March 13, 2010

Friday, March 13, 1931: Dow 180.14 -1.77 (1.0%)

Assorted historical stuff:

Sen. La Follette (R, Wis.) speaks to progressive conference; declares administration has lacked "either the will or the courage" to meet a crisis in which 25M people have suffered privation in the midst of plenty. Calls for remedial program that independents with balance of power in next Congress can support. Various remedies proposed in roundtable discussion, including shorter working hours and wider distribution of wealth. AFL Pres. Green says industry should generally be required to provide continuous employment for workers; opposes recognition of Soviet Russia.

Editorial: The progressive conference resembles "the confusion of tongues at the Tower of Babel," though there does seem to be some agreement for both less and more tariff (less for industry and more for agriculture), and that the Farm Board is a failure. If the conference is to be of use in expressing the public will, it must reconcile conflicts and "give form and coherence to the loose hodge podge of grievances that now surrounds the progressive movement."

Washington report: Progressive conference is a shrewd political tactic. Timed perfectly for maximum news exposure after Congress adjourned, its purpose is to excite public opinion, interfere with adoption of more conservative programs by both parties for 1932, and avoid breakup of the Democratic-Insurgent alliance; since this would leave them no place to go but a third party. Insurgents are facing alarming prospect of losing influence since Democrats may control the next Congress and therefore may no longer need them as allies. Several Congressional inquiries will be carried on during the nine-month recess, including the Wagner unemployment insurance inquiry, the Glass financial inquiry and some smaller investigations. Farm Board appears to be putting less emphasis on price stabilization and more on cooperative marketing. This is understandable in view of stabilization's failure, though Board officials still defend it as preventing far more serious financial disaster throughout the wheat belt.

Another editorial by T. Woodlock questioning govt. sponsorship of inland waterways.

J. Stevens, Panama Canal chief engineer, says building canal across Nicaragua unnecessary and could cost as much as $1B rather than estimated $750M.

Final link completed in railway spanning Southern part of Africa from Atlantic to Indian Oceans.

Population of England and Wales rose 194,033 in 1930; death rate was lowest on record.

J. Foltz of Westinghouse Electric recently demonstrated a 60 pound "electric ear" the size of a suitcase, designed to separate the different frequencies in complex noises. Possible applications include silencing noises by producing canceling sound waves, and detection of mechanical faults in airplanes.

New coast to coast air express service now being used to transport some urgent deliveries of food, including saddle of English mutton for Dr. A. Einstein during his recent visit to California, and fresh fruit and nuts delivered to San Francisco for a wedding.

NY Board of Trade unanimously asks for "complete immediate legislative investigation" of NY City affairs, with aim of "exonerating the innocent majority now hopelessly confused with the guilty minority."

Gov. Roosevelt signs unemployment bill allowing most corporations to contribute to charities; public utilities were barred on grounds they “might use the privilege to sway public sentiment to their advantage.”

NY Telephone directory has grown from a card listing 252 names half a century ago to 2.623M today; 600,000 new subscribers have been added in the last 5 years. This compares with about 370,000 telephones in all of Russia.

Digging of subway tube under East River between Manhattan and Brooklyn has started from the Brooklyn side.

A fashionable Fifth Avenue shop is rumored to have a permanently employed "Whipping Boy." His job is to appear before the manager when a customer has an insoluble complaint, be roundly abused for his stupid error, offer a lame excuse, get fired, go across the street for a cup of coffee, and return for his next dose.

Market commentary:

Market wrap: Bears more aggressive; rails came under heavy selling, and weakness spread to main body of stocks; US Steel came in for particular bear pressure, and late in the day was finally forced below last week's resistance level of 143 1/2, bringing more selling across the list. However, though market was irregular in final hour, wide-open break anticipated by bears failed to materialize. Bonds active, mostly reactionary; US govts. gained; foreign irregular; corp. mostly down, particular weakness in rails and speculative. Commodities mixed; grains mixed in narrow range; cotton rallied after early weakness to close up substantially. Copper prices stiffened slightly, with no offerings below 10 1/4 cents.

Conservative observers cautious, advise staying on sidelines until "definite resistance level has been established." Leading brokers report reduced public participation; customers tending to liquidate long positions and stay on sidelines.

Weak spots included American International on dividend omission, and Westinghouse on speculation of dividend cut. Rails continued to reflect dividend uncertainty, though some rallying developed at times. Utilities were strong early.

Bears encouraged by NY Central and other dividend cuts as reflecting pessimism of important interests on near-term business outlook.

Steel price outlook uncertain. Industry leaders reportedly had planned a price advance; what caused change in plans hasn't been learned. It's hoped leaders can establish current prices firmly and eliminate price "shading" (concessions).

Optimistic interpretation of rail dividend cuts is that it may be laying groundwork for gaining control of expenses; rails logically couldn't start cutting wages while still paying dividends at boom levels.

Considerable switching reported from rail shares, some of it going into leading utilities. Some optimism on mail order shares due to drought relieving weather in Indiana-Illinois region, and estimate of $26M in veterans bonus money to rural sections in those states. Krueger & Toll 1930 earnings expected to be close to 1929 level; some quarters contend management could report a much better showing, but is retaining undistributed earnings in subsidiaries to reduce taxes.

M. Traylor argues against fears of centralized control of US industry by sponsors of fixed investment trusts [similar to ETF's].

National Bond & Share, a managed trust [similar to mutual fund] run by Dominick & Dominick, did an amazing job of preserving value, only declining 5.65% in the two years ended Feb. 28. It's selling at 37, a discount of over 21% from net asset value.

Broad Street Gossip: Number of "blue chip" stocks (that traded over $200) rose from 16 in 1926, to peak of 94 in 1929, then fell to 37 in 1930. On Mar. 9, only 3 NYSE stocks traded over 200, though 6 more with ask prices over 200 didn't trade. Short interest has increased during the week, with some big professionals putting out large lines. Dividend news has been bad, but stocks of companies forced to cut dividends haven't been doing as badly as expected, because the actions mostly were anticipated. "A year from now, if business goes the way the majority think it will, many corporations will be restoring dividends." A well-known bank president's advice on investing: stick to good stocks; trade on values; study annual and quarterly reports; read a newspaper; look at earnings trend; figure out book value, cash position, inventory position, and other important items; look over list of directors and see if management is good; study industry prospects; stick to industries that are "well stabilized, ... sufficiently well organized to limit production to consumptive requirements."

Long-term wheat outlook poor; with US and Canada carryover of 500M bushels and likely surplus this year of 500M, there would be 1B available for export, while total world import requirements seldom exceed 800M. Corn, on the other hand, is likely to have an actual shortage of about 245M bushels through Nov. 1.

P. Crowley, NY Central pres., sees signs of improvement in some spots including auto and steel businesses; car loading increase in March over Feb. is hopeful.

C. Hayden of Hayden, Stone, at Boston Stock Exchange dinner, says: “we are on eve of one of the greatest periods of prosperity this nation has ever known.”

Economic news and individual company reports:

American International omits dividend. Bank of America cuts annual dividend rate to $3 from $4.50. Pennsylvania RR denies reports of dividend action, says board hasn't yet discussed the matter. Baltimore & Ohio subject of dividend cut speculation; yield is now over 9%.

Commerce Dept. reports no disturbing changes in retail credit in second half 1930 despite depression; proportion of business done on credit was about the same as in 1929; payments remained satisfactory, with bad debt losses on installment accounts 2.99% vs. 2.5% and on open credit accounts 0.6% vs. 0.5%.

Fed. Reserve reports money in circulation Mar. 11 down $21M to $4.554B, total Reserve Bank credit outstanding up $34M to $942M. Member banks in NY City report brokers' loans up $29M to $1.819B; loans on securities to non-brokers up $2M to $1.846B, first increase since start of year.

Arkansas business leaders report drought-breaking rains and improvement in banking conditions have put Arkansas "back on her feet." Red Cross reports sharp decrease in number of calls for relief since March 1.

Standard of Calif. cuts gasoline a further 1 cent/gallon; other Calif. majors meet cut. Standard of NJ cuts gasoline 1 cent/gallon to match Atlantic Refining cut. Canadian gasoline cut for second time in a month. Interior Sec. Wilbur reports all large oil importing interests have been willing to cooperate in reaching oil agreement; negotiations continue. Okla. Gov. Murray sends message to legislature approving oil production curtailment.

Scrap market uncertain; prices fairly steady though one market shows decline; buying quiet, and little likelihood of substantial advance seen.

French govt. announced deficit for current fiscal year will be 2B francs; suggested higher taxes have drawn widespread protests demanding spending cuts. Bank of France reported another record in gold holdings at 56.1B francs, up 13.3B from a year ago.

Brazil places embargo on all imports of manufacturing machinery for 3 years due to overproduction in textile industries.

Gov. Roosevelt says bill on St. Lawrence power development will be ready next week; proposal likely to follow commission majority in recommending public power plant with private distribution; however, may include additional safeguards.

The more controversial banking reform bills proposed by NY banking superintendent J. Broderick have been killed in committee. One State Assemblyman has proposed an investigation of the NY State Banking Dept. in connection with the Bank of US and other failures.

Upcoming NY State bond sale expected to go well due to high safety; NY State net debt is $287.1M, or about 1% of total assessed valuation.

Coral Gables, Fla. Bondholders Protective Committee asks for deposit of bonds so they can negotiate settlement plan with legislature; after 60-day session starting in April, legislature won't meet again until April 1933.

Largest NY City taxpayers are NY Central, $9.1M; NY Edison group $8.5M; NY Telephone $6.2M.

J. Young, convention bureau GM, reports NY City held 1,096 exhibitions in 1930, with about 750,000 out-of-town visitors spending $80M.

American Tobacco shows amazing sales performance over past few years; cigarettes sold increased from 31.3B in 1928, to 40.6B in 1929, to 45.5B in 1930, and now account for 38.1% of total US production; 1930 net was $8.56/share vs. $5.76 in 1929.

Stories on favorable prospects for Public Service of NJ and Engineers Public Service (public utilities).

Companies reporting decent earnings: Warren Foundry & Pipe, W.T. Grant (chain stores), Lambert (toiletries and medicinals), Industrial Rayon, Sweets Co. of America.


Ten Cents a Dance - Dramatization of dance hall hostesses suggested by the popular song. Barbara, played by Barbara Stanwyck, marries a weak, criminally inclined young business man played by Monroe Owsley. This is the second film in a month in which the capable Oswley plays "an irascible, nervous, over-ambitious fellow who loses in the stock market, steals money to cover up his losses, and narrowly escapes punishment in the end through the kindly intervention of the woman he has wronged." Film ends happily when Barbara is proposed to by her former husband's wealthy employer; however, it rates considerably below the song in entertainment value.

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