March 6, 2010

Friday, March 6, 1931: Dow 184.69 +3.73 (2.1%)

Assorted historical stuff:

"As the skirts go, so goes the market." Prof. B. Brownell of Northwestern Univ. observed to his students that "when skirts grow longer, an economic depression is approaching. And conversely, when skirts grow shorter, better times are coming." As example, cites "extremely short" skirts of early 1929, when boom was at its height, and "long-skirt vogue" that started in the fall, immediately followed by the crash. Prof. Brownell said he could explain this phenomenon, but chose not to "because he wanted students 'to do a little brainwork themselves.'"

Editorial: Business men may damn the 71st Congress with faint praise. It did nothing to help business recover and indeed set up two or three serious drags on that recovery, such as the veterans' bonus, but things could have been much worse. Now that it's gone, for the next 9 months "the country knows rather definitely the load it must carry on the upgrade to better times; it can and will adapt itself thereto." Detroit auto dealers report stimulated business due to veterans' bonus.

Terms of Indian truce include release of political prisoners and discontinuance of boycott as political weapon, though nonviolent picketing against foreign goods may continue. All-India Congress committee signs truce orders in spite of reported dissension from members who believed Gandhi had “sold out to the British.” Local banking circles believe agreement will increase business in interior of India, benefitting silver and cotton.

Washington report: Pres. Hoover rode down Pennsylvania Ave. to be inaugurated Mar. 4, 1929, under a steady downpour that turned out to be an omen. He rode down that route again on Mar. 4, 1931 to be present at the adjournment of Congress with the sun coming out; it remains to be seen if that was a better omen. Possible Democratic candidates in 1932 include three New Yorkers: Gov. Roosevelt, the popular choice but possibly too liberal for party leaders; Owen Young, the leaders' choice but avowedly not a candidate; and Alfred E. Smith, who retains a loyal following. J. Raskob speaks to Democratic Nat'l Committee; proposes Constitutional Amendment allowing states to produce and sell liquor within their own borders; warns against attacks on business, particularly utilities; proposes plan to aid mergers by allowing FTC to grant antitrust immunity. Interior Sec. Wilbur considering national oil industry conference. Pres. Hoover plans tour of 20 or more states sometime in June.

Sen. Smoot, Senate Finance Committee chair., says there will be no tax increase in spite of anticipated $500M deficit; sees signs of business improvement, which should lead to higher revenues.

Veterans' organizations urge universal drafting of men and industry in wartime “to take the profit out of war.”

Natural gas discovered in NY State counties of Steuben and Tioga, providing $1M in lease fees to local farmers.

NY Merchants Assoc., following conference with Mayor Walker, submits proposed new elevator code providing for increased safety, removal of speed limit on elevators, and operation of two separate elevators in the same shaft.

NY State dog license fees brought in $997,471 in 1930, covering 417,692 dogs.

Whaling groups discussing plan to curtail overproduction of whale oil; about 3M barrels will be produced this season vs. 2.5M in 1929-30.

Northeast suffers disastrous tides; “wall of water” causes millions in damages in New England; Nova Scotia tides reportedly highest in 60 years.

AT&T report: Within a short time, Bell system will be connected with all the world's countries except Russia. Teletypewriter equipment progressing, notable use is by police departments. Important advances made in television, but still so complicated and expensive that commercial possibilities are uncertain.

"Boys who went to sea half a century ago experienced the last adventures offered by the ocean ... science has transformed the sailor's career from one of uncertainty to one of mechanical routine, comparative safety, and monotonous system."

Market commentary:

Market wrap: Stocks weak in early trading, rails under particular pressure; however, utilities remained strong and effective support came into leading industrials; a good rally developed through mid-day and afternoon. Bond trading active; US govts. dull, steady; foreign strong; corp. high grade steady to firm, others irregular. Commodities mixed; grains generally steady, corn higher; cotton down moderately. Copper remains at 10 1/2 cents, buying low; little change expected in next week. Silver rises to 27 7/8 cents, highest since early Feb., on favorable Indian news.

Conservative observers see a further technical rally, advise using it to reduce long positions; profitable trading range seen for near future.

Oil shares were fairly steady in spite of the sharp price cut by Standard of Indiana. American Can was a standout among the industrials.

A large short interest is evident in demand for stocks in the loan market and private borrowing from brokers; some traders have been fighting the rally steadily. Supply of stocks may also be tight due to reluctance of some holders to loan stocks out. With Congress adjourned, an event many big traders were said to be waiting for, next market move is considered highly significant. Rally to new high ground would be “bullish signal of first importance.” A potential buying demand is thought underlying the market in outsiders who took profits during the Feb. rally on brokers' advice, and will be looking to repurchase.

Bears on utilities dismissed recent strength as "window dressing" before new financing by some important utilities; pointed out high earnings multiples enjoyed by many utilities. Bulls pointed out relative earnings stability shown by utilities in 1930. Wall Street studying steel industry conditions; would prefer industry take action to improve earnings by raising prices rather than cutting wages. Rail equipment buying has been negligible so far this year; outlook unlikely to improve while rail revenues remain poor.

Noble & Corwin say New York bank and trust stocks are good buys for the next year, although it would be nice “if buyers of bank stocks could get a little more information about their properties,” particularly regarding earnings and security affiliates.

Analysis of two International Match [Ivar Kreuger] bonds; some are skeptical that the company depends on good faith and stability of various countries, but “so far nothing has developed to raise any question” regarding soundness of foreign loans or match concessions.

Editorial by T. Woodlock: The now dead Parker Amendment to the Interstate Commerce Act would have cast a very broad net in cracking down on railroad holding companies. It would have made the error of giving the already powerful ICC vaguely defined additional powers, thus encouraging its bureaucratic tendencies and possibly encroaching on private rights. "It is to be hoped that this piece of attempted law-making will stay dead."

Farm Board chair. Legge sees some cuts in acreage of cotton and wheat planting, but not enough to correct supply situation.

Broad Street Gossip: Market has had "one of those 'healthy reactions' which always make some traders feel a little ill." At the close Thursday, the Dow was 23.24 above the 1931 low but 9.67 off the high. Opinion differs on whether the reaction has exhausted itself. Earnings and dividend reports haven't been good, but current business news has been a little better. G. M.-P. Murphy & Co. note some room for growth in European auto ownership; while US has one motor vehicle per 4.7 people, Britain and France have one per 31 and Germany one per 98. Oil production continues lower, but that doesn't seem to be helping the industry situation; gasoline in storage continues climbing.

T. Watson, IBM pres., says both foreign and domestic business improved over 1930, looks forward to another record year; “we feel the bottom of the depression has been passed and that we are on our way to a gradual recovery.”

Economic news and individual company reports:

A. Napier, Bank of US director, under examination by M. Steuer, refuse to admit he was a director “who did not direct,” but admitted he did practically nothing to ascertain what was going on in the bank, relying on information given him by executives. J. Durst, another director, testified several loans, that according to board records had been approved by the directors, had in fact not been reviewed at the board meetings. G. Egbert, deputy banking superintendent, testified bank officials were charged with flagrant dishonesty in a June 1929 bank examiner report, and superintendent Broderick was aware of this. Editorial: Testimony of J. Broderick, NY banking superintendent, on events leading to the Bank of US failure was illuminating. In hindsight, it would have been better to close the bank much earlier, but it was his duty to exhaust every other possibility first; it should also be remembered he was operating in “one of the most trying periods in banking history.” That said, he can be faulted for not cracking down harder, for example by insisting that some transactions that “were dishonest, even if inside the letter of the law, be at once undone.” Mr. Broderick has proposed changes in banking law to increase his office's power, but it doesn't seem they would have helped in this case. New laws should be enacted “as the need for them develops, but the value of legal machinery will always depend on the skill with which it is used.”

Representatives of leading banks continue opposition to large list of amendments to state banking law proposed by superintendent J. Broderick; say they approve of some of the amendments in principle but want them postponed at least a year for further study.

Total known security loans at end of Feb. were $7.778B, down $81M in month and down from peak of $13.205B on Sept. 3, 1929. This is roughly the same as the Aug. 1927 figure, and stock prices are also at about the same level. [This is the most complete estimate of all loans on securities.]

Fed. Reserve reports money in circulation Mar. 4 up $6M to $4.575B, total Reserve Bank credit outstanding up $4M to $908M. Member banks in NY City report brokers' loans down $8M to $1.790B; loans on securities to non-brokers down $26M to $1.844B; this figure has declined continuously since start of year.

Call money rose to 2% for the first time since Jan. 2; however, this was attributed to temporary mid-month factors.

Bank of America estimates a record high of over $2.5B will be spend on street and highway construction this year, vs. $2.2B in 1930.

Scrap markets continue irregular, with buying in Chicago but quiet markets elsewhere and price weakness in Detroit.

Representatives of shipping cos. denounce proposal to extend powers of ICC over steamships; believe commission is "railroad-minded" and would favor rails in setting competitive rates.

Australia's 1930-31 wheat crop estimated largest in history at 190M bushels, allowing exports of about 140M.

Canadian Nat'l Railways 1930 deficit estimated at $30M.

AT&T 1930 net $9.22/share vs. $12.57. Net gain of 122,500 in number of telephones, vs. 821,400 added in 1929. Plant expenditures $585M, about the same as the record 1929 level; however, 1931 is planned to be reduced to $450M.

NY Central's year off to poor start; expected to roughly break even in the first quarter, with management unable to cut expenses enough to make up for sharp traffic decline. Freight traffic on this road is a good business barometer, since it serves the automotive and steel industries. Amer. Rolling Mill (sheet steel) omits dividend; 1930 net 3 cents/share vs. $4.40. Woolworth Feb. sales were $19.4M, down 3.2% from 1930.

US Tobacco's unexpected dividend increase gives it a yield of 6 1/2%; co. has reported increased earnings every year for the last 16.

Companies reporting decent earnings: General Foods, Pillsbury Flour Mills, Southern Calif. Edison, Northern Indiana Public Service, Florence Stove, Homestake Mining, Alaska Juneau Gold Mining.


Ten Nights in a Bar-Room - "Old [from 1854] dramatic diatribe against the ravages of rum possesses considerably more vitality in its new talking picture version than one might expect." Little Mary attempts to save her drunken father from "complete degeneration"; picture produced by a small independent company known as Road Show Productions. "After the numerous burlesque versions of this old play, it is interesting to witness a serious presentation."


Crashed Airman - I was trying to set a record. Farmer - Well, you did. You're the first man in these parts who climbed down a tree without climbing up first.

Small Boy - What is college bred, pop? Pop - they make college bread, my boy, from the flour of youth and the dough of old age.

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