judge P. Linebarger, legal adviser to Chinese Nationalist govt., reportedly authorized to open negotiations with US for loan of 1B ounces of silver.

Editorial by T. Woodlock: Coastal shippers' requests to the ICC for rulings favoring them over rails are not justified economically, but are at least understandable considering coastal shippers pay their own way, including maintenance of the Panama Canal, while inland waterway shipping gets a free ride off the taxpayer. V. Cutter, United Fruit pres., hits severity of govt. treatment of rails while subsidizing competitors.

Editorial: Farm Board vice-chair Stone's warning to farmers to reduce wheat acreage or face a bad situation sound like an alibi being prepared in advance for the failure of the Board's misguided efforts to fix wheat prices. Recall that in Oct. 1929, the Board said it believed wheat prices to be too low based on supply and demand; the price then was about $1.23/bushel; the Board will end the current season with 130M bushels on its hands and July wheat at 68 cents.

NY State Senate Majority Leader Knight attacks Gov. Roosevelt's budget as dishonest, balancing only on paper because of "grossly overestimated revenues," and raising salaries of "favored employees" while denying relief to thousands of unemployed.

Goodyear plans daily dirigible service to NY City starting about April 15; has arranged to lease airship dock in Jackson Heights, Queens.

Waldorf Astoria opening scheduled for Oct. 1; over 50% of store and office space already rented.

Story by H. Alloway: Bringing natural gas into Chicago by pipeline, being considered as a new engineering project now, was first advocated by E. Benedict about 40 years ago. Main obstacle as he described it: "You think getting money is hard? You ought to try getting Chicago aldermen."

Postmaster Gen. Brown expected to require air mail service operators to buy planes capable of 150mph to get continued govt. subsidies. Pres. Hoover asks Congress to study ways of increasing Postal revenues due to expenses of promoting aviation and merchant marine.

Budapest Radio Co. proposes building 150,000 watt radio station, most powerful in Europe, at cost of $4M.

The US automat, "with all its rush and hurry," has finally conquered Paris, where eating has for centuries been a leisurely affair, "with every diner a gourmet." Automats have sprung up around Paris as if by magic. Largest is on Boulevard des Italiens; that one is open from noon until two in the morning, and has a dance floor with a live orchestra at one end. Possibly the best feature is that glasses of wine and beer spout out at the click of a franc.

Market commentary:

Market wrap: Stocks continued up in the morning, with majors matching 1931 highs and "sensational uprushes" in trading favorites. Resistance developed in afternoon; bears then launched aggressive drives; majors and trading favorites dropped quickly, more than giving up earlier gains, while the general list became weak and very irregular. Bond trading dull; US govts. down slightly; foreign steady; corp. high grade mixed, speculative and convertibles fluctuate with stocks. Commodities firm; grains and cotton up moderately.

Bears said to have been encouraged in yesterday's session by failure of US Steel and American Can to break through previous 1931 highs.

Opinion differed on immediate outlook for stocks. Pessimists cited the general opinion that the recent gain in stocks had outpaced slight improvement in business; optimists cited the sharp gain to above the recent trading range as evidence of a strong technical position, and also believed the sweeping gains would bring influential buying into stocks and improve general business confidence. Many test periods are believed ahead for the market; "opposition always develops after the market has rallied from a low point." Market observers advise waiting for things to settle down; if stocks are then able to "resume their upturn in an orderly fashion," this would be bullish.

Broad Street Gossip: A few opinions from recent market letters: “We believe the market is destined for lower levels”; “It looks as though the market was headed for higher prices”; “We advise selling on the rallies”; “We advise buying on the breaks”; “The news looks better”; “We advise caution.”

E. Murphy, publisher of Minneapolis Tribune and "practical farmer," denies general farm depression, says only the single-crop farmer is in trouble; "Whatever politicians or professional gloom spreaders tell you, the time-tried, cow-sow-hen-steer type of farming ... is far from being deflated ..."; "good farming with good livestock" is traveling fast along "the cow-paths to prosperity."

C.F. Childs & Co. say large bonus bond issue could, on balance, benefit banks due to higher interest rates.

C. Jaffray, Minneapolis St. Paul Rwy. pres.: "Business as a whole is better than a few months ago, and the outlook is improving. ... Bank failures, of course, have had a serious effect upon general business, but this is being gradually overcome."

J. McHugh, Chase Nat'l exec. committee chair., says "root of our trouble lies in an old, old practice. Plainly stated, we have let debt mount too fast ... quality of credit deteriorates when credit is excessive." However, while some current trouble was unavoidable, much is due to "paralyzing fear, unreasonable and partly unreasoning"; enthusiasm is overdone in booms, while fear is exaggerated in adverse times; when fear gives way to reason, "business will speedily become very substantially better"; US and the world won't remain for long on a level of business as low as the winter of 1930-31.

Comparison of business sentiment today to that of a year ago is interesting. A year ago, most people didn't understand the scope of economic upheaval and anticipated a quick return to prosperity; today, "conditions are realized and the future is regarded soberly." Rather than a strong recovery, the best that's expected by responsible observers is gradual improvement. "Nevertheless, the theory is becoming general that the worst phase of the depression has been passed ..."

Economic news and individual company reports:

Bank of US hearing topics included affairs of an affiliate, which according to investigator M. Steuer had $49M of securities on June 30 that entirely disappeared in less than 6 months. Also testified to was an appearance by pres. Marcus before bank directors in which he described a fall 1929 banking department examination as a triumph for the bank; Mr. Steuer produced the report of the examination, which contained about 60 pages of criticism of bank activities.

Rail freight loadings for week ended Feb. 7 were 719,053 cars, down 228 from prev. week, down 18.8% from 1930 week, and down 24.8% from 1929.

Steel production in week ended Monday was at 50.5% vs. 49.5% prev. week, 47% two weeks ago, 81% in 1930, and 88% in 1929; US Steel declined 1% while independents rose 2%.

Crude oil production in week ended Feb. 14 was 2.127M barrels/day, up 11,200 from prev. week but down 525,250 from a year ago.

Feb. auto production is expected to increase substantially from Jan. based on increased schedules at several manufacturers including Ford; industry output of 200,000 - 280,000 units is likely vs. 184,000 in Jan. and 346,000 a year ago.

US Jan. exports $250M vs. $411.3M in 1929 and lowest since 1914; imports $183M vs. $311.0M and lowest since 1921; trade surplus in 7 months ending Jan. $509.9M vs. $605.5M. Commerce Dept. emphasized declines in volume were not as drastic.

New life insurance production in Jan. was $888.3M, down 10.7% from 1930.

World gold production in 1930 was about 20.4M ounces vs. 19.7M in 1929, and highest since 1917; increase attributed to deflation lowering production costs.

Standard Oil of Indiana and Pan Amer. Petroleum say opposed to oil embargo, but would welcome and cooperate with "fair, impartial" investigation of oil industry (some House members advocating the embargo on behalf of small producers have threatened an investigation).

F. Garrison, prominent mining engineer, says life of South African Witwatersrand gold field depends on improvements in mining low-grade ore; although some of the best mines are exhausted, believes current estimates of fifteen years are too pessimistic. Cites Village Deep mine, at 7,700 feet, as deepest mine in history.

German retail sales of cars in 1930 were 79,140 units, down 16% from 1929.

Average milk price at the farm in Jan. was $2.04/hundred pounds, lowest in 16 years.

Chrysler 1930 net $0.05/share vs. $4.94 in 1929.

Companies reporting decent earnings: Baldwin Locomotive, Goldblatt Bros. (department stores), Midvale (castings, tool steel), Lawrence Portland Cement.

At the galleries:

Yamanaka Galleries: "interesting and splendid" exhibit of Chinese portraiture, mostly Ming and Sun paintings taken from albums, scrolls, and documents. The recently opened Empire State Building has two furnished example corporate office suites on the 6th floor. One has a boardroom in the "early Italian manner, with aged wood beam effect of plaster and carved wall corbel supports ... light fixtures are of hammered iron, and draperies of antique green satin ... chairs are in the Italian Renaissance style ... the library is in the Georgian manner, with a beautiful fireplace ... No atmosphere of office or business here - one might imagine being in a well appointed home."


Appearing at the Palace - Beatrice Lillie sings a few comic songs, pausing now and then "to address a side remark to the audience or indulge in antics obviously unbecoming a lady concert singer"; held over for a second week are "Dr. Rockwell, the quack medico with the rapid fire lecture on health, together with the dancing Merediths, whom he heckles from a balcony box."

Interesting history of NY theatre demographics. Audience was largely adult going back to Kean and continuing to Booth, until movies came around. Movies became very popular with children in “the rollicking days of the custard pie scenario”; “legitimate theatre” then began drawing a younger crowd; “the glamorous world of the playhouse, hitherto reserved for maturity and wisdom or for maturity and folly, was invaded by the child.”

Poem by F. Caverly:

... A thousand dollars send by check, your margin with us to protect.
With faith in Steel I held the stock; more margin sent from cash in sock.
A 10 point loss I took in Steel, again to try the gambling wheel.
Bought Woolworth, Can and Brothers Burns; To beat the game one never learns ...
As traders will, bought Radio, but picked it high and sold it low ...
I tried again; good rails I bought; they, too, went down and havoc wrought ...
The fool I was! I stayed and played; Put up more cash - more tips I played.
But now I'm wise. Of stocks bereft, all profits gone - no margin left;
Without a penny to my name, I'm off for life that market game."

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