Washington report: Large future deficits loom based on current $500M gap and trend of falling revenues. Continuing unbalanced budgets would “pile up fiscal troubles for the future.” Most logical solution would be a temporary surcharge on higher incomes; this would be easiest to implement politically and practically, and would reflect that drop in govt. revenues is largely due to temporary factors. Sen. Borah has already endorsed this plan. Veterans' bonus advocates are accurately explaining that the bonus hasn't been a big factor in raising the current deficit. However, it has disordered the carefully laid long-range Treasury financing plans. Pres. Hoover is “practically reorganizing” the Fed. Reserve Board; of six spots, he's likely to appoint four within a short time. Political observers very interested in Gov. Roosevelt's action on Prohibition measures now before him.
Editorial: Examination of 1929 tax returns fails to support Sen. Borah's contention of "robbery of the public" by "coterie of capitalists." Total profits of $2.240B were declared on security and real estate sales. Those with income under $5,000 declared net profits of $184M including losses of $43M, those with income of $5,000-$25,000 declared $676M including losses of $252M, and those with income over $1M declared $43M including losses of $48M (not including assets held over two years). It's a safe bet that when 1930 returns are tabulated, investment losses will be concentrated in the higher income brackets; small investors largely left the market in 1929, while wealthier ones tried to retain their holdings or recoup losses though a disastrous 1930.
Commerce Sec. Lamont reports on survey of unemployment in 19 selected cities taken in Jan.; of total population of 20.639M, 1.931M or 9.4% were unemployed; this compares with 3.8% in the same cities in April 1930; total estimate for US was 6.050M. This count includes people out of a job, able to work, and looking; another 1.8% had jobs but were on layoff without pay (excluding sick and voluntarily idle). However, Sec. Lamont points out survey was taken at in Jan., at peak of seasonal unemployment and most severe point of depression; notes some improvement since.
Editorial: It's been almost 3 months since executives of the 4 main Eastern rails made "impressive declarations" to Pres. Hoover and the country that they had ended 6 years of "guerilla warfare" and come to an agreement on consolidation. However, the ICC still hasn't received application for any concrete steps toward unification; what were described at New Year's as minor details may be holding things up. It will soon be clear if this inaction is due to "a return to a familiar and pernicious jockeying for position"; in that case, the rail executives will have played fast and loose with the President and the transportation system.
Washington observers give Russian five year plan better chances due to increasing success at obtaining markets for exports.
Austria and Germany announce preliminary agreement foreseeing "far-reaching economic union."
25 freight cars worth of honeydew melons are being transported from Chile to NY by fast ships with refrigerated space, allowing that nation to cash in on the reversal of seasons in the Southern hemisphere.
The frankfurter celebrates its 125th anniversary this year; it was invented in 1805 Vienna by Johann Lahner, who learned the butcher trade in Frankfurt.
Dr. Charles Mayo, famed surgeon of Rochester, Minn., says improvements in medical science are being offset by modern "too fast living," which "places a much greater strain on our mentality"; speed of life is so great, many fall by the wayside; declares proportion of insanity twice as high as before motor cars arrived.
Irving Trust Co., after 18 years in the Woolworth Building, moves headquarters into its new 50-story building at One Wall Street, corner of Broadway. Building is the fourth erected on that site, with the first dating back to New Amsterdam. The original Irving Bank's name came from Washington Irving, who is said to have begun his famous "Knickerbocker's History" in his law office, also on that site.
Special Master E. Campbell recommends Supreme Court stop NY City from continuing current method of garbage disposal; New Jersey had sued the City charging pollution of its summer resort beaches.
Henry Clay Graton, founder of Graton & Knight leather goods dealers, dead at 100.
Market commentary:
Market wrap: Leading stocks irregular in the weekend session, in spite of some favorable business news; further bad breaks took place in stocks with suspect dividends, including Liquid Carbonic and US Industrial Alcohol; however, setbacks in major shares remained within technical bounds. Bonds active, mixed; US govts. dull, steady; foreign somewhat irregular; corp. irregular, high-grade mostly firm, utilities strong. Commodities mixed; grains mixed in narrow range; cotton up substantially. Silver down 3/8 cents to 29 1/4.
Week in review: Stocks broke upward out of their trading range, encouraging observers; more outside buying seen; strength followed good news from several sectors including steel, autos, and construction. Bond market featured broadening strength in foreign issues, extending to bonds of states and cities across the globe; US govts. rose early in week but reacted later on talk of increasing deficits; domestic corp. generally steady but saw rally in convertibles and switching from lower-grade rails to utilities. Money market saw unexpected drop in call money rate to record low 1%; money rates normally rise after the tax date (Mar. 15). Banking figures for week fluctuated due to tax influences. Foreign currencies firm; marks strong on improving German political, economic situation; Britain able to buy gold in open market for first time in a year. Grains showed small changes; corn firm but wheat slightly down. Cotton strong early but lost most of gains. Silver rose sharply most of the week.
Market observers somewhat more cautious, warn against overenthusiasm; advise waiting for market to prove itself, using stop orders to protect accounts.
Dow industrials showed a 3-day winning streak Friday for the first time since start of Feb.; utilities are at new high for the year. Action of rails has been more discouraging, but signs of oversold position have recently appeared. Observers feel technical reaction is possible in utilities, but confident strong support will be forthcoming on setbacks; see attempt in near future to carry industrials over Feb. 24 high of 194.36.
Automotive stocks have been pushing ahead under leadership of GM; better news has been coming from car production centers, and J.J. Raskob has reappeared as a large buyer of GM shares, as he was during the memorable Coolidge boom. However, conservative interests say auto trade bears close watching in next two months since conditions can change quickly. GM probably won't cover its dividend in the first quarter, but is expected to in the first half overall. Studebaker is another motor stock that's come into greater speculative favor recently.
Observers are awaiting market reaction to Feb. rail earnings, which are certain to make poor reading. Danger to the bears in an overcrowded short position was demonstrated last week when Aluminum Co. of Amer. moved 40 points in one session (to about 200).
Broad Street Gossip: Proposed addition to NYSE will cost $10M and be 400 feet high, indicating the Exchange's continued optimism for the future. Goodbody & Co. say long-term investors should have 75% of funds in stocks see "irregular rising market over the next month." While one broker reports his proportion of active accounts went from 25% on Jan. 1 to 75% recently, another reports that public buying has increased, but still hasn't reached large proportions. Allied Chemical 1930 earnings report was a pleasant surprise, down only 16.8% from 1929 and covering dividends by a good margin. One broker who loans to the bear crowd reports short interest in rails is highest this year; NY Central and B. & O. are popular targets.
Editorial by T. Woodlock analyzing Kennett Dam hyroelectric project in Calif.; finds project only marginally profiable even using state financing.
F. Vanderlip, financier and former Nat'l City Bank pres., calls present depression "most stupid ever known because it is the result of artificial rather than natural causes." Believes technological improvement in industry is outstanding economic development in history of the world; sees nation on verge of economic development that will bring prosperity similar to that which accompanied development of automotive industry.
B. Anderson, Chase Nat'l Bank economist, calls for unilateral US lowering of tariffs to stimulate trade; attributes higher US wages not to tariffs but to immigration restriction during and after the War; dismisses suggestion US could maintain tariff but buy foreign bonds to cover export surplus, since this would require also covering “ever growing interest charge on the ever growing volume of foreign debt.”
J. Price of Peoples-Pittsburgh Trust calls for $1M/year bank publicity campaign: “Do not allow political demagogues to make a football of our most precious possession - the prestige and esteem which banking has always enjoyed.”
Economic news and individual company reports:
GM reportedly placed orders for its requirements of copper, cotton, rubber, tin, and zinc for rest of 1931 production season, against usual policy of only ordering a month ahead; seen as strong testimony to "belief of important interests that commodity prices were scraping bottom." Fisher's wholesale commodity index remained at 76.0 for the third consecutive week. Illinois Steel raises prices on products $2/ton over the price recently announced by Carnegie Steel, reestablishing the normal spread between Chicago and Pittsburgh prices. BLS reports wholesale price index of 550 commodities declined from 77.0 in Jan. to 75.5 in Feb.
Fed. Reserve reports nothing to handicap business recovery from banking standpoint; funds are abundant; member banks at end of Feb. were in strong position, showing relatively low level of total loans and investments, large volume of balances with correspondent banks, and small indebtedness to the reserve banks. Bank failures were much lower in Feb., indicating bank failure crisis has passed. Banks have been buying bonds, supporting prices through most of 1930-31.
F.W. Dodge reports total construction contracts in 37 states East of Rockies for first 2 weeks of March were $186.7M vs. $178.2M in 1930.
Commerce Dept. reports continued improvement in some lines of business for week ending Mar. 14; foreign business reports slightly encouraging.
Feb. life insurance sales were $30M/business day, down 19% vs. 1930; life insurance had suffered less from depression than other industries, but is now showing some effect; decline partly attributed to drought that prevailed in large areas of the country.
Dollars are trading at a premium to 7 of 10 major European currencies in spite of very easy money rates prevailing in NY.
Leading Bogota newspaper urges issue of paper money by Colombian govt. to offset losses of gold reserves. Brazilian Pres. G. Vargas says govt. is considering ways of funding public debt to reduce drain on nations gold stock; British financier Sir O. Niemeyer is advising.
Brazilian coffee conference delayed from Mar. 31 to May 15; govt. expected to announce purchase and segregation of 18.5M bag surplus, opening of free market.
G. Sloan, Cotton-Textile Institute pres., announces remarkably heavy demand for fine-goods cotton cloth in past 10 weeks; volume of unfilled orders double 6 months ago, inventories have been cut in half and are now at a minimum. While prices are firming production is still unprofitable, but this is expected to improve.
ICC reports average number of rail employees in 1930 was 1.511M vs. 1.687M in 1929; payroll $2.590B vs. $2.941B.
Ford looks likely to retake production lead from Chevrolet this month, with about 80,000 cars produced for the US vs. 78,000 for Chevrolet; Ford's April total is expected to reach 105,000. Some concern seen that auto sales have slowed since countrywide snowstorms Mar. 7-8, though inventories remain low.
International-Great Northern was only one of country's 52 major rails to show an increase in car loadings for Feb. vs. 1930, due to East Texas oil development.
Westinghouse Electric reports business so far this year well below 1930, but Feb. and March bookings slightly improved over Jan. Dividend cut seen likely.
Companies reporting decent earnings: Central & Southwest Utilities, Wesson Oil.
Movies:
The Front Page - Not as successful as the play, which was concentrated in the press room; scenes away from the center of action dilute impact. The play's profanity has naturally been deleted, but is hinted at by "extremely annoying" device of filming characters saying an expletive that we don't hear.
Tabu - Final film by the recently deceased F.W. Murnau, "one of the most artistic directors in motion pictures." Non-dialogue film of ill-fated South Sea lovers caught in conflict between love and superstition.
Joke:
"Tramp - Lady, won't you help a poor man that lost his family in the Florida flood and all his money in the Wall Street crash? Lady - Why, you are the same man that lost his family in the Galveston flood and was shell-shocked during the war. Tramp - Ain't it so, lady? I'm the unluckiest guy in the world."
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