May 6, 2010

Wednesday, May 6, 1931: Dow 148.89 -1.61 (1.1%)

Assorted historical stuff:

Treasure Sec. Mellon makes first public speech on business since start of the depression, and one of very few he's made since taking office [in 1921]. “The world is passing through one of the most extensive depressions it has ever known.” Almost all countries have falling prices, unemployment, lower consumption, govt. fiscal problems, and, in some cases, political revolution. Must not underestimate seriousness of the situation, but also must not lose perspective; crisis isn't unprecedented, but “one of those transition stages which come from time to time and entail drastic ... economic adjustments.” Crisis is exacerbated by effects of earlier war, as in 1873. Prices must be readjusted, and costs of production must be brought down to a point where demand is again stimulated; "in short, a balanced condition must be restored." This can be done without general wage cuts provided business can cut costs through greater efficiency. Country has made a "concerted and determined effort" to maintain wages and keep as many as possible employed, stimulating consumption. Capitalism, while it has defects, has had indisputable success in producing an abundance of life's necessities and goods to satisfy human wants. We still have much to learn about maintaining the system on an even keel, but will gradually overcome the defects in time. However, this “will be done in the future, as in the past, by individual initiative,” not imposed by authority. “Conditions today are neither so critical nor so unprecedented as to justify a lack of faith in our capacity to deal with them in our accustomed way.” On international matters, predicts world trade will increase in spite of tariff and other barriers; “all-important factor is purchasing power ... ultimate solution of the world's difficulties seems to lie in the possibility of building up a higher [living] standard, especially in the great, and as yet, undeveloped consumer areas.” Thanks to central bank cooperation, reconstruction of sound currency systems, Young plan, and B.I.S., confidence has been established in willingness and ability of European nations to pay debts. Doesn't know how long recovery will take, "but I do know that, as in the past, the day will come when we shall find ourselves on a more solid economic foundation and the onward march of progress will be resumed."

A simple funeral service was held for George F. Baker, attended by over 500 of the nation's banking, industrial. and public leaders. In keeping with his wishes, there was only a short prayer and no eulogy. Business leaders described Baker as an optimist who didn't get alarmed during panics and didn't believe in speculation.

Editorial: M. Traylor lays much of the blame for the business depression on the stock market decline of 1929-30, which he in turn largely blames on the management of security and commodity exchanges. This charge is unfounded. The stock market in 1929 was "merely the most conspicuous ... expression of a speculative fever that ran through almost every field of activity." For a few years, the US was supplying the world with all types of goods, "practically on its own terms"; this resulted in too much optimism, and excesses in "production, in capital investment, and in every kind of planning for the future. ...To hold the governing authorities of the exchanges responsible for such a universal loss of perspective by a whole people is unfair."

Editorial: Pres. Hoover, in his speech against competitive armament, said "no one would suggest ... that national defense should be abandoned." However, it's certainly worth suggesting that we try to define "national defense" more explicitly; this might "confirm or dispel the widespread suspicion" that in much of European politics national security is identified with competitive armament. The situation demands "critical and unblinking examination"; "tariffs and inter-government debts are not the only obstacles to the recovery of world industry, nor the most troublesome."

Pres. Hoover appoints Wayland Magee of Neb. to the Fed. Reserve Board, satisfying requests of farm organizations for a representative on the board. There is one more vacancy to fill, in the Chicago district; Pres. Hoover can now meet requests of financial interests in Chicago for representation.

Yet another editorial by T. Woodlock contending inland waterways are unprofitable and unfairly subsidized (at expense of rails) - this one questions accounting of the Inland Waterways Corp. 1930 annual report that shows a small profit, not neglecting to point out the gall of printing this misleading report at public expense.

French scientists discover common Paraguayan plant known as "kaabee" contains 300 times as much sugar per gram as sugarcane; "must determine effect of plant on human organism before adapting for manufacture."

11 new central telephone offices will be added in NY City in next few months using the new numerical naming system, including MUrray Hill-4 and GRamercy-7.

Travelers to Beijing tell of an old Mongolian known as Mr. Cigarette Factory who sits outside the Chienmen Gate, ready to supply any popular brand of cigarette on request. While the cigarettes are authentic and well-made, the more fastidious may not care to smoke them; they're made from butts discarded around the city and gathered by Chinese children working for Mr. Factory. On receipt of the butts, he unravels them, carefully keeping the different brands separate, though he also offers a custom blend mixing several of the brands.

Market commentary:

Market wrap: Stocks opened with continued rallying throughout the list on low volume; however, early gains were wiped out by renewed selling in late morning, and a general decline set in around noon, with US Steel particularly weak; volume rose on the reaction. Pressure slackened around two o'clock, but the decline picked up again during the last hour; with US Steel almost down to last week's low, the whole market closed with a nervous tone. Bond market more active, with a substantial number of domestic corp. issues closing higher; however, improvement was concentrated in highest-grade bonds; US and foreign govts. narrowly mixed. Commodities soft; grains irregular, with wheat down substantially on favorable weather but other grains narrowly mixed; cotton down substantially. Copper buying remained quiet; buyers are apparently unwilling to pay above 9 cents, and some sales are rumored to have taken place at that price. Zinc down to new post-1900 low of 3.25 cents. Cocoa down to new low of 4.95 cents/pound; coffee higher.

Conservative observers point to market action as indicating wisdom of remaining on sidelines. However, some noted that the rail average managed to close with a small gain, a possibly significant development since rails have predicted market action well during in the past 18 months; rails will continue to be watched closely.

Market observers disturbed by pattern of low volume during rallies and higher activity during declines. However, other market students believe recent irregular action, in particular resistance of general list to attacks on individual issues, may indicate market is establishing base for a technical recovery. Still other market students contend that some issues were definitely oversold during the March-April reaction. In any case, there's a general consensus that any rally is likely to be technical and a sustained market recovery will depend on improvement in business; an increasing number now feel this is unlikely to come until early next year.

Heavy May total of about $422M in bond interest payments and maturities seen possibly generating some reinvestment demand.

US Steel weakness attributed to disturbing decline in the preferred to a new 1931 low. GM has been a favorite in the past few weeks, strongly resisting bear pressure; public is reportedly buying the stock based on strong Chevrolet production and sales. Goodyear responded well to reports of increased production, rising almost 10 points from last week's low. Grand Union was also strong after favorable earnings report. Reynolds Tobacco sales have reportedly shown good increase in March after extensive advertising campaign. Anaconda is subject of some concern after reporting increase in notes payable (bank loans) during 1930 of $12.5M to $47.5M; this year's results are expected to suffer from low copper prices. National Lead has moved in a much smaller range this year than comparable stocks; this is attributed to a wide bid-ask spread, making it more difficult for bears to attack the stock.

Yet another opinion piece arguing that Farm Board actions have harmed all interests connected with grain.

A. Pirelli, Italian industrialist, questions how long US can continue to run surpluses on balance of payments of both goods and capital with Europe; this is only possible if US can reinvest the growing sums it receives.

D. Sarnoff, Radio Corp. (RCA) pres., says operations in the first quarter improved vs. operating loss shown in 1930. Company making "important forward strides" with television; expects broadcasting stations in New York and elsewhere before end of 1932.

Labor Sec. Doak says resumption of buying and continuing regular way of living by the employed will do more than anything to restore normal conditions; believes gratifying increase in employment will be seen due to great building and highway projects now under way.

Economic news and individual company reports:

S. Singer, Bank of US VP, testified he and bank pres. Marcus shared profit of $580,000 from organizing City Financial Corp. and selling its stock to the bank.

Amer. Bankers' Assoc. commission comes out against "trade-area" branch banking proposed by Comptroller Pole that would allow national banks to put more branches in country districts; calls it "anti-state bank policy" that in practice "would mean the destruction of our dual banking system." Calls for "evolutionary" change state by state rather than Federal action, moderate extension of allowed branch banking for both state and national banks.

Rail freight loadings for week ended Apr. 25 were 759,272, down 730 from prev. week, down 16.2% from 1930 week, and down 27.8% from 1929.

Refineries ran at 67.2% in week ended May 2; stocks of gasoline dropped 838,000 barrels to 45.613M. Crude oil production in week was 2.475M barrels/day, up 50,800 from prev. week but down 120,100 from a year ago.

April auto production by makers other than Ford was 231,017 units, up 20% from Mar. but down 12% from Apr. 1930.

NYSE bond trading in April was $227.8M vs. $247.0M in Mar. and $274.6M in Apr. 1930; with exception of 1929, this was lowest Apr. total since 1921.

State and municipal bond issues in April were $107.4M vs. $46.6M in Mar. and $149.0M in Apr. 1930; first 4 months a record high of $556.3M vs. $446.9M

American Metal Market says steel production little changed this week; buying as a whole continues sluggish but only slight further decrease seen in operations; automotive buying “hardly promises as large total automobile production this month as last.” American Machinist reports April machine-tool trade "brought no showers of orders to drench the somewhat arid ... markets"; orders for the month were below expectations, with the overall trend slightly down, and there are few indications of improvement before the fall.

Italian War Ministry budget presented to Chamber of Deputies with proposed spending of $156.8M; memorandum said French war budget was 77% higher. Italian cabinet approved issue of a new $209.2M bond to be issued internally; there will evidently be no new external borrowing by Italy in spite of many reports to that effect in the past few months, particularly of a loan from France.

Panama Canal tolls in April were $2.014M vs. $1.964M in March and $2.233M in April 1930.

3,000 employees of 15 Allentown silk mills went out on strike against recent wage cuts. Employees of 20 Philadelphia upholstery mills returned to work after three-month strike, accepting 14% cut in wages.

Tobacco tax collections for first months of the fiscal year totaled $328.4M, down $4.8M from previous year.

US shoe production is up sharply to about 24M pairs/month currently, vs. 17.5M in Dec.; current output is about 18% below a year ago, and about 13% below the average monthly output for the past eight years.

Florida passes inheritance tax bill designed to make effective a constitutional amendment approved last Nov. allowing such a tax.

Mississippi general fund deficit rose from $2.346M to $2.564M in April in spite of emergency $500,000 bond issue bought by banks. Deadlock continues between governor and legislature on extra session to issue state bonds. Asheville and Buncombe County, N. Carolina default on bond interest due May 1.

NY State is likely to receive substantial fiscal help from estate of George Baker; estate value may be about $200M, which would give the state govt. $31.5M and the Federal govt. $7.9M.

Ohio Oil omits quarterly dividend of 25 cents, becoming the first major company in the Standard Oil group to omit its dividend in the current depression, though several have reduced them. Co. is mainly a crude oil and gas producer.

April chain store sales vs. 1930: Woolworth $23.830M, down 2.2%; S.S. Kresge $12.590M, down 1.0%; W.T. Grant $6.402M, up 11.7%; McCrory Stores $3.703M, up 1.4%;

At the galleries:

The Knoedler Galleries are showing a comprehensive group of 86 Durer etchings and engravings, including the finest and best known of this master's work. The John Levy Galleries continue their "Mexican cycle" with an exhibit of Rufino Tamayo and Joaquin Claussel, two contemporary Mexican artists with widely differing styles. The Rinehart Galleries feature a loan exhibition of landscape paintings covering a long time range, starting with Cuyp, Gainsborough, and Turner, proceeding to "the Courbet-Corot-Renoir-Monet coterie," thence to Cezanne, Seurat, Van Gogh, Gauguin and Rousseau, and, after many more stops, eventually winding up with Georgia O'Keefe and Maurice Sterne.


Ladies Man - Paramount film, adapted by Herman Mankiewicz from a novel by Rupert Hughes. William Powell gives another intriguing performance as "a man who lived from the generosity of women ... and whose life was finally ended by the husband of the latest of his female supporters." Supporting cast also fine, including Olive Tell as the benefactress, Carole Lombard as her daughter, and Gilbert Emery as "a convincing jealous husband of the dignified variety."

Poem by J.Q. du Pont:

"In nineteen twenty and twenty-one, our uncle had a fire;
His house, with all its furniture, burned almost to the mire. ...
When the fire was out and every one had gone back to his work,
Our uncle vowed he'd build a house that'd make his bankers perk. ...
A sprinkler pipe was then installed in every room and pantry;
A golden pipe called 'Cash Surplus,' the dream of Uncle Sammy.
With valves and silver polished bright, and pumps of purest gold,
The system was the new delight for both the young and old. ...
Ten years passed quickly by, and then the cry of 'FIRE!' was heard ...
'Turn on the pumps, turn on the cash! Turn on the valves!' cried Sam.
The guards, they simply smiled and said, 'We're sorry, sir,' each man.
'Why NOT?' our Uncle sternly asked. 'Ye Gods, my house is burning!'
The guards, defiant, answered thus, (the crowd, meanwhile, was churning):
'You hired us to guard the pumps and keep them ever polished;
If we should start them for this fire their looks would be demolished!'
And so the crowd stood helpless there; the year was 1930.
The house burned down, the guards were pleased; their pumps had not got dirty."

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