March 5, 2010

Thursday, March 5, 1931: Dow 180.96 -2.80 (1.5%)

Assorted historical stuff:

The 71st Congress adjourned at noon Wednesday; the 72nd will convene in Dec., giving a 9-month respite from “legislative considerations.” Pres. Hoover obtained special ruling from Att'y Gen. Mitchell allowing him to abandon custom of signing all bills before adjournment; this was physically impossible due to a final rush of 400 bills sent to him in 36 hours. Congress failed to pass significant new regulation of utilities, rails, or bus transport; the only oil legislation passed was an order for a Tariff Commission inquiry.

This Congress was the most expensive peacetime one in history, appropriating about $10B in 3 sessions, excluding the veterans' bonus; much of the increased spending was due to the Farm Board. It first met in special session in April 1929 to carry out Hoover campaign promises on farm relief and tariffs. Major laws passed included Farm Relief Act creating the Farm Board, the Hawley-Smoot tariff, and the veterans' bonus. Important economic investigations included the ongoing Glass financial inquiry and the inquiry into rail holding cos. Outstanding clashes with Pres. Hoover included failure to confirm John J. Parker to Supreme Court and attempt to recall nominations of three Power Commission members.

Optimists expect Pres. Hoover may take advantage of 9 month freedom from Congressional interference to advance plans to stimulate business. Eastern rail consolidation may proceed through the ICC, without Congressional interference. Another likely area for action is stabilization of the oil industy by curtailing domestic production together with import restriction.

Mahatma Gandhi and Lord Irwin sign agreement ending civil disobedience movement after almost a year of turmoil for the 320M living in India. Indian commercial circles jubilant, anticipate brisk trade revival. News seen bullish for cotton and silver.

Terms of France-Italy naval agreement reportedly will limit construction to 22,000 tons/ year vs. over 40,000 previously planned; at end of 1936 France will have total tonnage of 670,000 and Italy 441,000.

Soviet govt. to present figures showing 8.250M peasant families now collectivized, 6M in 1930 alone. Difficulty looms in insufficient tractors.

Reports in London of impending revolution in Monaco to replace Prince Louis II with Prince Pierre, his son-in-law.

Editorial: With Muscle Shoals plan to "'dump' electricity on the market a la Stalin" dead for a year, Gov. Roosevelt now has a rare opportunity to set a model for development of water power through public authority. He should take the majority advice of his St. Lawrence power commission, and follow a plan in which govt. owns the generating plant but may distribute power through existing utilities. If we must have state ownership of hydro power, this would be a sound way to do it.

Combination of 6 construction companies makes low bid for Hoover Dam construction of $48.9M.

Three men who died last year in the US left over $1M in life insurance policies.

Increased purchasing power of the dollar is most evident in the "popular-priced restaurant field." Many large restaurant chains in NY City are now offering dollar dinners, and competing with each other on number of courses, extras, etc. One large chain is including a ten-cent after-dinner cigar.

Port of NY Authority announces new Hudson River [later George Washington] and Kill van Kull bridges may open later this year, ahead of scheduled 1932 dates.

NY Appelate Court hearing two cases brought by IRT seeking fare hikes from current 5 cents to 7 cents or 10 cents.

Dr. H. Eckener, Graf Zeppelin commander, here to visit Goodyear officials; says German Zeppelin Co. has definitely concluded helium is only practical gas for commercializing dirigibles; Zeppelin to make scientific flight over Polar sea, also travel to Brazil to attempt establishment of 3-day Germany-Brazil airmail service.

A. Einstein on last day of 3-month visit here; to sail at midnight for Germany.

Special New Haven RR train carrying Connecticut legislators to vote against law for eliminating car-rail crossings crashes into stalled car on the way to the vote.

Market commentary:

Market wrap: Stocks opened with rails under pressure; weakness later spread to leading industrials. Utilities declined with the market, but then staged a recovery starting around noon; however, weakness in the rails and industrials continued through the session. Bond market sees rally in US and foreign govts. after successful NY City sale; corp. continued irregular though high-grade were generally firm. Commodities strong; grains firm, corn up strongly; cotton up substantially. Copper still at 10 1/2 cents, domestic buying heavier.

Conservative observers still advise staying on sidelines, since market hasn't been able to carry through on rallies.

Discouraging news included a poor carloadings report from NY Central and a number of dividend cuts and omissions by rails and industrials. Possible dividend cuts were also rumored by NY Central and Baltimore & Ohio RR. On the other hand, some observers say such dividend cuts are common at end of depressions. Utility interests were pleased by adjournment of Congress without enacting any restrictive legislation, and by the Muscle Shoals veto.

Prospect of unfavorable rail earnings was ignored when stocks were rallying, but is now gaining attention; “Wall Street always accepts as influential the news which is in line with the trend of prices.” Last freight loadings report showing smaller (13.7%) decline vs. 1930 was misleading since the 1930 week contained Washington's Birthday.

Market observers have noted stiff resistance to reactions in the past 10 days; attributed to outside buying and short covering.

Broad Street Gossip: Reports that US Steel only earned a few cents/share in Jan. shouldn't have been a surprise with production and prices still at low levels; it's unlikely Steel will cover dividends until production is considerably higher. Market has been going through a considerable reaction, but this is natural after the rally since start of the year; whether the decline is a minor downward move in a major upward swing remains to be seen. Business has been improving gradually over the past few weeks, and confidence seems to be gaining. However, there have been no big gains and it may not be clear until end of the month if the upswing is merely seasonal. One positive factor is an improved banking situation; there have been few recent failures and scores of closed banks are reopening.

J. Dickerman, FTC utility expert, tells FTC inquiry New England electric industry is burdened with many obsolete plants, increasing costs vs. centralized sources.

R. Matthews, Union Oil of Calif. VP, tells annual stockholders' meeting present net price of gasoline is practically at cost of production.

Economic news and individual company reports:

Bank of US investigation hears testimony by J. McArdle, accountant for the bank. Under examination by M. Steuer, he agrees a transaction in which affiliates paid off an $8M loan to the bank provided no benefit and was done entirely to improve appearance of the bank's balance sheet for upcoming examination. After the hearing, M. Steuer told reporters plans for reopening the bank were “Utopian” and all assets should be liquidated immediately; he urged directors, and if necessary stockholders, to make up funds needed to pay depositors in full.

Merchants Assoc. of NY announces opposition to enactment of 19 banking reform bills introduced in NY legislature by bank superintendent J. Broderick, who defends bills as “for the best interest of all concerned” and asserts “banking is a quasi-public function and should be regarded as such.”

Fed. Reserve annual report: “For the banks of the country the period of 15 months ended in Dec. 1930 was one of readjustment and liquidation.” Important problems becoming clearer; but won't recommend solutions since Congressional committees are investigating. Bank suspensions in 1930 totalled 1,345 with deposit liabilities of $865M; highest previous total was $272M in 1926. Of total, 187 were member banks. 147 banks were reopened, with deposits of $61.6M. Year marked by lower commodity prices, money rates, and demand for credit, all typical of business depressions. Easy money policy led to year-end rates for bankers' acceptances 1 7/8%; commercial paper 2 7/8%; call money 2%. $310M was added to gold holdings in 1930, bringing them to $4.6B, close to a record.

Anxiously awaited $100M NY City long-term 4 1/4% bond sale very successful in spite of huge Federal sale Monday; issue sold for 101.977. Comptroller Berry's statement: “the splendid premium realized for the city is highly gratifying ... success will undoubtedly be another stimulating influence in the return of business confidence.”

Steel production continues gradual improvement; in week ended Monday rose over 53% vs. 52% prev. week, 50.5% two weeks ago, 79% in 1930, and 82% in 1929; US Steel rose to almost 55%, highest rate this year. Responsible steel interests believe earnings picture has deteriorated to the point that something must be done to restore profits in the near future; would prefer raising prices to cutting wages, although some unofficial price cutting has been reported in the past few weeks. Iron Age reports machine tool trade improving slowly and irregularly, with some markets reporting declines; inquiries fairly heavy but not necessarily translating to buying.

Standard of Indiana cuts crude oil purchase price 40 cents to 67 cents/barrel; cuts Midwest gasoline 2 cents/gallon. Standard of Ohio raises gasoline 1 cent/gallon.

US electric output for week ended Feb. 28 was 1,628 GWHr, down 4.8% from 1930, vs. a 3.6% decline prev. week and 4.7% two weeks ago.

Justice Dept. responds to Sen. Capper's report of threatening food monopoly; says already investigating bread and meat prices.

Cotton goods sales continued improvement this week; price advances have been numerous.

Dutch currency declining due to low money rates; may lead to gold exports from Holland.

France reported record 1930 trade deficit of 9.515B francs.

Navigation at head of Great Lakes may open April 1, earliest in 29 years.

ICC to hear 2 days of arguments by California Fruit Growers arguing for reduced rail rates on deciduous fruits other than apples.

American Chicle (chewing gum) stock about 45; earnings in 1930 were a record $4.42/share; earnings have increased every year since 1921; dividends paid in 1930 were $2 regular and $1 extra; no debt or preferred stock ahead of common. US Tobacco raises annual dividend to $4.40 from $4.

Companies reporting decent earnings: Electric Power & Light, Engineers Public Service, Wm. Wrigley, Bickford's (low priced restaurants).


Appearing at the Palace - Eddie Dowling brings back his "Youngsters of Yesterday" show, assembling vaudeville stars of 40 years ago. Performers include Josephine Sabel reviving the Spanish-American War number "There'll be a Hot Time in the Old Town Tonight," Lizzie Wilson singing her best known song "Schnitzelbaum," Dave Genaro dancing a cakewalk, and Tom Harris, who tap-danced for Lincoln.


"'I've got a pretty distasteful job before me. ... Mrs. Newrich employed me to look up her family tree, and I've got to inform her that one of her relatives was electrocuted.' 'Why worry about that? ... Just write that the man in question 'occupied the chair of applied electricity at one of our public institutions.'"

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