March 24, 2010

Tuesday, March 24, 1931: Dow 184.32 -0.92 (0.5%)

Assorted historical stuff:

Farm Board announced it will end support of wheat prices at end of May. Wheat plunged after announcement; futures for new crop months dropped below 60 cents, to lowest levels since 1895. Editorial: Farm Board's action is like carrying sick man across a river and dropping him midstream. Contrary to the Board's claims of benefits from their operations, farmers of other grains got no help at all and any benefit that wheat farmers received will be be obliterated by after effects of the policy, as they must "swim ashore by their own efforts." Sen. Nye (R, N. Dakota) says action may result in “serious calamity.” C. Gray, farm organization lobbyist, says expects next Congress to take action, possibly by adopting debenture [export bounty] plan.

Germany and Austria agree to create unified trade market; all duties between them to be abolished, and customs receipts pooled and divided; bordering countries invited to join as first step toward European customs union as proposed by Briand. France, Italy and Czechoslovakia warn proposed union violates existing treaties; British foreign office appears agreeable. Editorial: French charges of treaty violations are nonsensical. While we can't expect the French to be pleased at having the Germans "take a leaf from M. Briand's European confederation book and reprint it in Gothic characters," Briand himself has preached economic solidarity for so long that he can't reasonably object to this regional beginning. Whether this agreement was made in hope of political union "is beside the point. What really counts is that Europe is completing the peace."

Washington report: Capital gains tax, in addition to being inflationary for stock prices when prices are rising [since it inhibits sales] and depressing in recessionary periods, exerts the same effect on govt. revenues, reducing them at the worst possible times. However, action on revision is likely at least two years away, and if it is repealed some other levy will probably be substituted, such as one on transactions. Without minimizing effect of 6M unemployed, economic observers believe drought may be a larger factor in the depression. Drought hit after a series of poor years; many of those affected had no reserves to draw on, and there was little chance for occasional employment that a city worker could find. While unemployment reduced buying power, drought in many cases completely eliminated it. “First John J. Raskob wanted a coherent [Democratic] party organization. Now he wants a party platform written so clearly and concisely that it can mean only what it seems to mean. All of which goes to show that Mr. Raskob never has absorbed very much political tradition.”

House Speaker Longworth says believes govt. can cope with lower revenues without raising tax rates; predicts gain in business this year; amount allocated to public debt retirement could be reduced.

Another editorial by T. Woodlock on gold, responding to letters questioning the gold standard. It might be desirable and more reasonable to have other things as the ultimate basis for currency; it may even be true that most people take currency for granted without thinking about what's behind it, but when the world does think about it, "it clings to gold ... because it believes in it and wants it as it wants nothing else." People can't be made to accept something else by law; this was Bryan's error in attempting to make money of silver. "No legislative fiat ever yet has of itself made 'money' nor, in all likelihood, ever will it do so." One correspondent writes the gold standard is a "sad commentary on our ... civilization," reflecting our fear and distrust of each other. However, when you consider that each $1 in gold coin supplies the base for $8.50 of currency and credit, the "percentage of 'distrust'" is no worse than about 12%; "fair enough, all things considered!"

AFL pres. W. Green says organized labor will oppose attempts at wage cuts, and will take opportunities to compel employers to restore any cuts made. AFL to form committee to work for modification of Prohibition.

Treasury Sec. Andrew Mellon and brother Richard awarded medal by Amer. Inst. Of Chemists for distinguished service to science and profession of chemistry.

Some depression closings are welcome. One of the oldest and most famous London institutions, Pentonville Prison, is now closing for lack of "new accounts"; this makes the 22nd important British prison to close since the war. Future prison prospects look dim; only 10 murders were commited in London last year.

Oklahoma House passes bill prohibiting depiction of people smoking in most forms of advertising except newspapers.

Mr. and Mrs. Thornton of the Gunning River Poultry Farm, NJ, claim their hens have laid 15% more eggs since they put electric lights and radio in the henhouse.

NYSE firms note the value of clubs and organizations for gaining business; "many a large order has been obtained during the 'nineteenth' hole period at the golf clubs" or "during the 'chatty' hours at the big metropolitan clubs between 5 p.m. and 7 p.m."

Market commentary:

Market wrap: Stocks came under extensive bear pressure following Farm Board announcement, causing dips in leading issues, while stocks with suspect dividends continued down. However, the reaction was checked about noon, as trading slowed. Some rallying developed in the afternoon, and leaders had good-sized recoveries, while trading favorites including Auburn and Houston Oil ran up sharply. Advance faltered in last hour, and some irregularity developed, but leading issues generally held up well. Bonds mixed; US govts. higher; foreign dull, irregular; corp. highest-grade firm but speculative irregularly lower. Commodities very weak; grains down sharply after Farm Board announcement; cotton also suffered large decline. More copper available at 10 cents, though large producers continue to hold at 10 1/4.

Conservative observers cautious, believe inability of market to follow through on last week's recovery indicates new trading range has been established.

Aluminum Co. of America up sharply to new 1931 high after report of record 1930 production; A&P also hit 1931 high on good earnings expectations. Montgomery Ward seen having chance of breaking even or slightly better in first quarter, provided early-March Easter trade was good.

Some observers saw long-term benefits from the Farm Board decision, in a more “natural” price for wheat, and possible reduction in spring wheat planting. Public participation in the market is reportedly down substantially in recent sessions. A real and lasting upturn in general business will certainly be reflected in freight car loadings, though some students contend loadings won't improve for some time after the turn in business.

Broad Street Gossip: Bethlehem Steel shareholder protests at executive bonuses seem a bit ungrateful considering that Charles Schwab left US Steel to head Bethlehem when they were in grave difficulty, putting his $25M fortune at risk, a risk that was also borne by his executives. Their success eventually enriched thousands of shareholders, and the enterprise now employs close to 100,000 in normal times. Wall Street not excessively concerned with fluctuations in brokers' loans; a moderate increase could be a healthy sign considering the market went down for more than a year on declining loans. Advice of many brokers to buy on dips and sell on rallies has done well this year, just as selling on rallies and buying on dips did well last year. A Broadway trader notes the bears, when they can't think of anything else to sell, sell Westinghouse.

Morrison & Townsend note "exceptionally profitable investment opportunities" to be found during "uncertain periods at the end of depressions"; point out that "every depression in the past has laid a solid foundation for new high levels of prosperity." Advise farsighted investment policy considering not only current returns but long-term earnings potential; recommend selected chemicals, electrical equipments, utilities, specialties including American Can, Procter & Gamble.

Commerce Sec. Lamont predicts unemployment situation will improve by mid-summer, says our European trade is "holding its own."

Harvard Economic Society says “general turn for the better is probably at hand”; sees statistical evidence of improvement, particularly in “important early moving series”; believe “business decline, if not already ended, will end in the present half year, and be succeeded by general business improvement.”

Monthly report of Conference of Statisticians in Industry, surveying over 8,000 industrial firms, finds slow improvement in Feb.; increases in production were generally more than seasonal, while consumption picture was mixed and shipments increased an almost seasonal amount.

Bank of Nova Scotia sees stage set for recovery by large supply of loanable funds in Canadian chartered banks, “awaiting the revival of commerce and industry.”

Economic news and individual company reports:

Tax picture continues to worsen; March tax collections may run $100M below estimate (about $350M vs. $450M estimated and $559M in 1930); if June runs this far below estimate, fiscal year deficit may wind up at $700M, or $200M above estimate; short-term borrowing will have to be increased.

One of Superintendent Broderick's proposed banking measures has attracted widespread support: requiring commercial banks to segregate thrift (savings) deposits. Under current law, in case of a run on the bank demand depositors are paid off first, leaving thrift accounts to be paid with the bank's “less liquid” assets. Robert Moses [became hugely controversial NY urban planner], investigator of the 1929 City Trust failure, says banks that oppose stricter regulation will in the end lose public respect and hurt themselves, “as well as inviting drastic and hostile legislation on the part of radicals.”

M. Steuer, Bank of US investigator, submits new plan for reorganization of bank as alternative to Rosoff plan; details not made public. State Banking Dept. has been selling a few Bank of US bond holdings as opportunities arose; study of remaining holdings indicates sales prices will be substantially below values on books.

Farm Board Chair. Stone says their announcement was made now so farmers could take it into account when planning spring wheat crop; believes US wheat prices may now work down to world levels, which would be about 50 cents for July wheat. Board may have 250M bushels on hand by July 1 at average cost of 92 cents; supporting the 1931 crop might have required doubling holdings, for which Board had neither the money nor the storage. Board says it will handle surplus so as to minimize burden on prices; it's expected to hold on to it. Chair Stone says Board has not decided on policy for upcoming cotton crop; it's expected to abandon stabilization of that as well.

Texas Railroad Commission to meet Mar. 24, expected to extend curtailment to new East Texas fields; oil shares firmer. Negotiations among oil importing cos. and Federal govt. on curtailing imports continue; no agreement yet reached.

Commerce Dept. reports US installment selling, criticized by some economists, has weathered depression well. Annual installment credit is about $4B; average bad debt loss on installment accounts was 2.9% in second half of 1930 vs. 2.5% in 1929.

Nat'l. Industrial Conf. Board estimates US total wealth in 1929 of $361.8B and income of $84B; per capita wealth $2,977 and income $692.

Number of US lives insured has increased from under 500,000 in 1880, to 3M in 1900, to 35M in 1931, with total risks of $103B.

Worldwide oceangoing merchant marine fleets increased in 1930 by 220 ships totalling 1.733M gross tons; Britain maintained commanding lead with 18.2M gross tons, while US followed with 9.3M.

Canadian report: Dominion Statistics Bureau reports very poor 1930 year for rails; revenues $450.4M, down 14.9%; net revenues $72.9M, down 27.1%; payroll $256.4M, down 7.8%; passenger traffic lowest since 1909. Feb. building permits in 61 cities were $5.9M, down 21.1% from Jan. and down 33.5% from a year earlier. Total amount owed by Western Canada wheat pool last Sept. was over $68M.

Bank of England able to purchase more gold.

Norwegian Whaling Co. decides to suspend all hunting in coming season because of serious industry overproduction.

Nebraska House passes bill to prevent chain or corporate ownership of farms; State Senate passes law on unfair trade practices aimed at grocery chains.

Over 20% of Ford employees invest in a company-sponsored $20M investment fund that guarantees at least a 6% return. Henry Ford says if more businesses offered their workers this type of opportunity, “there would be far less appeal in the false Bonanza schemes that are exploited.”

Companies reporting decent earnings: Kaybee Stores, New River Co. (coal mining), H.F. Wilcox Oil & Gas, Montreal Tramways, Hudson & Manhattan Railroad (commuter rail).


Charlie Chan Carries On, starring Warner Oland - follows "obvious and mechanical" technique traditional in mystery plays of pointing "finger of suspicion ... alternately at every character involved," but competently produced and moderately entertaining.


'I want to do something that will encourage the conversational abilities of my guests.' 'That's easy; have a musical performance.'

Candidate for naturalization - My nickname is Vazil Ferencsik. Examiner - But your full name will have to go into the official records. Candidate - All right. My real name is Vazil Raska Feraravoceinemoozuigearmociccoui. I'll spell it for you. Examiner - Your nickname will be satisfactory.

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