Friday, May 15, 1931: Dow 146.64 -2.99 (2.0%)

Assorted historical stuff:

Austrian shares of Creditanstalt were suspended from trading in Vienna after falling to 30 from 42.5. A bank run continued Weds. with “thousands of depositors receiving cash in an orderly manner.” The govt. has proposed issuing a 100M schilling 3-year internal loan to pay for the bank's reorganization; two major political parties supported govt. aid. The B.I.S. is investigating results of the bank's difficulties for international finance, but isn't expected to grant it immediate loans.

Editorial: Defeat of Aristide Briand's candidacy for President of France has fortunate effect of leaving him in charge of French foreign affairs, where he can be more effective in his work to heal the wounds of war. However, French Parliament's refusal to grant him this honor will be seen as a slight; the German press charged it reflected disapproval of his liberal attitude toward France's former foes. In any case, the French results will focus attention on the current League of Nations meeting; the US will be particularly interested whether Pres. Hoover's recent remarks on the need for disarmament to revive world trade made any impression abroad.

G. Noske, German Defense Min., says tariff revision and modification of reparations will check growing crisis in Germany and prevent extremists of left and right from strengthening their positions.

Olympic Committee decides to hold 1936 games in Germany.

Govt. officials say they're aware of some wage cuts and that more are likely to follow if industrial conditions continue depressed. However, they know of no organized move among bankers or manufacturers to lower wages as implied by a recent AFL statement calling on workers to resist wage cuts. Believe industries and plants that can do so without endangering their position will maintain wage levels for the present; others may be driven to wage cuts. Current labor controversies not numerous; total of about 50,000-75,000 workers involved, slightly above recent average but only a fraction of those in previous depressions. Extensive labor strife would aggravate the depression. Pres. Hoover maintains attitude against moves that would lower living standards. Editorial: Rather than blanket opposition to any wage cuts, the AFL should realize the important question is the total buying power of all unemployed labor. This may be increased by cutting wages where this would lower prices and help market more of the goods produced. While labor should justly oppose attempts to cut wages "merely to increase the employer's profits" in businesses that are not endangered, it should consider accepting reasonable wage cuts if shown evidence they would "facilitate marketing of more ... goods ... and expansion of employment."

Brig. Gen. Benedict Crowell endorses Baruch plan to freeze wages and commodity prices in event of war. War Policies Commission is holding hearings to determine if legislation is needed to equalize burdens of war should the US again become involved in hostilities.

Russian wheat sowing has reportedly speeded up, making up to some extent for the poor showing through Apr. 25; sowings up to May 5 are reportedly 10.4M hectares vs. 12.3M a year earlier. Outlook for Russian wheat exports this year is uncertain; last year featured ideal conditions, while this year is less favorable so far; acreage sown by peasants (50%-60% of total) is further behind than that on collective farms. However, even moderate crop may allow some exports.

British Chancellor Snowden reportedly too ill to fight for Labor govt. finance bill; PM MacDonald considering successor.

Spanish Republican govt. decides to seize all private property in Spain of former King Alfonso.

Henry Ford praises decree of Brazilian Pres. Vargas exempting imports for the rubber industry from duties [Note: Ford was at the time making a disastrous and bizarre effort to develop a rubber plantation near the Amazon.]

5,000 coal miners in the Scott's Run field of W. Virginia expected to be idled due to general strike called by the United Mine Workers to protest wage cut.

Editorial by T. Woodlock: In spite of the fact that private electric utilities only account for 5% of Oregon's hydroelectric power, that state appears intent on slaying the power trust "dragon," and has passed some extreme legislation, including installing a single Power Commissioner and making him a prosecutor able to make orders against utilities without a hearing. By contrast, Wisconsin Gov. LaFollette is starting to sound almost reasonable; at least going by his recent proposals, he seems to have come around to the view that public and private utilities should be on equal footing and subject to the same strict regulation and taxation, allowing a fair contest. One suggestion for the Gov. is that all utilities be required to make reports in exactly the same way, and have them certified by public accountants; there should be no reasonable objection to that requirement.

Radio Corp. has drawn some speculative interest on rumors an announcement regarding television will be made shortly, and that demonstrations are planned; this is expected to bring public buying into the stock.

Rear Adm. W. Moffatt says worldwide airship service prevented by national prejudices and faintheartedness; some $25M of idle airship equipment worldwide could be used; missing links would be supply of helium by the US and airship terminal in the Eastern US.

NY City transit unification negotiations have progressed to the point where city officials including Mayor Walker and Comptroller Berry have been called to give their views at a conference to be held shortly. Major issues include overall proposed price of $489M, and issuance of $162M in city debt.

Southern Pacific Rwy. recently opened the largest and heaviest bridge west of the Mississippi - the $12M Martinez-Benicia bridge, a double track crossing the Suisum Bay near San Francisco that replaces ferries operating since 1879. It contains 22,000 tons of steel, is 5,603 feet long, and has a 328 foot lift span [part of the bridge lifted for river traffic], largest in the world.

Honey has been discovered by govt. scientists to be an extremely potent killer of all bacteria it absorbs. It kills bacteria by drying, withdrawing the moisture needed to maintain all living things.

For many winters now William A. Bentley of Jericho, Vermont has been taking micro-photographs of snow crystals; his collection is up to almost 5,000 designs, no two exactly alike. Art students and designers seeking unusual designs have found the collection a useful resource. The American Meteorological Society is now planning to publish the photographs in book form. [Note: AKA William "Snowflake" Bentley; first person to capture a single snow crystal in a photograph, in 1885; technique involved adapting a microscope to a bellows camera and years of trial and error; see Snowflakes in Photographs at Amazon.]

Market commentary:

Market wrap: Stocks suffered "depressing session" led by the rails, with various roads hitting new bear market and many-year lows including Pennsylvania, Rock Island, and Southern Pacific; NY Central hit post-1922 low as poor earnings report raised doubts on whether even the recently-reduced $6 dividend rate could be maintained. US Steel also worked lower into new bear market territory, but other industrials drew support; however, the afternoon brought further bad breaks in the rails, and selling spread to leading issues and across the market. Bond market irregular; highest-grade continued steady to firm while some of the weaker issues that had been pressured in the past week showed more resistance; foreign list irregular, but featured brisk rally in Argentine issues despite conflicting reports on political situation there. Commodities weak; grains down sharply; cotton down substantially. Copper buying quiet at 9 - 9 1/4 cents. Zinc up slightly from record low.

Relatively few market observers are optimistic at the moment; recent belief that investment liquidation had been at least temporarily exhausted has been shaken by renewed weakness in the rails. Market gives little indication of a turn for the better; customers advised to stay on sidelines until picture is clearer; short position also considered increasingly risky.

Recent irregular market attributed to dominance of professional trading, largely by longtime bears, though some bears have now turned long on particular stocks. "One important banker" believes we may be scraping bottom, based on apparent steadying over the past week or two in production, commodity prices and the stock market. "The next few months will tell the tale." One optimistic factor is the abundance of cheap money; this has already been reflected in bonds to some extent, and it's logical to anticipate this may spread to high-grade stocks. However, "a more cheerful feeling in the financial district" may be necessary before this happens; "it must be admitted" there's currently no economic news to make one optimistic on the immediate future.

Copper seen facing trying period, with possible test of price this summer; April statistics featured "disconcerting" sharp decline in domestic shipments, continued decline in foreign shipments, and rise in inventories; further production curtailment may be necessary.

Wrigley is attracting some buying from traders based on attractive yield (5.5%) and reports earnings are holding up well (price about 73; 1930 earnings $6.14/share vs. $5.80; earnings in 1931 expected to at least equal 1930). Gillette is reportedly the subject of an active bull pool operation.

An interesting anomaly is apparent in the common shares of managed investment trusts [similar to mutual funds]. Common shares that have no asset value behind them [after accounting for senior shares ahead of the common] are often selling at prices similar to those that have asset value substantially above the share price. Managed trusts have reportedly been largely inactive this year, with some managers saying they haven't made a single transaction; some have little choice since the securities they hold aren't easily marketable; in the main, “trusts are sitting tight waiting for a reversion of the market trend.”

P. Litchfield, Goodyear pres., responds to recent AFL criticisms of wage cuts; says cuts were smaller than decline in cost of living.

Records of our prominent banks lend some support to the "Horatio Alger romance" of the small-town boy makes good in the big city; almost every important NY City bank has at least one officer on the executive list born outside the city, many in small towns; New England is a fertile source.

L. Wiley, NY Times business mgr., cites hard work, courage to face facts squarely, good humor, and truthful information as tonics to stimulate the US businessman from his current lethargy and sweep away depression. Points to recent speeches by R. Whitney and M. Traylor, as well as Int'l Chamber of Commerce meeting, as giving helpful and illuminating information. Lauds courage of NY real estate community in completing Empire State building in face of depression.

Economic news and individual company reports:

Mexican currency situation reaches state of crisis; silver pesos set new low of 28% discount vs. gold; most leading banks reluctant to sell gold pesos or dollars for silver pesos, creating near panic in business circles, especially among dealers with earnings in silver and expenses in dollars or gold.

Bank of England cut rate from 3% to 2 1/2%, lowest since 1909. Sterling exchange showed little reaction as reduction had been expected; further weakness not anticipated since London rates on bills are still 1 1/4% above NY. Francs were strong, indicating Bank of France won't match rate cut this week. Bank of England weekly statement showed 1.521M sterling increase in gold to 150.003M, bringing it above "Cunliffe minimum" for first time since Dec. 18; however, timing of the rate cut surprised some observers who believed Bank officials wanted to add another 7M to gold reserves before seasonal fall demands. Bankers saw move as constructive for business in general, though it was pointed out it would be at least 4 - 5 months before the bond market feels the full effects.

Money in circulation May 13 was down $36M to $4.627B, total Reserve Bank credit outstanding down $49M to $918M. Member banks in NY City report brokers' loans down $28M to $1.671B; loans on securities to non-brokers up $7M to $1.759B.

Beneficial Industrial Loan Corp. estimates total volume of loans by licensed personal finance cos. is running at rate close to $700M this year, up 17%-20% from 1930; company business is running at $75M-$80M rate vs. $66M in 1930 and $60.3M in 1929. Average outstanding balance on loan is $114. About half of states have enacted uniform small loan law governing this type of business.

Dow average of 8 iron and steel products remained at $43.97, a post-1922 low. Scrap steel prices fell sharply in past week, reaching lowest levels in 17 years.

F.W. Dodge report new construction contracts in April were $336.9M, down 30% vs. 1930. R.G. Dun & Co. report US construction permits in April were $116.0M, down 4.8% vs. 1930; this showed improvement from declines vs. 1930 of 12.8% in March, 15.3% in Feb., and 24.6% in Jan.

Grain Stabilization Corp. denies reports they are considering chartering boats to store surplus grain. Bureau of Agric. Economics reports value of farmland was 106% of prewar level on Mar. 1, 1931, vs. 115% a year earlier. T. Lee, Armour pres., says govt. reports indicate slightly higher supply of livestock in 1931; “In some cases these levels are unprofitable to the farmer at present ... costs, but ultimate prosperity lies in the stability of prices rather than in the level of prices.”

"In these times of economic stress, France is finding her low birth rate a blessing in disguise." There are almost 2M foreigners working "under permits" in France, filling the void created by low population growth; France can now reduce unemployment by ensuring foreigners leave at the end of their contracts and limiting new arrivals. From Jan. 1 - Apr. 17, there were 29,317 worker departures but only 14,692 arrivals.

Austrian Parliament authorized loan flotation of $21M, of which $14M will be used for Creditanstalt rescue.

Australian Senate votes against bill providing for shipment to London of gold to meet Treasury bills due at end of June.

Czechoslovak Finance Ministry drafts bill for $75M foreign loan flotation, pledging tobacco monopoly as security.

King of Yugoslavia signs law stabilizing value of dinar at 26.5 mg of gold.

Apr. US postal receipts in 50 cities were $29.3M vs. $30.178M in Mar. and $32.644M in 1930.

Commerce Dept. reports exports of radio sets in Q1 were $2.927M vs. $1.937M in 1930.

Standard Oil of NJ 1930 net was $1.65/share vs. $4.75; this falls short of $2 dividend requirements. Standard Oil of Indiana cut retail gasoline price in Detroit to 8.1 cents/gallon from 8.9 cents.

NY Mayor Walker testified for NY in "free lighterage" case [see May 13]; accused NJ of seeking advantage at expense of NY; says NJ doesn't even have the facilities to absorb business that would be lost to NY.

Boeing System (subsidiary of United Aircraft) cuts airfares on service along the West Coast by 20%.

Companies reporting decent earnings: Mesta Machine (steel industry equipment), White Rock Mineral Springs, Claude Neon Lights, Telautograph (machines transmitting diagrams by wire).

Theatre:

Perfectly Scandalous - comedy by Hutcheson Boyd, at the Hudson. "Perfectly scandalous" indeed; shows no interest in theatre as medium of expression or in human beings, but instead offers "a counterfeit sophistication of the uglier sort." Concerns "l'amour, art and social philosophy in the Park Avenue apartment of the crusty, generous vestryman Sidney North." Disarray engulfs the household when North's young wife "takes his innocent and still younger nephew out for a 'time.' There is also an objectionable interloper, described for dramatic reasons as Spanish, who is eventually put in his place."

Jokes:

"Why did you leave your last place?" asked the lady. "I just could not stand the way the master and the missus used to quarrel. It went on all the time. When it was not me and him, it was me and her."

"Wife - But how is it that you are home so early from the theatre? Yokel (returning from first visit to theatre) - I came out after the first act. Wife - Why did you do that? Didn't you like it? Yokel - Yes, it was lovely, but I couldn't wait. The program said there was an interval of two years between the first and the second acts."