April 6, 2010

Monday, April 6, 1931: Dow 172.43. +2.54 (1.5%)

Assorted historical stuff:

Editorial: Pres. Hoover, in his recent visit to the Virgin Islands, made some gloomy remarks to the effect that they were "an effective poorhouse" that the US was unfortunate to have purchased from Denmark. The new governor of the Islands replied "no government can give a people prosperity." He discreetly refrained from stating what most already knew: that the US govt. in fact deliberately destroyed the Islands' prosperity by extending Prohibition there, ruining their main business of manufacturing world-famous Santa Cruz and bay rum. Citizens of the Virgin Islands are "slowly and needlessly dying as the result of the noble experiment ..."

Editorial by T. Woodlock repeating balance-of-payments argument that Germany's only possibility of making reparations payments is through “commercial hegemony” over world markets. “In forcing Germany to make reparations payments, the world has done the one thing best calculated to increase the actualization of the potentiality possessed by that nation. ... It is safe to say that economists a hundred years from now (if then there are such things) will have much to say on the strange lack of ... financial foresight which attended the handling of the reparations matter ...”

Editorial: The NY State Senate's has played a "cheap trick" on Gov. Roosevelt in amending the St. Lawrence power bill to name as members of the new Power Authority the commission that the Gov. himself appointed to investigate the issue a year ago. Not only is this a "gratuitous affront" in denying the Gov. his usual power of appointment, it is also a "covert insinuation" that he "might seek to 'pack' the new body" to promote his pet aims; the precaution is in fact unnecessary because of safeguards in the original bill.

Phone calls to and from the White House since Pres. Hoover took office totalled 711,780, more than double number in any similar period.

Thomas Edison to exhibit rubber made from goldenrod at 1933 Chicago World's Fair; exhibit will be in cooperation with Henry Ford.

In the past few years sunlight has come into vogue as an aid to health. Sunlamps have become standard equipment at gyms and barber shops, and are urged for home use; natural sunlight has been carefully studied. Air particules such as dust and soot have been found to block beneficial rays of the sun; on the other hand, the sun's intensity is magnified by water. Most recently it's been found that trees with light bark and shiny leaves also increase the sun's intensity. "Studies in the Chippewa National Forest show that groves of aspens or birches have an intensity of 140% of sunlight."

London burns 3M tons of coal daily in winter, both for home and industry; due to inefficiency only half is converted to heat while the other half is released into the atmosphere as "smoke, soot and other by-products." The British Sunlight League estimates 800 tons of foreign materials occur per square mile above London annually. "Large amounts of coal dust and even small particles of coal are frequently found in the lungs of those who die from respiratory diseases ..."

Union Pacific says it completed branch line between Boulder City, Nevada and Las Vegas Feb. 15, providing only rail access to the Hoover Dam, "world's greatest reclamation construction," which will create a man-made reservoir of 240 sq. miles. Adjacent 4,200 sq. miles in Nevada and Arizona, which has been set aside as a national monument, anticipated to become "a most interesting attraction to people throughout the world."

Market commentary:

Market wrap: Short stock session eventful considering many operators were off for holidays. Stocks briefly declined at the open; US Steel was pressured and hit a new 1931 low. However, this didn't lead to general liquidation and matters quickly reversed; leading shares staged good rebounds; motors were a strong spot, led by GM, and Auburn spectacularly punished the shorts, soaring 25 points. Bonds moderately active; US govts. firm; foreign irregular; corp. highest-grade firm but speculative and convertible highly irregular. Grains very strong; July wheat surged 2 7/8 cents to close at 62 5/8 on higher foreign demand; corn also up very sharply.

Week in review: Stocks worked substantially lower; rail shares hit a new 1931 low while utilities were relatively well supported. Business news was mixed, but “although shrouded in the obscurity characteristic of the initial stages of recovery, many indications were in evidence that commercial enterprise generally had already turned its face toward improvement.” Reports on cars, freight loadings, and electric output were positive, though steel production decline inserted a question mark. Bond market more active due to reinvestment of Apr. 1 payments; US govts. reacted slightly after announcement of large new issue, but remained at premium; foreign govts. active and mostly higher; Australian and German issues rallied; domestic corp. mixed; utilities and highest grade rails steady but lower grade, speculative and convertible declined. Month-end influences caused slight firming in call money but money markets otherwise quiet. NY member banks reported continued decline in loans, rise in non-govt. securities. Commodities very weak; grains declined sharply at times, with new season lows hit in corn and wheat, though they rallied sharply Saturday; cotton moved gradually down. Foreign exchange featured drop in silver and associated currencies, and talk of cut in German discount rate due to higher confidence and return of capital.

Conservative observers continue to recommend using rallies to reduce long positions, staying on sidelines until market demonstrates ability to hold uptrend.

Business news was mixed, with good automotive news and rally in grains but decline in steel production.

Due to market's inability to hold rallies in past 2 weeks, a growing number of traders now expect "the market has worked itself into a position where a selling climax is necessary." This normally comes with heavy forced liquidation, while there has only been a small amount of forced selling in the recent decline compared to late 1929 and parts of 1930. However, pattern of persistent, “dragging” decline may be due to the market's already extensively liquidated position after the past 18 months; brokers' loans are actually lower now than at the bottom in mid-Dec. Further declines should bring return of long-pull buying seen at year-end.

Dominick & Dominick point out recoveries after previous major depressions in 1873 and 1921 started before wages declined to the same extent as commodity prices; these have now declined 21% since mid-1929 while hourly wages are down only 3% but avg. weekly earnings are down 20% due to shorter hours.

Short selling has increased in past week, extending from bear professionals to some of the public switching from the long side; this is seen increasing chance of technical rally. Recent reaction may prove beneficial when first quarter earnings are reported, since it has technically strengthened market to withstand expected poor earnings comparisons and steel production decline. Copper situation considered discouraging; last price hike apparently wasn't justified by conditions.

Broad Street Gossip: Fiat Motors gives US shareholders little information about company operations, but must have been fairly prosperous last year judging by the 95 cent dividend just paid - a yield of about 8%. Callaway, Fish & Co. give list of suggested bonds and stocks; 25 suggested rail bonds have mean yield of 4.74%; 9 utility bonds 4.90%; 5 foreign bonds 5.87%; 11 preferred stocks 5.48%; 13 common stocks 4.57%.

Managed investment trusts [similar to mutual funds], after brief period of optimism and price appreciation in Feb., will apparently require more patience. Price swings in many trust shares are exaggerated compared to the general market due to leverage in the form of capital senior to the regular shares. Meanwhile, the Investment Trust Journal reports that "putting over a fixed trust [similar to ETF] is no longer as easy as it may appear."

Okla. Gov. Murray predicts conference in Washington will result in unified action by 10 oil-producing states, which will restore prices "to normal" within 30 days.

NY State bond issue of $34.975M to be sold tomorrow expected to fetch excellent price; Comptroller Tremaine, in a radio address last week, said: "One of the principal reasons why NY State's credit is so good is that it has always followed a very conservative borrowing policy. NY State does not borrow money for projects which do not at least outlive the bonds by which they are financed." State's net debt is about 1% of its taxable worth.

Pennsylvania RR VP County says co. will spend well over $100M of its $175M improvements program in 1931.

AFL survey of business finds opinion bottom of depression has been reached, and "in the fall we may look forward to the beginning of a more definite climb upward toward prosperity"; says union labor has kept promise to avoid wage agitation; believes wage cuts not called for and would delay recovery.

Economic news and individual company reports:

Gen. Hines announces week's veterans' bonus loans $375M, total of $820M "in sight," predicts $1B within 3-4 months, which would increase deficit $66M.

April car production schedules are a total of at least 25,000 higher than March, though the industry is being very cautious on forecasts and has tightened control of production to react quickly to changes in sales. March car and truck shipments by Chrysler and subsidiaries (Dodge, De Soto, Plymouth, Fargo) totaled 26,072 units, highest since last June and third straight monthly gain of about 50%; shipments were about 23% below March 1930, a big improvement over previous months. Auburn shipped 5,649 cars in March vs. 2,499 in Mar. 1930 and a record for any month; inventories low, anticipates production over 6,000 in April.

Steel seen facing critical period, with first-half production peak possibly already passed. Auto and rail industries have pulled back on ordering; rail pullback was particularly disturbing since they had maintained relatively liberal buying until about a week ago. Influence of lower production on price situation uncertain; some price cutting reportedly persists in spite of efforts of “leading interests.” Scrap market has weakened significantly. Youngstown district steel output will decline 3% to 45% this week; outlook remains confused, buyers cautious.

Remaining unsettled details of Eastern rail consolidation plan to be submitted shortly to panel of three arbitrators agreed on by the interested rails. Rail executives are reportedly getting tremendous pressure from their bankers to consummate the plan. US production of steel rails in 1930 was 1.873M tons vs. 2.722M.

Fisher's wholesale commodity index continued decline to 75.3, a new low.

New state and municipal financing in March was $275.1M vs. $11.7M in Feb. and $127.0M in Mar. 1930.

A total of 23.643M cars and buses were registered in the 48 states and DC during 1930, down 78,749 from 1929.

Texas Railroad Commission increases allowed oil production 45,700 barrels to 690,000 barrels/day; East Texas to start at 90,000, rising to 130,000.

After considerable delay, France enacts major public works program to spend 17B francs over next 5 years. France enacts law to partly compensate holders of rentes [bonds] for drastic decline in franc before 1928 stabilization.

New South Wales, Australia govt. defaults on $1.070M payment for soldier settlement advances, bringing total defaults to $5.815M. Callao, Peru City Council says will default on loan made by J. & W. Seligman Co. of NY in 1927 on grounds terms too onerous.

Credits to Russia of up to $150M being negotiated from Britain, Austria, Germany, and others, to compensate for fall in commodity prices and make it unnecessary for Moscow to export food. Frederick Morton Construction of London offers $100M in loans to Mexican state govts. for public works.

D. Schulte, head of Schulte store chain, says anticipates cigarette price hike to 15 cents/package in about 2 weeks.

Douglas Aircraft seen showing record sales for the full year based on strong Q1 and backlog.

Goodyear cuts wages of 13,000 workers 5%-20%; largest cuts for unskilled workers.

NCR expected to show a first-quarter loss from operations. Montgomery-Ward may show first-quarter loss after lower than expected sales in March. Chesapeake & Ohio RR expects to roughly cover dividends in first-quarter, will likely be one of few rails to do so.

Aluminum Co. of America 1930 net $1.92/share vs. $11.18.

Companies reporting decent earnings: Illinois Power & Light, Penn. Gas & Elec., General Stockyards, Best & Co. (chain store).


Private Lives, with Gertrude Lawrence and Noel Coward, reopens tonight after brief hiatus due to Lawrence's illness. Tony Sarg's Marionettes to present Alice in Wonderland and Rip Van Winkle at the Belmont. Harry Wagstaff Gribble will present series of plays in Montclair, NJ this summer including first US production of Titus Andronicus, and The Miller of New Jersey, farcical drama of the American Revolution.


Girl - Mama, if I grow up and get married, will I have a husband like father? Mother - I don't know, dear, very probably you will. Girl - And if I grow up and don't get married, will I be an old maid like Aunt Mary? Mother - Perhaps. Girl - It's a tough world for us women, ain't it?

Letter from Mark Twain to subscriber of a newspaper he edited in Missouri who found a spider in his paper and asked if it was good luck: "Old Subscriber: Finding a spider in your paper was neither good luck nor bad luck for you. The spider was merely looking over our paper to see which merchant is not advertising, so that he can go to that store, spin his web across the door, and lead a life of undisturbed peace ever afterward."

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