March 19, 2010

Thursday, March 19, 1931: Dow 183.95 +3.34 (1.8%)

Assorted historical stuff:

People have marvelled at Henry Ford's apparent freedom from detail, but he does have a system for keeping track of things; one old employee recently called him the "greatest sampler in the world." On one recent rainy day, Ford was with a visitor when 20 new cars right off the line came winding up the road and stopped in front of the house. Ford went right outside and closely examined the wheels on one, the engine on another, the underside of another, and so on, then waved the drivers away. Apparently the knowledge Ford may order such tests anywhere and anytime keeps the vast organization on its toes.

NY State legislature kills 40 banking reform bills proposed by Banking Superintendent Broderick, saying more study is required.

Washington report: Gov. Roosevelt's apparent favor among Progressives may hurt him with party leaders, who might be in position to block his nomination since a 2/3 majority of delegates is required. Likely beneficiary would be James L. Cox, former Ohio Gov. and 1920 Dem. Pres. candidate.

Editorial: Rep. Fish (R, NY) says the US has already lost the world wheat market and will lose $1B in exports in the next 4 years thanks to its aid in building up Russian Communism. While private capitalists are playing into Russian hands, we suggest to Rep. Fish that the US govt. also is, particularly in its disastrous farm policy. This policy, more than Russian production, is what has cost the US the world wheat market, since it fixed prices 50% above world levels.

Deposed Soviet premier Alexei Rykoff restored to Central Committee along with Nickolai Bucharin; action seen as move to reconcile Right and Left wings [both found guilty of treason and executed in 1938].

J. Leary, ex-NY World writer, to study systems of unemployment relief for Pres. Hoover; will visit England, Germany, and Switzerland, but not Russia.

British Premier MacDonald reprimands followers for lack of teamwork; suggests coalition govt., with Liberal leader David Lloyd George entering Labor cabinet to attack unemployment problem.

Editorial: Rep. Borah's recent attack on capitalists at the Progressive's convention was an "amazing compilation of mistaken assertions." For example, the Senator said: "IT&T stock was put to the public at 149. It shrank to 26 ... GE went to the investors at 101. It shrank to 45"; he then calculated a loss to investors in the billions, supposedly stripped from the public by a "coterie of capitalists." However, these weren't the prices at which the stocks were offered, but simply the 1929 peak and subsequent low; the high prices the Senator indignantly quotes were made through speculation by the general public.

Editorial by T. Woodlock: Dr. Charles Beard claims Progressive opinion is against wholesale nationalization of electric utilities, but it demands the govt. crack down on “stock juggling inflation” and clear up confusion about what constitutes a “fair return.” Evidence for this claim of moderation is nowhere to be found in Sen. LaFollette's statements or in the Progressive “organs of opinion.” Can Progressives clarify if they believe govt. utility operation is a good thing in itself, or only a possible lesser evil?

AFL Pres. Green says war profits reprehensible, but knows of no practical way to prevent them; only way for govt. to exercise control is through recapture tax.

Navigation on Lake Erie officially opened this week, about 3 weeks earlier than usual, due to unusually mild winter.

NY State Senate likely to pass bill removing restriction from prescribing of medicinal liquor.

G. Dawnay, Anglo-Norwegian Holdings pres., predicts another profitable year for whaling industry, though industry will face overproduction in 1932.

US air mail in 1930 was 8.004M pounds, up 12.7% from 1929; revenues were up 6.2%. Provisions of the Watres air mail law are expected to lead to eventual replacement of current planes that fly at 125 - 135 mph with new, faster planes with top speeds about 150 mph.

Spending on airplanes by army and navy to July 1, 1932 will be about $39M for 978 planes; orders for $24M will be placed in next few months to help industry.

New independent car company De Vaux-Hall, to start production about Apr. 1; car prices will be $595 - $795.

A can of corn packed 43 years ago was eaten at the Calif. Packers Assoc. convention at Del Monte, Calif. O. Huffman, Continental Can pres. and one of the eaters, stated the contents were just as palatable as if newly packed.

Horace J. Morse dead at 93; was senior member of A.M. Kidder & Co. and adjutant general of Connecticut during the Civil War.

Market commentary:

Market wrap: Stocks opened with rails still under pressure; however, industrials and utilities were well supported . Shortly after noon, a much firmer tone developed; then, unexpected steel price rise was announced and carried the whole list up sharply; even rails abruptly changed direction, though the rail average closed with a small loss. Bond market active, mixed; US govts. mostly steady; foreign unusually active and strong; corp. high-grade mostly firm, some weakness in rails and particular issues. Commodities strong; grains up moderately, corn strong; cotton up substantially.

Conservative observers warn against reaching for stocks on the rallies in spite of improved sentiment; advise reducing long positions on further rallies.

Strong spots included US Steel, GM, and Johns-Manville.

Bull pools recently seem to be withdrawing support from their stocks when bear pressure develops.

Market students are discussing stocks likely to benefit from improvement in silver; most often mentioned is Kreuger & Toll and the associated Internat'l Match.

Market observers are paying close attention to the Dow rail average, since it has indicated the general market trend on numerous occasions. The recent rail average has recently lost slightly more than 50% of the previous recovery, which is thought to be an important technical level for indicating a change in trend; many therefore contend that rail action in the next week or two "may give a definite cue to the trend of the market."

Rail freight loadings figure was somewhat encouraging; decline of 17.1% vs. 1930 was better than the 19.2% average decline of the previous two weeks.

Hornblower & Weeks note mixed bond picture, with high-grade strong but lower grade reacting more to stock market than money market conditions due to uncertain outlook for business earnings.

Broad Street Gossip: News of the past few days indicates things are "a little better all around," including better trade reports, improvement in textiles, better statements from the big Fifth Ave. stores, slight reduction in unemployment, evidence commodity prices have hit bottom, and more active buying. Many market writers believe the market will trend up for the rest of the year, but "advise caution in making commitments." Recent developments indicate people still have money in spite of depression: NY savings bank deposits increased in $40M in Feb.; bond sales have been near record levels; brokers report continued odd-lot (small) buying of higher-grade stocks.

Middle West Utilities reports business conditions in its territory spotty, with industrial activity generally at low rate but with a few indications of improvement; New England did best, while South remained unfavorable.

Dr. J. Klein, Asst. Commerce Sec., sees positive business signs. Confidence has improved; “shrewdest students are virtually unanimous in thinking that the bottom of the depression has been reached.” Corporations like Penn. RR taking advantage of low money; strengthening in residential building, steel, autos, cotton; employment improved somewhat in Feb.; internat'l developments positive.

Economic news and individual company reports:

US Steel reports two major positive surprises. Carnegie Steel subsidiary announced an unexpected price rise of $1/ton starting Apr. 1, shortly after reaffirming the old price last week; this was seen as indicating they had become much more optimistic on business. US Steel announced it had received an order for 125,000 tons of structural steel for construction of "Radio City," one of the largest single contracts ever. Some other steel prices are also reportedly firmer, including wire products. However, price concessions have been reported in some districts, and there hasn't yet been enough buying to test any of the recent price changes.

Steel production continued moderate uptrend; week ended Monday was 56 1/2% vs. 54% prev. week, 53% two weeks ago, 74% in 1930, and 94 1/2% in 1929; US Steel rose to 55% from 54%. Automotive steel continued gains; structural steel looks strong thanks to some large projects, and important upcoming highway building. Machine tool demand continues to drift, but some lines of industry that are normally good buyers have become more active.

Continental Shares (investment trust co.) postpones annual meeting to give officials time to respond to lawsuit; another stockholder files suit charging Continental paid Cyrus Eaton $2.4M over market value for certain stocks. Three suits filed against Transamerica (another inv. trust co.) alleging reported company profits for 1929 were inflated by $29M. Another Bank of US director testified he relied entirely on bank officers for information on bank activities, and signed reports as a matter of form.

BLS reports employment in 15 industrial groups up 0.1% in Feb., payrolls up 4.7% (based on survey of 42,383 establishments employing 4.575M). Employment in manufacturing industries was up 1.4%, and payrolls up 7.5%.

Treasury Sec. Mellon reports US must furnish about $500M by Apr. 11 to pay for veterans' bonus loans applied for up to Mar. 14; Gen. Hines estimates another $390M will be needed in following four weeks; new $200M short-term issue expected shortly.

US electric output for week ended Mar. 14 was 1,664 GWHr, down 3.4% from 1930, vs. 4.8% decline the previous two weeks.

Observers encouraged by Bank of England's ability to buy substantial amount gold in open market. Registered British unemployed Mar. 9 were 2.692M vs. 2.635M Mar. 2 and 1.564M a year ago. 5,000 coal miners in South Wales strike to protest wage cuts of 14 cents/day.

Chile able to show small govt. surplus in 1930 in spite of depression.

Australian Federal Treasurer Theodore defends fiduciary currency bill providing for printing of $90M in new currency notes against charges it is unsound; “Australia is faced with a breakdown of its monetary and economic systems and the country is practically paralyzed.”

New Zealand faces govt. deficit of $6.250M vs. $3.750M estimate; next year's deficit also likely to exceed $22.5M estimate.

German trade surplus rose to $41M in Feb. from $34M in Jan.

NJ Gov. Larson proposes bill authorizing state to appoint commission to take over finances of cities in financial difficulty. Texas repeals law allowing bondholders to put cities into receivership when payments weren't made.

F. Robinson, Union Pacific RR VP, estimates consumption of natural gas in 1929 replaced about 59M tons of coal, or 1.2M carloads, about 2% of all rail traffic.

Combined net of 95 utilities (excluding telephone and telegraph) in 1930 was $1.025B vs. $1.007B; gross was $2.382B vs. $2.230B.

RCA's sharp improvement in the final quarter last year has reportedly been continued since. Correction to earlier article - projection for potential home “little theatres” showing sound films was 20M, not 20,000.


Body and Soul - ineffective spy melodrama; "In a minor role, in the opening sequence of the film, Humphrey Bogart gives a better account of himself than do the principals."


Miracle at Verdun - New adaptation of the German play about resurrection of 13M war dead. Staging is a failure; vaunted talking film sequences are "suggestive of the old nickelodeon films"; "guttural noises" and "groveling tendencies" of the resurrected soldiers are grotesque rather than solemn. Author's original conception, while striking, is inconclusive. The soldiers find "their places have been taken by others as if they had never lived and died." Their wives have remarried, their sons are becoming soldiers, and factories are making even more destructive weapons of war. Going to the great peace conference, they find they are not welcome; the US Ambassador informs them they are undesirable surplus population.

Poem by F. Caverly:

"I know a man with income huge, Who says he can't - crass subterfuge -
Afford to buy or spend his cash, Because of that darn market crash. ...
When men are out of jobs, you know, It helps if those who have the dough
Would spend a LOT. Be not abashed; Forget the day the market crashed.
I urge you, get your savings out; Your funds from hiding places rout;
Most things are cheap and they're not trash; Make history of that market crash. ..."

Stock market joke:

Trader 1 in Broadway house - That man in the end chair seems to be very bearish. Trader 2 - Bearish? I should say he is. He just sold short on the Einstein announcement that the world would explode in 100,000,000,000 years.

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