June 4, 2010

Thursday, June 4, 1931: Dow 130.37 +8.67 (7.1%)

Assorted historical stuff:

[Note: We're all Citizen Kane-sians now.] William Randolph Hearst, in radio speech, says prompt spending of $5B by govt. would restore prosperity; advocates borrowing of this sum, saying additional taxes at this time would retard prosperity.

German Chancellor Breuning gave Pres. Von Hindenburg draft for a new emergency decree imposing drastic spending cuts. An address to be delivered by the President on Saturday will summarize the decree and also make "a significant pronouncement that the government would not impose decrees involving heavy new sacrifices by the people unless it was determined as soon as possible to undertake steps to alleviate the reparations burden. Austerity program to aim for closing budget gap by 1.4B marks ($333.5M) through tax increases of 718M, spending cuts of 303M, cutting unemployment insurance by 309M, and cutting railway wages by 84M. Times report from Berlin says Germany will take formal steps for revision of reparations within six weeks. Foreign banking circles see the Anglo-German conference at Chequers having far-reaching effects. German officials have long recognized need for revision of reparations but refrained from asking for it due to fear of damaging German credit abroad; point has apparently been reached where govt. believes it can no longer wait. Many economists believe that if reparations burden can be relieved Germany's position would be greatly strengthened; since Germany is a noteworthy sore spot in the depression, this should significantly help the worldwide picture.

Broad new Canadian tariff “has dramatized the tariff controversy more than any other development since passage of the Hawley-Smoot act a year ago.” Many other countries have raised tariffs since, but this revision “at a time when foreign trade is at its lowest level in years has brought the issue home with new force.” US officials continued silence on the subject. Canadian tariff seen leaving way open for negotiation of reciprocal reduction of rates with US.

Editorial: Gov. Pinchot's latest blast at the utilities makes one think of them as a "gigantic blacksnake" swallowing helpless little birds. The speech omits "a strong political odor of 1932" but is somewhat lacking in evidence; in particular, the Governor's claim that Federal regulation is necessary because states are powerless to tame the utility beast is doubtful due to recent Supreme Court decision allowing state regulation of gas transported across state lines. Call to extend Federal control over still more state and local affairs is dubious.

Reports of executives returning from European trips: E. Weir, Nat'l Steel chair., says depression in Europe is of same degree and from same causes as in US, but sees less pessimism abroad, particularly in France and England. "The people of the countries I visited are certainly well fed and clothed and there were no more evidences of distress, either in cities, towns or rural districts than appear in these sections of our own countries." R. Stanley, Int'l Nickel pres., says Germany somewhat more pessimistic than a year ago due to failure of business to maintain improvement shown earlier in the year; France just beginning to feel effects of the depression; situation in England shows no definite trend.

The Montour mine of the Pittsburgh Coal Co., one of the largest in western Pennsylvania, saw 600 striking miners accompanied by about 50 women establish picket lines. Police stood guard along the highways, and there was no disorder. About 100 men entered the mine to go to work while 20 joined the strikers. National miners union organizers claim 7,000 of a normal working force of 30,000 are on strike in this district.

Letter to the editor countering yesterday's letter arguing that repeal of Prohibition would stimulate business. While repeal "might cause a temporary flurry,” it would hurt business of “ice cream, soft drink, candy, and possibly semi-luxury manufacturers." [Note: but would probably stimulate 2AM payphone usage ...]

Kansas City Livestock Exchange protests "hot weather tip" by Federal Public Health Service urging citizens to eat less meat.

The Staten Island ferries in NY City carry three musicians each, usually a violinist, cellist and pianist, to entertain New Yorkers in transit; a hat is passed for "stray nickels and dimes." The right to operate this franchise is awarded by auction; for 1931-32 the winning bid was $20,950. The bootblack concession is even more pricey, going for $29,975 for one year.

The Carlsberg fund of Denmark, established by the founder of the famous breweries in Copenhagen, is considering establishing an international prize for art along the lines of the Nobel prizes.

Point counterpoint department:

Ruth Lois Bell, 16 year old native of Greenville, Miss., wins gold medal in economics essay contest of the Hibernia Bank & Trust of New Orleans. Writing on the depression, she predicts society will learn the need for poise: "Individuals will show their poise and self possession by living calmly, refusing to spread propaganda, buying as usual, cutting expenses, if it is necessary, only on luxuries, and allowing to remain in the bank the money upon which the bank depends for existence. ... By each individual exercising poise and self-control, the community may better do so. Panics and runs will thus be avoided. When each community conducts itself as if nothing were wrong, the feeling will spread throughout the nation and soon nothing will be wrong. Poise will have prevented disaster ... A drowning man, as long as he keeps his head and remains perfectly still, can be supported by a broomstick; but let him become frightened, scream and struggle, and he will drown. So it is with the nation. Almost drowning in a sea of depression and misery, let it but clutch firmly and quietly at the broomstick of poise, and it will be saved ..."

Charles W. Flint, chancellor of Syracuse U., is somewhat less sanguine in his baccalaureate address, ironically delivered in Archbold Gymnasium [named after a Standard Oil trustee]: "If Sovietism in the next 25 years evolves a better system ... it will conquer the world without firing a single shot. If our system survives, it will not be by an exhibition of smug superciliousness but by demonstration of real superiority. We are not proud just at the moment of the way our own system happens to function. In the richest nation in the world, with no scarcity of goods, millions have lacked the necessities of life, not through any fault of their own, but through the freezing of the channels and means of distribution. There seems to be general agreement that something is fundamentally wrong. ... The old laws and theories seem to have broken down. The economic gods no longer answer our cries. ... No longer merely from the demagogue or the Socialist ... comes the summons to recognize social responsibility and even social control of industry and commerce."

Market commentary:

Market wrap: "Wall Street heaved a sigh of relief yesterday" as the most sustained rally in many weeks broke out. Leading shares opened strongly; some unsettlement cropped up at the end of the first hour in individual issues including Anaconda, Radio, and J.I. Case, but major rails and industrials showed strong resistance and led the whole market in a renewed upswing toward noon. Rails set a rapid pace on the upturn, and the rally picked up momentum as the session progressed; short covering was heavy; market closed strongly, reaching day's highs in the final dealings. Bonds showed general improvement as liquidation subsided; US govts. firm; foreign steady to firm; corp. highest-grade steady to firm while lower-grade rails rallied. Commodities mixed; wheat down sharply to new lows in all months with May selling at 56 3/4 cents, lowest price for wheat since 1895; other grains steadier; cotton up sharply on last-hour short covering. Copper sold domestically at record low of 8 cents/pound; buying small. Zinc down to post-1890's low of 3.20 cents.

Conservative observers who have been discussing a possible technical recovery for several days are inclined to wait for the market to "show ability to hold the rally." If a sharp reaction doesn't develop in today's session, they advise clients to pick up leading shares on theory the recovery will continue and allow profit-taking.

Positive factors included a technically oversold position, govt. decision not to continue fighting the Vacuum - Standard Oil of NY merger, reduction of margin requirements from 25% to 20% by leading Wall Street banks, and a positive surprise in the May 23 rail freight report showing an increase of 7,339 cars. Traders were encouraged by the sudden reappearance after several weeks of a number of "confident bull tips on various individual stocks" including Johns-Manville. Vacuum Oil rose 11 1/8 to 34 1/2 as Justice Dept. decision to stop fighting merger with Standard Oil of NY was apparently unexpected by traders. Other oils were up strongly. Terms of the merger are likely to be modified due to change in stock market values. Liquidation in National Dairy and Drug Inc. attributed to special factors rather than poor business.

Recent liquidation has been heavy from both domestic and foreign sources. Part was forced selling by marginal accounts, but the bulk is attributed "to the fright which seized investors who had the stocks paid for and in strong boxes"; brokers report delivering many certificates in individual names.

Letter to the editor from a shipper warning that rail freight rates on basic raw materials is already close to or more than the commodity value; says rate increases should be confined to higher class freight.

Editorial: Justice Dept. decision not to continue fighting Vacuum - Standard Oil of NY merger on antitrust grounds is encouraging to those hoping for "gradual stabilization ... of industry." It suggests officials "are disposed to put contemporary realities above ... legal technicalities born of conditions which no longer exist. ... Today the mere suggestion of a possible 'restraint of trade' ... in oil and its products sounds almost grotesque."

Market students studying previous major bear movements have concluded they lasted an average of 22 months and each consisted of three distinct movements. This is encouraging since the current bear market is in its 22nd month, and has also shown pattern of three distinct downtrends (fall 1929, Dec. 1930, and now).

In spite of the sharp rally there were only 4 new yearly highs and 197 new lows.

Economic news and individual company reports:

Leading banks reduced margin requirements from 25% to 20%; action regarded as significant since 25% requirement has been effective for a number of years; seen as indicating recent decline "has carried quoted values of most stocks to a level justifying a liberal attitude in the matter of bank loans."

Steel production for week ended Monday was about 41% vs. 43% prev. week, 44% two weeks ago, 71% in 1930, and 95% in 1929. Decline in steel seen following seasonal pattern; conservative circles expect it to decline at least to 35% and then to show a "moderate normal" increase in fall, though not reaching level of previous years. Decline is expected to slow in coming weeks. Weekly steel reviews again had little constructive news other than slowness of the decline in output and steady demand and outlook from some sources including construction. However, other important sources of demand are "not doing quite as well," notably automotive. Caution by steel buyers attributed to gloom caused by Wall Street decline. Producers are reportedly more determined to maintain prices, though current price situation is mixed.

Difficulties caused by Austrian banking situation have led to “violent dislocation” in European currencies; marks have weakened while Swiss francs and Dutch guilders have been particularly strong; the dollar has gone to a discount against a number of currencies; sterling is above par vs. the dollar at a new yearly high although futures remain bearish. The Swiss central bank may cut rate to 1 1/2%, matching NY, to avoid importing more gold.

Bank of Spain reportedly studying mobilization of gold reserves; currency quieter after govt. measures but early return to currency stabilization doubtful; “apart from occasional strikes, the country is quiet.”

Cuban cabinet agrees to cut budget from $70M to less than $60M.

Dow Jones estimates US output of cars and trucks in May was 335,112, vs. earlier forecast of 351,000; Ford showed unexpected decline of 22,908 while Chevrolet showed unexpected increase of 4,852. Forecast for June is 289,000.

BLS reports wholesale price index of 550 commodities declined from 74.5 in March to 73.3 in April (1926=100). Retail food prices in 51 US cities declined about 2% in the month ending April 15 and 18% in the year ending Apr. 15.

Farm Board announced wheat stabilization activities ended; this was sooner than expected since it came prior to end of current crop season; Board said it had only committed to support until new crop started moving. Russia announced spring wheat seedings to May 25 were 49M acres vs. 45M in 1930.

US electric output for week ended May 30 was 1,565 GWHr, down 3.8% from 1930, vs. a 4.4% decline prev. week and 3.3% two weeks ago.

New Canadian tariff bill appears to embargo import of Russian goods through provision barring goods of any country not signatory to the Versailles treaty. This would technically bar US goods as well, though authorities said it wouldn't be applied to those. Canadian sellers of US magazines say 90% of magazine stores there will be forced to close due to new Canadian magazine duty of 15 cents/pound.

Argentina denies rumors of exchange controls; says recent request that private bankers cooperate to prevent speculation was aimed at avoiding controls.

Oakland Motor Car production in May was 14,829 vs. 14,188 in Apr. and 11,972 in May 1930; best month since August 1929. Cadillac - La Salle shipments for the first five months of 1931 were 9,572, up 5% from 1930.

City Ice & Fuel stock about 31; earnings in 1930 $4.65/share vs. $4.69 in 1929; annual dividend $3.60.

New book:

Problem of Unemployment, by Paul Douglas and Aaron Director. Attempts to address lack of reliable data relating to the subject by coordinating all information available; suggests methods for alleviating the problem.


The Third Little Show - sketch show with Beatrice Lillie and Ernest Truex, at the Music Box. Not all the sketches have "the advantage of brevity," but show as a whole "has the very great advantage of lightness." Ernest Truex enjoys his best few minutes in "a thoroughly mad prank authored by S. J. Perelman. It is a sketch entitled 'His Wedding Night' in which Mr. Truex is Lord Philbert, a sportsman and gentleman about to renounce the hunt, cricket, golf and night life in favor of matrimony ... estimably ridiculous." Another sketch is "The Traveler," where Mr. Truex, feeling the need for variety, travels to 125th St over the New York Central lines instead of the subway, hiring a Pullman car. Still another is a satire on jungle movies entitled "Africa Shrieks." Miss Lillie received a spontaneous ovation at the opening, progressing from clapping to vocal cheering well into the show; she appeared in 7 or 8 sketches, including 2 "beautifully funny" ones by Noel Coward.


Certain gentlemen "whose interests do not exclude the stock markets" have come up with a new interpretation for those conventional B.C. and A.D. abbreviations used in dates - "Before the Crash," and the eagerly awaited "After the Damage."

Telegram from excited farmer to his sister announcing blessed event: "Twins today. More tomorrow."

'How did Murphy make his money?' 'He was sitting in his old flivver [old, cheap car] one day, wondering where his next meal is coming from, when someone offered him a dollar to move out of the space he was parked in. Before the day was over, he made $6 more the same way.' 'But he couldn't have made his $100,000 that way!' ' Not alone. But he saw the possibilities, and now has 40 men with 40 flivvers working for him.'

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