April 11, 2010

Saturday, April 11, 1931: Dow 168.72 -0.05 (0.0%)

Assorted historical stuff:

Editorial: A merchant that repeatedly slams his door in the face of customers will soon find "cobwebs ... spun across his business entrance." The US is a great international merchant, and, as J. Mooney of the GM Export Co. observes, it has "slammed the door on many of our excellent customers." Mr. Mooney was talking of the Hawley-Smoot tariff. This has been a subject of much forgettable political debate, but Mr. Mooney's critique is worth listening to, since he's a businessman very familiar with the foreign trade and was talking to other businessmen. While the severe decline in foreign trade isn't entirely due to the tariff, it's been a "heavy contributor." Over 40 governments protested to Washington when the tariff was in Congress; many of our "excellent customers" including Canada, Cuba, Spain, Australia and New Zealand have responded by increasing their own tariffs; France, Italy and Germany took measures affecting some of our exports. The damage to our foreign trade is already indisputable, and is likely to increase in the future.

Editorial: Bank for International Settlements has become profitable only about 10 months after starting operations, more quickly than its most ardent supporters could have hoped considering the timing of its launch. Success is due to taking on a more active role in international finance than its original function of helping transfer German reparations; it has become an agency for cooperation between central banks and for effecting international transactions, "overcoming the first prejudices against it"; it's benefitting from investment of increasing deposits from central banks. Recent encouragement of long-term loans shows the BIS has "taken an important place in maintaining international stability. Like our Federal Reserve, the BIS came into being at a propitious time."

Interior Dept. is receiving 400-600 letters/day, seeking to obtain homesteads on government lands; most are from city dwellers feeling they might do better at farming than in their current job, if they have one. Unfortunately, very little of the remaining available land is suitable for farming.

Pennsylvania Gov. Pinchot says consumers of electricity overcharged by $900M annually; in 1929, ordinary consumer paid 5.96 cents/KWHr, while industrial consumer paid 1.35 cents.

Nationalist party of Puerto Rico issues first $200,000 of planned $5M gold bond issue to reconstruct Republic first proclaimed at time of unsuccessful revolution in 1867. Bonds are payable from Republic's treasury 5 years after its recognition.

Recent earthquake and fire in Managua caused $20M in damages, only $2M of it covered by insurance.

Suburban traffic to and from NY City by train and ferry in 1930 was 421.8M, down 15.0M from 1929.

Vatican City is now "most 'telephoned' community in the world." After recent installation of modern all-dial system by IT&T, it has 400 phones for 450 residents, compared to one for every 40 people in Europe. Listing for main Papal offices is "Vatican City, 102," from which 35M telephones worldwide are reachable.

National Aircraft Show in Detriot to showcase new 500hp single-motor Ford cargo plane, as well as Ford trimotor deluxe club plane with new high wing design.

Dunbar Nat'l Bank, organized by John D. Rockefeller Jr. and others to serve Harlem community, reported resources of $2.728M, up $450,000 in past year.

A recent guest of former President Coolidge reports he served a nightcap of hot chocolate with apples and crackers; Mr. Coolidge prepared the chocolate himself. "Wise Mr. Coolidge! Apples to keep the doctor away. Crackers, first cousin of bread, the staff of life. And chocolate, renowned as a healthful beverage." Brillat-Savarin, famed chef [1755-1826, author of "Tell me what you eat, and I will tell you what you are"], wrote of chocolate "Persons who habitually take chocolate are those who enjoy the most even and constant health and are least liable to a multitude of illnesses which spoil the enjoyment of life."

Market commentary:

Market wrap: Leading rails continued under pressure early, with the Dow rail average at noon hitting a new bear market low of 91.12. However, leading industrials resisted the weakness impressively, and US Steel led a rally after its unfilled orders report appeared about noon; rally spread to rails and across the market, and final hour brought good recoveries in active stocks. Bond trading moderate, prices irregular; US govts. steady; foreign mostly higher as Brazilian and German issues rallied; corp. mixed, with utilities firm, local tractions higher, but rails weak and much of the lower-grade list recording losses. Commodities fluctuated; grains closed moderately higher, recovering after sharp drop that hit new season lows in corn; cotton closed down slightly, also recovering after severe early break with price falling below 10 cents. Copper demand improved, price rise to 10 cents seen possible. Zinc down again to new low of 3.85 cents/pound.

Conservative observers disturbed by action of rails; anticipate technical recovery but advise against trying to catch it.

Westinghouse was a weak spot on forecast of Q1 loss. National Surety gained on analysis by Goodbody & Co. noting 7% yield on a strong and well-managed insurance company. Vanadium now subject of dividend rumors; directors will meet next Wed. to decide on action.

Stocks in London, Paris, and Berlin closed the week firmly, with Berlin at 1931 highs; money markets in London and Berlin were easier.

A statistician in the financial district has estimated Q1 earnings for 50 companies, and forecasts only 4 will show an increase over 1930.

An increasing number of speculative traders are turning to second-grade bonds; some traders who rarely dealt in bonds before now prefer them to stocks. Wide price fluctuations in the past year have offered chance of trading profits, and high interest rates offer another possible source of return.

Some observers encouraged by recent resistance of market to weak spots in individual stocks; believe this indicates oversold market. Small volume of trading in past week has been noteworthy; many had been expecting "selling climax" carrying the market down on heavy volume. Some reports have circulated of "quiet institutional buying" based on attractive dividend yields; however, these reports are usual after good-sized setbacks and can't be confirmed. Recent market action has found the bears well organized, as seen in ability to force sharp reactions when concentrating their efforts; the bulls, by contrast, have lacked leadership. Many traders have stayed on the sidelines, and those in the market have mostly been selling because less resistance is met in that direction.

Broad Street Gossip: Market has been declining so long that short selling has become a habit for traders; one large broker went over the order books Thursday and found 5 sellers for every buyer. The big bears are still short, but reportedly reducing their positions; most of the recent selling has been coming from small traders, much of it in odd lots; heaviest selling has been in active stocks including Steel, Can, GE, Westinghouse, Vanadium, and Radio. The lower the market goes, the more bearish the average trader seems to become. The Old Timer observes "One reason why we should have a substantial rally from the recent decline ... is that in the past we always have had." Part of recent decline attributed to tax selling, particularly by large holders of rail stocks who have income from other sources including businesses, dividends and interest. Some traders believe this selling, much earlier than in previous years, should help the market later. One banker observes low prices are affecting earnings more than low production; for example, the oil and copper industries are suffering although oil consumption is about as high as ever and copper consumption is 80% of normal.

Banking highlights: Fed. Reserve policy still seems aimed at keeping money very easy, including recent reduction of buying rate for open-market bills (46-90 day bills lowered to 1 1/2%); continued influx of gold is also working toward this end. Money paid out to veterans apparently is now returning to banks as deposits. NY City banks continue buying non-govt. securities, strengthening bonds; loans still declining fast.

Dominick & Dominick encouraged by recent political improvement in many foreign countries; believe this may lead to resumption of large scale foreign lending by US, and partial redistribution of US gold supply, greatly helping economic recovery by providing needed credit. US gold holdings Apr. 1 were at record high of $4.698B, representing 42.5% of world's monetary gold, more than twice France's holdings and almost seven times Britain's.

Economic news and individual company reports:

US Steel reported unfilled orders up 30,136 tons in March to 3.965M tons, vs. 4.571M on Mar. 31, 1930; this represents about 6 months production at current low levels. Report considered encouraging since it didn't include large Pennsylvania RR and Radio City orders.

Bank of US trial continues; defense attorneys move to dismiss charge that bank misapplied funds of subsidiary safe deposit company to buy stock on grounds this isn't illegal and many other large NY banks do the same thing.

Rails are expected to show a decline vs. 1930 of 25%-40% in March operating income, a big improvement from the 54.2% decline in Feb., due to seasonal improvement in revenues combined with expense cuts.

East Texas oil production has skyrocketed to 191,000 barrels/day, high grade oil selling as low as 20 cents/barrel is pressuring prices in other areas.

New bond offerings in past week were $294.4M, highest since Jan. 1930, of which utilities were $160M; industrial $80M; municipal $42M. Some slowdown in demand was reported, indicating huge borrowing in recent weeks may be approaching market's capacity. However, prices of high-grade issues have been steady.

F.W. Dodge reports Mar. building contracts in 37 states East of Rockies $370.4M, up sharply from $235.4M in Feb. Residential building was $101.3M, almost matching the $101.5M total from last year. Residential building for the quarter was only down 4% from 1930.

Mar. auto production in US and Canada was 286,883 cars and trucks vs. 229,768 in Feb. and 417,118 in 1930; Q1 was 694,998 vs. 1,046,689.

Mar. US postal receipts in 50 cities were $30.178M vs. $26.405M in Feb. and $32.475M in 1930.

Bradstreet's reports slower trend in both wholesale and retail lines, though comparisons are complicated by early Easter and lower retail prices. However, most correspondents report Easter trade below expectations. Dun's reports mixed picture with some encouraging developments but "numerous disappointing features." "Extremes of weather" have made for uneven retail trade in different sections, but rainfall in many areas has helped agriculture very significantly.

Gen. Hines reports veterans' bonus loans through April 4 were $379.0M; estimates ultimate total will be about $1B.

Bureau of Agric. Econ. reports low wheat prices are reducing world acreage of wheat planting, but favorable conditions make a total crop of 865M bushels likely this year, vs. 851M last year.

NY State Legislature passes bill reducing taxes on savings banks to put them more on a par with commercial banks.

NY State factory employment rose 1.5% in March vs. Feb., bringing employment index to 77.8, down 15 from 1930 and down 22 from 1929.

British Board of Trade estimates 1930 UK industrial output was down 7.6% from 1929 and 2.1% from 1928.

Manchester cotton market has been quiet in spite of firmer raw material prices; demand from India disappointing.

Franc has weakened close to point where gold could move from France to US, though this wouldn't be very useful; banking authorities expected to use weakness to bolster other currencies for possible gold movement, particularly pound sterling.

B.W. Dyer estimates world sugar supplies will be 11.589M tons at end of season Aug. 31, up from 10.682M last year and a new record.

International sugar conference agrees on terms; production to be limited by quotas; territories and prices not limited; surpluses in storage will start to be released when price reaches 2 cents/pound. International lead conference to be held in London next week; likely to lead to 15% cut in foreign output.

A&P sales for 4 weeks ended Mar. 28 were $82.7M, down 1.5% from 1930; tonnage sales were up 11%. A&P says won't follow lead of other stores in raising cigarette prices.

Company reports since Apr. 1: 28 companies reported higher earnings vs. 1930 and 92 lower; 55 dividends unchanged, 2 increased, 17 cut.

Companies reporting decent earnings: American Chicle, Equitable Office Building, Davenport Hosiery Mills.


The Rap - melodrama at the Avon. Topical expose of police abuse and corruption inspired by "present vicious circle of police and magisterial investigations." Play opens with murder of lawyer Harrington. Carter, a reporter who has cast aspersions at policeman Dugan and Detective Garrison in the past, was in his office nearby. This gives them the opportunity to retaliate by framing him; the lawyer's secretary and the building superintendent also are suspects. Carter eventually exposes Dugan as the killer; Dugan kills himself. "And in conclusion, as he is calling his city editor, Carter is shot and killed by Detective Garrison, in so cold-blooded a fashion that our dramatic sensibilities are finally altogether strained."

The Millionaire - based on a story by Earl Derr Biggers [of Charlie Chan fame]; dialogue by Booth Tarkington; starring George Arliss. A comedy of deception. Arliss plays Alden, wealthy head of Alden Motors, who is forced to retire by health concerns. Bored stiff, he gets a sobering visit from a life insurance salesman played by James Cagney in "a fine bit of acting" who breaks into his garden to sell him a policy but absolutely refuses to do so on hearing he's a retired businessman. He then begins sneaking out of the house disguised as a "poor workingman," to build a new garage business with his new partner Manners; coincidentally, his daughter and partner, each unaware of the others connection to papa, fall in love. All is resolved in a happy denouement; Alden is restored to health by his labors and returns to his company; the garage business is sold for a nice profit; and you'll have to guess what happens to the partner and daughter. Supporting cast is average and opening weak, but the star's performance is completely captivating and carries the film; Mr. Arliss' best picture since Disraeli.


"'I bet you a dollar that you won't guess why I have come to see you.' 'That is not hard to guess - you want to borrow money.' 'Wrong; I just wanted to ask how you were. Hand over the dollar.'"

Lawyer - You seem to have plenty of intelligence for a man in your position. Witness - If I wasn't under oath, I'd return the compliment.

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