March 25, 2010

Wednesday, March 25, 1931: Dow 186.00 +1.68 (0.9%)

Assorted historical stuff:

Editorial: Sen. Borah has recently opined "We should be legislating," calling for a special session of Congress based on report of over 6M unemployed. However, this figure wasn't that much of a surprise, and other recent news such as the increasing Treasury deficit would probably be studiously avoided if Congress was still in session. Much of the extra-session pressure is coming from bodies such as the People's Lobby, which says: "American business stands self-convicted and our traditional system of government large-scale doles to nearly every property and producing interest must give way to the needs of consumers." Groups like these "would put their hands into the public till, to distribute its contents according to the ideas of social justice held by those who indict all American business." A special session under such auspices would do nothing but harm. Delegation of Socialist and Liberal groups urges extra session of Congress to relieve unemployment through $500M dole fund; seeks audience with Sen. Watson and House Speaker Longworth.

Washington report: House and Senate leaders have been implying that tax hikes can be avoided due to improved business and by ending the sinking fund [paying down the national debt]. This is doubtful; this year's deficit will be about $700M, or $300M without the sinking fund, and dramatic increases in tax revenue are unlikely. "Like an individual, the government borrows more easily and more cheaply when it borrows moderately." When borrowing rises, so will interest rates; govt. has already been forced into too much short-term borrowing. Farm Board's statement was light on practical information about how it will carry out decision to stop stabilization and deal with huge surplus it holds. Considering political storm it has aroused, the statement may be "little more than an expression of hope."

Editorial: Gov. Pinchot's fervent assault on the electric power industry continues with his latest bill, the "Magna Charta of Pinchotism" calling for an elected power commission in Pennsylvania. This would invite utilities into the political arena and cause "tenfold more rate litigation. ... Even Gov. Pinchot's admirers must be puzzled to know whether it is effective regulation or a political issue that he wants." Editorial by T. Woodlock: An essential point for ensuring a fair test of govt. electric development, in the St. Lawrence case in NY and in general, is that the public power authority, while having some govt. functions and powers, shouldn't have access to the govt. taxing power, for example by having its bonds guaranteed by the state. This will allow a market verdict on soundness of the project. “Will that satisfy the advocates of public ownership? It will not - and we all know why.”

Moscow reports Soviet five-year plan target for petroleum production exceeded in third year; this year's total to be 27.5M tons, 6.7M above earlier estimate; production estimate for 1933 raised from 21M to 46M.

Austrian govt., in response to protests over customs union with Germany, invites all European nations to join. Union is to take partial effect Jan. 1932; ratification is required by both parliaments.

Richest man in France appears to be F. Coty, displacing Baron Rothschild; extent of fortune unclear, but it's estimated he made $50M from perfume manufacturing, and he has other interests including ownership of two of the best selling French newspapers.

Nat'l Air Transport and Boeing Air Transport to begin 31 hour direct all-air passenger service between NY and San Francisco on April 1.

A highlight of the huge Ford River Rouge plant is the system for rustproofing parts and distributing them to freight cars for shipment to the 36 assembly plants. A huge conveyor chain 1,800 feet long carries parts through an enormous chemical bath; the chain then runs parallel to the open doors of a long line of freight cars, each of which contains one or more men with lists of parts to be grabbed off the chain and loaded. Workmen call the chain the "clothesline."

The Nautilus, a submarine being prepared by Sir Hubert Wilkins to travel under the North Pole, will carry a GE refrigerator.

Metropolitan Life Ins. reminds customers there are more nonfatal accidents in the home than anywhere else, and the most common place for home accidents is the bathtub. Notes interesting US bathing trend - every night is now bath night, with only 1/7 of accidents occurring on Saturday and the rest evenly distributed.

Mexican doll menace - USDA inspectors find "brown spot disease" fungus on doll made of corn husks and silk.

Knute Rockne to join Studebaker as sales promotion manager; job won't interfere with coaching at Notre Dame but will require ending his work as stockbroker.

J.P. Morgan's yacht Corsair left Monte Carlo for Naples with Mr. Morgan and the Archbishop of Canterbury aboard.

New Irving Trust building at One Wall St. features 20 by 66 foot allegorical painting on ceiling of entrance hall depicting power of wealth to create beauty.

Market commentary:

Market wrap: Stocks opened weakly, with leaders declining early. However, selling dried up quickly and rallying tendencies cropped up about noon, led by major rails but quickly spreading to the general list; leading industrials scored good recoveries; shorts in Westinghouse and B. & O. were "thrown into urgent retreat" while Auburn advanced sensationally. Rally gained strength through the afternoon and market closed strongly. Bonds active, prices heavy; US govts. dull, slightly lower; foreign and corp. highly irregular, mostly lower. Commodities steadied; grain trading more active after Farm Board announcement, prices narrowly lower; cotton little changed. Copper now generally at 10 cents/pound; foreign buying more active. Silver up 3/4 cent to 30.

Conservative observers still cautious, believe market will stay in recently established range.

Bond weakness attributed to banking community disturbance over possible state law requiring commercial banks to segregate savings accounts.

Bears and bulls continue active contest; bears still fighting advances while bull pools reportedly intend to continue operations through first 10 days of April. Bears can look to two periods in the next month that may be tough on the market - dividend meetings by many major companies, and first-quarter earnings reports. Both of these will likely be generally unfavorable.

Bulls encouraged by market's ability to absorb bad news without "losing its equilibrium." The long-feared Farm Board announcement Monday passed without much disturbance in stocks. While upcoming earnings reports will likely be poor, much of the worst dividend news has already become public.

Shopping reports over the next two weeks will be followed with interest; better demand for seasonal good is expected, particularly since Easter falls early this year. Lower-priced chains, including Kresge, W.T. Grant, and particularly Woolworth, are expected to do best due to ongoing consumer caution.

Sugar shares strong. Producing countries to meet with T. Chadbourne in Paris on forming permanent stabilization commission. Major US refiners raise prices.

Aluminum Co. of America continued sharp rally, rising 15 to new 1931 high of 219.

Broad Street Gossip: Textile industry has been doing poorly for a decade or more; textile shares used to be popular since industry was country's largest in employment and in value of production. Poor showing attributed to "overproduction, foolish competition, and lack of stabilization." Recent improvement is encouraging; returning the industry to prosperity would greatly benefit the country as a whole. One thing to bear in mind when reading poor annual reports of industrials is that in many cases most of the earnings drop was due to inventory writedowns, not to earnings from operations.

Britain is understood to be reluctant on international silver stabilization conference; believes any agreement to curtail Indian exports would benefit producing countries at India's expense. Montagu Norman, Bank of England Gov., may discuss the issue on his upcoming visit.

I. Bush, Bush Terminal Co. pres., returns from six weeks European trip; reports economic conditions showed little improvement, but saw marked change in public confidence, strong undercurrent of optimism all over Europe.

P. Weld, NY Cotton Exchange pres., says reduced cotton planting and increased use will push up prices by Oct.

Economic news and individual company reports:

Gov. Roosevelt sends special message to Legislature advocating requiring commercial banks to segregate savings accounts; also sends appeal from Superintendent Broderick for $150,000 to appoint 30 additional bank examiners. Roosevelt's message drew onslaught from legislators accusing him of blaming legislative laxity for bank failures. Two Bank of US stockholders sue Broderick for $50,000 damages charging neglect of duties as banking superintendent.

Federal Farm Loan Board says a relatively small fraction of loans now on the books of Federal and Joint land banks were made when farm land value was highest.

Dividend announcements by Westinghouse and B. & O. expected today.

New NYSE stock listings in Feb. were $44.3M vs. $148.6M in Jan. and $725.7M in Feb. 1930, lowest total since Dow-Jones monthly record was begun; Feb. bond listings were $172.5M vs. $40.0M and $153.6M.

Rail freight loadings for week ended Mar. 14 were 734,262, up 10,728 from prev. week, down 16.6% from 1930 week, and down 23.4% from 1929.

Refineries ran at 64.3% in week ended Mar. 21; stocks of gasoline increased 937,000 barrels to 46.758M. Crude oil production in week ended Mar. 21 was 2.268M barrels/day, up 77,500 from prev. week but down 267,850 from a year ago. Majors cut gasoline price on Atlantic seaboard.

Structural steel orders for first 11 weeks of 1931, including the 125,000 ton "Radio City" order, were 440,000 tons vs. 340,000 in 1930; about 700,000 tons of new inquiry developed in the period, vs. 300,000 in 1930 and 500,000 in 1929, so about 260,000 tons of potential business was added. Trend of highway construction is to the overhead and underpass types to handle city congestion; these are heavy consumers of steel.

Nat'l. Industrial Conf. Board estimates US total wealth in 1929 of $361.8B was 32.8% over that of 1914 in constant dollars; this "represents tangible, physical assets only, excluding credits and securities." National income of $84B was 59.2% over 1914 in constant dollars; this "is the aggregate value of all commodities produced and services rendered to which a price is commonly attached." Top state in per capita wealth was Nevada, $6,318; bottom was Miss., $1,242.

Nat'l Assoc. of Real Estate Boards is waging attack on disproportionate local real estate taxation, advocating state income taxes as more equitable.

Peru likely to default on bond payment due Apr. 1, joining Bolivia as second S. American country to default in 1931.

Bank of England able to continue buying gold; has replenished holdings by about 2.2M sterling in past week.

Registered British unemployed Mar. 16 were 2.640M vs. 2.692M Mar. 9 and 1.622M a year ago.

Bank of Montreal reports Canadian external trade in Feb. was $95.9M, down 36% from 1930; unemployment still high but improving.

NY State and local tax bill in 1929 was $1.089B, of which $252.9M was for state use, and $634.2M for cities.

Four Boston banks cut rates on savings deposits 1/2% to 3 1/2% due to reduced yields on securities in which deposits may be invested; this follows the current trend in other financial centers.

US Steel in 1930 paid out $391.3M in wages and salaries, and $85.6M in dividends.

Chrysler March sales reportedly running about 50% over Feb.; shipments likely to reach 24,000 vs. 16,000 in Feb. and 10,000 in Jan.; shipments in Mar. and Feb. 1930 were 33,778 and 23,105. It's likely dividends are now being earned by a comfortable margin. Further improvement expected in April and May.

Middle West Utilities benefitted from wide diversity in territories served; revenue and earnings continued to grow in 1930, though at slower rate. “Other income” from financial operations and ventures into outside fields has become increasingly important, and in 1930 reached $11.4M, vs. $20M of “normal” income. [Note: Blew up in 1932.]

Paramount is launching aggressive talking picture production schedule, with 8 features now filming, 5 starting next week, and 3 being edited.

Companies reporting decent earnings: Houston Natural Gas.

At the galleries:

NY Art Dealers exhibition of over 100 old master paintings valued at $3M has generated tremendous interest among collectors. Dr. Valentiner, in the catalog introduction, notes that a European museum possessing this collection would be a must-visit, but they represent just a selection of those available; in fact, if all the treasures "in the possession of art dealers in the different European centers be brought together, one may question whether the aggregate would attain the proportions of the rich store housed within the few blocks around Fifth Avenue and Fifty-Seventh Street."


Man of the World - Starring William Powell, a "great boon to the talkies," because he isn't suited to playing stereotypical hero roles; his portrayals are non-sentimental and realistic, with genuine human frailties. Latest Powell character is the suave blackmailer who earns his living "by his wits." While story has the customary love interest, played by Carole Lombard, writer Herman Mankiewicz is to be praised for "sacrificing the more comforting happy ending for the sake of credulity and common sense."


"Mistress - I shall want you to help at my dance on the fifteenth. New Maid - Yes, ma'am, I will arrange to have dancing lessons at once."

A stockholder's complaint regarding repeated dividend cuts: "Your dividend policy is like that of the man who cut off his dog's tail a little at a time to make the operation as painless as possible."

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