June 18, 2010

Thursday, June 18, 1931: Dow 133.68 -1.79 (1.3%)

Assorted historical stuff:

Prof. John M. Keynes, "British economist and publicist," gave lecture at the New School for Social Research, 66 West 12 St. Disagreed with economists who feel equilibrium can only be restored through further deflation; noted "we have returned to prewar price levels, but not to the prewar level of debts and not to the prewar level of wages"; called for efforts to raise commodity prices. His arguments against futher deflation: drastic wage cuts would cause resistance from labor and threaten stability; fall in prices is against social justice since it makes debt burden intolerable. Disputes idea raised by questioner that it's necessary for a period of deflation or liquidation to follow one of inflated business; "this is the tendency, but we do not have to accept it fatalistically."

Washington report: Pres. Hoover, in recent speeches, seems to be outlining his Administration's approach to the next session of Congress and the 1932 campaign. Main theme is the choice between the "American system which holds ... that the basis of all happiness is in development of the individual," and "the other idea" to "directly or indirectly regiment the population into a bureaucracy to serve the state"; the first alternative relies on cooperation, the second on coercion. Therefore, while Hoover favors some reforms in taxes, banking, and other areas, he's against paternalism such as govt. gifts to "special groups," huge programs of public works paid for by borrowing, or Federal unemployment insurance. Administration sources insist "the President's speeches should not be given a political interpretation," but "the President's well-wishers think that this particular pose should be dropped speedily"; the presidency "can never be separated from politics," still less when a reelection campaign is nearing. Former Pres. Coolidge's decision to stop writing his daily newspaper column has heightened speculation he's considering pleas to run again in 1932, but weight of evidence is against this. Fewer statements are to be expected from politicians in the Capitol now that the thermometer is reaching into the nineties.

Editorial by T. Woodlock on NY City transit unification: "New York's transit problem has come to the place where it must be solved if ever it is to be solved." All the facts are out, and it's now merely a question of common sense, but that may not be an easy matter. Mr. Untermeyer has skillfully created a plan for the city to buy the securities of the companies now operating transit lines, and transfer operations to a new city agency. However, there's bound to be sharp differences over the price paid; "it is matters of the sort which make it almost impossible for a business transaction to be arranged upon fair terms between a civic entity and private persons." Mr. Untermeyer has ably defended the city's interests, "and as he has taken his compensation in the form of adjectives and hot temper, ... we need not grumble much over his honorarium." NY City Board of Transportation will start new series of unification conferences today to try to break deadlock with BMT. over terms of purchase by city; S. Untermeyer says will decide whether to resign as special counsel in next day or two.

J. Herbert Case, Fed. Reserve of NY chair. and Nat'l Assoc. of Community Chests pres., to head campaign to raise $82M for unemployment relief and welfare work next winter in cities of over 25,000.

New peace negotiations raise hope of settling coal strikes in W. Virginia and Western Pennsylvania; Gov. Pinchot involved. Some friction reported between United Mine Workers and National Miners Union in Eastern Ohio; coal operators there have said they will recognize the UMW.

Glenn L. Martin Airplane Co. of Baltimore is low bidder on Navy contract to supply "23 giant patrol-type flying boats" for $1.354M.

"Science, shatterer of illusions," recently spoiled another, concluding that the 300 odd islands collectively known as Bermuda are not coral islands after all, but "formed of fine sand, composed of pulverized fish shells and cemented by time and moisture." This composition does allow digging a cellar and building up a home from the workable "stone" dug out of the ground.

NY Edison will use over 60,000 tons of lead in manufacture of sheathing for underground cables to be installed during 1931-40.

The Columbus Circle location of Childs restaurant starts new "60 cents for all you can eat" policy today, becoming fifth location to do so.

"Few die, and none resign." This famous remark was made many years ago about US govt. civil servants; it remains as applicable today. So many young men are now eager for government jobs that the US Civil Service Commission is immediately filling vacancies even in the most technical positions. However, educators now realize govt. service offers "little opportunity for enduring success or adequate financial compensation" and are advising college graduates to seek other employment.

Advertisement for the “Radiumator,” a home machine for treating drinking water. “Each RADIUMATOR is thoroughly tested and is guaranteed to contain real radium, producing daily a high therapeutic dosage of Radium Emanation. Diffused in water it will produce daily a far greater dosage ... than is found in the waters of the world's most famous Radium Springs.”

Market commentary:

Market wrap: Stock market session was dull and generally featureless, except for a renewed drive on the major rails attributed to disclosure in their petition to the ICC that maintenance had been drastically cut this year, possibly overstating earnings. However, industrials remained fairly steady in spite of continued bad steel news. Bonds moved narrowly in quiet session; US govts. dull, firm; only notable movement in foreign issues was continued gain in German bonds; domestic corp. showed moderate strength. Commodities narrowly mixed; grains firm; cotton somewhat lower. Copper offered at 8 cents but practically no metal changed hands.

Conservative observers continue warning against short selling; favor purchase of stocks only on reactions and using stop-loss orders for protection.

NYSE volume was 900,000 shares, first time a 5-hour session fell below 1M shares in almost 5 years. Brokers, while acknowledging market dullness might make it hard to meet their overhead in the near term, were generally encouraged by the dullness, since "bear markets invariably are followed by a time of sluggishness, reflecting the exhaustion of the liquidating movement ... As a matter of fact, the development of a period in which discouragement ruled as to whether speculation would ever be revived, has usually been the best sign" a recovery was about to begin. Current fundamentals are poor; business continues to plumb the depths, foreign uncertainty is acute, and bank failures widespread. This would induce active selling if any liquidation was overhanging the market. "Consequently, the more dullness becomes intensified in coming weeks, the greater confidence will be that the end of the severe bear market over the last 22 months is at hand."

Yet another subtle positive sign of a turn in the market is the ability of some individual stocks, including Woolworth and Chrysler, to respond to good news. During previous dull periods in the bear market, individual stocks generally broke out of range to the downside, but bears have recently had little success in producing "airholes" of this type.

Freight car loadings have also shown signs of subtle improvement; aside from the holiday week of May 30, year-over-year decline has steadily declined from 19.8% in the May 9 week to 18.6% in the June 6 week. However, some financial district observers had anticipated a somewhat higher figure for the last report.

New bond offerings seen remaining low in second half; industrial borrowing likely to remain small until business recovers; real estate “still awaits ... corrective factors and the return of confidence”; rails likely to minimize borrowing; foreign issues “practically barred” due to political and economic uncertainty. Municipal and utility issues likely to dominate new bonds for near future.

Movie company stocks have been drastically deflated; at recent lows, all of the leading stocks were selling at less than 3 1/2 times 1930 earnings. This decline is probably excessive. Movie earnings showed striking increases in 1929 and 1930 due to the novelty of sound films and higher ticket prices. The novelty appears to have worn off, and a number of cuts in ticket prices have been made; in the near future the average admission will likely fall from 35 cents to 30. However, there seems to be plenty of room to cut costs; "the film industry traditionally is extravagant, so current developments may prove a blessing in disguise ..."

H. Parson, Woolworth pres., says company reports from all sections of the country show gratifying improvements in sales; gauged by Woolworth sales, believes business generally has turned the corner and is on the uptrend. In Germany, where Woolworth operates 63 stores, Parson said business also continued to be good.

Economic news and individual company reports:

Germany is reportedly seriously considering declaring a reparations moratorium under the Young Plan in July instead of waiting as had been earlier reported. Reichsbank has had to continue defense of mark, selling 60M marks of foreign currency Tuesday; total sales of gold and foreign currency estimated at 1B marks. Evidence accumulates that US and British banks have been recalling German loans despite official assurances. Flight of capital into Switzerland particularly heavy.

Recovery of mark seen dependent on clearing up of political situation and definite settlement of the Creditanstalt's affairs. Hopeful news on that front comes as danger of a moratorium [on bond payments] by Austria appears to have been averted by agreement of Creditanstalt's foreign creditors to extend credits for two years, and by offer of Bank of England for temporary loan of 150M schillings renewable weekly. This relieved anxiety over the prolonged wrangling with French bankers on terms for discounting 150M Austrian Treasury bill issue; the French govt. reportedly was demanding Austria abandon plans for economic union with Germany. Creditors of Amstelbank of Amsterdam met in London; Amstelbank is an affiliate of Creditanstalt, with liabilities of about 10M sterling. Marks were higher and stocks rose in Berlin; leading bankers in NY believe worst of German crisis passed; expressed satisfaction at latest Austrian developments; France drew some criticism for delay in providing credit, charged with using wealth to “further her political desires.”

Security-Home Trust of Toledo, Ohio closed due to heavy withdrawals attibuted to “undue fear caused by the business depression”; over $20M in deposits, including county, city and school board funds.

Railroads file application with the ICC for 15% increase on all freight rates; ICC says will give the petition its prompt attention. Representatives of life insurance cos. and savings banks [note: large holders of rail securities] considering cooperative action to improve rail situation; Nat'l League of Commission Merchants announces opposition to rate increase on fruits and vegetables, pointing out freight charges are already up to 80% of farm value. Editorial: Rail case is not about getting a "fair return" on property, but about practical consequences of situation approaching an emergency. As admitted in their petition, rails are now deferring maintenance, "grinding up their roadbed and equipment," in order to overstate net operating income; this is the only way many can cover interest charges and remain solvent, but it's "an emergency expedient." Insolvency of rails and resulting decline in their bond values would seriously hurt millions of savings bank depositors and insurance policyholders. Shippers and state rail commissioners who may oppose the rate increase must contemplate whether it's better to suffer these drastic consequences or to pay the rails "a little more for performing three-fourths of the transportation service which the country must have." Railroads are trying to reclaim some traffic from trucks using faster freight trains, including the new "Maine Bullet" from Portland to NY City and the "Speed Witch" between Boston and Baltimore. The "Maine Bullet" travels from Portland to NY City [about 300 miles] in 12 1/2 hours.

Commerce Dept. reports May exports $205M vs. $319.4M in 1930, and lowest monthly total since Oct. 1914; imports $182M vs. $284.6M, and lowest since Sept. 1921; important factor in decline believed to be loss of buying power in main US export markets, which are largely commodity producers.Agriculture Dept. reports prospects for US agricultural exports poor; no significant turn seen in European economic or demand conditions up to latter part of May; contrary to usual seasonal trend, unemployment increased in some countries, notably France and the Netherlands.

Steel production for week ended Monday was under 38% vs. 39% prev. week, 41% two weeks ago, 68% in 1930, and 96 1/2% in 1929. Youngstown district steel production dipped 2% to 40% at midweek. Weekly steel reviews were rather dismal, giving pessimistic outlook for midsummer with prospects of temporary shutdowns in the automotive industry and in parts of the steel trade itself; demand was down in all lines but structural. However, sentiment was reportedly "distinctly more buoyant" on "intangibles" including prospects of higher prices; Bethlehem and a number of other large producers have already steel increased sheet prices. Steel industry is increasingly favoring rail rate increase; it's believed resulting increased costs could be passed on, and rails might then increase steel buying.

US electric output for week ended June 13 was 1,581 GWHr, down 4.9% from 1930, vs. a 2.9% decline prev. week and 3.8% two weeks ago.

Govt. weekly weather report: beneficial showers in some parts of the Northwest but insufficient to generally break drought; spring wheat condition poor. Winter wheat conditions good in many sections. Cotton weather favorable. Administration says drought not yet serious enough to call special session of Congress.

News of earthquake in Japan had little effect on yen exchange.

Polish budget reduced to $272M, or $55M less than voted by Parliament; govt. salaries to be cut 15%.

International Tin Committee sets worldwide production quota of about 125,000 tons/year vs. about 173,000 in 1930 and 188,000 in 1929.

Ford executives and Detroit officials trade charges; Mayor Murphy denies administration of city unemployment relief "honey-combed with graft"; T. Dolan, supt. of public welfare dept. that was attacked by Ford as "antiquated and inefficient" sends letter to Edsel Ford asking the company to assume responsibility for thousands of workers allegedly destitute due to Ford layoffs.

NYSE seat sold for $200,000, down $7,000 from previous sale.

R.J. Reynolds cigarette sales in May rose to a record high, attributed to advertising campaign; stock has been well supported.


I Take This Woman - Paramount film, at the NY Paramount. Fairly entertaining in spite of "hackneyed plot" and "mechanical" acting by Gary Cooper and Carole Lombard, thanks to skillful direction and good photographic technique. Lombard regrettably "permitted herself to assume Garbo poses in the film, for they are so undeniably the art of the Scandinavian actress that they detract from the work of others who affect them." Kay Dowling (Lombard) falls in love with Tom McNair (Cooper), manager of her father's ranch. After a lonely winter at the ranch, she leaves him and goes back East; she returns after seeing him injured in the rodeo. Stage act includes Rudy Vallee and Libby Holman in On Ze Boulevard.

The Viking - Shot on location in Newfoundland by Varick Frissel before "ill-fated second voyage into the icebound Arctic waters" [to shoot more action sequences for the movie; boat exploded, killing 27 men including Frissel]. Little to be said regarding old-fashioned plot including "a stalwart hero, a bewhiskered, swaggering villain, and a lovely heroine who waits at home"; acting is "on a par with that in the average high school graduation play." Does contain some striking sequences of seal hunters trekking over the broken ice in search of the seal herd, and of the seals themselves; in one scene, a mother seal hears the cry of her baby in distress when the shooting begins, glides rapidly over the ice and drags her into the water "beyond reach of the bullets of the great enemy, Man."


'Did you hear about Johnson making $1,000,000 in US Steel?' 'Yes, yes, I heard all about it, but you haven't got it quite right. It wasn't Johnson, it was Thompson. It wasn't US Steel, it was Anaconda. It wasn't $1,000,000, it was $100,000. And, he didn't make it, he lost it.'

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