March 18, 2010

Wednesday, March 18, 1931: Dow 180.61 -3.00 (1.6%)

Assorted historical stuff:

Since Prohibition was adopted in the US, tourism has become one of Canada's largest industries. In 1930, 5.4M cars carrying about 21.5M tourists crossed into Canada, vs. 4.5M cars in 1929. The Ontario govt. made a net profit of $7.5M on sales in its 120 liquor stores, which it hopes to increase to $10M this year.

Editorial: As noted yesterday, "a decade of tax rate reduction and rapid retirement of the national debt has definitely ended." Higher taxes will likely be required for several years; deflation makes things worse by reducing tax revenue for the same volume of business. Congress faces the hard job of readjusting spending to the new price level so it can aid recovery by cutting taxes instead of raising them. One crumb of comfort is that debt was reduced from $25.5B to $16B in the good years.

Editorial by T. Woodlock: Hits price-support schemes, which have perhaps never been so widely deplored yet so much in use. “Capital must have the discipline of pressure. Ease the pressure in the slightest and capital rushes in like a storm into an area of low barometer.” Price fixing systems merely prolong the agony of inefficient producers, with no advantage to anyone; relief, if necessary, should be given by means other than price fixing, even by the dole if we must, rather than “valorization” or “stabilization.” The US has some trouble accepting these ideas, possibly due to generally soft living conditions compared to the Old World. In fact, the US harbors a set of ideas that “together make a most incongruous mess.” We want abundant and cheap credit for all, especially the “little fellow,” but safety and high interest for our bank deposits; everyone is entitled to go into any line of business and succeed, and if he doesn't, it's the fault of a “big fellow”; and so forth. “We could do with a little more hardness of head in our economic thinking.”

Washington report: Issues involved in the electric utility dispute are becoming clearer. Pres. Hoover is looking to extend regulation of power companies to fill in gaps where states can't act, particularly interstate business. On the other hand, Progressives say regulation has failed, since power companies "regulate the regulators." Power companies have a solid legal basis for rates, which would be hard to lower by law; therefore, Progressives are attacking indirectly, hoping that govt. run competition will force utilities to lower rates. There's little basis for the speculation on whether Progressive support for Roosevelt would help him in 1932; in the past, support of Progressive Senators hasn't even enabled Presidential candidates to carry the Senator's own state. Sen. Borah (R, Idaho) says believes any agreement to restrict oil imports or curtail production would be illegal restraint of trade.

Four special deputy sheriffs and several strikers injured in battle with 100 striking metal workers; deputies were to escort outside workers to Phillips Petroleum.

In the war-torn section of France, all but 3,900 of the 640,000 buildings destroyed during the war have been rebuilt. Of 4M acres of farmland ruined, all but 100,000 have been restored to cultivation. About $3B has been paid in cash damages in the areas destroyed, with about $240M remaining to pay.

Ex-Kaiser Wilhelm II remains richest German despite revolution, inflation, depression, and political disturbances; fortune is estimated at 150M-250M marks vs. 140M before the war, when he was only fifth richest in Germany. Fortune is largely German industrial shares and various castles and estates.

Dr. A Stetbacher invents new explosive more powerful than any on market, and less sensitive to shock than other explosives; combination of penthrit [PETN, later used as ingredient in Semtex plastic explosive and by recent attempted shoe and underwear bombers] and nitroglycerine.

Pacific Air Transport division of Boeing will start 7-hour service between Seattle and San Francisco.

Trans-Lux opens first movie theater with “daylight” screen lighted from rear, allowing theater to be adequately lit.

Pennsylvania RR grade crossing accidents in 1930 were 564 vs. 830 in 1929 and 933 in 1928.

Bank of America celebrates 100th anniversary of purchase of present site at William and Wall St. for $70,000; land alone now valued at $6M.

The Chrysler Building in New York is piped for gas to cook, heat, etc., from the subbasement to the roof 1,046 feet above the sidewalk. A 6 inch gas main runs up to the 70th floor, with outlets on each floor. The highest gas customer is the all-male Cloud Club occupying the top 3 floors.

Market commentary:

Market wrap: Stocks advanced across the list early, but encountered resistance and then a reaction in the afternoon; selling started in rails after M.K.T passed their dividend, but spread to industrials; decline picked up momentum late and trend was sharply down at the close. Bond trading more active; US govts. higher; foreign generally strong; corp. highest grade firm, lower-grade and speculative irregular. Commodities weak; grains mixed, corn and some wheat months down sharply; cotton down sharply. Silver fell back 1 cent to 30 3/8 after sharp rally; setback believed technical.

Conservative observers pointed to market action as justifying advice to stay on sidelines.

Otis & Co. note that at the Feb. highs, rails and industrials had regained about 50% of the Sept.-Dec. decline, and at last week's low had lost half of this recovery. "This is a fairly typical performance for the first three or four months following the absolute lows of important bear markets"; similar patterns occurred in 1904 and 1908. However, important break through last week's lows would indicate relatively weaker market.

Douglas Aircraft rallied on announcement govt. will spend $18M on aircraft of various types. Reynolds Tobacco advanced on success of $1M weeklong ad campaign for new cellophane wrapped Camels. American Smelting weak on silver decline.

Brokers report more small bruins in their midst than ever before. In past bear markets, few of the public knew the mechanics of short selling, but "expansion in financial learning" over the past 10 years has widened knowledge of this tool.

Broad Street Gossip: Market has shown more resistance to selling, even in those stocks "hammered persistently" by bears. While many of last years bears remain in that camp, many have switched to the bull side. Recent buying has shown "greater assurance" than in most of 1930. In 1929, people bought then investigated; now they investigate then buy. Short interest has built up over the past few weeks; borrowing demand by short-sellers was at its highest this year. One piece of recent good news is levelling off in commodity prices since start of Feb.; this may indicate bottom has been reached.

Editorial: The trade figures for Feb. at first look very pessimistic, with trade continuing its decline since the depression's start. However, a closer look reveals some reason for hope. Much of the decline is due to price deflation; volume decline is more moderate for most goods. Also, when the depression began there was a mountain of surplus to work through; considerable progress has been made in doing this. Inquiries for goods indicate conditions are improving; longer-range planning is needed by business to prepare their selling organizations for revival.

G.M.P. Murphy: “modern banking has performed a service which has raised immeasurably the standard of living of the entire civilized world and, by the same token, has made itself indispensable for the continued maintenance of the even flow of goods and capital.”

Economists have compiled well-researched charts of money rates over the past 50 years, and have found the course of rates invariably forecasts business upturn by several months. According to that pattern, the downward course of rates that started in late 1929 should soon be followed by business recovery; the slow improvement starting last Dec. could therefore be the start of a fairly good upswing.

Sir Ashley Sparks, Cunard Steamship dir., says current serious slump in British shipping aggravated by political as well as economic factors, but worst of slump seems about over and indications point to marked improvement in spring and summer travel; construction of new 1,038 foot liner proceeding as scheduled.

Economic news and individual company reports:

Missouri-Kansas-Texas Lines [rail] passed its dividend; while this is a relatively small rail, other rails and stocks with suspect dividends declined, including B.& O., NY Central, and Westinghouse. Rail freight loadings for week ended Mar. 7 were 723,534, up 41,534 from prev. holiday week, down 17.1% from 1930 week, and down 23.6% from 1929.

$1.5M judgement granted against former pres. of failed Bancokentucky; first judgement from numerous suits regarding bank failures of several months ago. Receiver has indicated he will go after Bancokentucky stockholders if assets aren't enough to meet liabilities. Continental Shares, an investment trust business, sued by stockholder claiming mismanagement caused $38M shrinkage in assets; losses incurred by buying securities during period of industrial depression, when "ordinarily prudent business men would not have made such investments."

Income tax receipts Mar. 1-14 were $45.0M vs. $49.4M; for fiscal year to Mar. 14, $1.216B vs. $1.302B. Customs receipts Mar. 1-14 were $14.6M vs. $19.1M; for fiscal year to Mar. 14, $272.9M vs. $398.6M.

Washington hopeful on agreement to restrict oil imports in line with curtailed domestic production; all importing cos. but Standard of Indiana have agreed to reduce imports and negotiations with Stanolind are ongoing. Administration is also willing to meet with committee of oil men early in April to help work out plans for industry stabilization. Oklahoma is waiting for action on East Texas fields before extending curtailment in their state, which is scheduled to expire March 31; Texas Gov. Sterling has introduced a bill to take curtailment away from the Railroad Commission and put it under a new state oil and gas commission. Refineries ran at 64.8% in week ended Mar. 14; stocks of gasoline increased 32,000 barrels to 45.821M. Crude oil production in week ended Mar. 7 was 2.191M barrels/day, up 33,850 from prev. week but down 392,650 from a year ago.

Agriculture Dept. reports Feb. 15 farm product price index 90 (vs. 100 prewar level), down 4 from Jan. 15, down 41 from a year ago, and lowest in 20 years.

Fed. Reserve member bank statements of the past week revealed encouraging $29M purchase of non-govt. bonds, while selling $9M of govts. large scale buying of non-govts. by banks would help general bond market. Liquidation of bank loans continues, with total loans now at $15.377B, down $1.636B since Oct. 1.

New state and municipal bond issues continued to draw strong bidding.

Average yield of foreign bonds offered in the US in 1930 was 5.49% vs. 5.81% in 1929, lowest yield since 1919.

Commerce Dept. receives optimistic reports on Germany, Netherlands, and India, though gains are mostly psychological.

French $150M loan to Italy now seen unlikely; negotiations have been suspended, and Italy is now reportedly more optimistic on issuing new bonds.

NYSE seat sold for $310,000, up $10,000 from previous sale.

1930 earnings reports: GE $1.90/share vs. $2.24; Warren Bros. (pavement) $6.08 vs. $6.05; Calumet & Arizona Mining $1.46 vs. $9.17.

At the galleries:

Major exhibition of 100 paintings from NY art dealers, for benefit of Women's Fund for unemployment. Includes pieces by such prominent artists as Neri de Bicci, Rubens, Pontormo, Goya, Monet, Hoppner, Renoir, Cezanne, Segonzac, Degas, Matisse, and many others. Boston Museum of Fine Arts has unusual exhibition devoted to a woman silversmith, Hester Bateman; little is known of her life other than the record of her work from 1774-90. Arden Galleries is showing a collection of contemporary furniture and art objects inspired by early peoples of the American continent, including Mayan, Inca, Indian, and Spanish Colonial design.


Tragic death of Lillian Leitzel, who fell while doing her trademark "back hand flange" high in the air, calls attention to decline of the aerialists who once dominated music halls and circuses. Ranks of the "be-tighted gentry" are dwindling; distractions of modern life have narrowed the circus field, while movies have offered an easier medium for young talent. In the US, the Ringling Brothers have absorbed most of the other major circuses; in England, the circus is now seasonal; in France and Germany, it plays mostly in the provinces. In the 1850's and 60's, aerialist "families" were well paid and in demand. Over time, demand for thrills increased until "death defying stunts" became "death inviting stunts", including loop-the-loops with bicycles and then cars, and the turn-of-the-century Desperado, who dove from the top of the tent into a runway. Competition from movies brought even more dangerous performances, including the "human fly" who fell to his death a few years ago in NY and the "human cannonball" who died before 5,000 spectators in Atlantic City last summer after being fired from a gun in an airplane.


"'Perhaps you can tell me. What does it cost to divorce one husband and marry another?' 'I'm sorry - I don't know the present rate of exchange.'"

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