April 16, 2010

Thursday, April 16, 1931: Dow 164.66 -3.77 (2.2%)

Assorted historical stuff:

Spring wheat areas in the Dakotas, Minnesota, and part of Iowa report a shortage of rain “so serious as to cause widespread dust storms”; both topsoil and subsoil in bad condition. This is “a comparatively late turn in events. Up to a couple of weeks ago, it appeared as though the drought had almost been broken.” Canada's Western prairie provinces also report drastic lack of rain, poor seeding situation, and major dust storms.

Head of Spanish provisional govt. N. Zamora pledged Spain will be given Constitutional govt. respecting religious and property rights of all. Peseta (currency) rallied vigorously in spite of continued rumors and skepticism on new govt.'s chances of success, with bankers expecting inflation.

Sen. Couzens (R, Mich.), former Ford VP and GM, warns that unless business leaders quickly make concerted effort to solve unemployment and stabilize industry, Congress will step in and provide for old age and unemployment insurance. Editorial: Sen. Couzens, using some sarcasm, stated that he hopes the US Chamber of Commerce meeting will "instruct Congress what we are not to do concerning the care of our citizens who are in distress." If the Chamber's pres. wanted to answer in kind, "he might have referred the Senator to ... the last session of Congress for some examples of what not to do"; instead, he took the high road with a "polite and evidently sincere" invitation to Sen. Couzens to "give the Chamber the benefit of any constructive ideas that may be teeming in his brain." This is a fine idea. The Senator also asks the Chamber "if it approves of 'the present trend of accumulation of property into the hands of the few.' Who is better qualified than the Senator to enlighten the Chamber on that process?" [I assume this was a shot at Couzens' wealth - he sold his interest in Ford for $35M in 1919.]

Recent surveys indicate little hope of smaller deficit in 1932 fiscal year (starting July 1), since economic recovery will be too gradual. It remains to be decided if govt. will cover deficit by borrowing or by raising taxes. If a tax hike is chosen, the politically expedient form would be a “soak the rich” surtax, though this would of course be harmful economically. A more desirable course would be to broaden the tax base, though this seems unlikely to attract support.

Editorial: In Canada a royal commision headed by Sir Josiah Stamp will investigate the very old question of whether speculation in farm products leads to lower prices. While US and Canadian farmers believe it definitely does, they might be surprised to find British consumers are positive it raises them! In fact, it does neither but is simply "a factor in registering prices, and those prices represent an equation of supply and demand ... The sooner farmers in Canada and the United States learn that speculation does not make prices high or low, and that it perfoms a most useful function in marketing farm products, the better it will be for them."

Editorial by T. Woodlock refuting Gov. Pinchot's accusation that electric utilities overcharge home customers by about $500M/year based on the rates they pay compared to industry. In 1929, utilities made $835M of profit on an investment of $11B, a return of 7.59%; lowering rates to home users by $500M would reduce return to a measly 3% (rates to industry are set competitively and so can't be raised much). Detailed analysis by Col. W. Kelly, VP of Buffalo, Niagara & Eastern Power, shows costs of service to home customers are in fact much higher, accounting for the difference in rates. Pennsylvania Senate committee investigating the state utility board criticizes Pinchot for attacks on the board and utilities in general, saying it found no evidence of corruption.

The Rotolactor, a machine that bathes, dries and milks 50 cows in 12 1/2 minutes, is now employed at the Walker-Gordon farm in Plainsboro, NJ. A turntable 60 ft in diameter is used; cows enter and exit without direct human assistance; vacuum pumps milk each cow, placing its milk in a separate jar. All this ensures the milk is kept absolutely clean. The machine runs 21 hours a day performing more than 5,000 separate milkings; each cow gets three turns on the ride.

The NY Telephone Co. has developed into an amazingly efficient organization; for example, service on a new phone begins immediately after the wires are attached. The serviceman, after completing installation, makes the first call to his coordinating office to report installation is complete and working, after which service on the new phone is no different from the other hundreds of thousands in NY City.

A huge factory, occupying 5 acres and costing $1.5M but without a single window, was recently built in Fitchburg, Massachusetts for Simmonds Saw & Steel Co. Daylight is replaced by uniform illumination from hundreds of 1,000 watt lamps. Other "scientific innovations" include an electric ventilation system and noise reducing appliances. The color scheme is also notable - machinery is orange, walls and ceilings blue, green and white, to rest the eyes.

NY City to immediately spend $2M of $10M appropriated by Legislature to give jobs to unemployed; will put 15,000 to work.

Archbishop of Canterbury and J.P. Morgan, cruising the Mediterranean on the Corsair, visit Jerusalem; King David Hotel flies US flag in Morgan's honor.

Market commentary:

Market wrap: Stocks broke badly. Bears applied pressure early, attacking US Steel through the morning and finally establishing a new bear market low under the 134 3/8 mark reached last Dec. Attention swung to Vanadium about noon; it plunged after suspending dividends. Selling spread to leading rails at mid-day; NY Central particularly weak on poor loadings report. Pressure on rails lifted briefly after Penn. RR declared normal dividend, but another selling wave broke over the general market about 2 o'clock; leaders lost further ground and US Steel and the rails closed at new bear market lows. Bond trading quiet; US govts. strong; European steady but S. American unsettled after another break in Brazilian issues; highest-grade utilities firm but rest of corp. list generally down; oil and rail issues particularly weak. Commodities mixed; wheat up substantially, other grains firm; cotton down substantially. Copper buying quiet; price remained at 10 cents/pound. Zinc declined to new low of 3.80 cents.

Conservative observers discouraged by inability of market to resist selling; continue recommending the sidelines.

Liquidation by the public and brokerage traders was higher than in recent sessions.

Observers encouraged by recent moderate improvement in copper conditions; believe latest price firming may be on a sounder basis than the sharp advance attempted earlier. Tobacco shares have held up relatively well recently; some of the buying may be due to persistence of rumors of wholesale price hike. Some quiet buying reported recently in rail bonds based on expense cuts and moderate business improvement in March.

NY Central may have felt effects of the industrial slump more than any other system; most of its volume is supplied by important industrial states including NY, Pennsylvania, Ohio, Michigan, Illinois, and Indiana. US Steel annual meeting will be held Monday, directors' meeting on dividends and earning report on the 28'th; report "may make poor reading."

Leading brokers report public has been waiting for a definite business upturn before buying, but report some "shrewd buying" by longer-term interests. Bankers queried on their outlook generally feel the market "may be about dragging bottom," but admit the "banking fraternity" doesn't contemplate "important action ... to stimulate interest on the buying side until it has been established definitely that general liquidation is out of the way for some time."

Broad Street Gossip: Rails are viewed more pessimistically than in years by the general public and market writers, although many high grade issues are selling at half or less of their 1929 peak, and "it is a foregone conclusion that when general business begins to pick up, the business of the railroads will increase with it." Stock "accumulation" continues, "but that counts for little in the absence of organized support." Stocks of some companies with gains of 25%-50% in shareholders over the past 18 months are down 50% or more in that time. One group recently bought over 100,000 shares of a certain stock over two weeks; the stock gained 3 points, but then lost all of the gain on total sales of less than 30,000 shares. Short interest is very large, "but it is evident that the shorts are confident of their position and have refused to be stampeded."

F. Awalt, deputy Comptroller of the Currency, says banking affiliates should be supervised, but without unreasonable restrictions that would tear down the national banking system.

Former Bank of France Gov. Moreau says there's a tendency to exaggerate role of central banks in world economic problems, since they are incapable of fixing prices. Sees need for developing foreign loans.

Hotel Pierre pres. Charles Pierre reports NY City's large hotel business, long considered an accurate barometer of general business trends, is clearly picking up.

J. Auchincloss, NY Better Business Bureau pres., says experience shows depressions "provide the richest soil for crooks' predatory activities." People who have lost the most "are the readiest to seize upon deperate expedients to recoup their losses"; urges coordination of fraud fighting agencies.

J. Pelley, New Haven RR pres., says business remains at low level, but sees some encouraging signs, and "more definite feeling of optimism in the air."

Martin Insull, Middle West Utilities pres., says utility holding companies have made US electric industry preeminent in the world over past 20 years; best interests of public served by “regulation of the operating company, with freedom of the holding investment company.”

While current depression isn't an exact parallel to that of 1921, history does show that when recovery begins corporate profits can recover with amazing speed; following the 1921 depression, corporate profits in 1922 rose an astounding 800% on a revenue increase of only 8% (though they were still below the 1920 total). Steel industry decline was more drastic in 1921 depression; production bottomed at 22% vs. 39% in 1930, while prices declined 50% vs. 12%.

Economic news and individual company reports:

Conference of West Palm Beach bondholders and city officials fails to reach definite conclusion. City has been in default of payment of interest since May 1929 and principal since Oct. 1929. Stockholders of defunct City Trust Co. to be allowed to sue officers and directors of the bank for "alleged wrecking of institution." NY Banking Superintendent Broderick testifies he didn't know of complex transaction by which Bank of US made it appear two affiliates had repaid $8M loan.

Steel production downtrend continued; week ended Monday was 50.5% vs. 52% prev. week, 55% two weeks ago, 75% in 1930, and 96% in 1929. Weekly steel reviews more pessimistic; hopes for recovery to March level waning; rail and farm demand down; automotive hard to predict; some hope for construction increase. Some price weakness in finished products; severe weakness in scrap “seen as ominous by many observers.” Machine tool demand weaker.

Labor Sec. Doak reports employment in manufacturing industries increased 2.3% from Jan. to Mar.; payrolls increased 10%.

New life insurance written in March was $1.028B, down 15.9% from 1930; total for Q1 was down 12.2%.

Long analysis of national income and tax data for 1929. In spite of the crash late in 1929 that wiped out $25B in stock value, total net income of $24.5B was almost unchanged from 1928, and much of that income came from capital gains, particularly for the highest income brackets (total net gains $3.9B).

Bell System grew at slower pace in 1930; revenues were $1.103B vs. $1.071B; net $283.5M vs. $291.1M; phones in system 20.098M, up 1.054M.

Rubber industry operations have recovered seasonally from low of last fall, but production for Jan.-Feb. remained 15% below 1930 and 30% below the 4-year average; outlook uncertain pending summer buying season; tire prices believed firmer; crude rubber situation remains unfavorable,

World sugar agreement to be signed June 5 at The Hague, where the permanent commission will be located. World lead producers agree to curtail output 15%.

Lloyd's reports world shipbuilding activity declined over 325,000 gross tons since start of year, to lowest in four years; British plunged from 908,902 to 693,814, US was relatively stable, and French increased substantially.

Canadian budget for fiscal year starting Apr. 1 was $386.4M, down $37.3M from prev. year.

French decree raises allowed percentage of foreign wheat in flour from 5% to 15%. Price of wheat is at postwar record high of 180 francs/100 kilos.

German state and central govts. guarantee 70% of credits to Russia to support German exports there.

Argentine exports in Q1 were 3.976M tons, valued at $162.0M, up 37.7% in volume but down 15% in value vs. 1930.

14 textile mills in Carolinas to merge into Textiles, Inc.; to be largest yarn spinner in US, controlling 300,000 spindles.

Fertilizer sales in 10 Southern states in 8 months ending in March were down 33% from prev. year.

American Tobacco makes 8 brands of cigarettes, 2 of little cigars, 2 of cigarette paper, 3 of "twist tobacco," and 17 of plug, chewing, and smoking tobaccos. American Machine & Foundry, whose machines make 95% of US cigarette output, is developing a machine that can produce up to 2,000 cigarettes a minute, vs. current machine's capacity of 600/minute.

GM sales to dealers worldwide in March were 119,195 cars and trucks, up 24% from March and only down 10% from 1930, best comparison this year; Q1 sales were 304,547, down 17%.

International Great Northern Rwy. was only one of the first 23 class 1 rails reporting Q1 traffic figures to show an increase over last year; car loadings gained 17.8%, benefiting from large movement of oil from new East Texas fields.

Companies reporting decent earnings: W.T. Grant (chain stores), Niagara Hudson Power, American District Telegraph, Rand Mines Ltd., Zonite (antiseptic and household drugs), Wil-Low Cafeterias.


Top-notch vaudeville at The Palace. Four actors share role of MC, including Phil Baker and Bert Lahr. Features Don Azpiazu's Havana Casino Orchestra playing The Voodoo, Azpiazu's "stirring composition ... particularly effective in dance form presented by the West Indian [Caribbean] girl who appears with the orchestra." Of course, the band also plays Azpiazu's smash hit The Peanut Vendor, with English lyrics by Marion Sunshine. Other acts include Lahr and Ben Bard in "the examination scene from Flying High, which nearly everyone found shocking but hilarious," and Baker and "Italian dialect comedian Harry Burns ... in some more or less spontaneous nonsense."


Strangers May Kiss - MGM, starring Norma Shearer and Robert Montgomery, at the Capitol. "Cheap trash", "lavish production and competent acting of the principals are powerless to make the movie saisfying," although it does feature Shearer saying "I'm in an orgy, wallowing, and I love it."

Poem by Justa Naverage (with apologies to Kipling):

"Wheat, wheat, wheat, wheat, Wheat and the chronic sight of it!
Cheap, cheap, cheap, cheap, But millions can't get a bite of it!
Pools and probes and probes and pools, Government guarantees, politics, fools
Farmers, grainmen - these are the tools That have chiseled the present plight of it. ..."

Report from France:

Old Paris, with its "narrow crooked streets," "sinister quarters," and "unsavory tenants," is being demolished to make way for more pleasant neighborhoods, including modern cinemas. The most notorious slum in old Paris, the former Cour des Miracles, is now home to the Theatres des Miracles, showing a film with Douglas Fairbanks, Jr. This neighborhood, once home to "the most depraved criminals of Paris" and immortalized by Victor Hugo in Notre Dame de Paris, took its ironic name from a public court at which beggars "miraculously" washed off their painted wounds to turn into "banditti" by night, while old women returned from begging on church steps and shed their years and rags "for that other role which they played by night in the streets of Paris."

1 comment:

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