May 19, 2010

Tuesday, May 19, 1931: Dow 139.52 -3.43 (2.4%)

Assorted historical stuff:

Community Councils of NY City asks Pres. Hoover to accelerate work on $2B govt. construction program approved by last Congress to relieve unemployment. Pres. Hoover returns to White House from weekend conference with Interior Dept. officials; plans worked out for savings of $17M-$20M over next three years. Future weekend conferences on cutting govt. spending will include officials from the Treasury, Post Office, Agriculture, and Navy depts. Editorial: Urgent requests of the Community Council for faster govt. spending, and of M. Hart for the opposite [see yesterday], demonstrate the "diametrically opposed conceptions of the way to meet business depression" now widespread across the country. Situation calls for cutting public spending that doesn't contribute directly to employment and business revival, while speeding up spending that does so contribute. Both Federal and local officials have a "compelling obligation" to concentrate spending on works that can quickly be brought to the employing and material buying stage; a recent White House report on Federal building projects with ultimate cost of $453M found that projects costing close to $300M had no sites or plans yet.

F. Croxton, acting head of Pres. Hoover's unemployment committee, says believes current wage rate will be maintained, most capital and labor doing the best they can to live up to the agreement made with Pres. Hoover over a year ago; doesn't believe AFL statements foretell any widespread disturbance.

Supreme Court hands down two decisions seen as important precedents. Allows Indiana tax charging higher rate per store to chain stores on grounds it's not prohibitive in that it won't drive them out of business; about 20% of US merchandise is sold through chain stores, but the proportion has been growing quickly. Sustains oil conservation policy of Pres. Hoover under which all applications for oil and gas prospecting on public land have been refused since Mar. 1929.

Uruguayan Chamber of Deputies passes law for state control of foreign exchange designed to eliminate speculation blamed for current low value of currency. Conference of bankers in Mexico City will form syndicate to take charge of Mexican exchange.

100,000 French textile workers went on strike in area of Roubaix to protest 4% wage cut. A force of 20,000 troops and police is patrolling the strike zone.

League of Nations Council discusses legality of Austro-German customs union; French submit long protest; matter likely to be submitted to World Court.

Although the US operates airways with total mileage about 3 times that of any other country, (50,000 miles; France second with 18,000), longest airmail line in the world is operated by the Netherlands, from Holland to the "Dutch East Indies" [Indonesia]. Air passengers carried in 1930 by US airlines were 417,505 vs. 173,405 in 1929 and 5,782 in 1926. Air transport in Q1 1931 showed continued growth in miles flown (7.428M vs. 5.044M in1930) and in airmail poundage (up 15% to 2.097M) and express air (up 279% to 209,004); passengers carried fell 11.3% to 65,604, but were up about 24% from month to month in the quarter. 88.5% of mileage scheduled was completed vs. 86.7% in 1930; almost all cancellations were due to bad weather.

Chicago business stimulated by Jubilee celebration; crowds thronged the city and transportation operated at capacity around the Loop for the various events.

As England rose to industrial preeminence because of its cheap coal, so Canada is rapidly developing as a manufacturing power due to its abundance of "white coal," or hydropower. Some $1.4B is now invested in hydropower developments throughout Canada, much of it to power the paper and pulp industry.

A generation ago, alfalfa was a troublesome weed; now, it's one of the most valuable agricultural crops in the US, particularly in Western sections requiring irrigation. In irrigated parts of California, six crops are produced on the same land each year. Farmers call it "the cows' delight."

A Wall Street analyst recently found the railroads "are not missing a trick in guarding their revenues." On a business trip, he encountered the celebrated "Siamese Twins" of circus fame; upon returning, he wired a rail executive asking if one or two fares were charged. The reply: "No 'double-heading' these days ..."

Sir Arthur Conan Doyle left estate valued at $270,740 net.

Market commentary:

Market wrap: Stocks opened under pressure Monday after the Dow industrial and rail averages broke through to new lows Saturday; sell orders accumulated over the weekend; selling again converged on Steel and Can, both of which broke below par (100) in spite of expected resistance at that point. "Selling poured into the market in a steady stream as the morning progressed"; rails sold off heavily. Industrials began moderate recovery about 1 pm, but a sharp break came in chain store stocks following Supreme Court ruling on Indiana anti-chain tax. Market turned sluggish in the last hour, but selling picked up again at the close. Bonds continued recent trends; US govts. moved to new high territory, highest-grade corp. issues continued strong, while bonds of many corporations with high debt or doubtful earnings reached new lows. Foreign bonds were mostly firm, but S. American issues suffered a bad break late. Commodities weak; grains down, with some new season lows in corn and oats; cotton down sharply to 16-year low, with May selling at 9.00 cents. Copper producers lowered asking price to 9 cents; foreign sales were active as price was brought to parity with domestic, while domestic buying was moderate. Silver declined 3/8 cent to 27 5/8.

"It is difficult at the moment to find an optimist in the financial district." Conservative observers continue to keep customers on sidelines, "contending that the market is in control of the bear contingent, with bullish demonstrations entirely absent."

Thin markets developed in some high-priced stocks, particularly rails; specialists [market makers] had difficulty establishing an opening price for Atchison. “Many and varied rumors are being circulated again to influence selling.” Dividend cuts in recent months have reduced investors' income and curtailed amount of money reinvested. “Blue chips” have been consistently liquidated for some time; this has disturbed investor sentiment since these shares are widely held. Many investors have been switching from common stocks to preferred shares and bonds. After recent downtrend, stocks of some of the larger banks are now yielding over 5% (Chase Nat'l 5.4%, Nat'l City 5.1%).

Interests on floor of the NYSE report steady support in GM, with bears meeting resistance and at times run to cover; some public buying has been attracted by good business reports. Bethlehem Steel continues to draw better support than US Steel, holding above its 1931 low. Liquidation in Texas Corp. has been increasing as time for dividend action approaches.

Steel production continues to decline; sustained uptrend is seen unlikely until end of the summer.

Sen. Nye (S. Dakota) advocates nationwide organization of independent merchants as only effective defense against chain store dominance.

J. Farrell, US Steel pres., says gradual improvement now apparent in depressed conditions affecting agriculture, commerce and industry.

E. Clark, Newton Steel pres., says steel output and business in general in June and July, while seasonally slower, won't decline as much proportionally as in 1930.

J. Klein, Asst. Commerce Sec., says installment sales have stood up remarkably to the depression, demonstrating right of system to survive.

F. Lisman advises against panic and selling "at any price" of railroad bonds that lose "legal" status [as investments for savings banks and trustees; these were required to cover interest charges by a relatively wide margin].

Harvard Economic Society predicts preponderance of gains in business in coming months. At end of first quarter, allowing for seasonality, "decline in the general volume of business was checked, and in April an upturn occurred." Unfavorable developments include increased commercial failures and decline in stock prices, but "current statistics indicate that they have not caused a general setback." Rate cuts should benefit business.

Bank of Nova Scotia reviews of 4 Canadian business indexes since 1890, noting progress has been maintained despite war and severe depressions. “It would be remarkable if the momentum established so long ago, which was resumed unfailingly following each interruption ... were to be lost now ... simply because another serious depression has occurred.” Experience suggests that, though the timing is uncertain, “the momentum of Canada's progress will presently be resumed.” Canadian PM Bennett speaks out against Progressive proposal to establish govt.-owned central bank. Says Canada's banking system safe; cites only one bank failure since 1914 vs. thousands in US; differences with US system include larger reserves and writeoffs each year, and double liability of stockholders.

New book: Banking Concentration in the US - by J.S. Lawrence. Argues against prevailing opinion favoring larger banks; "in his opinion the economic factors so favorable to industrial combinations do not hold with banks, and the advantages enumerated by advocates of branch banking are greatly exaggerated."

Dow industrial average closed at a new bear market low; there were 5 new yearly highs and 163 new lows [Note: all new highs were preferred stocks]. The rail average also hit a new bear market low, down 3.82 to 75.58.

Economic news and individual company reports:

Bank suspensions in April fell to 63, least since May 1930, with total deposits of $49.5M; 23 banks reopened with deposits of $21.1M. W. K. Macy, NY Republican State Committee chair., says joint legislative committee will investigate State Banking Dept. Chelsea Bank reorganization plan approved; depositors with claims totaling $9.5M to be paid in full.

Asheville and Buncombe County officials will meet with bondholders' committee to discuss refinancing of over $35M in bonds that officials admit they will be unable to repay. Financial crisis was precipitated when Central Bank & Trust failed last Nov. with $8M in public funds on deposit.

Austrian govt. loan of 150M schillings for Creditanstalt bank approved by committee of nations guaranteeing Austria's 1922 loan. B.I.S. will permit National Bank of Austria to discount 100M schillings of Austrian commercial paper to alleviate current disturbed financial situation.

NY Clearing House member banks reduce interest rates paid 1/2% to 1% on time deposits and 1/2% on demand deposits.

Fed. Reserve reports member banks' security loans fell $400M in Q1, while other loans fell $573M, reflecting lower business activity; since start of 1930, the declines were $1B and $2.250B. Investments at member banks rose $931M in Q1, of which $920M was in govt. securities. Further easing in money rates in April and May has been reflected in lower rates on deposits throughout the country. However, in spite of low rates influx of gold has accelerated since start of April.

Editorial: Bradstreet's report of April building permits in 215 leading cities is encouraging. While total of $151.2M is below the $180M total from Apr. 1930, the gain from $142.1M in March was more than seasonal; building permits in NY City are up substantially vs. 1930. Building is one of the most reliable business indicators; it's therefore hopeful the trend has been up since Feb. Amer. Bankers' Assoc. reports banks generally will proceed as planned with their building programs this year; 428 banks are planning new buildings and 828 are planning improvements.

Oil curtailment in East Texas has been complicated by numerous lawsuits and completion of "a multitude of new wells."

Wheat situation difficult. Indications point to bumper N. American crop of about 1.340B bushels; together with a record carryover of 445M, this would leave an exportable surplus of about 1.050B after domestic demand, vs. exports this season of 380M. Farm Board member S. McKelvie, addressing int'l wheat conf., said most important part of solution is curtailing planting in exporting countries; hits “pressure sales” by some govts., not mentioning Russia by name; also hits uneconomic measures by some govts. but defends Farm Board intervention; warns US will remain exporter; says Board will sell surplus but “in orderly fashion.”

Commerce Dept. estimates record sugar production in 1930-31. T. Chadbourne says int'l sugar agreement will help exporters, though uptrend won't be immediately noticeable.

Foreign currencies generally higher; sterling strengthened against francs. Canadian currency disappointingly weak, not responding to usual seasonal factors. Silver price has fallen gradually over the past week in spite of improving "statistical position." However, observers point out "the decline is orderly and bears no resemblance to the striking declines of the past two years."

Institute of Amer. Meat Packers reports average wholesale prices of meat for week ended May 16 were 13%-30% below a year ago.

Worldwide conference of tin producers decides on further 15.9% restriction of allowed production.

New car registrations in France exceeded those in the US in 1930, in spite of a much smaller car market; France gained 178,000 registrations, or 13.5%, vs. a gain of 126,094, or 0.5% in the US.

Many German workers are returning to the farm because of the scarcity of jobs in larger cities. In the first half of 1930, Berlin saw a drop of 8,000 inhabitants vs. a gain of 17,000 in 1929, and the pattern in other large cities was similar.

Rails serving Port of NY testify in favor of NY City in "free lighterage" case; a number of industries in NJ also favor NY City's position. Some contend the case is sponsored by Newark real estate interests.

Kreuger & Toll analysis shows substantial hidden assets in undistributed earnings of associated companies; K.&T. only reports dividends received as income.

Westinghouse operated at a profit in April, improving markedly from the first quarter.

Companies reporting decent earnings: Coca-Cola, Pillsbury Flour.


Bachelor Apartment - Among the best of the light comedies this week; Lowell Sherman directs and stars as wealthy bachelor; "farcical complications over his various women arise; they are fortunately more originally contrived than is customary with these dramatic plots."

It's a Wise Child - Bright, swift moving cinematic farce; Marion Davies plays spiritedly, but James Gleason as the iceman is the hit of the show; Sidney Blackmer competently plays Joyce's trustee, the only of her male friends who doesn't scurry to cover when it's intimated she is about to have a child.

Six Cylinder Love - a Fox film, at the Roxy. Lorin Raker is mechanical in the lead role of Gilbert Sterling, a weak husband "milked ... of his savings by a group of pleasure-loving acquaintances, as if he were turned by a crank"; film as a whole is long-winded and dull, although Spencer Tracy is excellent as the automobile salesman who starts the Sterling family on the downward road by convincing them that they need a $2000 Lincoln car for social reasons.


Motorist in very old car - How much to park? Garage owner - I'll have to ask you a five spot - in advance. Motorist - My gosh! A five spot in advance? But I'll come for the car in the morning! Garage owner - Ah. That's just it. Will you come?

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