March 11, 2010

Wednesday, March 11, 1931: Dow 183.63 -1.75 (0.9%)

Assorted historical stuff:

Editorial: The Senate, by its "absurd rules" giving a single Senator the power to block any pending legislation for as long as his physical strength holds out, has "robbed itself of parliamentary virility." In most recent example, Sen. Thomas of Oklahoma took the floor on midnight of Tuesday last week to move for investigation of the oil industry, and held it until Congress adjourned, blocking action on several important measures without accomplishing anything.

Editorial: Senate's postponement of action on World Court means US "remains three long steps behind the leaders in the world's endeavor to render war unlikely." Adherence of the US to the World Court, under the 5 Senate reservations, is desired by decisive majorities of both the people and the Senate; "shabby exigencies of domestic politics" shouldn't be allowed to delay approval beyond next session.

Editorial from Sat. Evening Post: The Russian Five-Year Plan is a misnomer, since it's being moved ahead by our own capitalists. “If the Five-Year Plan succeeds, it will be with the help of American engineers, experts, machinery, and money ... it will be at the expense of the American farmer, laborer, and manufacturer.”

Soviet ship with cargo of lumber to test Sec. Mellon's embargo on prison-made goods; will have to prove only free labor was involved in production.

Dr. H. Moncado, Filipino Fed. of Amer. head, tells NY Times he has been assured by Sen. King and Rep. Knutson that majority of Congress favors Philippine independence; believes next Congress may take action.

Washington report: It now appears the only way to end Prohibition may be through repeal of 18th Amendment; quicker methods such as legal challenges or modification appear unlikely to succeed. Repeal process is likely to take several years. Effect of State Dept.'s decision to launch new study of Russia uncertain. Last official statement 8 years ago said Soviets must recognize debts of former govt. and discontinue propaganda within US before recognition.

Story by H. Alloway on death of banker Andre Lazard, head of Lazard Freres, remembering him as postwar advocate of liberality in dealing with defeated nations.

Radio Corp. of America reports sharply lower 1930 income due to decline in consumer buying power; however, co. in stronger financial position and launching intense development program. Radio manufacturing has been unified and balance sheet is in better shape. Television has been repeatedly demonstrated in the lab, but further development is needed before production. Ready to begin production of home sound movie theatre systems as soon as system of film distribution to homes is available; eventual market may be 20,000 "little theatres" in homes. Developed home recording phonograph. Successful experiments on transmission of facsimiles to ships at sea. Nat'l Broadcasting Co. subsidiary now profitable, as is RCA Photophone sound film system. Antitrust suits ongoing.

Canadian Nat'l. Research Council reports new process for making industrial alcohol from natural gas wasted in oil fields.

Incoming calls to the new Western Union skyscraper are handled by a "robot" that automatically detects a call on any one of 120 trunk lines and transfers it to an operator in the order received.

Rear Adm. Byrd reportedly planning another expedition to the Antarctic.

Goodyear Zeppelin to operate daily sightseeing dirigible from NY City to surrounding towns.

Average wage of women working in 5 and 10 stores is $12/week; average wage in 32 department stores is $26.17/week for men and $16.13 for women.

The NY Central supposedly offered Lincoln $10,000 a year to be their general counsel just before he was nominated for President; Lincoln replied "It would ruin my family to have that much income."

The 71st Congress spoke 40.5M words; cost of printing 36,000 copies of them in the Congressional Record was $758,693.

German Reformed Church in Byron, Ill. has been modernized by their youth. For 40 years of Sunday services, men have been made to sit on one side of the church and women on the other; now, they will be permitted to sit together.

Wall Street Athletic Assoc. to hold annual Basketball League championships Mar. 10-18 at the Brooklyn Elks Club; dancing to follow.

Market commentary:

Market wrap: Stocks moved ahead impressively for most of session, with utilities particularly strong; however, rally was checked by heavy selling in Allied Chemical over earnings outlook; some high-priced shares declined sharply; stop-loss orders were uncovered, adding to the selling; final tone was weak. Bond trading more active; US govts. quiet, steady; foreign active, generally higher; corp. high grade firm; speculative unsettled, continued weakness in amusements. Commodities weak; grains off moderately; cotton down substantially. Copper remains at 10 1/4 - 10 1/2 cents, with large producers holding at the higher price. Silver rose again to 29 3/4 cents.

Conservative observers pointed to late reaction in stocks as confirming their advice to use stop-loss orders; continue to recommend sidelines.

Bulls encouraged by expanding auto production, drought-relieving heavy snows in the Midwest, anticipated veterans' bonus spending, more optimistic international feeling, and "philosophic manner" in which market received worse than expected US steel unfilled orders report.

Bond offerings of $75M by NY Central RR and $50M by Pennsylvania RR well received, as was the $66M Port Authority of NY issue.

Leading stocks appeared to run into resistance when reaching new rally highs. Market has recently been unable to follow through on either rallies or declines, leaving a market where profits are to be had by the more nimble traders while others are "whipsawed." Some observers feel continuation of this range-bound market is an increasingly strong indication of consolidation before another advance. Many observers are still puzzled by conflicting indications on how far the currently moderate improvement in business will extend; a large number are remaining on the sidelines until definite evidence appears.

Broad Street Gossip: Country has "billions of idle money" as seen in record savings bank deposits and ease with which new bond issues are sold; "To bring things back to normal, the dollar must be put to work, and recent developments show that the dollar is getting a little more active." The Old-Timer observes: "Many traders have taken their heaviest losses, because of their successful efforts in dodging the margin man." Six representative brokerage firms report margin calls are at a record low. Year has started off fairly actively for stock trading; veteran traders predict numerous 5M-10M share days assuming business turns up.

Editorial: London Times criticism of US for recent lack of lending to rest of the world is "not without foundation," but situation should soon reverse. Factors behind lending slowdown include decline in securities markets and international political instability; "both are now in a fair way to recede more or less into the background."

German banking circles optimistic on improved prospect of long-term loans. Political situation has also improved; authorities say Hitler hasn't availed himself of political opportunity; while Nazi element continues to be a menace, influence of the party is waning. Stocks and currency have strengthened.

Improved prospects seen of Britain replenishing gold holdings.

G. Roberts, National City Bank VP, says highly complex modern economic system provides much higher standard of living but sometimes becomes imbalanced due to complexity. Disagrees with idea of limits to growth; “There is no limit to human wants ... or to the amount of wealth that may be created ... The only danger of overproduction is unbalanced production.”

Economic news and individual company reports:

Federal indictments for violation of national banking laws returned at Greenville, Tenn. against Rogers Caldwell of Caldwell & Co. [collapsed in Nov.] and Col. Luke Lea, Nashville publisher and political leader.

Bethlehem Steel executive bonuses become subject of another stockholder lawsuit, this one in NY Supreme Court by S. Hopkins. Suit claims directors and officers received $31.9M while only $43.3M was distributed to stockholders in dividends.

Ford and Chevrolet continue seesaw battle for supremacy. Ford regained lead in Sept. 1928, when Model A overtook Chevrolet 4-cylinder cars; Chevrolet retook lead in Dec. 1930; preliminary Feb. figures indicate Chevrolet will maintain lead but struggle looks likely to tighten in the near future. J. Mooney, GM VP, reports substantial improvement every month since Dec. in GM European sales.

US Steel unfilled orders ending Feb. were 3.965M tons vs. 4.132M Jan., 3.944M Dec., and 4.480M a year ago; decline was greater than expected. Steel authorities hope for increased production in March, but say this may be first-half peak unless demand improves. Smaller producers reportedly cutting prices again.

Rail freight loadings for week ended Feb. 28 were 682,000 down 31,958 from prev. week, down 24.1% from 1930 week, and down 30.2% from 1929; comparison misleading due to Washington's Birthday. Total class 1 rail operating income in Jan. was about $35M, lowest month since 1922; showing was disappointing since gross only declined 3.4% from Dec. while net declined 35.4%.

Banking reports show total loans and investments of Fed. Reserve member banks now $22.621B, only $155M below Jan. 7, vs. $531M decline last year in the same period; Fed. Reserve easy credit policy continues. Banks appear concerned with strengthening their positions; in period since Jan. 7, security loans are down $380M, and "all other" loans down $243M, while on the other hand govt. bonds are up $355M and other bonds up $113M. Rise of $17M last week in "all other" loans was first sign so far of seasonal increase in business credit.

Interesting review of security loans over past few years. Commonly cited ratio of brokers' loans to total stock value fluctuated between about 8% and 10% during the bull market, actually declining from 9.75% on April 1, 1929 to 8.79% near the peak on Sept. 1; it's now at 3.22%. However, the more comprehensive ratio of total known security loans to total value of stocks and bonds has been much more stable, remaining between 9% and 10% for most of the bull market, hitting a peak of 10.5% on Nov. 1, 1929, and only in the past two months falling below 8%.

Refineries ran at 60.8% in week ended Mar. 7; stocks of gasoline increased 997,000 barrels to 45.789M. Crude oil production in week ended Mar. 7 was 2.157M barrels/day, up 51,800 from prev. week but down 378,650 from a year ago. Many major oil cos. follow drastic oil purchasing price cuts by Standard of Indiana and Union Oil. Representatives of 7 oil producing states met in Texarkana to discuss ways of putting oil industry on sound basis; suggested modifying antitrust laws and restricting imports. Oil importing companies may agree to voluntary restriction of imports to avoid legislation. Los Angeles independent stations reportedly selling gasoline at five cents a gallon.

Commerce Dept. reports no general upturn in world trade, but a few encouraging Feb. reports from Japan, China, Australia, and Canada; however, French unemployment rose sharply.

Annual world consumption of machinery estimated at $5.5B, of which US accounted for $2.5B.

US aluminum production in 1930 was 229M pounds valued at $51.0M, vs. 225M valued at $51.9M in 1929; about 44% produced at plant in Messena, NY.

Feb. postal receipts in 50 cities were $26.4M, down 10.4% from 1930.

NY State Industrial Commissioner F. Perkins reports NY factory employment up 1.4% in Feb., slightly better than usual seasonal gain but 16% below Feb. 1930.

Florida state and local officials to meet with Jacksonville City Commission to discuss ways of dealing with Florida's $600M bonded debt (51% municipal). Resulting taxes, mostly on real estate, "have in a measure destroyed the value of real estate" and damaged building-related industries, the largest Florida employer.

Mack Truck cuts quarterly dividend from $1.00 to $0.75; says first-quarter earnings will be poor but sees "very evident signs ... of a substantial improvement."

Companies reporting decent earnings: Equitable Office Bldg., International Cement.

At the galleries:

Third Annual Antiques Exposition enjoys smashing success, with attendance estimated double last year. Gallery Zborowski of Paris makes NY debut with exhibit featuring group of unusually fine portraits by Modigliani. Mr. Zborowski was “at the crucial period of Modigliani's pathetic career, his most ardent champion ... even to the selling of his own personal effects to supply funds and food materials for his protege.”


Unfaithful - "The screen's most proficient actress," Ruth Chatterton, is "handicapped by an unworthy scenario" involving marriage to a straying English lord, falling in love with a young artist, and a conveniently fatal car accident that allows a happy ending. Casting of Paul Lukas as the romantic lead is interesting, since he's previously played suave villains; "casting such types in romantic parts occasionally should add a welcome note of variety."


"Teacher - If a number of cattle is called a herd, and a number of sheep is called a flock, what would a number of camels be called? Little Johnny - A carton."

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