August 21, 2010

Friday, August 21, 1931: Dow 141.93 +0.21 (0.1%)

Assorted historical stuff:

Yet another editorial by T. Woodlock arguing "root of the present world depression is political" [meaning European tensions persisting from the war] and reparations and war debts must be adjusted permanently. It's shocking that even at this stage, France threatened to withdraw from the bankers' conference at Basel if reparations were discussed. "When did it happen before that in face of absolute unanimity of the world's bankers, economists and financiers, on so important a matter as that of German reparations and world debts, the world's statesmen were either flatly determined ... that it should not even be discussed [France] or unwilling ... to force its discussion [US]. ... And the bankers, who of all men best know what the end will be, are compelled to patch ... a cancer with no hope beyond that of averting an immediately fatal result - not only that but they are obliged to ... choose their words as to do no more than vaguely hint at what everyone knows." [Note: There seems to have been a sharp difference here between banking and popular opinion. Good thing that hasn't happened again.] Editorial along similar lines, this one concentrating fire on the “invincible ignorance” of US politicians opposing reduction of reparations or debts.

Washington report: W. Gifford, appointed by Pres. Hoover to direct unemployment relief this winter, will meet with the pres. this weekend at his Rapidan Camp [predecessor to Camp David, now open to the public.] F. Croxton, who has headed the President's emergency employment committee since A. Woods left, will assist Gifford. "Statements from ... political opponents of the administration that the relief needs of the country for next winter are being underestimated are not supported in any way by talks with officials who are handling this particular problem. There is no disposition to gloss over or minimize conditions ... likely to be faced with the coming of cold weather." After extensive study, it's been decided that local resources, properly organized, "can be made ample to care for the situation" and "Federal aid should not be generally necessary." Problem in most cases seen as "failure adequately to organize for collections and expenditure of relief funds," although some "one- industry towns" and agricultural areas may require aid from outside. It's hoped that effective functioning of local relief agencies may prevent Congress from enacting extensive Federal aid when it next meets in December. Pres. Hoover seen almost certain to be the Republican candidate in 1932 in spite of intermittent discussion of drafting Coolidge. While Coolidge remains a popular favorite, he appears to have no desire to run again, and in any case there would be practical obstacles to his doing so. "The situation seems to be that the Republican party must stand or fall with Mr. Hoover in 1932. Candidly many leaders are not sanguine of success, particularly if there is not considerable improvement in economic conditions. However, they recognize the futility of failing to back their own administration while asking four years more of power."

Gov. Roosevelt, stressing dark outlook for coming winter,” says close cooperation among govt. branches needed for industrial recovery.

Relief fund committee chair. E. Ryerson estimates Chicago and Cook County will need $8.8M to take care of destitute families this winter, 76% over last year; Samuel Insull, Jr. is chairman of the campaign to raise funds to be distributed through charity offices.

Further veterans relief legislation “looms” at the upcoming Congressional session in Dec.; possible proposals include compensation for dependents of hospitalized veterans, pensions for their widows and orphans, and lower interest rates on bonus certificate loans.

High Soviet official, with harvest well along, predicts Russian grain crop this year will exceed last year's bumper crop. General previous impression had been that crop would be somewhat smaller due to summer drought.

Labor Dept. has begun inquiry into conditions in W. Virginia coal fields where 6,000 miners are on strike; results will be given to Pres. Hoover within two weeks, along with report on outlook for general industry conference, favored by labor but opposed by many mine operators.

Census Bureau reports number of radio sets in the US far below estimates; total sets as of Jan. 1930 only about 10M vs. industry estimates of 15M. Census Bureau reports US rural population fell to 43.8% of the total in 1930 vs. 48.6% in 1920.

There are 1,196 brands of ginger ale in the US, but only four with nationwide distribution. One of the four is made by a “St. Louis concern” that before Prohibition was one of the world's largest breweries, with output of over 1M bottles of beer daily. Thanks to diversification into ginger ale and many other articles including marine diesel engines, it now has revenue as large as the days when beer was its main product.

Despite rapid growth in popularity of US magazines, Japan probably leads world in output of children's magazines. In Tokio alone there are 20 monthly children's magazines, some with a circulation of 200,000 copies; the largest has about 300 pages, printed in four colors.

The French govt. has made Louis Mathurin a knight of the Legion of Honor. He recently retired after 41 years as switchman at the St. Nazaire railway station. In that time, the lives of about 594M passengers were in his hands; no serious accidents occured. [Note: I once babysat a cousin, returning her with only a minor concussion.]

Market commentary:

Market wrap: Stocks opened strongly after reports of seasonal steel improvement but then turned sluggish, fluctuating listlessly in a narrow range for the last four hours. Corporate bonds mixed; second-grade rails continued decline but high-grade rails rose; industrials and utilities fell. The Dow average of second-grade rail bonds has declined 7.31 points to 88.29 in the period since July 13. Oil bonds rose sharply on merger news. S. American issues suffered heavy liquidation; Colombian issues weak in spite of reports govt. had declared against moratorium. Grains rose after Farm Board statement of willingness to negotiate with China for wheat sale; cotton also higher.

Persistent bond market weakness attributed to liquidation by banks in difficulty; steady decline in bond prices therefore hasn't caused "the concern that would result if the reason ... was not so readily apparent."

Stocks continued encouraging pattern of dullness on reactions. Public buying in the market remained at a minimum.

While the forced oil-well shutdowns in Texas and Oklahoma have stimulated some buying in oil shares, many observers are concerned about future "efforts by states to control business actions in other directions in the future."

Opinion on whether rails will get a freight rate increase is split, with some observers now more encouraged they will get at least part of the requested 15% increase but others less confident on the prospect of early relief.

Early estimate of July output of 221,000 cars and trucks in the US and Canada drew concern since it's an 18.5% decline from June vs. the usual seasonal 12% drop. Many economists now predict that due to unemployment in fall and winter, car output will be much smaller than predicted earlier in the year.

Tobacco shares fell on reports of lower July production vs. 1930, though July 1930 output was abnormally heavy. Automotive equipment cos. in the Chicago area did relatively well in the first half, covering dividends by a good margin, though a few reduced their dividends; some smaller cos. even reported income higher than 1930; cos. were helped by replacement demand and development of new parts and accessories. Coca-Cola stock has been well-supported over the past few months; earnings so far this year have continued the streak of 7 straight years of increases. The co. has benefitted from lower sugar prices, but success is mainly attributed to stable sales and aggressive merchandising steps in the past year (advertising budget is $1M higher than in recent years).

Economic news and individual company reports:

Toledo banks are reportedly helping businesses so they can remain open and give credit to customers; it's pointed out that no commercial failures were reported since the four big banks failures last Monday. However, plans to release part of deposits to small depositors have fallen through. Union Savings & Trust of Warren, Ohio closed after 120 years in business; deposits $2.3M.

Southwestern farms are holding onto their bumper wheat crop to an extraordinary extent due to low prices; almost no wheat is now being sold, and it's estimated farm wheat holdings are as large as the entire 1930 crop. "Farmers' bins are loaded and immense quantities are piled on the ground. ... Country bankers are exerting almost no pressure for sale as current prices would not enable farmers to pay notes"; bankers, along with farmers prefer to delay selling in hope of price increase. Cash wheat premium over futures has advanced to 7 - 8 cents/bushel. Farm Board chair. Stone says willing to negotiate with Chinese govt. on wheat sales. Editorial favoring Farm Board sale to China on whatever terms can be obtained. “Of far greater importance than the possible loss of a part of the price of the wheat is the value to us of China. Not the war-torn bandit-infested China of today, but the China of tomorrow. Give that country a stable government” and a chance to develop, “and it would be one of the greatest markets that the world could offer to us.”

Refiners in Oklahoma are “faced with a rapidly approaching oil famine” and are reportedly “seriously considering a drastic upward trend in prices,” though as yet there have been no major price increases due to the shutdowns. Chicago wholesale gasoline market is at 5 - 5 1/4 cents/gallon but with little available. Kansas oil producers are considering shutdowns to cooperate with Texas and Oklahoma. Rise of 25 - 30 cents/barrel in midcontinent oil prices expected shortly. Five independent oil cos. (Sinclair, Prairie Oil, Prairie Pipe Line, Tidewater and Rio Grande) consider merger into large co. to be named Commonwealth Oil; would have over $1B in assets, largest pipeline system in world, and distribution in every state and many foreign countries.

Money in circulation Aug. 19 was up $62M to $4.952B, total Reserve Bank credit outstanding up $36M to $1.141B. Member banks in NY City report brokers' and non-brokers loans both reversed trend; brokers' loans were up $14M to $1.343B, while loans on securities to non-brokers were down $25M to $1.672B.

British inter-party conferences on solving budget crisis and closing $600M deficit continue; govt. is reportedly considering general 10% import tariff as revenue-raising measure.

Foreign currency market quiet; pesetas advanced on stabilization rumors. Bank of England lost no gold, and currency circulation is decreasing as is normal seasonally. Bank of France continues converting maturing bills to cash.

Chilean govt. orders complete moratorium on foreign debts for rest of the year.

More sentiment seen for worldwide curtailment of rubber production after recent record low prices below 5 cents/pound.

Representatives of Montgomery Ward and Sears have reportedly met to discuss a merger; no definite decisions yet reached.

Companies reporting decent earnings: Connecticut Electric Service.


The Last Flight - First National film, at the NY and Brooklyn Strands. "Curious" film about "psychological maladjustments of a group of ex-aviators and a girl" also apparently affected by "the ravages of war." The men have "been through hell and choose to forget by remaining in Paris in a more or less uninterrupted state of intoxication, rather than return to America to face ways of living that no longer have any meaning for them." They encounter the girl in a Paris cafe and "become intrigued by her odd sense of humor"; she becomes their constant companion, though the audience never finds out "how she came to her present state of disillusionment." Problems of the characters are "arbitrarily solved" by killing one in a bullfight, having two shot in a gunfight and another fleeing to avoid the police. This leaves Nikki and Gary to find what looks like mutual happiness. [Note: I love a happy ending!]


Bumptious Young Man - I'm a mind reader. I can tell exactly what a person is thinking. Elderly Man - Oh! Well in that case, I beg your pardon.

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