Monday, April 20, 1931: Dow 162.37 +2.14 (1.3%)

Assorted historical stuff:

Some concern on stability of Spanish govt. prompted by King Alfonso's statement: "I renounce none of my rights ... I await the true expression of the collective opinion of the people, and, while waiting for the nation to speak, I deliberately suspend the exercise of royal prerogative and take myself from Spain." Some bankers see possibility of a coup d'etat on part of the King if Republican leaders are unable to hold their position. Heavy flight of capital reported.

"Definite report" received from Russia of delayed sowing of spring grain due to difficult weather conditions.

Conference of French political leaders considers countering Austro-German union by reaching mutually beneficial accord between agrarian Eastern European states and industrial Western European ones.

Editorial: Reports from China concerning silver are hopeful, along with recent gradual rally in price. Movement of silver back from Shanghai to interior is seen as evidence of greater security and growing strength of Nanking govt. The govt. has also set up a modern mint in Shanghai, and may be preparing to start coining silver; this would indicate it's strong enough to to suppress the ten old mints scattered around the country and operated as lucrative sidelines by various military chiefs.

7,500 miners strike against Lehigh Coal & Navigation to protest closing of Nesquehoning colliery.

Editorial by T. Woodlock: Sen. Nye intends to modify antitrust laws to “protect the small manufacturer ... and merchant.” This is a misunderstanding of the laws, whose purpose is to preserve competition and competitive prices, not guarantee success; competition “means ... a winner and a loser.” Our attitude toward antitrust law comes from the dominant theory early in the industrial revolution that “free and unlimited competition of individuals” assures “the greatest good of all”; this contrasts with the Socialist principle of complete cooperation. However, our much more complex modern economy requires cooperation to a large degree; “so far as the visible structure ... it is well on the way to the structure contemplated by orthodox Socialists. ... The modern problem is to reconcile” these principles; “somehow, the necessary planning must presrve the largest freedom possible for individual action ... so as to bring into play the largest possible percentage of the existing individual ability-potential.” [Note: Huh??]

Col. Arthur Woods, chair. of Pres. Hoover's Emergency Employment Committee, to resign next week and return to private life.

National Geographic Soc. reports US leads world with 49,000 miles of airways (including those to Central and S. America); France is second with 18,000. Newark Airport is world's busiest.

World's smallest airplane tested by O. Vecchiarelli at the Capo di Chino airdrome in Italy. Craft is a tri-plane; wingspan 10 feet; weight 396 pounds; 40 hp engine; speed about 100 mph; can fly 120 hours without refueling.

Only seven rail passengers were killed in train accidents in 1930, a record low and 29 under the 1929 figure.

Residents of Broad Street are heaving sighs of relief as its repaving is nearing completion. Within living memory, the street has been always been torn up and traffic obstructed for one construction project or another. The relief may be short lived, however, as Continental Bank & Trust is planning a new skyscraper at the southwest corner of Broad and Exchange, the Stock Exchange will reportedly construct another annex just to the north, and Radio Corp. may be putting up a huge skyscraper on its large plot at Broad and Beaver.

Plant producing fake Coca Cola beverage and labels raided in NY.

Cuba, "trying to hasten the time when American tourists may dispense with the wild gesticulations now necessary to make themselves understood," has imported 50 teachers from the US and made English compulsory in elementary schools.

In an experiment in esthetics, students at Lawrence College in Appleton, Wis. may now rent, for a nominal fee per semester, original paintings by Whistler, De Goya, Max Pollock, Bertha Jacques and many other noted artists in the college's collection. Program is made possible by a $2,000 gift from the Carnegie Corp.

Week in review:

Stocks down sharply, with US Steel and the Dow rail average hitting new bear market lows; decline attributed to poor earnings and seasonal downturn in steel production, though "nothing happened to change the belief of important banking and commercial interests that the bottom of the business depression has been seen." Insurance shares were active for the first time in weeks, and ended the week sharply lower, though decline in bank and trust shares was relatively moderate. Berlin stocks reacted after rallying in previous weeks, though there was some favorable business news, including large export increase in March, agreement on Russian export credits, and tax revenue up to expectations. London market had "one of the most stagnant weeks on record." Paris Bourse "under slow liquidation" on unsatisfactory industrial reports. Bond market featured firmness in highest-grade issues while others were highly volatile. US govts. gained substantially; new $275M issue of 1 7/8% Treasury certificates was oversubscribed almost 4 times. European govts. were notably steady, but the market "furnished considerable excitement" for holders of S. American bonds; Brazil issues declined severely, while Argentine rallied after breaking badly. Corp. highest-grade issues were firm, particularly utility and the best rails, but lower-grade and speculative were weak, with sharp breaks in many issues. Spanish peseta fluctuated wildly on fall of King Alfonso, uncertainty and skepticism regarding new govt. policies. Argentine peso broke after radical gains in elections appeared to imperil Uriburu govt. Weekly bank statements showed record low Fed. Reserve discounts outstanding of $132M. Money in circulation increased, probably due to veterans' bonus. Grain prices firmed after declining last week. Cotton was down substantially in first half of week, then steadied between 10 and 10 1/2 cents/pound.

Market commentary:

Market wrap: Leading stocks including US Steel were firm early. However, spoilsport bears "hammered away relentlessly," this time concentrating on trading favorites and driving them lower; Auburn plunged below 200 vs. 295 1/2 last Tuesday, while Industrial Rayon fell to less than half its 1931 high of 86. "Liquidation was dislodged" in many stocks, and selling spread across the list; US Steel hit another bear market low while J.I. Case and McKeesport were heavily pressured. Some rallying at the close attributed to short covering. Bond trading moderately active; US govts. firm; S American issues mostly lower, sharp break in Brazilian bonds, though Argentine improved; corp. highest grade utility and rail issues strong, lower-grade reactionary. Commodities firm; wheat up sharply, other grains firm; cotton up substantially. Butter hit another record low. Small copper sales made at 9 1/2 cents; large producers holding at 10 cents. Silver up 3/8 cent to 29 1/4.

Market observers generally pessimistic and advise against taking long side.

Opinion differs on immediate outlook for market; some have believed that the current decline will end in extreme dullness, but opinion seems to be turning to the idea that a selling climax will come before a change in trend. With the rail and industrial averages approaching the bear market lows, and recent pickup in activity as stocks were declining, bears are very confident and intend to “play their hand to the limit”; vigorous selling is likely to continue until support appears in volume. However, we're now in a range where investment buyers can confidently take advantage of depressed prices; as in the 1920-21 bear market, which this one has “closely paralleled,” this buying is likely to come before significant improvement in earnings.

Market break below trading range last week brought heavy selling by public "who follow the advice of chart students"; demand mostly restricted to short covering. Market was apparently not prepared for decline in steel operations and resulting pessimistic commentary, though the lull in production was predicted by some. Many small bull pools that formed several weeks ago are reportedly disbanding after "considerable difficulty in their operations."

Reports of upcoming cigarette price hike continue to circulate; latest gossip is that it will happen by midyear. United Fruit is recommended by some brokers based on increasing banana sales; stock is selling well below book value, though many other stocks are as well. Western Union's poor first quarter seen indicating increasing competition for cable and telegraph cos. from radio communication. Eastman earnings said stabilizing in spite of increased competition; co. has been developing new products which should increase future income.

March rail earnings are expected to improve over Feb., though some rails are reporting worsening traffic in April.

Editorial: The railroads have a clear need for "common action for the common good," as previously pointed out by T. Woodlock; one of their biggest problems is excessive competition by their own overzealous traffic departments. Situation is critical; net operating income fell 30% in 1930 and a further 46% in the first 2 months of 1931. Main obstacle to common action is "multiplicity of ownership." While public think of rails as highly centralized because US only has about 20 large systems, every section also has "little roads which can and do upset rates to get a little business." Rails need "intelligently planned and far-reaching consolidation."

Auto industry seen likely to have a flat production curve through summer, not reaching the peak of previous years but also not showing the usual declines in production in May; industry will be watching for effect of eliminating midsummer change in models. Inventories are very low and orders continue to come in steadily. Companies already planning production for May are holding it relatively steady. Q1 earnings will be mixed, but Q2 has gotten off to a good start.

Much of the public apparently bought stocks "on the installment plan" in 1929, and in most cases continued the payments, reducing their buying power. Some firms handling such buying report payments have progressed enough to release a large amount of buying power.

G. McLaughlin, Brooklyn Trust pres., suggests real estate loans by banks should be restricted to "small portfolio of marketable first mortgages" and short-term loans to well-capitalized second mortgage cos.; sees this as remedy for "sorest spot in the banking world today."

Commerce Dept. says tariff changes in 1930 are indication of increased economic nationalism; "sense of common distress" led some groups of countries to consider concerted action, but little result seen from this through end of 1930.

Darmstadter und Nationalbank, one of the largest German banks, praises cooperation of world's leading central banks in spite of political differences; hopes this gradually leads to more rational worldwide distribution of capital; Germany, since it's dependent on capital imports, must guarantee its complete safety.

Economic news and individual company reports:

After recent dust storms, the affected areas including Minnesota, the Dakotas, Iowa, and Nebraska, received some rain, greatly relieving the situation temporarily. However, conditions remain bad; subsoil is very dry and more rain will be needed to give crops a proper start.

Cash has poured into securities at an unprecedented pace during the depression; at least $17.5B of cash savings has been used to buy securities since Sept. 30, 1929; rate is over 50% higher than in the preceding few years. The US saved about $3B more during 1930 than in 1928, implying spending was at least $3B less; “clearly, the urge for self preservation overcomes the desire to spend ... this process has intensified the depression, but sooner or later it will end the depression.” While use of savings to pay off loans doesn't stimulate business, it's “not unlikely” this is nearing an end.

West Palm Beach, Fl. reports agreement on general principles with bondholders committee; defaulted bonds to be exchanged, par for par, for long-term bonds, interest payments to be reduced for a period of years; moratorium on principal payments. Mississippi faces financial crisis due to stand off between Gov. Bilbo and legislature. State is running short of cash, but Bilbo refuses to call special session to authorize bond issue unless legislature pledges to avoid all political investigations.

Maj. A. Spaulding reports Maine banking situation strong; no failures in past two years, few foreclosures or bankruptcies. Potato prices have held up relatively well compared to other agricultural commodities [a chief product of Maine].

Manufacturers at the National Aircraft Show in Detroit report marked increase in sales compared to last year. New low-priced "flivver" planes are drawing interest; Curtiss-Wright has sold about 175 of its two-seater "Junior," powered by a 30 hp motor, many of the them sight unseen. However, it's thought unlikely the number of commercial planes produced this year will exceed the 1930 total of 1,937 (total for 1929 was 5,357).

Youngstown district steel output to decline 1% to 43% this week.

Fisher's wholesale commodity index declined again to 74.6, vs. 75.2 prev. week and 90.7 a year ago. BLS reports index of retail food prices Mar. 15 126.4 vs. 127.0 on Feb. 15 and 150.1 a year earlier.

Nat'l Assoc. of Credit Men April survey reports seasonal improvement in sales and collections.

New NYSE stock issues in Mar. were $141.7M vs. $44.3M in Feb. and $702.3M in Mar. 1930.

World copper production in Mar. was 136,655 tons vs. 128,685 in Feb. and 129,390 in Jan.

Fed. Reserve says movement of money between rural and city banks is interfering with their policies due to higher reserve requirements at city banks. For example, during current period of liquidation and easy money, natural movements is from rural to city banks; this causes an increase in reserve requirements. Conversely, in 1927-29, when the Fed was trying to restrain credit, movement of money to rural banks reduced reserve requirements.

Russia is aggressively expanding exports of petroleum products to markets including China, Italy, Brazil, and India; "sales by Russia in these markets will be made at whatever price is obtainable." Russo-German trade credit agreement seen raising 1932 German exports to Russia 50% over 1931 level of about 500M marks; will give employment to several thousand in machinery and electrical factories.

French coal miners in Loire Valley end strike, accept small wage cut; settlement may allow reopening negotiations on coal cartel involving France, England, and Germany.

Allstate Insurance Co. subsidiary of Sears chartered in Illinois.

Barbizon hotel defaults on mortgage bonds; Chase Nat'l Bank has taken possession.

Companies reporting decent earnings: Loft (restaurants), Dome Mines (gold).

Theatre:

Precedent - dramatization by L. J. Golden of the Mooney-Billings case at the Provincetown Theatre on McDougall Street; "marks the reclamation of this Greenwich Village playhouse for the drama of social protest". Tom Mooney and Warren Billings, labor organizers, were convicted in 1916 of planting a bomb that killed 12 people in the Los Angeles Preparedness Day Parade. New evidence was found exonerating the men, but to date, the considerable effort on their behalf has only acheived the commutation of Mooney's death sentence to life imprisonment [In Nov. 1938, newly elected California Gov. Olsen ordered Mooney and Billings released from prison]. Play concentrates on Mooney, Tom Delaney in the play. First act shows his "framing", trial and conviction, second the story of newspaper editor Fremont's crusade to right the injustice [based on Fremont Older of the San Francisco Bulletin], third the hearing which leads to commutation of Mooney's death sentence; an epilogue is set in the present where new efforts toward freedom are underway. Fine acting and direction; writing is notable for "treating ... characters sympathetically without burlesquing" the villains or canonizing those fighting for justice.

Jokes:

"Willie - Did Edison make the first talking machine, pa? Pa - No son, God made the first one; but Edison made the first one that could be shut off."

"'Your medicine has helped me wonderfully,' wrote the grateful woman. 'A month ago I was so weak I could not spank the baby. Two bottles of your cure and I am now able to thrash the old man. Heaven bless you.'"

"During one of the many controversiess between President Lincoln and General McClellan the general arose in anger and asked: 'Sir, do you think me a fool?'

Lincoln calmly replied: 'No, but then I might be mistaken.' - Capper's Magazine."

"It seems that the brakeman and conductor could not agree as to the pronunciation of the town along their line called 'Eurelia.' when the train reached there, the passengers were startled to hear the conductor from the front end of the car call 'You're a liar; You're a liar' while the brakeman at the rear end shouted, 'You really are, You really are'."