April 14, 2010

Tuesday, April 14, 1931: Dow 171.07 +3.04 (1.8%)

Assorted historical stuff:

Weather conditions in grain states, at least for the time being, are overshadowing the huge surplus in storage. "For some days messages from the American and Canadian Northwest have been telling of severe dust storms." This is indicates lack of surface moisture, and recent official reports have also told of a lack of subsoil reserve. While rains have been sufficient to give winter wheat crop a good start, "persistent rains will be necessary to prevent deterioration."

Editorial by Guy Walker citing astonishing total of US national income as evidence of the "folly of fear for the future and the restraint upon spending that is being shown by the American people." Puts total gross US income for 1929 at $213B, including corporate, individual, and farm revenues; also cites $210M increase in savings deposits in NY alone during Dec.-Feb., "at a time of unparalleled unemployment and depression. ... The chief problem is to use intelligently the capital which we have been gathering in such large amounts in developing the rest of the world and bringing it up to a standard of living comparable with our own. If the people of China could be benefited by the use of American capital" national income there could rise to $80B; this would flow into foreign trade and benefit the whole world.

Editorial by T. Woodlock: Human progress now depends on replacing society's current “drift” with “mastery” under direction of a talented minority. This will be difficult because the instincts of all work against it. The majority will find it difficult “to realize that in the politico-economic order it is not the fount of all wisdom and the seat of omnipotence,” since it is often assured by politicians that it is both. On the other side, “it is not natural for the minority of mankind (which constitutes the upper tier of brackets) to regard itself as trustee for the welfare of mankind.” To achieve this, “some unifying principle must be found which both minority and majority recognize, believe, and resolutely attempt to put into practice.”

Editorial on idea that workers' buying power can be preserved by avoiding wage cuts or by a universal 5-day workweek. Situation is more complex; workers can be divided into those making full pre-depression wages, and those whose pay is lower or who have no work. The first category can command greater amounts of the labor of the others; this must be temporary, since the others will respond by curtailing most their consumption of what the first category produces.

Sen. Borah says oil industry should be declared a public utility to give Congress control of prices; says curtailment plan arrived at in recent conference of oil producing states fails to protect consumer from exorbitant oil and gasoline prices. Interior Sec. Wilbur replies this is a matter for states to decide, though he assumes whatever plan is agreed upon will include consumer protections.

Herald Tribune reports Pres. Hoover plans renewed effort to stimulate public interest in home building.

Editorial: Legislature has finally acted on bill to relieve savings banks from discriminatory tax. Under current system, savings banks, originally supposed to receive preferential tax treatment to promote thrift, were paying as much as 12% of net income vs. 4 1/2% for commercial banks. Final version of the bill offers full relief, reducing rate to 4 1/2%; Gov. Roosevelt is expected to sign it even though it reduces tax revenue a few million dollars from the existing "unjust and unfair law."

For the first time since organization of the Honolulu government over 20 years ago, a man without Hawaiian ancestry is mayor: G. Fred Wright, born in Honolulu of "Anglo-Saxon parents." Board of Supervisors also has record-low Hawaiian ancestry, featuring "but one member of part Hawaiian blood. Other members include one Chinese, one Portuguese, and four Anglo-Saxons."

About 18,000 attended National Aircraft Show at Detroit City Airport on Sunday. Show expected to unveil decided improvements over last year's models. New "flivver" planes priced in $1,000-$2,000 range should revive moribund demand in commercial field. Airline officials encouraged that recent disaster in Kansas [in which Knute Rockne and 7 others died] hasn't diminished passenger traffic; another record is expected this year.

Rail innovations: B.&O. is installing electric air-conditioning units on its special "Columbian" NY- Washington train that can change the air in the car in two minutes while excluding all soot, cinders, and other foreign bodies. Southern Rwy. is printing menus for its "Crescent Limited" on cotton cloth to promote use of the textile.

Market commentary:

Market wrap: Stock trading was light, and movements narrow but mostly upward through the session; trading turned "virtually lifeless" on declines. A convincing rally broke out near the close "which forced the shorts into urgent retreat"; uptrend spread across the list and stocks generally closed at the day's highs. Bond trading quiet, prices irregular; US govts. firm; foreign mixed with European in demand but renewed weakness in Brazilian issues affecting S. American list; corp. irregular with utility and traction issues strong, but continued weakness in some rails; some speculative issues were in demand. Commodities strong; grains and cotton up substantially. Copper up to 10 cents, domestic demand is moderate but foreign sales brisk.

Conservative observers see possibility of further technical gains but remain cautious; advise using further advances to reduce long positions. Recent weakness of rails seen as warning sign, considering rail movements have predicted general market well in the past year.

Market appears to be resisting bear pressure more firmly in recent sessions, in spite of many very poor Q1 earnings statements. While the averages declined steadily in the 3 weeks ended Saturday, many groups have held their own including chain stores, tobaccos, and coppers; in the meantime, volume has been shrinking and main offerings seem to be coming from short-sellers. This indicates technical strength and makes a "selling climax" less likely.

Market conditions seem ripe for technical rally; some traders have quietly been picking up leading stocks in anticipation, though they're protecting positions with stop-loss orders. Some brokers report recent heavy short selling by the public, despite their advice to the contrary; these new recruits have been putting out stocks while some of the old-time bears have been covering. A number of brokers report recent liquidation of rail shares by long-term investors disturbed at inability to resist bear pressure; some switching to bonds reported.

Public utilities were a strong spot, including AT&T and Consolidated Gas. Coppers also strong on improved price situation. Vanadium was down sharply on dividend rumors, but other trading favorites were strong, with Auburn soaring 14 points to 292 1/2. Only three weeks after announcing a dividend cut, Westinghouse is again subject of dividend rumors based on poor first-quarter business. Company has been one of the "outstanding targets for ... the most powerful bear group operating in the Street." Procter & Gamble, going against the trend, is rumored to be a candidate for a dividend increase. Mexican Seaboard (oil) said to be subject of bull pool operations.

Recent survey finds a representative group of 34 managed investment trusts [similar to mutual funds] had average depreciation of 31.6% in assets in 1930.

Broad Street Gossip: Although business has been declining since the summer of 1929, well-managed corporations are as strong as ever in cash assets; shrinkage has been confined to earnings and market capitalization. This contrasts sharply with previous depressions, in which many cash-poor corporations were forced to borrow at 6% or more. Lending and "heavy investing in securities by corporations is something never witnessed in previous depressions." Despite the long economic downturn, public buying power is still large. NY State savings bank deposits continue to increase, now totaling $4.958B with 5.436M depositors. Floating supply of the stock of many corporations is at a record low, indicating public still has money to buy stocks. Public has also been absorbing $500M or more per month of new securities. Recent $275M issue of treasury certificates drew almost $1B of bids.

US study for Internat'l. Chamber of Commerce finds automation of industry in recent past hasn't caused appreciable reduction in employment opportunities for industrial workers; displacement of workers by technology seen as problem of "vocational readjustment." H. Houston, US committee member, to present proposal for economic study of war debt question in light of current business conditions; suggests canceling payments based on arms cuts.

G. Pierce, Nat'l Shawmut Bank VP and head of foreign dept., says US and France should greatly increase foreign financing to bring about business recovery.

T. Chadbourne on closing of his world sugar agreement: plan is unique in receiving support from govts. of all countries involved; without this agreement, enormous oversupply would have persisted for several years, but with it there's every reason market should become orderly again; price could rise to 2 1/2 cents or higher.

A. Erskine, Studebaker pres., predicts auto industry will produce 3.1M cars in 1931 and 4M in 1932.

Economic news and individual company reports:

Spanish pesetas broke sharply after election that precipitated “grave political crisis” putting govt. in danger of overthrow. Bank of Spain apparently failed to defend the currency, bearing out recent criticism that “political stability and the willingness to make the necessary sacrifices” were needed for stabilization.

GM strengthened balance sheet in 1930 in spite of lower earnings; working capital rose $29.7M to $281.0M; current ratio rose 4.35 from 3.13, highest since 1924. Auburn shipments for Jan. 1 - Apr. 11 were 13,888 cars, exceeding shipments for the entire 1930 year. Nash Motors maintained per-unit profit margin close to previous 5-year average in spite of sharp decline in sales and earnings, thanks to tight control of expenses. Sales are up sharply in Mar. and Apr.

Cotton textiles report continued progress in March; production was 271.6M yards, up 2.4% over Feb.; shipments 317.2M, or 116.8% of production; sales 295.3M, or 108.7% of production; inventories 273.8M, down 14.3% in March and lowest since Jan. 1928; unfilled orders 374.0M, down 5.5%.

Oil production figures for past week will be up sharply due to rise in East Texas and temporary increase in Oklahoma. Texas oil operators say decision temporarily suspending curtailment in East Texas may upset quotas in other Texas districts. Supreme Court decides against govt. in antitrust suit charging Standard Oil cos. of Indiana and NJ, Texas Co., and others regarding gasoline cracking patents.

Agriculture Dept. reports drought relief loans to Apr. 10 totaled $32.7M to 234,786 borrowers. Cattle and hog prices sharply lower after heavy runs to market. Farm Board chair. Stone confers with Chinese Minister Chauochu Wu on possibility of distributing Farm Board wheat in China.

Bank for Int'l Settlements reports progress in new role of international clearinghouse for currency and gold transfers, which may help work toward “European monetary solidarity” by reducing risks of shocks among the 25 European gold-based foreign currencies. Has also been investigating ways of facilitating medium-term credit to countries in need of capital.

Canadian report: Highest-grade bonds have shown uptrend in spite of relatively heavy new issues this year; tax-free govt. bonds yield 3 1/2%, taxable 4 1/2%, and highest-grade utilities slightly more. However, the need to refinance $1B in govt. debt over next few years is causing some concern. Local govts. are taking advantage of the favorable market to finance public works; new bond sales were $190.4M in Q1 vs. $162.6M in 1930 and $125.2M in 1929. Savings deposits continued uptrend in Feb., while current loans continued decline. An early spring is increasing retail trade in some lines, though retail prices have only declined 9% from the Jan. 1930 peak while wholesale prices are down 24% from the Sept. 1929 peak. Weekly rail freight loadings showed some improvement in March. Major distilleries agreed to end price cutting; export trade has suffered since govt. closed off liquor exports to US.

Australian govt. to claim $3.5M from state of New South Wales to compensate for payments made to holders of state bonds when the state defaulted Apr. 1.

Argentine govt. replaces high tariff on imported foreign movies with 20% tax on profits of distributors.

3,500 workers of the Philadelphia & Reading Coal & Iron Co. out on strike.

R. Whitney renominated as head of NYSE.

Companies reporting decent earnings: Beatrice Creamery, Internat'l Hydro-Electric System, Jamaica Public Service Ltd, Warren Foundry & Pipe.


Peter Ibbetson - Lee Shubert's "painstaking revival" of the wistful romance, based on George Du Maurier's popular novel. [Childhood sweethearts are separated, the man unjustly imprisoned, but they can reunite eternally in each other's dreams].


"Mrs. Youngbride (in bookstore) - What are the blank pages in the back of the cook book for? Clerk - My wife uses them for the addresses of the delicatessen shops."

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