Saturday, May 2, 1931: Dow 145.58 -5.61 (3.7%)

Assorted historical stuff:

Editoria: “Russia the Enigma” - What Russia may mean to the world becomes “daily more confused and conflicting.” Those with personal experience there “agree no better than the armchair authorities”; recent Moscow press reports, while appearing freer from censorship (possibly deceptively), shed only “puzzling half-lights.” A striking recent example: T. Campbell, prominent Montana farmer who advises the Soviet govt. on agriculture, sees no danger of Russia disrupting world grain markets for years due to rising domestic demands of “155M undernourished people” that will absorb any increased production. On the other hand, M. Hindus, a "disinterested but understanding observer," believes Russia will displace the US in supplying grain to Europe in a short time. Reaching a firm conclusion is "manifestly impossible," but it may be reasonable to conclude that "Russia is not nearly so likely to swamp the world with commodities as many of us have been led to fear."

R. Stephenson, Amer. Bankers Assoc., hits unemployment insurance as not really insurance due to uncertainty of the risk, but “in fact merely a name under which an industrial dole fund is to be set up by industry, aimed to relieve the individual” from risk properly met only by “personal financial prudence and responsibility.” Industry should aim at preventing unemployment rather than attempting to patch it up. US standard of living may need to be “based on sounder understanding of realities.” Attempting to raise standard of living by inflating consumer credit “can be only temporarily successful. It is merely a means for borrowing from the future ...”; at least in part, this is what happened in the past half decade.

Letter to the editor responding to Woodlock editorial calling on stockholders to be more active. In practice this is difficult; "Ownership is so scattered, and in such small units, that the managements take undue advantage of such majorities. ... Stockholders, although in majority, are helpless."

White House announced Federal govt. won't increase pay of its employees except in cases required by law.

AFL pres. Green and Labor Sec. Doak lunched at White House; it's "presumed unemployment was discussed."

Farm Board chair. Stone defends the Board's stabilization program as fully justified by agricultural emergency. D.C. Harrower accuses Farm Board of making elementary mistake in plan for cooperative marketing - ignoring cost of storing wheat over period of months. F. Murphy, Minneapolis Tribune publisher, points to prosperity in dairy region as evidence of success of combining farming and dairying.

Nationalist govt. of China has launched crackdown on "confirmed opium smokers"; 34 employees were recently dismissed, of whom 28 worked on the Shanghai & Hangchow Railway.

Paris is installing a thoughtful device for motorists; turntables at the and of narrow streets, so that the driver, instead of having to maneuver back and forth several times to turn around, can simply drive onto the turntable and be rotated about.

Commerce Dept. reports total of 2.716M people flew as passengers in civilian aircraft in the US in 1930, of which 417,505 flew in scheduled operations and 2.298M in "miscellaneous flying operations."

Empire State Building formally opened; speakers included Gov. Roosevelt, Mayor Walker, R. Shreve (architect), and Paul Starrett (builder); Pres. Hoover pressed button in Washington to light the lobby. Building was completed in a year, will house 25,000 tenants; about a quarter of space already rented.

Govt. helium plant at Amarillo Texas set production record for output in March, with daily average of 56,740 cu ft of 98% pure airship gas.

The new International House on the campus of UC Berkeley, built through a contribution by John D. Rockefeller, Jr. to promote international goodwill, is now housing about 400 students from 25 different nations, including Bolivia, China, Egypt, Germany, India, Iraq, Italy, Japan, Latvia, Palestine, Peru, and West Africa.

Babylonian realty brokers were apparently "wizards in the expert drawing of mortgage contracts," according to a historical bulletin of the Home Title Insurance Co. Most of the thousands of clay tablets discovered in the palaces of Babylonian kings record commercial transactions. Example tablet: "Iddinmarduk has loaned to Nabubanaha three mana through the agency of Belrimanni upon certain land owned by the second party ... It is to bear interest monthly ... Belrimanni gives Iddinmarduk a receipt ... and in turn he receives one from Nabubanaha ..." All this, and considerable other detail, is on a 2 by 4 inch clay tablet.

In a recent Berlin directory of professions and trades, a total of 991 males reported themselves to be "professional gigolos."

Market commentary:

Market wrap: Stocks continued recovery on moderate scale in the morning; Bethlehem and Standard of NY were firm early after better than expected dividend announcements. However, selling by profit takers and bears increased in early afternoon, and market turned definitely down in the last hour; US Steel suffered sharp break to another post-1927 low, causing severe unsettlement; selling picked up across the list, and the market closed under pressure. Bonds continued yesterday's rally on more moderate volume; highest-grade were firm near 1931 highs while many groups of lower-grade issues were up substantially; sharp rally in Brazil and Chile govts. Commodities weak; wheat a shade higher despite large crop forecast, but other grains down sharply, particularly corn; cotton down sharply to new season lows. Copper buying at standstill with nominal quote at 9 3/8 - 9 1/2 cents but small sales as low as 9.

Market observers advise against taking the long side, recommend stop-loss orders near current prices.

Thursday's sharp rally of 7.58 points in the Dow after a steady two-week decline was very similar to the pattern on Dec. 17, when the market rallied 8.09 after a similar downtrend. However, inability of market to carry through on the rally the following day as it did in Dec. was keenly disappointing. Some of the selling yesterday was likely due to disappointment that the rumored Fed. Reserve rediscount rate cut didn't materialize. Short-covering during rally attributed to nonprofessional short-sellers frightened into covering; heavy deliveries were also reported from "strong boxes"; major bears reportedly maintained their positions. Some long-pull buying has come into cigarette cos. on theory their current intensive advertising campaigns will eventually increase earnings.

Bethlehem Q1 earnings report of 6 cents/share better than expected; many had predicted a loss after the poor US Steel report; co. believed to use relatively conservative accounting. Dividend reduction to $4/year from $6 was also a favorable surprise; some had predicted the dividend would be omitted entirely. Transamerica denied reports it was selling its large bank stock holdings. Kroger Grocery has held firm against the market trend on estimates of good earnings. Pullman sold off after reporting $0.15 in Q1 earnings vs. $1.16 in 1930 and dividend requirements of $1. Assoc. Gas & Elec. A is selling to yield 10% in spite of covering its dividend by a good margin and reporting higher earnings so far this year. Texas Gulf Sulphur sold off on unconfirmed reports of sulphur price cut.

NYSE trading in April averaged 2.174M shares/day vs. 4.627M in 1930 and 3.176M in 1929; lowest total for April since 1927. The Dow Industrial average was down 19.63 in April, a record decline for the month.

Selected Shares Corp. reports fixed investment trusts [similar to ETF's] have generally declined less than the Dow industrial average; a composite fixed trust average is down 49.7% since Oct. 15, 1929, while the Dow is down 56.7%.

E. Reeser, Amer. Petroleum Inst. pres., says action of California oil producers in voting to reduce allowable output in the state to 469,000 barrels/day is "very constructive," as is new order of Texas Railroad commission restricting East Texas production to 160,000 barrels/day. Oil States Advisory Committee is completing first draft of legislation to be introduced in oil-producing states to uniformly curtail production and reduce waste. Oil industry "does not seek a plan which might bring about unreasonable prices to consumers, but it does intend to ... stabilize the industry, which necessarily means remunerative prices ..."

T. Adams, Yale economist, says wouldn't be surprised to see long period of falling prices as occurred in US from 1873-1896.

T. Watson, IBM pres., points out importance of US as customer of rest of world; exports by 5 leading trading partners to US are up 44% since 1920 vs. 23% to all other countries; US exports are only $42.70 per capita, a figure exceeded by 23 other countries; US exported 5.5% of manufactures in 1929 vs. 5.7% in 1879.

Editorial: The Hawley-Smoot tariff was supposed to be a flexible one in which specific rates could be corrected from time to time; this idea "is good in theory, but in actual practice it has been productive of little result." Of 377 petitions for changes filed so far, about 20 have been decided, leading to 8 decreases and 3 increases. "Changes move on leaden heels, and injustices are not corrected as they should be, except in a few instances." Now, the Amer. Farm Bureau Federation contends the commission should wait 2 1/2 to 5 years after a rate is set to make any correction. This would make the commission a "delay, linger and wait body"; instead, like a court, it "should be open for investigation ... whenever a reasonable ground is laid for it to act."

Economic news and individual company reports:

Fed. Reserve of NY annual report states: "The events of the year have called attention to banking practices requiring close scrutiny. They have emphasized the dangers of security operations as an adjunct to banking, and have raised questions with regard to the activities of subsidiary and affiliated security companies." No suggestions for reform made.

Initial reports from 6 carmakers indicate April car production increased sharply over March, and in some cases substantially exceeded forecasts early in April. In particular, Chevrolet produced 106,096 cars and trucks vs. 79,603 in March; this was 20,000 over the initial schedule and only 4,000 below April 1930; co. expects to maintain current production rate at least through May, and sees good prospects of running ahead of last year's production in late spring and summer.

Railroads seen likely to request general increase in freight rates from the ICC to save some lines from possible bankruptcy and protect credit of others.

Bank statements reveal only category of loans that increased last week was security loans to non-brokers, which showed the first significant increase this year; brokers' loans showed sharp decline as expected during period of liquidation. This may "indicate the reappearance in the market of relatively strong buyers" while weaker speculators are selling, though a one week rise isn't that significant. Business borrowing, as reflected in "all other" loans, declined $44M to $2.204B, the lowest total at this time of year since 1923. Banks continued to actively buy both govt. and non-govt. securities. Fed. Reserve credit outstanding increased $25M and gold holdings $8M, indicating continued money ease.

New bond issues continue at a low rate for second consecutive week, with total of $18.4M; decline attributed to weakness in lower grade issues. Municipal bonds continue strong: Dow average of 20 municipal bonds yields 3.78% vs. 3.87% on April 3. Expected new municipal financing this week is large. A large number of corporate bonds are scheduled to be called (before maturity) in May - total of $99.1M vs. $31.9M a year earlier; total for first 5 months $304.5M vs. $161.4M.

Dun's and Bradstreet's weekly business reviews reports slowdown in retail trade due to cooler weather after three warm weeks following Easter.

After getting off to a slow start in Jan., cigarette production in the first 3 months has pulled ahead of 1930. Only twice this century has cigarette production declined over a full year - 1900 and 1920.

Forecasts by five leading grain experts indicate largest winter wheat crop since 1919 (about 665M bushels vs. 604M in 1930 and 576M in 1929). Bureau of Agric. Economics reports farmers this year striving to cut production costs by economizing on labor and other cash items. Livestock industry position has worsened since a year ago, as cattle and sheep prices have slumped drastically. Wholesale meat prices are down substantially from year ago; beef is 27%- 32% lower, pork loin 10%-15%, and "smoked picnics" 30%.

Swedish and Norwegian business was relatively favorable in 1930; Swedish banks (many affiliated with Kreuger & Toll) reported earnings better than 1929, although some industries were affected by depression. However, 1931 is expected to be more challenging.

Spanish pesetas dropped after new govt. said they hadn't intervened to support it. Spanish circles argue prospects for stabilizing peseta are favorable given stable govt.; Spain was only leading nation with budget surplus in 1930; also ran trade surplus; Bank of Spain's notes have 52% gold cover. Other foreign currencies also fell after Fed. Reserve of NY failed to lower rediscount rate.

French oil refining industry is developing rapidly after government required private companies to construct their own refineries in France; over a dozen are under construction, and some will be operating within a year. The govt.-controlled French Oil Refining Co. is also participating.

Mexican dual gold-silver currency system under pressure as premium for gold pesos over silver reaches record high of 22%.

Albany sources say NY state personal income tax returns this year will total slightly under $38M vs. $84.5M last year.

NY City financial statement shows net debt of $1.278B and total of $18.806B in assessed value of taxable real estate.

Home Insurance Co. issues new type of policy with a large premium discount for first few years to meet current “financial retrenchment.”

Trials of lawsuits against Radio Corp. for $40M by 15 radio tube manufacturers likely to start in June due to recent patent decision against Radio.

Company reports since Apr. 1: 112 companies reported higher earnings vs. 1930 and 441 lower; 236 dividends unchanged, 6 increased, 64 cut.

Companies reporting decent earnings: Peoples Drug Stores, Hollinger Consol. Gold Mines, Charis (women's apparel).

Some current NYSE members have been at it for 50 years or more; the deans are W. Wadsworth and M. Bouvier, who started in 1869. John D. Rockefeller, elected in March 1883, will have his 50th anniversary before too long.

Boating special:

Projects are under way or being planned for expanding facilities for pleasure boats throughout the country. One of the most ambitious proposes construction of combination marinas and country clubs at intervals of about 200 miles (about a day's run for the average cruiser) along the Southern half of the almost completed inland waterway route down the Eastern seaboard. Heavy construction activity is also underway on the West Coast.

The Bath Iron Works will shortly launch a new all-steel 148-foot diesel yacht built for former Montgomery Ward executive Charles Thorne. Accommodations include owner's stateroom, dining room, living room, and four double guest state rooms with baths.

Interesting bit of history on US clipper ships. While Robert Fulton's steamship Claremont made her famous voyage up the Hudson in 1807, it took many years after that for steamships to conquer the oceans. The peak of US wooden sailing ship construction came around 1849-1869, after "countless generations of evolution"; clipper ships combined speed, beauty, and "burthen," setting records for sailing around the Horn to California that were long unsurpassed by steamships. History of the US clippers is curiously unsung in the literary record, but they were beautifully rendered by artists of the time and survive in Currier & Ives prints.

Movies:

Tarnished Lady - a Paramount film, at the Rivoli. Tallulah Bankhead, in her American screen debut, proves British theater public wasn't wrong in acclaiming her. However, another story of this poor quality "would undoubtedly cripple her chances for success." Girl loves poor artist, but marries rich businessmen to help her mother, a woman accustomed to wealth but suddenly impoverished. She then decides to leave her husband and go to her sweetheart but discovers he's become a social climber and has himself married a rich woman she detests. Following a wild night at New York speakeasies, and "a reel or two of despair," she decides she really loves her husband after all, and, in a climax that unfortunately caused the audience to "titter scornfully," reunites with him.

Svengali - a Warner Bros. film, at the Hollywood. John Barrymore gives a performance among his most masterful in this adaptation of George du Maurier's sinister tale set in old Paris of a hypnotic music-master and the pretty model who falls under his spell. Supporting cast is also fine; film is reminiscent of Dr. Jekyll and Mr. Hyde and The Cabinet of Dr. Caligari. Also on the bill is the first Bobby Jones instructional short on golf, entitled "The Putter."

Joke:

The Hyde Park orator was holding forth passionately on the theory of evolution. "What's he talking about, Bill?," asked one onlooker to another on the outskirts of the crowd. "Eat more fruit, I think," Bill replied. "He keeps talking about oranges an' peaches." [Get it? Origin of Species ... ah, what's the use ...]