August 18, 2010

Tuesday, August 18, 1931: Dow 140.98 -4.82 (3.3%)

[Administrative note: As warned a while ago, I am going to have to cut back to fewer stories a day for a while due to a heavy interval of work. Incidentally, if any of you are in the San Jose area be sure to check out the 2010 01SJ Biennial in a month or so - I'm working on one of the events there.]

[Note: I bet you thought they just picked Dow and Jones because they sounded good Dept.] "Some six and 40 years ago [1885] Charles H. Dow and Edward D. Jones started the financial news service of Dow & Jones at 24 Broad Street. ... During business hours Dow and Jones took turns collecting news in the financial district ... after hours Jones went to the Windsor Hotel and picked up such news and gossip as there was. He then went to Dow's apartment where it was talked over and put into shape for next day." The news was written up on a "flimsy" for circulation early the next morning. Some time later the service moved to 41 Broad; the Wall Street Journal was born there in 1889, necessitating an elaborate plant installation including a fuel-burning engine in the cellar which made good use of the waste wood from the construction of the Edison building across the street. On Oct. 12, 1892 the entire staff spent the first "Columbus Day" holiday helping to hang the piping necessary to provide steam heat, which, "as Dow informed everybody ... saved $150 in expense." The Journal moved to 44 Broad Street in 1893, where it has remained until the temporary move out now for reconstruction. At the time of the move in 1893, the entire editorial and reporting staff consisted of Dow, Jones, a stenographer, a "lady typist ... hired especially by Dow in the hope that her presence would check the profanity which in those days was usual in newspaper offices," a telegraph operator, a special Washington correspondent (John Boyle, still on the job), a special Philadelphia correspondent, and three or four part-time correspondents in other cities.

[Note: Holy Toledo! Dept., or, Just as things were looking up ... #37 Dept.] Four Toledo banks closed over the weekend; total deposits over $80M. The Ohio Banking Dept. put a force of 60 men, augmented by six Fed. Reserve examiners, to the task of liquidating the banks, and pledged to do so as quickly as possible: "we realize the importance of speed to the depositors, and nothing will be left undone." Over 100 bank examiners from other states are being brought to Toledo to help. Shops operating on a cash basis found business severely restricted. "Business men organized to obtain release of a small percentage of deposits in the closed banks to facilitate business transactions in the city," and may guarantee a percentage of small deposits. Building and loan associations in the city with deposits of $50M also decided to stop payments on deposits; similar action was taken in Akron by associations with over $13M in deposits. Heads of 100 country banks in Ohio and Michigan conferred with Ohio officials on how to cope with the crisis; almost all had funds at the four closed banks; withdrawals at the country banks were heavy, and some put into effect the 60 day withdrawal notice allowed by Ohio law. The bank trouble was not wholly unexpected. The four closed banks had invoked the 60-day clause preventing withdrawal of savings deposits after the June 17 failure of the Security-Home Trust. Since then the banks had suffered a drain of commercial accounts, which forced them to use up much of their liquid funds; efforts at a merger failed, and when the 60-day clause expired and savings withdrawals resumed, the closures followed. Bankers believe that since the situation was known, other banks and leading industries in Toledo were able to protect themselves.

[Note: Reassuring statements Dept.] L. Ayres of the Cleveland Trust: “It is trite to speak of a financial situation as fundamentally sound. The phrase itself is in disrepute, yet this is literally true of Toledo.” No dishonesty or “dissipation of assets”; “the worst one can say is that an undue amount” of bank funds were in slow assets that can't be converted to cash on demand. "Business men of this city are confident that the situation can be untangled without difficulty for they are of the opinion that the banks are solvent and that the closing was merely a precautionary measure." Fed. Reserve is keeping close track of the situation and is ready to assist banks, within legal bounds; however, “it is pointed out that eligible paper is needed before Reserve credit can be extended to those banks which will feel the pressure of the failures reported on Monday.”

Texas Gov. Sterling proclaimed martial law in East Texas area to cooperate with Oklahoma Gov. Murray's effort to raise oil prices to $1/barrel. 800 National Guard troops, all cavalry units, swarmed into the oil field area to enforce well shutdowns; over 1,600 wells affected and at least 10,000 workers estimated thrown out of jobs. "Drastic upward revision" of oil prices expected. Gov. Sterling's decision attributed to expected delay in funds for Texas Railroad Commission to enforce new conservation law.

France, despite starting to feel effects of the depression in the second half of 1930, has held up relatively well; the business downtrend apparently stabilized at the end of the winter and since then business has “gone along on a comparatively even keel, at approximately 10% below the prosperity levels of a year ago.”

Cuban rebellion reported crushed; rebels making last stand in Santa Clara province.

Market wrap: Bull operators met unexpected obstacle in the "serious banking difficulties at Toledo." News over the weekend of trouble there brought heavy selling into leading stocks at the open. Selling lightened after the initial orders were absorbed, and a sluggish rally set in toward noon, but renewed declines broke out in the afternoon after news of further Ohio banking trouble, and trading was unsettled in the last hour.

Decline in corporate bonds last week has caused some skepticism on the rally in stocks over that time. However, "many observers feel that the principal reason for the recent heaviness in bonds has been the difficulties experienced by banks in many sections of the country, who have been forced to liquidate bonds"; therefore, the downtrend in bonds may not have its usual "barometric significance with relation to business prospects."

Brokers report the public has shown little inclination to take part in the recent stock market rally.

Editorial by T. Macauley, Sun Life of Canada pres., repeating call for large-scale ($500M) govt. bond purchases by Fed. Reserve to increase credit base and alleviate depression; warns of danger of currency hoarding.

Declines of major commodities from their wartime or postwar highs have been drastic; corn is down 76.5%, copper 79.7%, steel 81.5%, cotton 84.4%, wheat 86.2%, rubber 95.8%, and petroleum 96.0%.

Pullman (passenger rail cars) stats: annual consumption 98.8M sanitary drinking cups; 9.1M paper bags for hats; 3.8M boxes of safety matches. The US, with a population about 122M, has over 8,000 sleeper cars, vs. Europe, with population about 480M and only 2,000 sleepers.

Cotton paper catching on in radio due to "crackleproof" properties.

Bureau of Industrial Alcohol authorizes production of 2.728M gallons of medicinal whiskey in 1932, of which 70% will be bourbon and 30% rye.

Mexicans incensed at seeing themselves habitually portrayed as "fiercely mustached villains" have barred such films from Mexico City. "Hollywood producers have taken notice, and are changing their methods in order to satisfy their many customers south of the Rio Grande."

Movie: [Note: Clark Gable upstaged by horse Dept.] Sporting Blood - MGM film, at the Capitol. "The hero ... is not Clark Gable, who is featured in the film, but a sleek thoroughbred race-horse, although Mr. Gable does win the hand of Tommy Boy's pretty owner in the end. The point is that the human characters in this story are less important than the equine ... " [Note: At least he didn't have to play a gangster this time ... ]

Joke: "So you use three pairs of glasses?" "Yes - one for long sight, one for short sight, and the third to look for the other two."

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