July 28, 2010

Tuesday, July 28, 1931: Dow 139.64 +1.40 (1.0%)

Assorted historical stuff:

In the first statement from the Administration that acknowledged wage cuts might be needed due to the prolonged depression, Commerce Sec. Lamont said many corporations without strong reserves now are in the difficult position of having to cut dividends, salaries and wages. In letter declining Presidential intervention in Rhode Island textile strike, Lamont noted "marvelous" success of 1929 conference in maintaining wages up to now in spite of the fact that, contrary to Washington belief, industries had made no binding commitments to do so. He went on to say "no one could have done more to maintain wage rates" than Pres. Hoover, and expressed great regret that corporations are now compelled to cut wages, "but I do not believe it is the duty of the govt. to interfere ... neither do I think such interference would be effective." A govt. economist noted that, even if general wage cuts were now approved by the govt., judging by past depressions the reduction in wages wouldn't approach that in living costs.

Henry Ford says most important factors to economic recovery are working and thinking. When asked about possibility of upturn in spring or sooner, replied neither he nor anyone else knew anything about that. Condemned speculation, saying it led to inflation and subsequent depression. Admitted factory at Dearborn was operating about 50%, but declined to say if this was an increase or decrease over previous months.

Editorial by T. Woodlock agreeing with a reader's interesting suggestion that German debts be adjusted for prices (downward if price deflation occurs, upward if inflation does); if this isn't done "and prices continue to fall, a fresh 'crisis' infallibly will arrive. 'Fair' or 'unfair,' that is the inescapable logic of the facts. The 'price-equation' is at the bottom of the entire trouble of the world's finance. A change in that equation has 'frozen' a great mass of bank-credit in all countries and generated in it a large loss ... The all-important thing is to hold the banking structure intact while that loss is being distributed."

Revolt reported in Chile; deposed President Carlos Ibanez, "his strong rule ... broken by a popular uprising," left the country. The US ambassador said there were large crowds in the streets but no particular disorders and that no US citizens or interests had been harmed. The president of the Senate was reportedly acting as President of Chile. Banks were closed from July 27-30 and "a four-day moratorium on commerce effected."

Brazilian govt. reportedly agreed to all recommendations for stabilizing their finances made by Sir Otto Niemeyer of the Bank of England; this was seen likely to "exert a steadying influence" on the country's outstanding securities.

Editorial noting threat from the "militant Attorney General" of Texas to put the San Antonio Public Service Co. into bankruptcy for the offense of selling appliances including "bottle warmers and ... washing machines to unsuspecting females." Judging by a call from the editor of the Texas Weekly for a more business-friendly environment in Texas, "Attorney General Allred will not be wholly without honor in his own country if he calls off his receivers and allows the San Antonio company to surrender its curling irons but to keep its charter and business."

Yet another Farm Board editorial, this one rather humorously calling on the Board to join the Native Americans in Saskatchewan who recently successfully held a rain dance. "The Farm Board was organized ... to give agricultural 'relief'; what greater relief could it give than rain in those parched areas? ... All other means ... have failed, some even were proven failures before the Board tried them, but the rain dance remains officially untried. Why doubt its efficacy? From the land of the Sioux and the Saskatchewans down to the Southwest, where the Hopi ... rake up a few bushels of rattle snakes to add fervor to the ceremony, the rain dance has been held" for time immemorial. "If it did not produce results, how could it have survived through all the centuries?"

Since flying has become commonplace in recent years, weather services have started reporting visibility. This is recorded on a scale of 1 (objects invisible at distance of 1/8 mile, reported as "no visibility") to 10 (objects visible at 10 miles, "unlimited visibility").

The New Yorker Hotel reports that during an 8-month period it found over $20,000 in cash in the pockets of 125,000 guest trousers delivered to the valet shop.

First winter fashion openings in Paris indicate big woolen season; all houses so far feature "thick wool dresses and thicker wool coats."

The miniature golf craze that swept the country last year has given way to two new fads - the golf driving range and the archery target range.

Architects of recent skyscrapers have borrowed the ensemble idea from fashion designers, "to the extent that the modern skyscraper, from jutting gargoyles to telephone booths, is a unit in appearance." One of the newest buildings carries this to an extreme. In a reception room sits an efficient-looking gentleman answering the telephone; when he leans back in his swivel chair, a replica of the building is clearly visible on his socks.

Market commentary:

Market wrap: Stock trading continued "lethargic" trend of last week. Opening was lower, but the general list firmed gradually through most of the session, ending at the day's best levels. However, some leading rails fell and Auburn Automobile plunged over 10 points. Bond trading very quiet, with price trends mixed. Foreign list featured sharp movements in some S. American issues; Chilean bonds fell on reports of revolt while Argentine issues firmed. Trading in German issues was light, with price changes mixed. Domestic issues generally steady, with price changes fractional. Commodities steadied after early declines; corn ended higher while wheat, other grains and cotton finished moderately lower. Copper continued at 7 3/4 - 8 cents with buying small; consumers are covered for the next 4 - 5 months and appear to be waiting for clearer business picture before buying; production continues higher than consumption and current record low price may not hold. Silver up 1/2 cent to 27 7/8.

NYSE volume of 600,000 was lowest since Oct. 1924.

Some heartening signs of improvement seen in several industries including textiles (particularly wool), sugar, and oil; stocks in these lines have drawn buying.

American Woolen preferred was up sharply based on improvement in the wool markets and reports "Paris has decreed woolen clothing for women this fall and winter, even to evening wraps and hats"; even more encouragingly, "the trend in garments is toward longer and fuller dresses." Coca-Cola has been doing better recently; sales in June were particularly good due to hot weather, though sales in earlier months were probably slightly behind 1930; Q2 net expected to show gain over 1930. Allied Chemical fell on reported failure of talks to reconstitute nitrate cartel. Loose-Wiles, "the country's second-largest cracker concern, is making a good showing in this uncertain year." Chrysler has almost doubled from its 1931 low of 12 1/2 on optimism regarding its new line of low-priced Plymouth cars. Nat'l Steel likely only major steel co. to cover dividend in first half, thanks to strategic plant locations, diversified output and decentralized organization.

"The rank and file of the Street" are largely standing aside from trading; some seem disposed to await market reaction to the US Steel dividend decision.

A favorable factor for market sentiment has been better than expected Q2 earnings reports; a group of leading companies in basic industries generally showed improvement in earnings from Q1. Also encouraging was a “rather unusual turn for the better during the week ended July 18.”

While some Q2 earnings reports have been better than the bears anticipated, statisticians are carefully examining reports of some companies that show dividends "earned" through dubious tactics such as cutting allowances for depreciation.

J. Post, Nat'l Sugar Refining pres., says Chadbourne sugar plan has been successful so far; expects recent rise in sugar prices to hold. Russia seen likely to join Chadbourne sugar stabilization plan.

Harvard Economic Society sees slight upturn in commodity prices during July, following decline of over 28% since July 1929; expects upturn in BLS commodity index this month; this rise comes "at a time when business volumes have given evidences of recovery." Also sees possible positive in moratorium on intergovt. debts; if this relieves pressure on foreign currencies, "stabilization of commodity prices would be almost assured."

Inventories are generally "at a low ebb. The whole country is largely on a hand-to-mouth basis, and only necessary replacements are being made. This has created a healthy trade situation, although a very dull one." While this dullness may continue for some time, "sooner or later there is going to be some active buying."

Asst. Commerce Sec. Klein says US now witnessing last stages of the depression; low point in business reached last spring.

R. Stephenson, Amer. Bankers' Assoc. pres., says business conditions present most optimistic outlook since 1929 market crash; settlement of European debt problem will help world trade; transportation to be regulated; increased freight car loadings a sure index of returning prosperity; “gloom” atmosphere of New York, which has radiated to rest of the country, is being dispelled by improved employment conditions.

Germany special:

Considerable interest aroused by reports from Paris that Bank of France together with leading French banks were arranging 20M pound loan to Bank of England to support sterling. Prolonged conversations reported between Bank of England dir. R. Kindersley and Bank of France Gov. C. Moret. Montagu Norman, Bank of England pres., has apparently withdrawn his previously consistent opposition to aid from Bank of France as result of current conditions. NY bankers are split on whether the loan is needed, since gold drain appears to be ending. British gold losses eased to 1.9M pounds sterling, bringing holdings to about 135.7M; slowdown in losses improved sentiment; foreign exchange circles believe gold losses are gradually ending and danger of Bank of England being forced to raise rate to 5% has passed. French bankers are concerned that accumulation of gold in France may lead to inflation; on basis of current gold holdings, currency in circulation could be doubled.

Heavy British gold losses attributed first to German banks unable to export money to settle obligations drawing down balances in London, and then to scare in which French private banks withdrew balances, reportedly becoming nervous after warning by Sir Arthur Henderson that a moratorium at Berlin would be followed by one at London; “it is understood that the Bank of France did not sell a single pound ... and urged that the private banks cease withdrawing funds from London.”

Restriction on bank payments within Germany will reportedly be lifted Wed., making monetary movement within the country completely free; restrictions on foreign currency movements will remain at least until extension of foreign short-term credits is negotiated. Reichsbank officials not concerned with likely large increase in currency circulation causing price inflation since currency will largely be hoarded rather than used; believe further increase in discount rate (now 10%) not needed; private banks now charging average of 15% on loans. A German acceptance bank has been formed with combined capital of 200M marks from the Reichsbank and private banks; it will stand ready to buy acceptances (bills) from any bank in difficulties, since it's recognized closing of another large bank would have “dire consequences for the entire banking structure.”

Economic news and individual company reports:

Fed. Reserve reports industrial production fell more than seasonally in June; factory employment fell 3% and payrolls 6% between mid-May and mid-June; wholesale prices, which fell until the end of May, rose during June but mostly declined again in first half of July; textiles and shoes continued to be bright spots.

Texas House oil industry investigation hears testimony from W. Farish, Humble Oil pres.; says Humble is currently losing $500,000/month; believes Texas 50% oversupplied with pipelines; wouldn't object to law requiring certificates of necessity to drill a new oil well or build a pipeline; favors modifying antitrust law to allow unit (cooperative) operation. Sinclair Oil raised buying price to 50 cents/barrel for Oklahoma-Kansas crude. Gasoline in Chicago wholesale market firmed to 3 - 3 1/8 cents/gallon

West Palm Beach city commission invites bondholders committee to further discussions. Coral Gables Citizens advisory committee approves plan of settlement reached by city commission with bondholders committee.

NY City net funded debt as of March 1 was $1.658B, or 8% of assessed real estate value; city is $321M below debt limit.

Commerce Dept. reports June factory sales of automobiles in the US 249,462 vs. 315,115 in May and 334,506 in June 1930; half 1.568M vs. 2.199M.

Rail union executives are meeting in Washington to discuss labor problems; unions are expected to support the 15% rail rate increase.

Complete strike against Paterson, NJ silk industry involving 20,000 workers believed possible this week.

Nitrate conference in Brussels ended without agreement on reconstituting a cartel.

Foreign govt. and corp. financing in the US during the first half was $574M vs. $839M in 1930, $720M in 1929, and $1.479B in 1928; so far this year there have been no European securities offered and over 90% of the total was Canadian.

Newfoundland received $10M loan through Montreal interests, running for 35 years at 5%. "Miss Jeanette M. Lewis," who arranged the loan, is involved in numerous mines in Quebec, Ontario, Newfoundland and Samoa; she achieved her first business success by convincing the Canadian Northern Rwys. of the feasability of a tunnel under Mount Royal. NY and British capitalists are reportedly ready to negotiate loans up to $100M for development of Newfoundland.

Mexico adopts law making "gold peso no longer ... usable for circulation"; foreign currency loans payable in Mexican silver coins; no restriction on import or export of gold coins; Bank of Mexico becomes central bank with powers similar to Fed. Reserve of the US. Mexico City Chamber of Commerce petitioned govt. for measures to alleviate the depression, including: substantial increase in import duties; Federal govt. ending imports of goods that can be made in Mexico; "ceasing parcelling out lands to peasants and affording guarantees to large and small rural proprietors"; and a more evenhanded govt. policy between industry and labor to replace "a bias in favor of the workman." Govt. newspaper characterized suggestions as reactionary.

French June imports were 3.194B francs and exports 2.513B, vs. 3.440B and 3.377B in 1930. For the first half, imports were 23.202B and exports 16.235B vs. 26.832B and 22.628B in 1930.

Latest British trade reports "extremely dismal"; unemployment up to 2.643M; Federation of British Industries watching for German dumping of inventories.

Canadian foreign trade in June was "exceptionally light" at $107.8M, largely due to lower commodity prices; this was down 37% from 1930, while trade in the three months ended June 30 was down 31%. Early returns from Canadian govt. sources indicate entrance of US tourists has reached record proportions so far this year; a larger percentage of long-stay permits is being issued.

Argentine imports fell over 25% in the first half vs. 1930, resulting in trade surplus of $28M.

Republican Senate leader Watson says party opposes any tinkering with tariff in next Congress; content with revision by Tariff Commission.

US Shipping Board reports Baltimore was second to NY in volume of foreign shipping during 1930, outstripping New Orleans for second time in history.

NY State motor fuel tax netted over $30M for fiscal year ended June 30, up about $5.3M from prev. year.

Earnings reports: J.C. Penney half $1.46 vs. $1.14. Peoples Drug Stores half $1.37 vs. $1.17. Bangor & Aroostook RR half $4.56 vs. $8.31. Virginian Rwy. half $1.44 vs. $3.95. General Refractories Q2 $.12/share vs. $2.07; half $1.02 vs. $4.60. Consol. Chemical Indus. Q2 $.43/share vs. $.66; half $.84 vs. $1.12. Congress Cigar Q2 $.37/share vs. $1.11; half $1.00 vs. $1.87.

Companies reporting decent earnings: J.C. Penney, Peoples Drug Stores, National Distillers (medicinal whiskey).

Upcoming movies:

RKO - Law of the Night, a story of New York night courts. Warner Bros. - Larceny Lane, with James Cagney and Joan Blondell; The Road to Singapore, with William Powell; Five Star Final, with Edward G. Robinson; The Mad Genius, with John Barrymore. Elstree Studois - Alfred Hitchcock's Rich and Strange. Paramount - "picturization" of Dreiser's American Tragedy "is being withheld from showing pending important developments in the author's suit against Paramount, claiming the producers have turned his novel into a 'Hollywood version of a murder.' Sylvia Sidney is being replaced by Peggy Shannon in Working Girl, in order that she may start work at once on Ladies of the Big House.


Mistress - Why did you leave your last place? Prospective Maid - They were too highbrow for me. They were always fighting and fussing, and I had to spend all day running from the keyhole to the dictionary.

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