Thursday, April 30, 1931: Dow 143.61 -4.34 (2.9%)

Assorted historical stuff:

Commerce Sec. Lamont delivers address to Chamber of Commerce that was reviewed carefully by Pres. Hoover. Favors high wages; "most prosperous periods of our industrial history have been coincident with high wages and shorter hours." Expresses confidence in gradual recovery; says business currently about 25%-30% below normal and unemployment about 10%. Other speakers proposed modification of antitrust laws, more industrial planning, and gave mixed reviews to unemployment insurance as possibly of benefit to some employers but no cure-all.

Editorial: Henry Ford's adherence to the high wage theory that "has made his name a heroic legend the world over" may be right for the Ford business, but is questionable as a wider policy. Most of the products of wage earners must in turn be bought by other wage earners; in the current depression, much of the population has lower income due to unemployment or reduction in hours worked, but still is being called on to absorb the production of high wage earners. This imbalance is harmful and should be fixed by more widespread wage cuts in industries where the lower costs would help marketing, such as construction. “It is inequality of buying power among large segments of the population that now holds business activity in check.”

Washington report: Col. Woods' resignation from Pres. Hoover's emergency employment committee comes after unconfirmed rumors of disagreement with some Adminstration policies; the new chairman, F. Croxton, is a longtime Hoover associate. Democrats may be wavering on taking definite anti-Prohibition stand. J. Raskob wanted to do so when the Dem. Nat'l Committee met 6 weeks ago, but was prevailed on to postpone action by other party leaders; now, his right hand man J. Shouse is saying economic issues will dominate the 1932 campaign. Vacancies on the Fed. Reserve board are subject of a conflict between farm organizations, who want one vacancy to be filled by a farm representative as previously, and Midwest financial interests wanting representation on the board. Rep. Wright Patman of Texas proposes impeaching Treasury Sec. Mellon.

Editorial: Business sentiment increasingly demands revision of the Sherman antitrust law. Whatever the need for the law when Pres. Harrison signed it in 1890, it's now a handicap to industry and should be revised, while still protecting people from monopolistic oppression. Framers of the law followed the example of the Constitution and made it very brief and broad. However, after 40 years, "the statute intended to prevent restraint of trade has in some respects become a restraint upon industry; intended to prevent cutthroat competition," in some cases it has compelled it, for example in the oil industry. "Why should a restraint that is beneficial to the public welfare be illegal? ... The fundamental purpose of the law is to protect consumer and producer, but when ... it compels a producer to commit suicide the purpose of the law is not attained."

Employees of Big Black Mountain coal mines (not unionized) are working under protection of armed deputies after a week of "sporadic disorders" and an outbreak yesterday in which hundreds of shots were fired. United Mine Workers have tried to organize the mine unsuccessfully.

Brazil imposes press censorship after “small revolt in Sao Paulo.” Bankers are “far from satisfied with the Brazilian financial situation”; gold reserves are exhausted, and, while the country is running a trade surplus, it's exceeded by debt service.

United Fruit reports conditions quiet in districts where it operates in Honduras and Nicaragua.

Reminiscence by H. Alloway on early career of Samuel Insull, young assistant to Thomas Edison (Insull is now 76 and Edison 84). "Sam was probably the most elastic secretary that Wall Street ever knew. In his early 'prentice days, Edison finance was the wonder puzzle. Inventor man didn't care a Hannah Cook for money - his whole five normal senses (and a few extra senses uniquely his own) were keyed to 'stepping up' discoveries, applications, ... manufacture sequences. Young Insull just had to be a buffer for one who couldn't remember business appointments."

Chlorophyll is known to be a substance in plants that enables them to turn carbon dioxide and water into sugars and starches. But just how does it work? This may not remain a mystery for too much longer. Scientists at the Agriculture Dept. have learned to extract chlorophyll in large quantities and are sending it to labs all over the country for other scientists to experiment with. It's hinted that knowledge of the process may allow producing plant products synthetically.

A petition is before the King of Hejas to rebuild the Damascus-Medina-Hadj Railroad which was destroyed in the World War. The road began in, traversed and ended in desert, and carried no freight; its sole purpose was to transport Moslems "making the Hadj", the religious pilgramage aspired to by all Moslems. Since the rail was destroyed, Moslems have had to make the Hadj on foot, a wearying journey. The railway itself was designed by a German, built by Italian, Polish, Hungarian and Turkish engineers using Italian, Greek, Turkish and Montenegrin labor, had its rails made in the US, France, and Belgium, and its engines in Germany.

Frank D. Whipp, Illinois superintendent of prisons, says state will soon equip prisons and reformatories with radios. These will be used for entertainment purposes and in prison management, allowing messages to be given to all prisoners simultaneously.

The Audubon Society of America, is trying to save the antelope herds of the high sage plains of Northern Nevada and Southern Oregon from extermination. Plan involves gaining control of 48 sq miles of land that forms the antelope's native range. The Boone and Crockett Club of New York is participating in the financing and the Interior Dept. has closed off lands in the area designated as best suited for antelope; area will also be sanctuary for other birds and animals.

Heartwarming story of recently deceased man from San Francisco whose will stated "I want everything to go to the Offens Hom of San Francisco" is somewhat tarnished by lawsuit from relative contesting will on grounds there is no such entity as the "Offens Hom."

Market commentary:

Market wrap: Stocks opened under severe pressure; US Steel opened down 2 7/8 after poor earnings report and continued to sell off rapidly, ending the day down 9 1/8 to 115 1/4. Other sections of the list weren't as bad, but the whole market was badly unsettled by the plunge in Steel; new bear market lows were hit by Westinghouse and Bethlehem; utilities were weak after Commonwealth & Southern dividend cut; many issues came under attack, and stop-loss orders increased the selling. Bond market recent trends continued; US govts. firm near year's highs; European issues steady to firm while S. American gained on late rally; best-grade corp. steady while heavy selling continued in lower-grade and speculative issues. Commodities mixed; grains narrowly higher; cotton down substantially. Lead, zinc, and crude rubber weak; coffee rallied sharply.

Dow industrial average closed at a new bear market low; there was one new yearly high (Noranda Min.) and 223 new lows.

Market observers recommend sidelines; advise against going short on expectation market may have technical rally toward end of week if liquidation is completed.

Brokers reported "plethora of frightened selling"; steady decline has disturbed those believing "some unfavorable development is hanging over the market." Public liquidation was particularly heavy in US Steel. Demand was heavy in the stock loan market (in which short-sellers borrow stock), with a record number of stocks at a premium (indication of heavy demand).

US Steel was subject of dividend fears after showing $14.0M deficit in Q1 including dividend payments. Bears argued Q2 earnings were likely to suffer from lower steel production in April; prices have also reportedly weakened. Westinghouse has been subject of severe bear pressure day by day; latest talk is that dividends may have to be eliminated by end of 1931. General Foods earnings said to benefit from slower decline in its product prices than in raw materials it uses. American Can held up relatively well until recently as shipments this year were only about 5% below 1930, but it has weakened on reports of lower sales in the past two weeks. Gillette said to be subject of accumulation by "New England interests who are said to be more confident of the long-term outlook for the company than they have been in a long while."

Sun Life Assurance of Canada, manager of one of world's largest investment funds, denied numerous recent rumors it was selling its common stock holdings.

After low earnings and dividend cuts by vast majority of steel companies in the first quarter, question of cuts in wage rates is likely to arise. However, hasty action is unlikely; independents insist action must first be taken by US Steel, and officials there are inclined to view cuts as a last resort; US Steel finance committee chair. M. Taylor is in Europe and not expected back until June.

T. Woodlock spoke at Chamber of Commerce meeting on principles for fair competition in transportation: public entitled to the most economical possible form of transportation and users should generally bear full cost, not public. US system doesn't fulfill these principles, discriminating against rails in several ways.

Freight loadings report for April 18 week was somewhat encouraging, showing a new yearly high of 760,002 cars, vs. previous high of 741,942 in the Mar. 21 week with gain largely due to miscellaneous freight; however indications are the next week will show a decline again.

Severe dividend doubts were apparent in the yields available in NYSE-listed shares. Of a total of 646 dividend-paying listed shares, 460 had yields of 6% or more, 260 had yields of 8% or more, 152 had yields of 10% or more, and 37 had yields of 15% or more.

Economic news and individual company reports:

Eye-opening stats on what states pay in taxes to the Federal govt. vs. what they get back from it: Idaho paid $868,000 and got $1.315M; North Dakota paid $556,000 and got $1.704M; Illinois paid $247M and got $4.3M; New York paid $928M and got $8.7M .

Bank of US depositors and other creditors will soon receive claim forms; these should enable them to receive an initial cash liquidating dividend, though this probably won't happen until September. About 125,000 of 400,000 depositors took advantage of the 50% loan offer from NY Clearing House banks. Justice Valente dismisses $50M lawsuit by Bank of US stockholders against NY Banking Superintendent Broderick for negligence. Five partners in Prince & Whitely (broker that failed in Oct.) questioned by Federal Grand Jury investigating the firm's failure. Receiver [bankruptcy] asked for Wheat Farming Co. of Hays, Kansas, largest farming corp. in the state.

Fed. Reserve governors continued spring meeting for third day; will meet with members of Reserve board to take up policy matters before adjournment.

Estimate of total class 1 rail operating income in March shows sharp improvement from Feb.; total of about $45.3M was up 66% from Feb. and only showed a decline of 25.3% from a year earlier, vs. a decline of 54.2% in Feb. from a year earlier. Rail freight cars ordered in first 4 months of 1931 were 4,958 vs. 28,570 in 1930; passenger cars 4 vs. 431; locomotives 25 vs. 251.

Counsel for the four rails involved in the Eastern rail consolidation plan met all day Tuesday; tentative draft prepared "with a view to ironing out further legal details" before presenting plan to the ICC; observers say plan is at critical point. While announcement was made in Dec. that agreement was reached except for "minor" details, this was done under tremendous pressure from the White House and some of the "minor" issues have turned out to be difficult to resolve.

Steel production for week ended Monday was 48 1/2% vs. 49% prev. week, 50.5% two weeks ago, 77% in 1930, and 101% in 1929. Weekly steel reviews reported developments “less uniformly negative” as downtrend slowed. Prices show weak tone, though actual declines mainly limited to scrap. Automotive buying lower; reports persist of decline in Ford steel demand.

US electric output for week ended Apr. 25 was 1,647 GWHr, down 3.1% from 1930, vs. a 4.6% decline prev. week and 3.1% two weeks ago.

World gold production continued at record pace in March; estimated at 1.757M ounces vs. 1.697M in 1930; Canadian 230,000 ounces vs. 170,000.

Texas Railroad Commission raised allowed production from East Texas to 160,000 barrels/day, 30,000 over original allowable. Some water has appeared in several wells, causing some to lower estimates for ultimate productivity of the field.

Foreign currencies reacted after a few days of gains; it's still believed the long-awaited Paris-to-London gold movement is imminent.

French Cabinet approves $40M loan to Yugoslavia to strengthen French counterproposal to Austro-German customs union.

Germany to reduce wheat import duties 50 cents/barrel from current $1.62 due to shortage of domestic supplies.

Argentine trade deficit in Q1 was only 1.420M gold pesos vs. 11.263M in 1930; total trade decreased 17%.

Pres. Ibanez of Chile accepts resignation of 5 ministers and organizes new cabinet to carry out economy program.

Mexico raised duties on almost all agricultural imports by over 100%.

Total fire insurance risks carried by all companies in US estimated at $201B, or 59% of total US wealth.

US car accident deaths in 81 cities in month ended April 18 were 669 vs. 625 a year earlier.

NY City comptroller says won't sell new long-term bonds until fall, relying on short-term borrowing until then; this had bullish effect on existing long-term issues; upcoming $52M four-year sale expected to draw very strong interest.

C. Nichols, former Allied Chemical chair., denied family had disposed of its interest in Allied in spite of his leaving the board of directors.

Goodrich joins Goodyear in reporting encouraging uptrend in tire sales in March and April, though profit may be hurt by lower prices.

Radio Corp., after unfavorable ruling by the Supreme Court in patent-related antitrust suit by DeForest Radio, faces important case before Federal Radio Commission that could lead to its loss of 1,400 radio licenses held by subsidiaries. Govt. counsel said breakup of the entire company would definitely not be sought.

Companies reporting decent earnings: Standard Brands, Trico Products (auto equipment), Plymouth Oil.

New books:

“Business Adrift” by W. Donham, Dean of the Harvard Grad. School of Business Admin. - Presents plan for saving capitalism though large-scale public works paying relatively low salaries, to be initiated by govt. when depression hits private industry. Recurrent severe depressions “must be prevented if capitalistic civilization is to endure.” Makes good reading, though “professors of the dismal science” may be too influenced by Russia in “their furious search for 'a plan.'” Speaking of Russia, several interesting volumes have come out with conflicting reports on success or failure of the five-year plan started two years ago; some go so far as to accuse the Russians of actually practicing state capitalism.

New York Theatre:

The Theatre Guild will produce Eugene O'Neill's trilogy, Mourning Becomes Electra, next season. The trilogy contains three full length plays with the same principal characters, requiring the same actors to play throughout. Aside from one act set in a clipper ship, all the action takes place in a New England seaport town at the close of the Civil War.

Paris Theatre:

The boulevard music halls are "opening those undressed warm weather shows which are designed for tourist trade." The Folies Bergere unveils the new revue L'Usine a Folies (folly factory) which is "just a little more undraped than" Paris on the Move, at the Casino de Paris, where Josephine Baker leads a "procession of more or less exotic and erotic episodes." However, the legitimate theatre is “conforming to the long-skirted ... mode ... if it is not altogether going back to crinolines”; trends include maternal and poetic dramas, as well as a “back to tragedy” movement and “reverently and beautifully staged” revivals of classic dramas including Misanthrope and Phedre. Continental theatre is undergoing a transition with a clear division between the music hall and the theatre. While music halls are thriving presenting revues “gay and gorgeous, squanderous in talent” and scenery and “vying to outdo each other in bizarre and daring spectacle,” theatre is increasingly austere. Plays are no longer larded with cloying sentimental songs; leading actresses are mature and poised rather than "'cuties' with treble voices. ... While the boulevard music hall is more nude and quick stepping even than Broadway, the real theatre of France is trailing classic drapery and moving regally across boards once trod by Rachel and Coquelin and Sarah Bernhardt." This may not please the summer visitor but Parisians are welcoming the change.

Jokes:

"Mrs. Brown (with newspaper) - John, it refers here to some gunmen taking a man for a ride. What kind of a ride? Brown - A slay ride, my dear."

"Mother - You know, Geoffrey, Norma is nearly seventeen years old, so today I had a frank discussion with her about the facts of life. Father - Ah! Did you learn anything new?"