Friday, May 22, 1931: Dow 139.54 +1.80 (1.3%)

Assorted historical stuff:

H. Bancroft, Dow Jones pres., says US not buying much but “we are individually saving and getting out of debt at a remarkable rate. That is one of the reasons why business is bad, but it is preparing a strong foundation” for recovery. Wholesale inflation is largely wiped out, but retail prices haven't adjusted yet, which largely explains current difficulties; people whose buying power depends on wheat, oil, copper, etc. can't pay retail prices for manufactured goods, creating imbalance. Recovery will take place when prices readjust; this will mean accepting inevitable wage cuts since wages and salaries make up most of margin between raw materials and finished goods. Idea that high wages make prosperity has it backward; it's prosperity that makes high wages possible. Cost of living has fallen 20% in past 2 years; a general 15% wage cut now would revive business, end unemployment, and general standard of living would be higher than in 1929.

Editorial responding to letter from Texas charging the Journal with bias because they advocate tariffs protecting "practically all American products" except oil. This is inaccurate; the Journal opposed the Hawley-Smoot tariff, and believes tariff preferences "for industries able to exert the required political pressure" have unquestionably gone beyond the Hamiltonian purpose of rearing "infant industries" which couldn't otherwise survive. The US oil industry has reached its advanced stage, producing 2/3 of the world's oil and exporting much more than it imports, without benefit of a tariff, which would now be counterproductive; what's needed is "state law with teeth ... to restrain reckless overproduction."

A. Thomas, Int'l Labor Office dir., estimates world unemployed at 20M currently, vs. 10M a year ago.

Editorial by T. Woodlock: Gov. Roosevelt, disappointingly but not surprisingly considering “his leanings toward the 'left'”, has gotten rid of the men who wrote the sensible report he commissioned on St. Lawrence River power development, and replaced them with a group with aggressive “liberal” leanings. As made clear by his recent telegram to the Progressive conference in Washington, Gov. Roosevelt has chosen to “throw in his lot with that of the 'liberals', so-called”; while the board he chose no doubt will act in good faith, they were chosen for their strong opinions and will be difficult for any private utility to deal with.

State Dept. reports immigration in 10 months ending April was down 90% from 1930; only 613 US visas issued in 21 top countries vs. total quota of 14,846.

War Dept. proposes abandoning 53 Army installations valued at $22M as part of Pres. Hoover's program of spending cuts.

O. Zubizaretta, Interior Sec., says attempts at revolution quelled last night in several cities; army has situation well in hand; declines to reveal casualties; says suspension of Constitutional guarantees may be necessary depending on opposition attitude, would be far more rigid than previous suspension. State Dept. says has no knowledge of disturbances in Cuba.

Chilean FM Planet proposes Pan-American customs union to remedy economic depression in American nations.

Nat'l Safety Council estimates accidents cost 99,000 lives in the US during 1930, up slightly over 1929; auto deaths rose 5%.

Many corporations can attribute their success to research; AT&T, GE. and Westinghouse are three of many that maintain their own laboratories and owe some of their position to the work done there. Another vital source is the Mellon Institute of Industrial Research at the University of Pittsburgh, which does research on a contract basis. Industrial fellowships are granted with “the broadest facilities for the accomplishment of a definite piece of research.”

The great mosque at Medina, described as the second holiest in all Islam, has recently replaced candles and oil lamps with electricity.

Esperanto, one of various invented international languages, is now taught in German public schools and is so popular they are short of teachers. A new entry in this category is "Romangle," invented by G. O'Harve, distinguished Belgian philologist, who claims anyone can master it quickly.

While the traveling salesman's lot can be difficult here in the US, it's even more complicated abroad thanks to languages, customs procedures, etc. M. Duchenois of France, addressing the Int'l Chamber of Commerce, recently advocated the salesman's cause, reporting several countries have recognized validity of the international identity cards for traveling salesmen, and efforts are being made to simplify customs.

E.T. Bedford died yesterday at 82; was one of the "Big Five" of the old Standard Oil of NJ, and built Corn Products Refining from near-bankruptcy to one of the largest US corporations; fortune estimated at over $75M.

Market commentary:

Market wrap: Encouraged by rampant pessimism, bears attempted to continue the market reaction for the first four hours, "roaming restlessly from stock to stock"; targets included Anaconda, Western Union, Allied Chemical, and leaders such as GM, Can, and GE; some trading favorites broke badly. Meanwhile, however, rail shares were working slowly higher after closing Wednesday with the second consecutive daily gain. The rails eventually developed "definite rallying tendencies"; news from London of the fortnightly bank settlement passing without incident gave impetus to the recovery, and an active rally spread across the list, with sharp rebounds from the day's lows in leading industrials and utilities; rails were further stimulated by news of Eastern rails' vote to ask for rate increase; market closed strongly. Bonds generally lower on moderately active trading; US govts. down slightly on profit-taking and talk of heavy new issues; sharp break in Chilean bonds to record low unsettled S. American list, while Europeans were narrowly mixed; highest-grade corp. relatively steady but "reactionary tendencies prevailed in most other groups." Commodities soft; grains down substantially, with season lows in some corn months; cotton barely changed. Copper sold at record low of 8 3/4 cents late Wed.; larger producers held at 9 cents. Cocoa hit new record lows.

Many observers anticipate a week-end rally on technical grounds, but conservatives advise using it to reduce long positions. Some are buying rails in belief they will lead on a recovery. New record lows in copper seen forcing some companies to shut down completely; even low-cost producers will have trouble showing a profit. Aluminum shares declined on fears of increased competition from copper. Auto parts and accessory co. earnings should improve in Q2 vs. Q1 based on auto output gains of 30%-40%, though they are likely to remain below Q2 1930.

Investors have reportedly been selling more stocks "out of strong boxes" recently than in a long time; market trend has apparently disturbed them enough to realize cash for their holdings, in some cases of stocks held for years. Selling has not been particularly heavy in the recent decline, but buying demand has been missing; the public has been "disinclined to buy" due to general pessimism even though brokers report many customers are carrying credit balances; demand is largely coming from the shorts, but they've refused to bid stocks up.

Woolworth met some selling after the Indiana anti-chain tax was upheld in spite of apparently miniscule effect on company (about $750/year); this attests to "readiness of traders to put out short lines on any news at all which appears unfavorable." Continental Can has been pressured on reports of poor earnings so far in 1931 and predictions that demand will be lower than expected this year because of large carryover of many canned products. American Chicle (chewing gum) foreign business, which fell 15%-20% last year, has reportedly revived back close to 1929 levels. Alaska Juneau Gold has bucked the market for months, moving to new highs while the market headed down. Some bears have reportedly bought it as a hedge.

Organization of new short-term fixed trusts [similar to ETF's] has been halted by persistent market decline; birth rate was high in Q1 when many believed bottom had been passed. NYSE plans to issue bulletin to all members listing fixed trusts that members can be associated with.

A. Brown, Brown's Letters pres., urges Pres. Hoover to restrict short-selling on the NYSE.

Editorial: Two items of recent news are encouraging indications rails may finally be realizing "the advantages of solidarity" in defending against loss of traffic and earnings, and are not pinning their hopes solely on the ICC granting an emergency rate increase. Southwestern rails have decided to start pickup and delivery service using motor trucks, a long-awaited necessity to meet highway transport competition. Also, several rails have acknowledged failure of cut-rate passenger fares to simulate traffic; this may compel them to curtail unprofitable service and moderate competition with each other.

Treasury Dept. says reentry by US to international lending field would materially improve worldwide economic conditions, but investors have not been attracted due to unsettled conditions and previous losses in foreign bonds; these unsettled conditions also account for continued influx of gold to US in spite of low money rates. Notes some direct investment being made abroad.

T. Macauley, Sun Life of Canada pres., responding to rumors, says co. has “not sold a single share of any stock for months,” remains bullish as ever on future of US and Canadian stocks.

N. McClave, Nat'l Assoc. of Furniture Mfrs. pres., advocates campaign in US and Canada for 5-day week and maintaining current wage scale.

B. Anderson, Chase Nat'l economist, says depression caused not by general overproduction but by "unbalanced economic situation"; unbalanced factors include: international balance sheet; money and bond markets; production of more export goods than can be sold under existing trade restrictions; unbalanced prices, with violent breaks in raw materials and farm products compared to manufactured goods; costs, particularly labor, that have not fallen as fast as prices. Problem is "merely one of keeping the different kinds of production in proper proportion"; this requires "flexible prices, competitively worked out."

J. Barnes, US Chamber of Commerce chair., “handed down 11 commandments” that the govt. should make effective as remedies for the depression, including removal of restrictions against private unemployment insurance, revisions of capital gains tax, antitrust law, rail regulation and tariffs, adherence to World Court, etc.

Economic news and individual company reports:

Settlement Day in London passed without “undue incident”; Bank of England weekly statement failed to reveal any "signs of undue stress" or unusual calls for funds; London stocks mostly higher, showing some relief from recent nervousness. British gold holdings rose 1.192M pounds sterling from last week, to 151.205M vs. 1931 low of 140.141M; steady rise together with relative firmness of sterling "gives promise of eventual solving of the Bank's gold problem for the rest of the year unless some unforeseen event completely alters the situation." Foreign currencies irregularly higher; sterling steady near year's highs and further strength anticipated.

Cook County has made little progress in relieving “embarassed financial condition” due to unsatisfactory collections of delayed 1929 tax levy. Most likely solution is for units within the county to issue bonds, but this would have to be approved by the State Legislature, and there's considerable opposition to the plan.

Philadelphia Clearing House Assoc. advances $15M in funds to First Penny Savings Bank to meet "present unusual demand"; says bank is solvent.

Eastern railroads vote to ask ICC to raise rates to level that would restore their credit standing and partially reverse the “whittling away” of rates since 1921. ICC seen likely to give request prompt attention. Nat'l Assoc. of Mutual Savings Banks convention to consider petitioning ICC on behalf of the rails. H. Bruere, Bowery Savings Bank pres., speaks in favor of rail rate increase; also urges employers to cooperate in enabling workers to buy insurance for old age, unemployment, and sickness, speaking against creation of system such as that in Russia.

Earlier reports from the world wheat conference in London were that all delegations except the US “tentatively agreed to the quota plan, with slight reservations.” However, it was later reported that “due to failure at the last minute to reach a compromise,” the conference will break up without reaching definite plan for controlling exports; failure attributed to Russian demand for quota on basis of prewar exports, and to opposition to US proposal for mandatory cut in acreage.

Money in circulation May 20 was up $12M to $4.639B, total Reserve Bank credit outstanding down $24M to $894M. Member banks in NY City report brokers' loans down $40M to $1.631B; loans on securities to non-brokers down $4M to $1.755B.

Dow average of 8 iron and steel products fell to $43.58, a new post-1922 low.

Oil operators in Oklahoma and adjoining states with large fields under strict curtailment are closely watching developments in East Texas to determine their stand on future curtailment proposals.

Life insurance sales in Apr. were down 16% from 1930, showing some improvement from 18% decline in Mar. and 19% in Feb.; comparison is difficult due to record sales in early 1930.

BLS reports building permits in 340 cities with population over 25,000 were $161.7M in April, up 6.2% from Mar.; April permits in 292 identical cities were down 14.7% from 1930, with new residential building down 6.7%.

Van Dusen-Harrington Crop Report finds no serious crop damage except in some dry areas in N. Dakota and Montana.

German tax receipts in Apr. were 983M marks vs. 1.153B; budget deficit now estimated at 700M; cut expected in unemployment dole, now $14/month for unemployed married worker. Ruhr coal mines and Saxon machine industry demand 10%-20% wage cuts.

Canadian public works projects have reportedly supplied 4.857M man-days of work up to Mar. 31. Canadian whiskey exports in April plunged to $169,000 vs. $2.178M a year earlier.

Russia plans 5.683M of cotton sowing in 1931 vs. 3.840M in 1930.

Spanish Republican govt. rescinds oil monopoly granted to monarchist govt. of Romania and transfers it to Russia.

Colombia enacts new general tariff substantially raising duties on most non-food products.

NYSE seat sold at $230,000, down $5,000 from previous sale.

Sears midsummer catalog showed average price decreases of 9% from the spring-summer catalog and 11.4% from a year earlier.

Du Pont reports greater than seasonal gains in almost all lines in Q1 and so far in Q2; expects to cover dividends in Q2 by fair margin..

Companies reporting decent earnings: Connecticut Electric Service.

Revue:

Billy Rose's Crazy Quilt - with Fanny Brice, Phil Baker and Ted Healy; a revue staged by Mr. Rose at the Forty-fourth Street Theatre. “Clowning, mimicry, balladry and barking back-talk from these three eminent entertainers” produce a successful hybrid between revue and vaudeville. Paths of the three stars cross and re-cross throughout the evening in song and sketch. Scattered between are a large and comely dancing chorus, “graceful interludes with dancers Gomez and Winona” and some good numbers, particularly “I Found a Million Dollar Baby in a Five-and-Ten-Cent Store” in which all three and Lew Brice participate. Another winner is a plaintive number sung by Tamara wherein Mr. Baker displays his versatility by accompanying on the accordion, to the audience's delight. Other noteworthy acts include Miss Brice's Peter Pan “travesty,” and the Crazy Quilt Sextette, “consisting of six young and comely but excessively world-weary damsels who utter jaded observations in straight-faced unison.” Costumes “are bright without being dazzling,” as can be said for the “jests that are tossed about with expert pace and pungency”; some will cause the more modest to blush, but otherwise “recommended as a very funny and jovial show.”

Jokes:

[Note: I heroically refrained from changing this to a blond joke.] "A lovely lady was a dinner guest recently at the home of Jules Bache, the banker. Dinner passed, and he offered to show his guests his collection of paintings. Throughout the tour of the gallery, the lady observed the masterpieces with a sprightly interest and at the end turned enthusiastically to her host. 'Oh, Mr. Bache,' she exclaimed. 'I do hope sometime you'll find time to paint me.' - New Yorker."

"Willie Kane, representative for the World-Telegram, tells about the query that stumps all applicants for jobs in the New York Fire Department. The question that drives them all cuckoo is: 'What piece of fire apparatus won't go up a one-way street?' No applicant has ever answered it correctly. The answer is 'A fire-boat.' - New York Mirror."

"Pastor's Wife - Ah, Mrs. Miles, one-half of the world is ignorant of how the other half lives. Mrs. Miles - Not in this village, ma'am."

"You demand a quarter of a million for a breach of promise?" "Yes." answered the determined woman. "Sentiment demands it. I would not have him think, even now, that I valued his affections lightly."