March 20, 2010

Friday, March 20, 1931: Dow 186.56 +2.61 (1.4%)

Assorted historical stuff:

Despite "apparent urgent wish" of Gov. Roosevelt, legislature seen unlikely to revive Broderick proposals for banking reforms; most legislative leaders appear to oppose any radical changes in banking laws at present. Gov. Roosevelt is expected to send the legislature a message on his ideas for banking "remedial legislation."

Washington report: Deficit for this year will be financed, with no thought of raising taxes due to economic conditions. Future deficits are another matter; continuing to borrow money would increase interest charges; “such a process could not proceed very far.” Aside from tax increase, possible targets for large reductions in the deficit include the sinking fund, postal deficit, and Farm Board operations; other possible spending cuts would be relatively small. Progressives may need a substitute for the farm debenture idea; it's understood foreign govts. have made known their strong objections and threatened reprisals.

Editorial: J. Farrell, US Steel pres. recently said: "There are indications that the world-wide depression in business is subsiding and that the upturn is beginning." His statement is "welcome as the notes of the wood thrush announcing that ... the dawn is appearing." He also calls for "thorough examination of economic conditions" and cooperation on international trade. It's indeed time for those things, as a look at the low Feb. trade figures shows. However, while economic conditions account for a great deal of the decline, some may be due to political factors; "whatever may be the causes, they should be made known in order to seek proper remedies."

Editorial: Urgent calls for an unemployment insurance law in NY to address the current crisis are misguided, as seen by opposition of both the state Federation of Labor and the Nat'l Assoc. of Manufacturers. Insurance won't help the already unemployed; "there is no human possibility of making insurance retroactive." As Gov. Roosevelt has stated, "It is of the utmost importance that unemployment insurance, like the other forms, ... be based on sound actuarial tables. This is the fundamental which will prevent a mere dole or gift on the part of either private agencies or governments themselves."

Yet another editorial smackdown between T. Woodlock and letter-writer E. McCue concerning extremely complex situation in the beleaguered anthracite (hard coal) industry. One interesting point concerns Mr. McCue's criticism of the industry's attempts to market their "clean coal": "All the money spent in trying to impress the buyers with the clean coal idea is wasted. What the masses of people want to know is 'how much.'" [I think clean here refers to amount of dust from handling.]

A. Swayne, GM VP, says trucks and buses already pay a large and adequate share of expenses for highways; calls on rails to display more initiative in coordinating highway and rail service. Says motor industry favors Federal regulation of interstate bus traffic but is strongly opposed to Federal truck regulation.

Sec. of State Stimson reports visas issued in Feb. for immigrating to the US were 10% of the normal quota; Congress failed to pass a bill to cut the quota 90%, but the State Dept. has effected the reduction by administrative means.

US Red Cross attains goal of $10M for drought relief fund after 63 day campaign.

Dr. P Arcaya, Venezuelan Ambassador, cites advantages his country offers to US capital, outlining natural resources and denying any possibility of revolution.

Dr. G. Stromberg of the Carnegie Institute proposed to a gathering of eminent astronomers that while the heavens and earth were made in six days, these were not 24-hour days but "galactic" days, taking about 250M years each. Since then we have passed through six more galactic days, making 3B years since creation.

Col. Starrett predicts buildings will grow much larger, covering entire city blocks, but not excessively higher, due to cost and inconvenience.

French Academy of Medicine opposes use of baking powder and other chemicals in making bread; says impossible to determine if such chemicals are harmful.

New Mexico has placed in service five ingenious machines that travel over roads at about 10 mph equipped with powerful electromagnets to gather in nails, tacks, bolts, etc. A year's operation removed 66 tons of metal from the highways and saved drivers about $270,000 in tire repairs.

Market commentary:

Market wrap: Stocks opened higher on accumulated buy orders; shorts "showed less courage than in the past" and were urgently buying to cover in the morning; general list advanced under leadership of steel shares; brokers also reported increased public buying. Advance faltered later in the day as rails retreated; however, general market showed "good undertone" and setbacks in leading utilities and industrials were limited. Bonds moderately active; US govts. rally; foreign again active and strong; corp. generally higher. Commodities quiet; grains down slightly; cotton barely changed. Silver reacted again, down 5/8 cent to 29 3/4.

Conservative observers still favor sidelines, but admit continued advance would be bullish signal; most interests inclined to wait "three days or so."

Strong spots included US Steel, Bethlehem, GM, entertainment shares, Macy, Sears, Ward, Lambert. Advances in utilities were relatively moderate. Crucible Steel weak after unexpectedly omitting dividend.

Feb. business statistics give concrete evidence of slow improvement, particularly in employment, steel, and residential building. Financial community has been skeptical on indications of business revival due to unfortunate early 1930 experience. However, this attitude is giving way to greater confidence; steel improvement has persisted in the past weeks as opposed to 1930, when downturn began in late Feb. While first quarter earnings will undoubtedly be poor, it seems likely their market influence will be offset by improving business trends.

A number of professionals and floor traders are now active in automotive shares on the belief that, as they were the first to decline before the general market broke in 1929, they may be first to reflect a general uptrend. A few brokers are favoring food shares such as General Foods and Borden, since they can buy raw materials at lower prices and have well developed distribution organizations. Considerable interest in Sears-Roebuck prospects for this month; a good showing is anticipated due to Easter shopping and better Midwest crop prospects.

Strong buying in GM, said to be by interests identified with management, reflects improved outlook. Sales in Q1 will be about 20% below 1930, vs. 35% decline for the industry; March production is about 15% above Feb. vs. an 8% gain last year, while dealer inventories are low; further gains expected in Q2.

Brokers report considerable switching by the public from stocks with suspect dividends to those whose prospects have held up better, indicating public is carefully watching fundamentals; this has caused part of the selling in rails.

F.S. Smithers note two effects that aggravated slide in investment trusts [similar to mutual funds] after the 1929 break: leverage (caused by senior capital with first claim on fund assets), and switch from trading at premium of asset value to trading at discount. However, these could also increase gains on a market advance.

Frazier, Jelke report most popular stocks in portfolios of 100 managed and 50 fixed investment trusts were AT&T, Consolidated Gas, US Steel, Standard of NJ, GE, NY Central, and Union Carbide; believe these “portfolios invaluable as a guide to intelligent commitments.”

Investors who bought stocks late last year seen unlikely to sell on rallies; "considerable accumulation has taken place for interests who intend to hold the shares for the next sustained bull market"; rallies since haven't induced selling from these holders, which has reduced floating supply in many high-grade issues.

Broad Street Gossip: "Close students of economic conditions" will be very surprised if things don't improve over the next 6 months. The year starts with probably the largest number ever of big contracts, in hand and announced; rails, big industrials, and the Federal and local govts. have announced construction programs running into the billions. "Big interests who have accumulated millions because of their faith in the country and ability to see into the future have not been discouraged ... They intend to build and construct on a larger scale than ever before." What some call a nervous market may be jangling more nerves for the bears than the bulls; new highs for the year have often outnumbered new lows, a reversal from the late-1930 market. Manufacturers are concentrating mightily on reducing costs due to lower earnings and desire to maintain wages at current levels.

Economic news and individual company reports:

Trial of 5 Bank of US officers set for Mar. 30; indicted are: Bernard Marcus, Sol Singer, Isador Kresel, Henry Pollock, and Herbert Singer.

Eastern Regional Savings Conference opens. W. Bennett, Emigrant Industrial Savings pres., says savings banks potential stabilizers of business, calls for advertising campaign aimed at “man on the street.” W. Evans, Boston Five Cents Savings pres., cautions against depending on “legal” status of bonds to buy, notes that during 1930, municipals in Ariz., Colo., Fla., Mass., Mo., NJ, NY, N. Carolina, Tenn., and Texas defaulted.

Florida Citizens' finance committee recommends general sales tax as emergency measure, consideration of refinancing $650M of outstanding local bonds by a long-term state bond issue.

Republic Steel and Youngstown Sheet & Tube match Carnegie Steel price advance.

Fed. Reserve reports money in circulation Mar. 18 up $8M to $4.562B, total Reserve Bank credit outstanding down $35M to $907M. Member banks in NY City report brokers' loans up $94M to $1.913B; loans on securities to non-brokers unchanged at $1.846B.

Oklahoma Corp. Commission continues oil production curtailment indefinitely, pending oil conferences in Texas and Washington. East Texas production rose to 95,000 barrels/day in week of Mar. 19; potential production may reach 400,000 barrels/day by the time hearing on allowable production is held Mar. 24.

Agriculture Dept. reports US meat production and consumption was lowest since 1922. Farm Board reports prices of all classes of meat now below production costs; recommends "producers consider more carefully the regulation of production"; notes difference between wholesale and retail prices has widened substantially in recent years, suggests comprehensive study of ways to improve retail distribution.

Farm equipment shipments in Q1 will be only 20%-25% below the "phenomenally large" Q1 1930. However, the outlook is slow; large Soviet orders will be completed this month, and production not including those orders is down about 40% this year; dealer inventories are high and farm buying power lower; large manufacturers are trying to compensate by offering more liberal credit to farmers.

Former Farm Board chair. Legge becomes pres. of Internat'l Harvester.

Sugar prices have recently rallied on developments favorable to the Chadbourne stabilization plan, particularly recent law enacted by Dutch Indian govt. to restrict production in Java (second-largest exporter); raw sugar is up to 1.29 cents/pound.

M. Gandhi and Indian mill owners plan to form company to help dispose in other countries of foreign cloth held in India.

Bank of England able to increase gold holdings 1.097M pounds sterling in week, bringing total to 142.826M, due to recent rise in sterling vs. francs; foreign exchange circles optimistic the Bank can replenish holdings over the next several weeks. Bank had to reduce credit outstanding 2.110M to maintain bill rates.

Feb. silver production down sharply; US production 3.274M ounces vs. 3.480M in Jan. and 5.161M in Feb. 1930; attributed to low prices.

US Embassy in Buenos Aires reports trade with Argentina in Jan. down over 60% from 1930.

Smuggling of diamonds into the US has been greatly reduced since the new tariff law made polished diamonds duty-free.

Companies reporting decent earnings: Central Illinois Light, Amerada (oil), Arundel (sand and gravel), Blauner's (department store).

Movies with suggestive titles:

The Hot Heiress - first movie by musical comedy writing team of Fields, Rogers, and Hart. Workman meets beautiful heiress when a rivet he fails to catch while working on a skyscraper flies through her window and sets her apartment on fire; "bare and silly."

Lonely Wives - Attempt at film farce; vaudeville impersonator takes place of a husband one night so the husband can go out and relieve the loneliness of another woman who, amusingly enough, turns out to be the impersonator's wife; "unusually asinine."


Testimony of trackwalker after head-on train collision: 'You say at 10 o'clock that night you were walking up toward Seven Mile crossing, and you saw No. 8 coming down the track at 60 miles an hour?' 'Yah.' 'And you looked behind you and saw No. 5 coming up the track at 60 miles an hour?' 'Yah.' 'Well, what did you do then?' 'I got off the track.' 'Well, but then what did you do?' 'Well, I said to myself, dat's one hell of a way to run a railroad.'

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