June 16, 2010

Tuesday, June 16, 1931: Dow 135.26 -1.77 (1.3%)

Assorted historical stuff:

[Note: That's crazy talk! dept.] Sir Basil Blackett, Bank of England dir., sees world faced with partial repudiation of debts. Urges abandonment of gold standard and varying volume of money as needed to keep prices stable. Henry Ford calls present depression a recovery from prosperity founded on stock speculation; sees annulment of German war debts by next generation. L. Zimmerman, head of Zimmerman & Forshay bank, urges concerted action by US and allies to cancel or at least substantially reduce German reparations. Chancellor Breuning's Catholic Party advocates reparations revision plan as “only means of saving Germany and other European nations from revolutionary upheaval and untold misery.”

Asst. Commerce Sec. J. Klein hits “utterly false notion that we have not played fair in money matters with other nations of the world.” French Foreign Min. Briand asks League of Nations to discuss unsatisfactory German execution of the Versailles treaty, particularly with regard to military matters.

Editorial: “A 7 per cent rediscount rate at Berlin means that Germany is fighting with her back to the wall”; at stake is not just the reparations situation but threatened “withdrawal of foreign liquid capital without which her industry and commerce could hardly carry on.” Normally, higher rates might lead to resumed long-term loans, but as the German govt. pointed out they've already gone to the limit of safety in borrowing to meet reparations. Germany is likely close to conditions that allow her to postpone reparations under the Young Plan; unfortunately even that moratorium offers too little relief to help with the near-term emergency.

Editorial by T. Woodlock: Unemployment this winter is almost certain to be even worse than last year. Experience then made clear that private charity, while generous, will be inadequate; govt. funds will be needed, “to a considerable extent”; much may have to come from Federal sources due to “orgy of borrowing and spending in which so many states and cities have engaged”, leaving finances “approaching an unsound position.” The existing private and public agencies should be coordinated under “unified command” to avoid waste, though this should be done with “extreme tact and discretion.” Much legislation of doubtful soundness is likely to be considered; it's time for business leaders to consider solutions in form of some type of unemployment reserves on a national scale, rather than labelling and dismissing such schemes; unemployment problem is likely to be a long-term one, caused by both business cycles and automation.

Ford Motor refutes charges of indifference to workers' welfare; says welfare work by Ford started in Jan. 1930, 6 months before unemployment appeared in the industry, and thousands of visits have been made to check on condition of workers' families; visits resulted in medical and other aid, mostly jobs. Cites Henry Ford Hospital, with expenses borne by Ford family. Checked list of 3,960 men provided by Detroit Welfare Dept. who claimed Ford as last place of employment for over 6 months; found 1,315 never worked there, 324 were still working there, over 300 had left voluntarily, and 164 had been fired for cause.

US govt. submits report on military strength to League of Nations, which in Jan. asked all countries to make such reports to prepare for disarmament conference in Feb. So far only other govt. to comply is Russia. Land forces were 139,957 officers and men; defense spending in year ended June 1930 was $835.8M; Army had 965 fighting planes, 550 trainers and 49 transports; Navy 787 planes, 18 battleships, 3 airplane carriers, 15 cruisers, 227 post-war destroyers, and 90 submarines.

US Weather Bureau reports another drought prevails this year in a large part of the Northwest, including Idaho, Oregon, western half of the Dakotas, and parts of Montana and Washington; drought appeared earlier than the one last year; winter wheat crop almost all gone in Oregon and Washington; spring wheat in poorest condition on record. Farmers in parts of Montana have applied to the Agriculture Dept. for drought loans, but appropriations for that purpose have expired.

League for Independent Political Action, headed by John Dewey, files protest with the ICC against 15% rate increase, on grounds rails are generally owned by wealthy people who "have not been seriously affected by the economic depression" while a rate hike would "plunge the farmers and consumers deeper into distress."

China builds first “automobile truck” using “parts largely imported from the US and the expert advice of American automobile engineers.” Truck was made in plant at Mukden, which will now turn out 15 trucks a month; some parts will be made in the factory.

Thomas Edison ends 48th annual Florida vacation with announcement he has successfully vulcanized rubber made from goldenrod; will soon construct large scale factory and plant 1,000 acres on Henry Ford's plantation near Savannah, Ga.; plans to donate project to govt. for emergency wartime supply.

Internal Revenue Bureau reportedly refuses $4M offer for settlement of Al Capone tax case, wanting to carry case to jail sentence.

Pennsylvania Gov Pinchot calls conference of United Mine Workers and Pittsburgh Terminal Coal Corp. for Thursday.

British Labor govt. suffers surprise defeat on land tax as Conservative amendment is approved by House of Commons; exempts estates based on agricultural value even if not used for farming; PM MacDonald said govt. would accept the amendment, preventing immediate crisis. "The vote indicated a well-planned tactical maneuver by the Conservatives to muster their supporters at an hour when the Labor and Liberal attendance is normally low." Labor government has been defeated frequently since taking office 2 years ago, but MacDonald has always decided issues weren't important enough to bring down the govt., leading Winston Churchill to refer to him earlier this year as “the boneless wonder.”

W. Glover of the Post Office says radio is cutting deeply into mail revenue by reducing volume of mail advertising.

The Oberammergau Passion Play of 1930 has ended its run. Gross receipts were about $1.250M and profit about $500,000. There were 1,156 people paid, with leading actors getting $250 and young walk-ons $10-$15. his covered 79 performances and months of rehearsal; the musical part alone was rehearsed 300 times before the first performance.

The first Protestant church in the world, the Schlosskirche in Prussia, built in 1544 under Martin Luther's direction, is to be restored as a memorial.

An English rubber Company tests boots and shoes by employing two girls to walk around in them. In the 4 years they've been employed, they have walked 12,000 miles, or an average of 12 miles per workday; the exercise is said to have given them perfect health.

The "tonic properties of ... healing springs may be made available right in your own office." A US company has invented a practical way of capturing and using "the emanations of radium, that most valuable possession of the famous thermal springs of Europe and which is so efficacious as a treatment in the ills of mankind. This precious quality has been translated into gaseous form ... and rendered easily applicable to ordinary drinking water. The consoling idea of radioactivity, at least in the water cooler, might offer some little stimulation to the trader long bored by a sluggish market."

Market commentary:

Market wrap: Stocks opened the week moving higher on quiet trading, but became irregular again as the morning progressed, with mixed movements in individual issues; trading was in a narrow range at midday but picked up activity on the downside in early afternoon after several more Midwestern bank failures; Steel and other major industrials suffered setbacks, and extensive profit-taking came into the rails. However, support appeared on the decline, and late trading was again in a limited range. Bond market featured broad and strong rally in foreign issues, led by German; US govts. slightly irregular; domestic corp. issues moved in a narrow range but ended mostly higher, with notable improvement in various second-grade issues. Commodities soft; grains off moderately; cotton little changed. Copper still at 8 - 8 1/4 cents with little metal changing hands.

Observers see market under professional control, likely to "continue irregular within its recent range." Advise against adopting the short side, favor buying gradually on reactions, protecting accounts with stop-loss orders.

Coca Cola has been subject of "important buying" on reports of well-timed large purchase of sugar at around the low price.

NYSE volume for Monday was 1.3M shares, lowest since Feb. 2.

Market last week demonstrated encouraging ability to ignore unfavorable news; several news items which would have previously "upset the list" didn't cause any heavy liquidation. Observers closely watching for any resumption of public selling, which may indicate a renewed downtrend. Indications are that the relatively small group of operators working to advance the market has attracted a following among NYSE floor traders; they're now believed working to encourage the public to join in. "If they are able to build up an outside [public] demand, it would go a long way toward establishing higher prices for many of the standard shares."

Market observers are watching the current rally closely since it has lasted about 10 days, or about the same as the technical rally starting in late April that gave way to a renewed bear movement. It's believed "ability of the rising trend to carry on for several days more would strengthen indications of a definite turn in the main trend of prices." An important point in favor of the current rally is that it's been led by the rails; last time, rails failed to confirm the upturn in the industrials which, as throughout this bear market, indicated a renewed downtrend. "This greater vigor on part of the carrier shares has been the most stimulating influence that bullish sentiment has enjoyed a long time." Rails should continue to be well-supported on prospects of a freight rate increase.

R.W. Pressprich & Co. point out that "in the past 10 years no reaction of any consequence ... has started between June 24 and Sept. 10"; the industrial averages showed a gain between those two dates in all 10 years, even though this includes the bear market years of 1921 and 1930.

It's unlikely any new managed investment trusts [similar to mutual funds] will be launched until the market turns. However, plans have been made for new types of trust to be launched when possible. One new feature would be greater assurance of dividend payments, since income is now almost essential for most investors. Also being considered are formulas that would force trusts to shift money from stocks to bonds when prices rise “so that the end of the bull market will not find them loaded up with common stocks”; “it is hoped that some method may be worked out by which they will be forced ... to take profits near the height of a bull market.”

C. Hanch, Nat'l Assoc. of Finance Cos. GM, sees potential US demand for over 5M cars because of obsolete models now in use; "practically all the cars manufactured prior to 1927 are obsolete and many of them should go to the junkyard"; there are 5.126M cars made before 1925 now in use.

Economic news and individual company reports:

Gold continues to pour into the US; June imports have been running at annual rate of $1.8B. Influx seen likely to keep “credit rates in this country at abnormally low levels for a long period.” Austrian discount rate raised from 6% to 7 1/2%. Hungarian discount rate raised from 5 1/2% to 7%. Berlin stocks continued Saturday's rally on Monday. Marks were steady. German trade balance continued to improve in May thanks to lower imports; surplus was 162M marks ($38.6M) vs. 126M in Apr. German Fin. Min. Dietrich says reparations burden has forced govt. to drastically curtail imports, including wheat and crude oil.

West Palm Beach bondholders committee representing holders of over $5M in bonds rejects settlement proposed by the city.

A large number of industrial bonds trading on the Curb Exchange [later Amex; small cos.] now yield between 10% and 25%.

Several small to medium size banks in Illinois, Indiana, and Michigan closed; largest was Pontiac Commercial & Savings Bank with $16M deposits.

Bank of US trial likely to go to jury Wednesday or Thursday.

US Steel makes first move to reduce salary expenses by ordering cuts in clerical forces.

The cigarette industry, which already yields the Federal govt about four times as much income as cigarette manufacturers get, has increasingly been looked to by states in recent years for additional tax revenue; 12 states now tax them, though the most populous states have so far rejected cigarette taxes. Where it has been possible to track sales volume, no effect on sales is yet visible from the state taxes.

Rails to file 15% rate increase petition with ICC tomorrow; will ask for increase effective Sept. 1; will say wage cuts a last resort, may be impractical due to time required and possibility of labor trouble; only asking to be assured earnings at 1930 level, which would cover fixed charges by the 150% margin needed to maintain their credit. ICC issues supplement to recent oil report allowing railroads to lower freight rates on oil to meet truck and pipeline competition.

Automotive shipments to overseas markets in April were $19.427M vs. $37.444M in 1930.

Copper "producers would like to curtail ... but they do not know what their workers would do with so many men idle and hunting work as none but married man and men with dependents are being held on the payrolls. These men are working only part time at wages that make it barely possible to support their families."

Crude oil production somewhat lower in California and East Texas.

Editorial: Based on cotton consumption for 10 months ended May, carryover of cotton into the new season will be over 6M bales, up from 4.5M a year ago and 2.3M two years ago and most since the postwar deflation in 1920-21. Welfare of the cotton industry requires stimulating foreign demand rather than discouraging it.

Canadian Nat'l Rwy. says purchases of Canadian coal under govt. pressure are costly; paying $4.31/ton vs. $2.34 for US rails. Eight-year deficit of the railway was $111.3M, not including interest on govt. advances.

Russian cotton sowings for 1931 are estimated at 6.2M acres, up 61% from last year.

US citrus crop this season estimated at record high of 170,000 railcars, up 58% from 1930.

State Dept. estimates 156,715 new and renewed passports will be issued by June 30, over 50,000 below last year and the first sharp decline in eight years.

Boston sells $5M 111-day tax- anticipation notes at 1.09% yield, a record low rate for the city.

About 18,000 men are employed on 285 NY State highway projects or in maintenance force, largest total ever.

BMT and IRT refuse to appear before NY City Transit Commission regarding revised Untermeyer unification plan; situation now confused.

IT&T stock has been strong in recent weeks; rumors include option to buy the L.M. Ericsson Telephone Co. of Sweden from Kreuger & Toll; IT&T officials refuse to confirm or deny negotiations. Ivar Kreuger arrived in the US about 10 days ago and is still here. Ericsson is one of the world's leading telephone manufacturers and the pioneer for the industry in Europe.

American Chicle (chewing gum) sales are running slightly behind last year, but earnings remain higher.

Companies reporting decent earnings: American Chicle, Abbott Laboratories.


Transgression - RKO-Radio film, at the Mayfair. Ricardo Cortez "has hung up a record for at least one kind of motion picture activity." In the past week, he's been viewable in Big Business Girl playing an employer and lover; in The Maltese Falcon as a shrewd detective-lover; in White Shoulders as confidence man and lover; and now, in Transgression, as a nobly born Spanish lover. The film, however, is "another unimaginative version of the familiar triangle." Robert Maury leaves ancestral English country home for year in India on mining business, arranging for wife Elsie to spend the year in Paris. She runs into the busy Mr. Cortez as Arturo, who "tampers with Elsie's emotions and lures her to his Spanish castle"; after Paris has turned Elsie into a "sophisticated, well-garbed and more emotionally responsive woman of the world," her formerly neglectful husband finally wins her back.


Jenkins - I say, you've got a tremendous lot of luggage. Brown - Yes, but all but two of the trunks are empty. You see, we always manage to lose one full of things, but we hope it will be an empty one this time.

'Have you made every conceivable effort to collect this account? Isn't there anything we can do?' 'Well, sir, what about buying him an Irish sweepstakes ticket and hopin' for him to win?'”

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