Wednesday, April 22, 1931: Dow 158.83 -4.58 (2.8%)

Assorted historical stuff:

Thomas E. Dewey, Chief Asst. US Attorney, announces Amer. Bond & Mortgage is being investigated by Justice Dept. Company issued about $90M of mortgage bonds in past few years, most of which are now in default. Company owns and operates the Mayflower Hotel in Wash. and several NY hotels.

Pres. Hoover denounces "Nicaraguan insurgent general" Augusto Sandino for "cold-blooded murder of eight or nine American citizens," says confident he will soon be brought to justice. Some criticism of tardiness of US intervention. Editorial: Sec. of State Stimson's statement that the US would henceforth confine military protection of citizens's lives and property in Nicaragua to the coast towns has generated much "newspaper hubbub" calling it everything from scrapping of the Coolidge Nicaragua policy to a landmark of Monroe doctrine clarification. In reality, it's just a practical restatement of existing policy; past foreign armed interventions have usually been limited to the coasts for logistical reasons. US citizens there must "make a commonsense estimate of the conditions" and realize "their citizenship gives them no unlimited call upon the military." Regardless of whether it wished to, the Adminstration had to intervene in Nicaragua and in Honduras following the recent revolution, both out of obligation to protect its citizens, and to prevent other govts. from entering to protect their own citizens. Looking ahead, "a sufficient force of marines is to remain in Nicaragua long enough" to complete committment made in 1926 to assure free elections, establish an authentic govt., and train a National Guard strong enough to protect against "political banditry." The Administration recently said it would withdraw the Marines by June, and would like to stick to this timetable, though this now appears doubtful.

H. Bancroft, Wall St. Journal publisher, says unclear if business has definitely passed low point of depression, but “whether or not business has passed the extreme low point, it is very close to it.” Cites rapid US increase in savings and paying down of debt.

Pres. Hoover receives reports from editors of business papers covering seven major industries on "What Is Holding Back Industry." List by industry: Automotive - tariff and "hand-to-mouth buying." Construction - lack of standardization and banks' hesitancy in making loans. Food - waste in distribution and failure of big baking cos. to lower bread prices. Chemical - lack of price stability, taxes, inadequate statistics, and bad trade practices. S. Dennis, chair. of nat'l conf. of business paper editors, proposes committee of outstanding business leaders headed by Owen Young to help business plan national economic policy and restore prosperity. Attacks "individualistic trend based upon the philosophy of 'devil take the hindmost.'" Labor Sec. Doak warned editors it would be dangerous to reduce wages as percentage of nat'l income. Dr. J. Klein, Asst. Commerce Sec., pointed to some positive news including recent steadying in prices and European markets.

Editorial by T. Woodlock: It can't be denied that US stockholders in general display “something lik complete indifference” compared to their British and Canadian counterparts. There are few cases in our corporate history where stockholders took matters “into their own hands and achieved a complete revolution”; instead, the history is one of occasional “'riots' which in due time subside or are repressed.” Anything that would increase intelligent involvement of the stockholder would be good, “as it would be in the political field where the inertia and indifference of voters is just as marked.” One possibility is for investment trusts [similar to mutual funds] to combine forces and take a more active role.

Britain recognizes new Spanish Republic.

Harvard Prof. W. Ripley advocates creation of cabinet post of Sec. of Transportation as means of helping rail conditions; would take over current ICC functions and regulate truck and bus transport as well. "While the situation looks critical ... it is not hopeless ... the revival, when it comes, will bring a quick snap back."

The maker of an automatic fire alarm used a unique method to convince skeptical prospects that it would work. The alarm was based on quick melting of a special metal at temperatures above 140 degrees. Taking his prospects to dinner, the manufacturer served coffee along with spoons made of the metal. The spoons instantly melted and disappeared when the guests dipped them into the coffee; the alarms were sold.

While some Civil War ships have been scrapped and others have become monuments, some are still operating. Among these is the "Chickasaw," commanded by Farragut in battle at Mobile, Ala. After the war, the ship became a coal barge for some time; it then was used as a train ferry at St. Louis; finally, about five years ago it was made into a transfer boat named the "Gouldsboro" operating from New Orleans at the "mouth of the Mississippi." The old boat is still fairly fast, making the trip across the Mississippi in 11 minutes.

New Schrafft's restaurant to open today at ground level of Chrysler building; largest in the chain, with seating capacity of 800.

Contrary to predictions of the wets when Prohibition banned beer, the pretzel industry has grown every year since.

Market commentary:

Market wrap: Stocks opened under an overnight accumulation of sell orders from the public; later, bears resumed insistent pressure against the list, producing new lows in many stocks with a wide public following; most demoralizing was US Steel, which sank steadily through the session, to a new low since 1927. Active selling spread to rails about noon, with NY Central reaching its lowest since 1924, and Illinois Central sinking to a record low. Liquidation spread across the list with little support in evidence, and weakness prevailed at the close. Bond volume up but still below normal; US govts. slightly lower; foreign govts. somewhat irregular with rallying in Brazilian and Argentine issues; corp. highest-grade utilities steady but lower-grade weak, particularly rails, oils, and other industrials. Commodities irregular; grains finished narrowly mixed with wheat recovering after a sharp decline on erroneous press reports Farm Board planned to dump its entire surplus on the European market; cotton also down sharply after the Farm Board rumor but failed to recover. Copper buying quiet again; some sales at 9 1/2 cents; market action indicates price will stay below 10 cents until demand increases or small producers are brought under control. Zinc hits 30-year low of 3.625 cents/pound. Coffee up sharply after reports of continuing conference of leading Brazilian producing states.

Market observers pessimistic; it's felt "professionals are in control of the situation," and, while this remains so, tendency is to stay on sidelines and use any technical rebounds to lighten long positions.

Public liquidation was heavier than in some time. Selloff in US Steel intensified in the afternoon after news of production decline below 50%. Utilities weakened on higher volume in the last hour, and sharp drops occurred in leaders including AT&T and Consolidated Gas.

Jewel Tea has been under selling pressure lately in spite of reporting good 1930 earnings; co. had been subject of dividend rumors but declared regular distribution a few days ago [stock about 44, annual dividend rate $4, 1930 earnings $6.09/share]. Atlantic Coast Line RR broke badly after directors' meeting postponed action on dividend to await March results. Western Union reached new low since 1925.

With little positive business new expected in near future, any stock market recovery will probably be technical. Lack of volume on declines has been disturbing; many observers say the decline should end with heavier liquidation. Talk of heavy short selling may have caused some of the public to postpone some liquidation on theory market would rally when bear pressure was lifted.

It's uncertain if corporations are buying back stock, though some have been rumored to be buying small amounts. However, it's considered unlikely buybacks will be as large a factor as last year, when many corporations were buyers.

Important steel reports next week include earnings and dividend actions from US Steel and Bethlehem; it's clear earnings reports will make poor reading.

US seen likely to ease credit further if large export of gold from France threatens to follow recent $3.5M shipment; objective is to divert gold to where it's needed.

W. Woodin, Amer. Locomotive chair., says prospects for orders over rest of the year not very good as there are few inquiries outstanding, but "we are at least at the bottom of the business depression," and long-range results shouldn't be in doubt due to large number of obsolete locomotives.

A number of economists believe business is scraping bottom; they don't expect quick improvement, since summer is usually dull for business, but believe a further sharp decline is unlikely.

W. Atterbury, Pennsylvania RR pres., notes business decline has lasted almost two years; precedent certainly indicates we're scraping bottom and trend should turn upward before long. Wrong to single out rail difficulties in the depression; rails have been affected similarly to other industries, should recover similarly.

T. Woodlock says rails' overall return on property invesment in 1931 likely to be about 3%; situation may be regarded as emergency or as opportunity.

Last week's bank statements contained some encouraging signs: loans and investments reversed downtrend, increasing $206M to $23.051M, though bulk of the increase went into buying securities; demand deposits increased, possibly due to veterans' bonus money; purchases of non-govt. securities continued.

Harvard Economic Society says gains in seasonal spring recovery this year have been far less widespread than a year ago, but, since they started from a much lower base, should be longer lasting. "We anticipate that they will continue and spread and that an upturn of general business is in early prospect."

B. Hutchinson, Chrysler VP: "Automobile production and sales are steadily progressing toward what we regard as normal volume and may reach that point this summer." Expects more sustained production for remainder of the year than in previous years; inventories in very satisfactory shape.

Economic news and individual company reports:

C. Mitchell, Bank of US chairman, admitted under defense cross-examination that he attended the directors' meeting at which large loans to affiliates were approved; Mitchell previously contended he had little to do with those loans.

Farm Board chair. Stone denies reports Board will dispose of surplus in Europe; no change from previous policy of trying to sell 35M bushels of wheat abroad by July, and not supporting the 1931 crop. Believes wheat prices likely to increase based on low European storage and recent decline in Russian exports. Editorial: The Farm Board previously reassured the grain trade it wouldn't swamp European markets with its huge wheat surplus by pledging not to sell more than 35M bushels in the near future. Now, the Board reports foreign markets are so well supplied that it only sold 7M so far. Calculation of likely supply situation shows that selling the surplus now or anytime soon would ruin the market for our entire crop.

Rail freight loadings for week ended Apr. 11 were 737,934, up 9,423 from prev. holiday week, down 19.0% from 1930 week, and down 24.1% from 1929.

Steel production downtrend continued; week ended Monday was 49% vs. 50.5% prev. week, 52% two weeks ago, 77.5% in 1930, and 98% in 1929.

Texas Rail Commission to set East Texas allowable oil production at 130,000 barrels/day, increasing over time to 150,000; oil interests there agree to the limitation.W. Farish, Humble Oil pres., says East Texas field appears to be largest ever in US, covering 100,000 acres of highly productive area; oil of good quality; East Texas price likely to control prices of all competitive oils. Humble reduced purchasing prices on other Texas area oil by 5 - 20 cents/barrel but also reduced transport charges on its pipelines.

Refineries ran at 68.2% in week ended Apr. 18; stocks of gasoline declined 383,000 barrels to 46.384M. Crude oil production in week was 2.422M barrels/day, up 113,750 from prev. week but down 138,900 from a year ago.

S.W. Straus reports March construction permits in 568 leading cities were $153.9M, down 18% from 1930, refuting recent reports of increasing activity.

Cotton goods demand slowed up in March and April, almost coming to a halt in the past 2 weeks; this raised concern in the cotton trade as well as among those who had looked to textiles for a sign of general business revival.

Foreign exchange market strong; featured surge in Spanish pesetas after govt. cancelled recent $60M international stabilization credit unused, with the Fin. Min. stating domestic resources adequate to defend currency. Sterling continued strong against francs, though it's uncertain if gold shipments from France will result.

Some silver factors appear bullish. Worldwide monthly production in Q1 was new low of 15.227M ounces vs. 17.619M in 1930 and 19.017M in 1929; shipments to China were up sharply in March from earlier in 1931, though still well below 1930 levels.

Mississippi banks are conferring on temporarily taking on state bond payments as standoff between Gov. Bilbo and legislature continues.

Detroit index of industrial employment on Apr. 15 was 82.7, vs. 83 on Mar. 31, 82.5 on Mar. 15, and 109 on Apr. 15, 1930.

Foreign govt. and corp. financing in the US in Q1 was $171.2M, lowest in years and entirely made up of Canadian offerings.

Revenues of natural gas utilities in Feb. were $30.3M, down 13% from 1930; manufactured gas $32.8M, down 4.3%.

Soviet govt. announces $29M trade surplus in Q4 of 1930.

[Note: apparently corrects earlier item from 4/17.] NY State income taxes expected to decline $21M from total of $81M collected last year; inheritance taxes to increase $8M; state to end fiscal year with $40M surplus.

Q1 earnings/share: GE $0.38 vs. $0.50; General Foods $1.05 vs. $1.13; National Biscuit $0.70 vs. $0.70; IBM $2.82 vs. $2.82; Gillette (excluding "special reserve for obsolescence") $0.82 vs. $0.98; Chesapeake & Ohio Rwy. $0.65 vs. $0.91.

Companies reporting decent earnings: General Foods, National Biscuit, IBM, Northern States Power, Commonwealth Edison, Brooklyn-Manhattan Transit (BMT), Chicago Great Western RR (against industry trend), Briggs Mfg. (auto bodies), Parker Rust-Proof, Canada Dry Ginger Ale, Philadelphia Dairy Products, Sweets Co. of America.

At the galleries:

Brooklyn Museum will hold an exhibition of modern industrial and decorative art; among those represented will be Rockwell Kent, Frank Lloyd Wright, and Edward Steichen. Keppel Galleries is showing a comprehensive collection of Joseph Pennell's etchings. "His record of the earlier days of the American skyscraper is invaluable, although his line ... was hardly up to the requirements of fully interpreting the mounting Babylonian grandeur of Manhattan's lofty edifices." American-Anderson Galleries will be selling a collection of autograph letters, manuscripts, and first editions of Hawthorne, Melville, Twain, Burroughs, and Whitman; prize of the collection is an unpublished 4-page letter from Melville to his wife regarding "Moby Dick," considered one of the most important literary letters in existence. The galleries will also be selling G. McKearin's collection of early American glass, recognized as the finest in the world.

Movie:

Quick Millions - Yet another racketeering film, starring Spencer Tracy as Bugs Raymond, a truck driver who advances from control of one racket to another "until he becomes virtual dictator of gangdom"; trouble comes when he decides to steal the bride he loves right out of a church, leading his old sweetheart to conspire with his gang to have him "put on the spot." Excellent acting, but poor direction and camera work create confusion and dissipate the story's drama.

Jokes:

"Rose - Is he a good salesman? Dale - Good? Say, he could sell liquor permits at a prohibition convention."

"'She's seen 29 winters.' 'Oh, she's 40 at least.' 'Yes, but they go south every fall.'"

"'Jerry ain't much of a farmer, I'm afraid.' 'Naw, he keeps foolin' around with his crops so much he don't half tend to his fillin' station.'"