May 16, 2010

Saturday, May 16, 1931: Dow 144.49 -2.15 (1.5%)

Assorted historical stuff:

American Legion will ask Pres. Hoover to call a new national non-political conference on unemployment, bringing together banking, business and labor leaders. The Legion's special unemployment commission estimates 6M out of work; fears continued inaction will bring "dire results." White House said hasn't yet received the American Legion resolution. Pres. Hoover said closely following agitation on wage rates; White House said "Mr. Hoover is as interested in maintaining the American wage scale as any man alive."

Washington report: In a noteworthy change from as little as two months ago, it now appears that the economy and not Prohibition has become the leading national political issue and will remain so through the 1932 Presidential elections. One matter likely to become prominent is possible relief appropriations from the Treasury; farm relief may come up again, but the more likely focus will be relief for industrial centers with large numbers of unemployed. Washington officials are making efforts to organize local agencies with voluntary funding to make Federal aid unnecessary. Federal unemployment insurance is also likely to come up, though it seems unlikely it can be enacted anytime soon. Any heavy new Federal spending would, of course, worsen the already serious budget situation; Treasury faces two consecutive deficits of about $1B each. Banking reform and transportation may also be involved in legislation proposed to meet the depression; tariffs are seen unlikely to be modified until after the 1932 election, but may become an important issue in the campaign.

State Dept. says will participate in silver conference if called by another govt. Britain seen maintaining opposition to silver conference with object of stabilization, but accepts conference of non-govt. experts to study issue. Editorial: Rather than being "merely acquiescent" with "meticulous reservations" to the Chinese desire to call a world silver conference, the US should be openly encouraging. The current Nanking govt., for all its faults, offers the only current hope of restoring order "among 400M people bordering on anarchy." The US can't affort to abstain from any movement to help the world "make a better living; indeed, it cannot much longer abstain from leadership therein."

Pope Pius XI, in address marking 40th anniversary of Pope Leo's famous encyclical on labor "Rerum Novarum," makes most significant pronouncement of the church on social conditions since that time. In the past, distribution between capital and labor has been unjust, accumulating immense riches and economic power for the few while leaving little for the proletariat. “Therefore it is absolutely necessary to reconstruct the whole economic system by bringing it back to the requirements of social justice so as to ensure more equitable distribution of the united proceeds of capital and labor”; neither has the right to demand all profits of the mutual collaboration. Calls for wages high enough to let workman care for his family and and improve his condition, respect for worker's “human dignity,” and end to opposition between classes. Hits “false hopes” of Socialism, which even in “mitigated form” has fundamental differences with the Church; “it is not possible to be simultaneously a good Catholic and a true Socialist.”

Moscow reports spring wheat sowing has caught up with 1930; total to May 10 was 31.952M acres vs. 31.382M in 1930.

A. Bunge, Banco de la Nacion dir., says conditions in Argentina peaceful despits political propaganda being broadcast by Uriburu opponents in other countries; both parties working in harmony toward peaceful election.

When Simon Fishman moved to Greeley County, Kansas in 1920, little wheat was being grown there. He began raising wheat on a large scale, and when pres. Baldwin of the Missouri Pacific RR visited, wagered him the county would someday ship a million bushels over the railroad in a year. Shipping records reveal this just happened in 1930; Fishman and his family have claimed their prize - use of Baldwin's private rail car to travel wherever they like on the railroad. [Note: breaking up much of Greeley County's sod to plant wheat in the 1920's caused severe problems there in the dust bowl period.]

Editorial: Farms and rural areas seem to be entering a period of far-reaching change and reorganization. There is a trend toward large mechanized farms to lower costs, but there may be other approaches possible, including industrialization of rural areas. Current migration back from cities to farms may be a fluctuation due to unemployment, or start of a trend. Henry Ford has been reporting with satisfaction on results of his experiments in establishing combined agricultural-industrial Michigan communities. His vision of factories among farms may never be exactly realized, but the relationship between the two is changing.

As result of R-101 disaster [British airship crashed, killing 48 on board - see Oct. 7, 1930] British govt. will temporarily stop building airships, but will continue to use the R-100 as an experimental craft.

Yacht brokers and designers report many prospective buyers are putting designs on hold until business recovers, feeling it would be unseemly to buy during a depression. However, 80% of a yacht's cost goes to labor, and it also benefits other industries that make the hundreds of accessories and appointments needed. Third annual outboard race around Manhattan will be held June 28 under sponsorship of Herbert Pulitzer.

Sent to investigate a break in cable service between Colombia and and Panama, a cable repair ship discovered a 90 ton whale tangled in the cable and dead in 3,000 feet of water. The whale may have been scooping along the ocean bed to feed, picked up the cable in its jaw, and become wrapped in it.

Trans-Lux opens twin newsreel and short film theatres on Broadway between 49th and 50th St. Theatres are modernistic in design, have "commodious seating," modern heating and cooling system, and rear-projection systems, making it unnecessary to turn theatre lights off or use ushers.

Questionnaires returned by over 500 freshwomen at the University of Chicago on their preferred occupations after leaving school showed almost all wanted to be teachers, stenographers, artists, saleswoman, or even aviatrices. One lone girl wanted to be a wife and mother.

Market commentary:

Market wrap: Stock weakness from Thursday's late trading continued into Friday; with the Dow rail average the lowest since Jan. 1924, pressure again converged on the rails, with majors including NY Central, Pennsylvania, and Atchison reaching new bear market lows. Bears also heavily pressured Steel aiming to drive it below par (100); after a 3 point break, attack shifted to American Can, which was driven to a new 1931 low. Both these leaders extended their decline in the afternoon, while weakness spread across the list and trading favorites suffered sharp breaks. However, just as Steel and Can both appeared ready to break below 100 about 2PM, some support came in; market rallied irregularly in the last hour. Bonds continued recent two-tier market; US govts. and highest-grade corp. issues were strong with many new highs, while lower-grade suffered "price adjustment" and liquidation with many record lows; this pattern was particularly noted in rail issues. European govts. traded in a narrow range while S. American were mixed. Commodities soft; grains narrowly mixed; cotton down substantially. Copper remained at 9 - 9 1/4 cents with foreign buying more active but domestic almost nil. Cocoa hit new record lows; coffee higher.

Conservative observers believe late rally may extend into the short session today as bears cover to even accounts; advise longs to use chance to reduce positions.

"Absence of constructive news has been aiding the bear group, which is flushed with its successes." Bears continue to resist all rallies by applying pressure when moderate gains take place. Selling by the public has increased moderately, but little is forced liquidation; a considerable part may be selling against "strong boxes."

Woolworth plan for recapitalizing British 434-store subsidiary seen increasing return on the US stock; part of shares will be distributed as stock dividend, while part will be offered to British investors, possibly giving extra cash distribution to US stockholders. US earnings are running ahead of 1930 in spite of slightly lower sales and outlook is promising. Woolworth may have another hidden asset in its German store chain, though this is in an earlier stage. General Foods has drawn some buying on reports April earnings were about 25% ahead of last year; co. said benefitting from manufacturing efficiencies. R.J. Reynolds said able to use substantially smaller amount of tobacco with new cellophane "humidor" pack, which prevents shrinkage through drying.

Fed. Reserve's reported $49M decline in credit outstanding "not so pleasing to those who feel that credit expansion will help business recovery" though it was offset by $23M gain in US gold holdings and $36M decline in currency. Recent "erratic fluctuations in currency ... have been somewhat puzzling"; the expansion starting in early April and lasting to the past week was against usual seasonal trend and "probably resulted in part from withdrawals for hoarding purposes." NY bank statements appeared to show increase in credit extended, but this was probably due to technical factors including replacing call loans from out-of-town banks. Holdings of non-govt. securities continued to rise. Brokers' loans fell to new low record while loans to non-brokers rose for the third straight week.

Municipal bonds were strong this week after successful NY City sale, but a rather wide spread exists between highest-grade and lower-rated issues.

S. Baker, Bank of Manhattan pres., speaking at Great Northern Rwy. shareholders meeting, says failure of some of the larger rails to pay dividends has created fear among investors that's largely responsible for depressed conditions. Arthur Curtiss James said to be holder of world's largest group of rail shares, complains of unfair competition by tramp steamers through the Panama Canal, which are free to "make any rate they want, while railroads are bound by regulation."

Some observers cited agitation over wage rates as a reason for continuing pressure on stocks; the AFL recently called on workers to resist "to the fullest extent" all attempts at cuts, and walkouts have occured in various parts of the country. Col. Ayres of the Cleveland Trust Co. has cited as a fundamental problem the question of how to maintain high US industrial wages in face of declining US farm income and declines worldwide in both product prices and wages. The Street is showing great interest in the strike at a small steel maker after a wage cut [Empire Steel - May 14]. Many believe the cut was made as a test of conditions, and may be followed by larger independents and ultimately by US Steel.

A. Smith, Union Trust of Cleveland VP, says commodity price deflation was “an inevitable economic adjustment” but hopes it's at an end; stabilization is needed if wage rates are to be maintained.

W. Donham of the Harvard Grad. Business School says "psychology of fear is dominant," not only in 6M unemployed and 12M dependents, but in 7.5M half-time employees and in the other millions afraid they will lose jobs; condition may be beyond capacity of business to cure quickly; foresees possibility of a dole system.

Deputy Comptroller of the Currency Awalt proposes education campaign to “acquaint bank directors with their duties and responsibilities [Note: like Western civilization, would be a good idea.]

R. Stephenson, Amer. Bankers' Assoc. pres., says sharp decrease in number of bank failures clearly indicates general improvement in business conditions, while weaker banking units have been eliminated.

Economic news and individual company reports:

Austrian Nat'l Council votes to issue treasury bonds to aid Creditanstalt bank. Govt. asks League of Nations Control Committee to authorize placement of 150M schilling loan abroad. Rothschild financial group, under leadership of French bankers, reportedly offered to arrange the placement if Austria abandons German customs union and instead agrees to Austro-Hungarian-Italian trade treaty.

Bradstreet's weekly reports unsatisfactory weather across much of the country has slowed retail trade, while wholesale is slightly more active.

V. Boatner, Chicago Great Western RR pres., says condition of winter crops is best in years; farmers throughout the region encouraged over crop conditions; recent general rain will give the additional moisture that was needed.

1930 income of life insurance cos. licensed in NY (a large percentage of the US total) was $3.959B, up $227M from 1929 [I think this is gross]. Total of $89.2B life insurance was in force at end of year, up $4.1B.

New NYSE listings of bonds in April were $311.9M vs. $193.3M in Mar. and $392.1M in Apr. 1930; stocks were $104.7M vs. $141.7M and $891.6M.

1930 saw record “repatriation” of foreign securities [buying from abroad of securities originally offered in the US], leading to gold inflow in spite of about $840M more of foreign loans from US in 1930 vs. 1929. It's believed foreign banks played a major part in the buying.

Federal District Court issues 60-day injunction against ICC order lowering Western rail grain rates, insuring rates won't apply to most of the 1931 crops. Rail unions back rail executives' proposal for general rate increase. Several rails report results of experiment in cutting passenger rates from 3.6 cents/mile to 2 cents to increase traffic have been disappointing.

Pres. Hoover will host members of the Interior Dept. this weekend to discuss ways of cutting expenses. In line with Administration policy of eliminating unnecessary military posts, Navy Sec. Adams has ordered a survey seeking to cut number of naval bases.

Mexico City bankers decide to import US gold coins to meet public demand in effort to remedy Mexican currency conditions.

US exports of industrial machinery to Russia in 1930 were about $40M vs. $13.7M in 1929; total exports $220.9M vs. $257.1M.

Bank of the Netherlands cuts discount rate 1/2% to 2%. Bank of Ireland cuts discount rate 1/2% to 3 1/2%.

At least one German enterprise is holding up well - breweries continue to pay handsome dividends in spite of the depression.

Comptroller Berry reports NY City in excellent financial condition with cash balance of $140M on hand, thanks to good tax collections and recent financing.

Connecticut legislature passes bill for state referendum on Prohibition in 1932 election.

Indianapolis construction workers return to work after winning strike against 20% wage cut.

Company reports since Apr. 1: 144 companies reported higher earnings vs. 1930 and 567 lower; 382 dividends unchanged, 9 increased, 92 cut.

Companies reporting decent earnings: Swedish Match [Ivar Kreuger co.], Walgreen, Equitable Office Building, Nat'l Air Transport.

New books:

Fight for Financial Supremacy - by P. Einsig. Surveys battle for world's foremost banking center between incumbent London, and up-and-coming NY and Paris; concludes London will retain title in long run.

The Life History of the Salmon - by F.G. Griswold. Presents authoritative story of the salmon's life history and habits, a topic only well understood within the past generation. Also charges North Americans with wastefulness and improvidence; salmon, once numerous in US rivers, have long since been wiped out by sawmills and dams; day is fast approaching when Eastern Canada salmon will be endangered. Salmon would be a valuable harvest if rivers were managed to allow normal spawning. Salmon is not a luxury; presents evidence it can be more economical than cod.

Report from Spain:

Interesting report written by "one who ... met Spain so paradoxically, in an ancient house gone Republican, whose nearest parallel would be a Wall Street banker turned Socialist." The writer "was taught to know Spain by Spanish aristocrats who had been almost impoverished by their Republican sympathies." The elderly head of the household rode triumphantly into Madrid as a leader of the first Spanish Republic, established in 1868 and lasting 3 months. The family lost most of their wealth, but their faith in a second and stronger Republic never wavered; its advent was toasted at all family functions. Yet even one with those sympathies must question the "transition from Velasquesan colors to photographic black and white; from the red velvet capes of courtiers to the dinner coats of Republicanism" and particularly from the "natural exuberance of Spanish music" to the French Marseillaise and the Russian Internationale - "was the old music of Spain the song of an ancient monarchy?"

Movie censorship report:

Sound movies have made movie producers' lives easier with regard to censors; strangely, many state and local censors object less to "a bit of sophisticated dialogue" than to "certain subtitles on the screen." However, there are still many pitfalls to navigate around. Some no-nos in various locales: Canada - no removal of clothing by vacuum cleaner; Australia - no girls smoking cigars, no parodies of the marriage ceremony; Alberta - no nose-thumbing; Britain - bans "various American colloquialisms"; Ohio - frowns on "heroine in a bathing scene." Most censorious US states are Pennsylvania, Ohio, and Virginia.


"Did you say the professor was absent minded?" "Absent minded! Why he read an erroneous account of his death in a newspaper, and sent himself a wreath."

"What's the cause of Janet's unpopularity?" "She won a popularity contest." - Life

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