Tuesday, April 21, 1931: Dow 163.41 +1.04 (0.6%)

Optimistic statements special:

W. Gifford, AT&T pres., says company statisticians see current signs of improvement. Statement seen as significant because of wide scope of AT&T operations and care with which statistics are prepared; first such statement from Mr. Gifford since the depression began. Speaks out against undemocratic quick fixes: "In this depression, some folk of intelligence but little faith have been calling for immediate remedies, for strong leaders to make everything all right at once for everybody." These leaders would have "autocratic or tyrannical power. Uneducated people that can not attend to their own affairs must have such leaders. Educated peoples do not need them and will not tolerate them." The US won't fall for autocrats; instead, it progresses by the initiative of many. There are also those who want to return to the “good old times,” like the legendary Wufus birds that “fly backward to keep the wind out of their eyes, and are not interested in where they are going but only in where they have been.” And then there are those who threaten that if their course isn't followed “the bolshviks will get us.” However, the US doesn't look backward, and won't be directed by threats. Praises policy of maintaining wage rates to reduce impact on the most vulnerable.

J. Farrell, US Steel pres., speaking at annual meeting: “The gloom that pervades the atmosphere of the country hasn't settled on the roof of 71 Broadway” [Headquarters of US steel; now an apartment building]. Company has passed through two depressions more serious than this one; got through 1930 in reasonable fashion, earning $9.18/share while continuing huge construction program. March business substantially improved over Feb., and prices for many products have increased from Q1. Praises new company pension plan with mandatory retirement age of 70; at 68, Farrell will be one of the first senior executives affected.

Assorted historical stuff:

"Semi-official" Soviet Pravda newspaper says tractor plant at Stalingrad, one of largest in the world, has "practically broken down," producing fewer than 3,000 vs. annual capacity of 50,000. Soviet govt. to introduce new wage system known as "khozraschiot" on May 1 paying "according to individual skill and ability rather than on basis of communistic theory of equal division."

Two somewhat contradictory editorials: Increase in tariffs and economic nationalism is prompting concern by economists and statesman. There were 6 extensive tariff revisions by European countries in 1930, mostly upward, and all but two European govts. made some tariff changes. These may or may not have been reprisals against the US, but at the least, it seems that after our large increase other countries thought it necessary to preserve their markets for domestic producers. There's increasing recognition of the danger of this trend, but so far little ability to see another path. The US has long had a policy of protective tariffs, and it would be bad business to advocate sudden sweeping changes in that system. However, it's in the interest of business to recognize the current tariff hasn't met the promises of its supporters, and to make an impartial study of how to correct what's wrong. Discussion of Russian trade menace has "freed itself of certain hysterical tendencies manifested in high quarters last summer." This is positive, but on the other hand the Manufacturer's Export Assoc. goes too far in defending machinery sales to Russia by arguing their overall long-term effects would be positive for the US. This stance would require our miners, lumbermen, and oilfield workers to bear the sacrifice for other industries. The less restriction of trade "to mutual advantage the better. But there is such a thing as dumping, and so long as a country of such vast resources and population practices or threatens it, we shall have to be ready with defensive measures."

Poland and Belgium recognize new Spanish Republic. Spanish republican govt. plans cooperative system of peasant ownership of land expropriated from the aristocracy. Pesetas weak again.

Yet another opinion piece detailing failures of the Farm Board.

US immigration visas in March reduced from quota of 14,846 to 1,711 to avoid increasing unemployment; in fiscal year ended June 30, about 140,000 aliens who would have entered US under old quota will not receive visas.

Attendance during the 9-day Detroit air show was over 75,000. A total of 10,595 planes took off from the field during the show; about 5,585 people took sightseeing flights. Sales by 17 of 41 exhibitors were 636 aircraft valued at $1.653M.

The almighty conveyor, iconic symbol of mass production is regarded with awe in countries, like Russia, where industry is barely out of the "handicraft stage." Russians, great admirers of Ford, have coined the term "Fordisme" to signify the industrial efficiency that the conveyor exemplifies; even in the US, most believe carmakers pioneered industrial use of the conveyor. In reality, it was Parke Davis who first used the conveyor industrially, in Detroit, for mass production of pills.

Agriculture Dept.'s venture into sound film production, rather mysteriously, is starting with a film on Native American sound language. The mystery is explained when it's learned the audio will be a lecture by Major Gen. H. Scott explaining the action more fully. Film is to be a permanent record of the sign language.

An ordinary gas meter is made of 32 different materials, including steel from the US, sheepskin from Australia, sisal hemp from Mexico, silk from Japan or Italy, oils and varnishes from the tropics. Each meter contains 130 parts and requires 400 operations to make.

A long-running wage dispute in Bordeaux, France was recently settled. In 1919, a large cafe changed from a tip system to adding a flat 10% service charge; the wait staff was switched from being paid in tips to a small wage. One waiter asked for the 10% in addition to his wage; upon being denied he took his case to the council that deals with wage disputes, and won. The council thus "established the principle that if an employer charges a customer a service charge, the money should go to those who render the service."

Negotiations underway to establish New York daily newspaper devoted to the dry cause.

Market commentary:

Market wrap: Stocks opened weakly, failing to carry through on late rally Saturday; individual issues were pressured; US Steel hit another bear market low, dipping below 130, while Standard Oil of NJ went below 40 for the first time since 1928 and Auburn suffered another sensational plunge. Prices drifted in mid-day, then improved somewhat as US Steel rallied following positive remarks by pres. Farrell at annual meeting; improvement broadened across market in final hour, with good recoveries in GM, GE, and Auburn. Bond trading quiet; US govts. steady; European steady while S. American rallied, though Bolivian issues reacted after announcement of partial interest payment May 1; corp. high grade steady with some improvement in rails, while speculative issues were soft again. Commodities mixed; grains weak with wheat down sharply on report of beneficial rains, other grains down fractionally; cotton somewhat higher. Copper firmed slightly to 9 3/4 cents; buying more active. Crude rubber and zinc hit new lows.

Market observers remain unwilling to recommend buying, though many believe technical recoveries are likely when the market becomes oversold.

Public interest is growing in automotive shares, though conservative brokers recommend sticking to GM because the stock has held up well this year. However, rumors have been heard that "bears were planning to attack the stock to further unsettle general sentiment." Allied Chemical has been subject of bear attacks.

Trading continued to be mainly professional, and the afternoon recovery was attributed to short covering. In spite of market averages down near the bear market lows, brokers report few margin calls; one large broker sent out only 10 calls during the 3 week downtrend. Most selling has been by interests who bought in the past two months and were scared out by poor earnings news and dividend cuts. Opinion is spreading that recent short interest was not as large as thought, since many were selling against strong boxes [hedging stocks they already owned].

Bears encouraged by recent pattern of low volume on rallies; feel it's unlikely the downtrend will end until a relatively active 5M-6M share day of trading.

After recent widespread dividend cuts, even companies that have maintained dividends are finding in necessary to calm nervous shareholders. For example, National Lead pres. E. Cornish, who generally doesn't comment on dividends, issued a rather indirect statement that, if it became necessary to cut dividends, all of management's careful planning over the past 15 years will have been in vain.

Many industrialists believe stock weakness is influencing business conditions; over the past few months, several encouraging spurts in business have been followed by renewed bearish operations and a subsequent letdown in business; this may be happening again now. While influence of bear efforts on business is uncertain, it's known many business leader watch the market closely for signals.

Recent Labor Dept. report of 10% wage reductions in 50 manufacturing industries during March seen as hopeful sign. During depressions, wholesale commodity prices always decline first, followed by dividends, retail prices, and finally wages, at which point the end is usually in sight.

Col. A. Woods, chair. of Pres. Hoover's employment committee, says wage cuts by industry at this time would be "most unfortunate."

Economic news and individual company reports:

Household Finance (small loans) reports record Q1 earnings, in spite of bad times and adverse factor of veterans' bonus. As of Mar. 31, had $41M loans outstanding to 280,000 customers vs. $34M to 252,000 a year earlier. Bad debt charges were 1.02% in 1930 vs. 0.75% in 1929.

Judge P. Hatting of NY Supreme Court rules Bank of US stockholder C. Frank may proceed with suit to recover $100M from directors for losses due to mismanagement; this contradicts an earlier ruling by Justice Valente on another suit. Bank of US trial continues; defense attorneys question H. Lipschutz, officer of several of the bank's affiliates, on “various phases of” the disputed transaction by which an $8M bank loan to the affiliates was paid off.

Mississippi Gov. Bilbo says state won't default on May 1 bond payments, indicating he may relent and call special legislative session, or that Miss. bankers may tide the state over; banking circles are anxious to preserve the state's credit since it's about to start a 6,000 mile $150M-$200M highway paving program.

Foreign exchange market abuzz over unexpected $3.5M shipment of gold from France to US. While shipment in itself wasn't very useful, merely shifting gold from one center where it's in excess to another, it was seen as evidence the Bank of France was willing to allow export of gold based on market conditions. Bankers believe stage is set for heavy French exports of gold to other European countries. France had imported large amounts of gold over the past few years, bringing about a “form of inflation” and temporarily staving off the world depression; however, it has recently started “to be affected by the general world trend.”

France proposes plan to solve marketing and credit problems of European farmers through new $50M international farm credit co.; plan intends to make European agriculture self-supporting and keep European markets for it.

Poland accepts $44M loan from France for railroad construction.

Revolutionary govt. in Peru, following recommendations of Prof. E. Kemmerrer, decrees stabilization of sol (currency) at 28 cents vs. par value of 40 cents; also decrees reorganization of reserve bank.

B.I.S. seen opposing German bank's request to rediscount Soviet notes so Germany can increase exports there; official reason is that currency isn't stabilized.

Canadian report: Howard Smith Paper Mills Ltd. has acquired 965 sq miles of spruce pulpwood land from the Ontario govt., bringing their total holdings of woodlands to over 2,000 sq miles. Bell Telephone of Canada earnings are failing to cover dividends so far in 1931. Turner Valley oil field in Alberta "has passed its peak as an oil producer, in the opinion of best informed operators," though it still has long life as a gas producer. It's unlikely the field will pay back much more than development expenses. [Had another huge boom starting in 1936; last new well drilled in 2007.] Western coal mining interests demand protection from crude oil competition. One of largest coal mines located on Vancouver Island.

Western rails to sue ICC in Federal court in effort to annul large reduction in rated on grain transport that the ICC ordered effective June 1.

Drop in passengers carried by NY City traction cos. may upset calculations in proposed unification plan; revenues are likely to fall about 5% below plan estimate.

Major newsprint companies cut prices by $5/ton; estimated to cost industry $15M-$20M based on 1930 production; may encourage industry consolidation.

US investments in Honduras estimated at $40M, of which United Fruit Company accounts for $25M.

Companies reporting decent earnings: Household Finance, Beech-Nut Packing, Brillo Manufacturing, Telautograph (machines transmitting diagrams by wire), Butterick (sewing patterns).

Movies:

City Streets - Crime drama starring Gary Cooper, from a story by Dashiell Hammett. Cooper plays a rancher from the West who joins a city beer-running gang after becoming involved with Nan (Sylvia Sidney), daughter of a leading gangster. Suspenseful and full of surprises. Cooper has never acted better; supporting cast also convincing. Director Rouben Mamoulian tells story mainly with the camera, with one image dissolving quickly into another and spare dialogue.

Iron Man - Boxing picture starring Lew Ayres and Jean Harlow, directed by Tod Browning. Smoothly produced and well acted, but scenario lacks the punch to lift it out of the ordinary.

Jokes:

A small boy proudly returned home and told his parents he'd gotten a job at the blacksmith shop. They laughed, and said: 'You surely don't mean to tell us that a little fellow like you can shoe horses.' 'No,' said the boy, 'but I can shoo flies.'

"Bettie (just home from a holiday in Egypt) - And Auntie, it was so interesting; the tombs and pyramids and things were all covered with hieroglyphs. Aunt Louise - Oh dear, I hope you didn't get any on you, child."

"'I can't see why they have a man to steer from the rear of a fire department ladder truck,' said Mrs. Tellum. 'Well, it's a necessary thing , I suppose,' replied Mrs Backseat, 'but I agree with you that it's not a man's work.'"

Aristocrat - Speaking of old families, one of my ancestors was present at the signing of the Magna Charta. Little Ikey - And one of mine was present at the signing of the Ten Commandments.