August 19, 2010

Wednesday, August 19, 1931: Dow 141.26 +0.28 (0.2%)

Assorted historical stuff:

Medical leaders throughout the US, including Dr. Charles Mayo and Interior Sec. Wilbur, believe the cost of medical care is too high and are cooperating in a movement to reduce the fees charged by doctors and hospitals for care. "Rich people can pay high fees, ... and poor people resort to charity, but the great middle class are unable to afford efficient medical attention when ill." It's hoped that "encouraging people to submit to physical and dental examination at frequent and regular intervals" will prevent illness.

Toledo banks that remained open had a quieter day on Tuesday; arrival of $11M from the Fed. Reserve of Cleveland appeared to restore some confidence, although 300 additional safe deposit boxes had been rented on Monday. Toledo Mayor Jackson met with city officials to discuss plans for financing relief for the poor; delay in payment of taxes has left the city unable to issue bonds to finance relief, and the Mayor said the city might ask for aid from the state and Federal govts. A few stores are advertising that they "are continuing to grant credit to responsible persons."

"White House flatly denied that Pres. Hoover would call a special session of Congress to deal with the unemployment situation."

British financial crisis meetings continued; the govt. "economy committee is working practically day and night in an effort to achieve quick results"; the committee, headed by PM MacDonald, reportedly considered "voluminous documents prepared by various govt. departments" showing possible spending cuts and revenue increases. "French bankers continue to be nervous" about British finances even though sterling is holding above the gold export point against francs; proposals for taxing British bond interest are causing French liquidation of British bonds, and it's feared they could prompt a flight of British capital. Some gold exported to Holland. London brokers believe acceptance (short-term bill) houses there should join in a mutual guarantee for all liabilities to restore faith in sterling.

Editorial: George Bernard Shaw "has been quoted as saying that he was a Marxian before Lenin was born. With his usual candor he says, in effect, that the Bolshevik program is a 'noble experiment'"; he has "told the world how lovely everything is in Russia - especially the food served only to high-up Communists and favored visitors." Now, however, "G.B.S." and the Soviet rulers have come to a slight but significant divergence in views, as the Soviets seem to be adopting some capitalist ideas, including giving industry managers the power of discipline, and calling for the "liquidating of technical illiteracy." The latter is of particular interest, since "it is safe to say that when technical illiteracy has been liquidated in Russia, the Red Russian Menace will disappear. The real communists in Russia are insignificant in number though at present dominant in power. Liquidation of illiteracy ... should bring about a counter revolution of the real Russian peoples. When that revolution occurs the 160M Russians will require all the food they can raise and all the products of industry ... to support themselves in a new comfort they have never known. Evolution is a slow process ... When Russian illiteracy has been liquidated ... possibly a new era will dawn."

New tri-motor airplane route from NY to Los Angeles via Cleveland and Chicago now operating; total travel time 31 hours.

Hungary has come up with a novel way to dispose of a two-year accumulation of surplus wine: Ecseny, Hungary offers hot wine baths for 17 cents a dip.

Market commentary:

Market wrap: Stocks showed early rallying tendencies, with oils particularly strong. The rally petered out at mid-day as active selling broke out in auto shares and the Pennsylvania RR on earnings and dividend concerns; selling spread to leading industrials in afternoon, though oils continued strong. Corporate bonds continued falling; rails were particularly weak, with both the high- and second-grade rail averages hitting new lows for 1931. Corn hit new season lows. Rubber hit new record low of 4.90 cents/pound. Cotton sagged near season lows.

Conservative observers cautious; advise waiting for market to prove ability to move ahead before buying; also advise against going short.

"While a difference of opinion exists as to the advisability of the methods being used in Texas and Oklahoma to curtail crude production, the opinion is virtually unanimous in the oil trade that material benefits are likely to result." Substantial price increases are expected by next month. Editorial: Real problem in the oil industry is the antitrust laws, which must be amended for modern conditions.

Recent decline in rail bonds to new 1931 low causing some concern that bond market action may be foreshadowing stocks.

Current bank troubles seen as less dangerous for stocks than those last year which were accompanied by "extensive forced selling of stocks"; current troubles are largely caused by "frozen real estate loans. This means that security liquidation arising out of these difficulties will be negligible."

Lord Beaverbrook says hundreds of millions of dollars in short-term loans to Germany are crux of the world financial crisis; Britain "has so extensively committed herself to German financing that she is in the same position of the creditor being ordered around by the debtor," and the US is also in this position.

Economic news and individual company reports:

Crude oil production has been reduced about 1M barrels/day thanks to martial law-enforced shutdowns in Oklahoma and East Texas; refiners in those two regions face oil shortage. Violaters in East Texas ordered jailed until martial law is lifted; no evidence of resistance reported. Texas Gov. Sterling says intends to maintain martial law at least 30 days. East Texas proclamation of martial law and complete oil well shutdown was much more drastic than the expected action of cutting production to the allowed quota there (270,000 barrels/day). Gasoline in the Oklahoma wholesale market is up 1 1/4 cents to 5 cents/gallon in the week ending Aug. 17, but at least two major crude oil buyers feel the situation is still too unstable to raise buying prices. E. Reeser, Amer. Petroleum Inst. pres., praises Texas Gov. Sterling's "courageous action ... in placing East Texas oil field under martial law"; scores of congratulatory telegrams received from oil operators across the country.

Signing of agreement on extension of German short-term credits has been postponed; latest snag concerns 700M in marks held by foreign banks in Germany (a separate amount from the 5B in short term credits which it's agreed will be left intact for 6 months). The foreign banks want to withdraw those deposits, while the Reichsbank wants them frozen. Berlin stock exhange opening postponed to Sept. under govt. persuasion. German govt. has appointed committee to advise it on banking and is reportedly considering “establishing a type of Federal Reserve System with membership obligatory.”

Shanghai taels (silver-based currency) fell sharply in spite of slight rise in silver; decline attributed to heavy floods and prospects of famine, necessitating more buying of provisions from abroad. Observers are following proposal for China to buy 100M bushels of wheat from the Farm Board using long term credit, which could relieve the unfavorable effects of large cash purchases on silver and Chinese currency.

Farm Board losses based on current values estimated at $198.5M; the Board bought 235M bushels of wheat and 1.3M bales of cotton for about $322M, and has paid carrying charges of $42M since; it sold 35M bushels of wheat for $20M and retains wheat and cotton now valued at $165.5M.

Rail freight loadings for week ended Aug. 8 were 734,780, down 22,513 from prev. week, down 18.7% from 1930 week, and down 32.7% from 1929.

BLS reports the US, as of Apr. 1931, had 79 unemployment-benefit or employment-guarantee plans potentially covering about 226,000 employees, though "for various reasons the number actually eligible to benefit was considerably less."

Public utility revenues in the first half were off less than 1% from 1930; home consumption of electricity rose 8 1/2% but industrial consumption fell 15%.

Planned Manhattan building has slumped; July total of $1.0M was lowest in many years; first 7 months $83.4M vs. $116.4M in 1930 and $465.2M in 1930.

Pan American Airways reportedly is now operating profitably; expenses to develop and survey S. American routes mostly past; fare cuts of 8%-42% early this year have stimulated passenger traffic; 13,000 passengers carried in Q1.

Companies reporting decent earnings: McWilliams Dredging.

Report from Paris:

Tragedy has again touched the circus - Annie Ringen, the US aquatic star whose 100-foot "plunge of death" into "a canvas tank thrilled audiences from Madison Square Garden to Tokio, broke her back in the last turn she will ever do of a 'death defying' feat." She joins Lillian Leitzel, "the best known aerialist on two continents," who fell to her death from a trapeze in the spring, and Harvey Powers, the human cannonball, who a year ago was shot from a cannon on a plane flying over the ocean near Atlantic City; "he provided a thrill for 5,000 spectators, but he did not live to hear the applause." Movies have severely affected the daredevil industry; "death-defiers" of yesteryear were "much better insurance risks" than those of today, while today's pay is smaller. Audiences have grown more sophisticated and demanding, fed on a steady movie diet of "perilous rescues from the wheels of onrushing trains, racing autos careening around corners on one wheel, forest fires and parachute jumps."


Father - Doesn't that young man know how to say good night? Daughter - I'll say he does!

"Why do you never go fishing with anyone but Wisely?" "He's a better liar than I am."

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