April 24, 2010

Friday, April 24, 1931: Dow 157.43 +1.06 (.7%)

Assorted historical stuff:

Editorial: Under-Sec. of State Castle's statement that the US would "undoubtedly take part" in the world disarmament conference in Geneva next year was reassuring, since it implies the US role will be more than just "passive representation by an unofficial observer"; apparently Washington plans to "lend its official aid to this intensely practical phase of the world's striving for assured peace." Even more significant is the attitude reflected in Castle's speech: "Some of you think ... that the idea of universal and permanent peace is a dream ... But to those of us in the thick of international affairs, it does not seem so impossible." It must be remembered this is the statement not of a "dreamer nor of a woolly-minded pacifist," but of one of the most experienced and professional diplomats in the State Dept., known as an effective, "hard-boiled" negotiator. If he's convinced of this, "shall laymen dismiss the idea as a delusion?" In the matter of reducing land armament, the US has little to offer but encouragement, but this may in fact enhance her influence as a disinterested party.

Possible precedent seen in plan to stabilize oil industry by interstate compact curtailing production with approval of Congress; this would be a way to avoid antitrust restrictions. While success is far from assured, if plan works it might be applied to other industries including coal and agriculture. However, Congress is likely to demand consumer protection against price rises, which may be more than the industries care to trade for antitrust immunity.

Editorial by T. Woodlock: “Fetish” of competition is keeping rail transport expensive. Rails currently earn a clearly inadequate return of about 3% on investment, and have already done most of the modernizations possible to cut expenses. The only remaining way to cut a large amount from the expense side is to get rid of the excessive and circuitous routes that are maintained because of the strange US fixation on competition in a heavily regulated industry. The public would be better off with a rail organization like the British one - perhaps 20 systems consolidated from existing rails according to geographic district. This would “undoubtedly save immense amounts of money” and allow for “lower rates - probably much lower” than possible under present conditions.

Democratic Nat'l Committee to start drive for $1M to eliminate deficit of $650,000 and enable committee to remain active up to next national campaign.

Fed. Reserve Gov. Meyer says discussions with Bank of England Gov. Norman during his US visit didn't lead to any “international understandings.”

British govt. suffers third defeat in two days in vote on agricultural land-use bill.

Lufthansa to install 10 new crude oil airplane motors developed by Prof. Hugo Junker in regular service after successful tests.

"Professional" rainmakers still find some suckers ready to believe rain can be invoked by incantations. However, chemical engineers have discovered a way of enticing sufficient moisture from the air to help dusty roads, if not farmers. Calcium chloride has the property of deliquescence - attracting moisture from the atmosphere due to its strong affinity for water. Two applications of the white powder to roads during summer months attract enough moisture to settle dust.

There's a new type of wood on the market - a thin sheet of choice, genuine cabinet wood mounted on fabric, flexible and practical as canvas. Available in pine, mahogany, walnut, etc., it can be installed over metal, plaster or tile. The manufacturers claim two coats of shellac and wax give it a finish to rival the finest cabinet woods, at one-tenth the cost. So now if you want wood paneling for your next redecorating project, you can just call the paper hanger.

Construction of a new Buenos Aires subway, second in the city, is an international affair. The 2,500 workers there represent 34 nationalities and speak 37 different languages. The project was financed, to the tune of $20-$30M, in NY City.

NY Gov. Roosevelt signs NY City Transit Unification Bill; Transit Commission likely to start hearings in May; final plan may differ sharply from tentative Untermeyer proposal; if Gov. signs the Thayer Amendment, unification may be through private corp.

NY City authorizes construction of four new 1,000 foot piers on the Hudson between West 48th St and 54 St, and a 925-foot one at West 56 St.; construction will take 2 1/2 years and cost $17M. Docks are to be used to provide berths for new transatlantic ocean liners now under construction.

Public school systems around the country are giving more attention to music and music appreciation. The NY City Board of Education recently installed pipe organs in seven public schools to assist in musical programs.

Market commentary:

Market wrap: Stock trading picked up substantially; day's volume of 3.8M shares was highest since Mar. 6. Trend was down most of the session, with new bear market lows hit in majors including US Steel and NY Central. Attempt at a rally about 11 o'clock fizzled, and selling broadened across the whole market around noon; trading turned "highly feverish" during mid-day, switching between highly active and very dull with "disconcerting abruptness." Another selling wave broke out in early afternoon, forcing US Steel below 125. Last hour saw sudden reversal following reports Fed. Reserve of NY might lower its rediscount rate from 2% after the close (proved to be unfounded); shorts urgently covered, leaders rallied sharply, and pressure lifted across the list. Bonds moderately active, prices continued to diverge according to grade; US govts. rose, reaching new highs for 1931; foreign list active, mostly steady although Australian issues continued fractionally lower; corp. highest-grade relatively strong but much of the list crumbled, with many record lows; amusement and lower-grade rail issues particularly weak. Commodities mixed; grains down substantially; cotton little changed. Copper had small amount of buying at 9 1/2 cents, with larger producers still asking 10 and largely out of the market. Coffee continued strong rally; uptrend over past five days has added $50M to value of world inventories. Silver rose 1/2 cent to 28 7/8.

Market observers increasingly advise against short-selling, anticipating technical rally; however, recommend using such a rally to reduce any long positions. Needless to say, buying is discouraged, and the sidelines recommended, until market clearly indicates a strong turn.

US Steel seen likely to maintain dividend in spite of not earning it over past two quarters; in 1929-30, it earned $14.64/share in excess of dividends (current annual dividend rate is $7). Westinghouse broke badly on announcement of $2.9M loss in Q1. Chrysler stock has been acting relatively well recently, reflecting reports of increasing sales each month this year and increasing market share. Reynolds Tobacco sales reportedly rising after extensive advertising campaign was recently started. Gold shares continue generating favorable comment at brokers; Alaska Juneau is holding near a several-year high.

Dow theory adherents are closely watching action of leading rails, which have been "foreshadowing the trend of the general list with extraordinary accuracy over the past year" and also predicted the ultimate bottom in the 1920-21 bear market. Rail fundamentals look somewhat more encouraging based on expected substantial improvement in March earnings, though outlook is clouded by dividend uncertainty.

Demand for high-grade preferred stocks continues to strengthen; they make up most of the recent new yearly highs lists, and many are at record highs.

Symington & Sinclair say world rubber output still well above demand; only bright spot is that almost no producers are profitable, so situation should correct itself.

C. Stone, chair. of Stone & Webster, says US business needs further coordination and systematization. However, expresses confidence in future and predicts upturn, once underway, will be extremely rapid and carry country to new high levels of prosperity.

G. Roberts, Nat'l City Bank VP, says wage rates must be readjusted lower, particularly in manufacturing industries, to return to equilibrium and real prosperity.

Economic news and individual company reports:

Fed. Reserve reports seasonally adjusted index of industrial production was up 2% in March to 88% of the 1923-25 average, vs. 104% in Mar. 1930. Industries showing larger than seasonal increases in employment and payrolls from mid-Feb. to mid-March included steel, automotive, textiles, and shoes. Money in circulation Apr. 22 was down $11M to $4.618B, total Reserve Bank credit outstanding up $16M to $911M. Member banks in NY City report brokers' loans down $5M to $1.844B; loans on securities to non-brokers down $46M to $1.713B.

Dow average of 8 iron and steel products was unchanged at $44.23, low for 1931. Steel scrap markets report very little buying and softer tone; this confirms opinion steel activity has peaked for the first half.

Pennsylvania crude oil purchasing price cut 15 cents/barrel to $2.

Fairchild Service forecasts cotton acreage at 40.722M acres, down 11.9% from last year.

City Ice & Fuel reports refrigerator rail car shipments are showing substantial increase, counter to downtrend in passenger and freight traffic.

Foreign currencies strong, particularly sterling, after Fed. action lowering buying rates on bills; further shipments of gold to NY from France seem unlikely.

Bank of England has been selling securities in open market operations to support bill rates; it's evident central banking authorities are trying to widen the spread in money rates between London and NY with the idea of cutting off French gold flow to the US and aiding sterling. However, at 124.35 francs/pound, sterling is still well below the point where gold would be exported from France to Britain (124.45).

Brazilian gold reserves reportedly exhausted; milreis currency hits record low.

German unemployment Apr. 15 was 4.526M, down sharply from 4.772M on Mar. 31 and 4.972M on Feb. 28.

Mostly French group of banks agrees on $45M 25-year loan to Czechoslovakia; to carry 5 1/2% rate and be issued at 95.

Chinese Finance Min. says central bank will issue banknotes secured by incoming gold customs payments; seen as first step toward establishing gold standard.

NY Gov. Roosevelt seen vetoing up to $6M in appropriations as indications point to decline of $30M in state income tax receipts.

Ford executives deny rumors a shutdown is planned, or that company has curtailed its steel orders; reliable sources say Ford management is pleased with April results, and an increase is likely in the May schedule. Chevrolet has reportedly stepped April production up substantially from scheduled 85,000 cars and trucks.

Swedish Match [Ivar Kreuger co.] reports 1930 net of $15.4M vs. $14.6M in 1929; to pay usual dividend; 1930 a favorable year, sales largest in co. history.

Nat'l Cash Register swings to Q1 loss of $373,183 vs. profit of $912,240 in 1930.

Q1 earnings/share: GM $0.61 vs. $0.98; Studebaker $0.35 vs. $0.62; Allis-Chalmers $0.38 vs. $0.93; Caterpillar Tractor $0.55 vs. $1.79; Standard Gas & Electric $6.04 vs. $6.59; Lambert $2.81 vs. $2.76; Lily-Tulip Cup $0.79 vs. $0.77.

Companies reporting decent earnings: Standard Gas & Electric, Calgary Power Ltd., Swedish Match [Ivar Kreuger co.], Consol. Chemical Industries, Perfect Circle (automotive piston rings), Lambert (toiletries and medicinals), North Amer. Aviation, National Distillers Products (medicinal whiskey), Lily-Tulip Cup.


The Perfect Alibi - based on A.A. Milne's ingenious mystery play, at the Cameo. Unfortunately, spirit of the play is smothered by plodding direction and frequent cuts to "scenes of little importance," often in mid-conversation. Acting of C. Aubrey Smith as the victim and Warwick Ward as one of the murderers is top-notch, but Frank Lawton and Dorothy Boyd, as the young lovers who solve the mystery, are "allowed to speak their lines so rapidly that few of them are clearly audible."

God's Gift to Women - based on Jane Hinton's play, The Devil Was Sick, at the Beacon and Brooklyn Strand. Frank Fay plays Jacques, a modern day Don Juan in Paris. Jacques falls in love with American heiress, Diane, but must prove to her father that he is worthy of her. Fay's gift for farcial pantomime is "almost entirely smothered beneath a silly story and distressingly ancient situations." Cast is able, considering the vehicle, including Laura La Plante as the heiress and Joan Blondell and Louise Brooks as former sweethearts.


Young Sinners - by Elmer Harris, first in a proposed series of revivals for $1 or less. Dorothy Appleby stars as Constance Sinclair, "the precocious, exaggerated 17-year-old heroine of this distorted picture of modern youth"; Jackson Halliday takes the male lead as Gene Gibson, the under-age rake who is the "excuse for a series of lessons in physical culture and sex hygiene." [Note: at least the title appears to be accurate for once.]


"Motorist (changing tire) - Oh, Muscle Shoals. Passerby - Why Muscle Shoals? Motorist - It's the biggest dam I know of."

"Master - Did you throw out that bootmaker when he came with my bill? Servant - Yes, sir; but he's here again with a bill for me, so now perhaps you would throw him out, sir."

"Housewife (engaging new girl) - I hope you had no quarrel with your last mistress when you left her? The Girl - Oh, no. She was taking a bath and I just locked her in, took my belongings, and left."

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