Friday, May 29, 1931: Dow 131.81 +1.05 (0.8%)

Germany special:

German consensus has developed even in “the most conservative minds” that drastic action is needed; problems include growing govt. deficits and debt, leading to interest rates of 8%-10% on formerly prime risks, new low records in stocks, and gains of Hitler faction in recent bye-elections; it's estimated a third of workers may be idle or working less than half-time this winter. Criticism has centered on injustice of Young plan reparations; it's argued the reduction in payments in that plan has been canceled by drastic commodity price declines since. Germany can suspend part of the payments, but doing so would have drastic consequences in practice, including capital flight and cutting off new credit; action from outside Germany would be preferable. European banking circles believe German govt. has "virtually decided" to use BIS mechanism for reopening reparations issue; Chancellor Breuning and British PM MacDonald will meet June 8, just before monthly BIS meeting June 10; Britain favors combining forces to win US support for cuts in debts to promote disarmament. French govt. strongly opposes any revision in reparations; points to costly military spending that could be cut instead.

Editorial by T. Woodlock [note: strange combination of obtuse and prescient]. Back in the good old day of wars between princes, combatants in wars maintained a limit on hostilities, making it possible although difficult to have a real peace afterward. The World War, however, was "between nations" making a real peace afterward almost impossible. Crux of current world economic problems is that the Versailles treaty "imposed upon Germany a continuance of war," putting it in "virtual subjection to the other powers of Europe" and also imposing an almost intolerable reparations burden. "We all are excited considerably ... about the 'Russian menace' but ... it is Germany and not Russia that may prove to be the real and immediate 'menace.'" The world faces an urgent problem of declining commodity prices, reversing a trend that lasted about 35 years; this is "sapping ... the foundations of the credit structure everywhere, and it is a question of how long that structure can escape a buckling of its principal girders." It's impossible to solve this "without first putting an end to the war." Responsible European statesmen realize change is needed, though they're "afraid to tell their masters the truth." Here in the US, "we are blind and deaf to the real and immediate difficulty."

Assorted historical stuff:

Letter to the editor disputing characterization that during the boom "all who entered a broker's office were wild eyed speculators ... there is a vast army of citizens who ... had the temerity - and as it now transpires, the bad judgment - to purchase outright in 1928 and 1929 stocks of leading corporations. ... But all you hear about in the after dinner addresses is the impecunious bootblack, widow and orphan whose speculations all but ruined the country, via Wall Street."

It's believed many members of Congress will oppose any proposal to substantially increase the number of taxpayers, "as many ... will be working to rebuild their fences for election day"; they are likely to prefer increasing corporate and surtax rates.

High Administration officials are looking to crop prospects to forecast economic improvement; in past depressions, favorable crop outlook has improved farmer buying power and led to general business uptrend within 6 months. Low point has apparently been reached in buying and see some improving economic factors, but reluctant to forecast upturn at this time due to previous false starts. Labor Sec. Doak notes "slight and gradual" but definite upswing in employment during May. Wall Street has been favorably impressed with recent Administration comments on the economy. While hopeful, "they have broken away from the tendency to 'whistle in the dark'" of a year ago. Spokesmen now emphasize futility of forecasting a definite upturn, pointing to past positive indications that later turned out to be false starts. Administration is looking to crop prospects for clues on the outlook, but there may be good news on company earnings first; some are reporting an uptrend, and comparisons later in the year will be with a period when profits were falling rapidly.

Editorial: The Nat'l Foreign Trade Council meeting has produced extremes of opinion on tariffs, ranging from US Steel pres. Farrell's "stand-patism" on the unconvincing grounds that exports only consume 10% of our total production, to Nat'l Council of Amer. Importers pres. Fletcher's demand for an immediate extra session of Congress to reduce duties by 25%-50%, a "manifest political impossibility." In fact, trade barriers are "a large part of what ails this country and the world." A reasonable middle course might be for Pres. Hoover, at the next regular session of Congress, to propose a 10% cut in all tariff rates provided that a given number of major trading nations agree; "this might or might not be coupled with a limited suspension of war debt and reparations payments."

Another editorial arguing Farm Board plan to reduce wheat acreage by 20% could endanger domestic supply in case of bad weather or breakout of crop pests.

Packard diesel-engine plane sets world non-refueling endurance record at Jacksonville Beach [6,600 miles in 84 hours 33 minutes].

Washington, DC had an average of 450 phone calls per person last year, almost twice the US average of 231; there were 32.7 phones per 100 people vs. 16.4 for the US; however, highest density of phones was in San Francisco, with about 40 per 100.

Newspaper printing has become tremendously more efficient thanks to improved equipment. A 16th century printing shop would have required 6,000 man-hours to turn out 10,000 copies of a four-page newspaper; this job would now require 175 man-hours. The first US newspaper was started in 1704, but no daily paper had a circulation of over 900 for the following century. By 1896, total daily newspaper circulation was over 8M; in 1929 it was over 66M.

Great cities like NY and Chicago have been trying to eliminate air pollution. Electrification of railway terminals and adoption of smokeless fuels have helped; the most hopeful recent advance is substitution of natural gas for coal. In San Francisco natural gas is now almost universal, leading to a "decided improvement in the clearness of the atmosphere, with proportionate improvement in health and comfort, and with lower laundry bills for the fortunate residents."

Market commentary:

Market wrap: Stocks showed some relief from pressure, allowing moderate recoveries in many leading shares; trading was largely professional, with many traders evening accounts before the holiday weekend. Early price movements were mixed and based on individual company news, with NY Central weak on poor April earnings, Westinghouse strong, and Steel breaking to a new low just above 90. However, other leading shares including Can, GM, and AT&T drew good support, and a general recovery set in about noon; upturn was moderated as nervousness over the Creditanstalt situation caused some irregularity, but market maintained a better tone. Bank stocks sold off sharply in late afternoon. Bond trading active, prices "highly irregular"; US govts. and highest-grade utility issues were relatively steady but almost all other parts of the list "were disturbed," with many record lows; foreign list weak after sharp break in German issues; liquidation continued in lower-grade rails. Commodities mixed; wheat and corn up sharply on reports of urgent need for rain in Canada; cotton closed little changed after hitting new lows during trading. Copper now available at 8 1/2 cents; buying quiet. Zinc and lead back at long-time lows. Cocoa again hit record lows, with July at 4.53 cents. Silver up 3/8 cent to 26 7/8.

Considerable selling has continued from Austrian interests in the past few days; the selling is said to have represented "necessitous" liquidation, and orders have been "at the market." Foreign liquidation may have also caused some of the demand for stocks in the loan crowd normally attributed to short sellers; much of the foreign selling was by phone or cable, and brokers had to borrow shares for delivery until certificates arrived from abroad. Recent liquidation in bonds has been disturbing to many investment interests who had anticipated an improved market leading up to new govt. financing.

GM has been exceptionally active lately, trading well over 100,000 shares for several consecutive sessions. This reflects a contest between a strong bear crowd pressuring the stock on reports of a recent decline in auto production, and "interests close to the management" who've been accumulating based on outlook for a satisfactory second quarter, with some even expecting Q2 earnings to match those in 1930. Weakness in cotton prices has affected shares of railroads operating in areas dependent on prosperity of growers, including Southern Rwy. Baar, Cohen note that in almost every previous depression, before a bull market developed again in industrials and rails it first came in gold mining stocks; this is a natural result of "people wanting to put their money into securities where the income is definite ..."; note strength of Alaska Juneau and recommend Dome Mines.

With holders of some Florida municipal bonds inclined to dump them regardless of price, some are now trading at very low levels (West Palm Beach 42-45, St. Petersburg 48-51). Some investors have been attracted, feeling difficulties may be worked out over the next few years; an intriguing feature of the bonds is that Florida real estate owners can turn them in at par (100) to pay taxes.

Investment trust [similar to mutual fund] heads say rumors they are selling are efforts to imply forced liquidation due to "embarrassing situations" [financial trouble]; insist that isn't the case, "other than the embarassment that any investor feels over holding stocks at prices two or three times what they command now."

T. Chadbourne, negotiator of international sugar agreement, says at a loss to explain recent weakness in sugar prices; believes agreement will be enforced, "and that is the difference between this ... and any other international agreement that has ever been tried."

Gen. C. Dawes, US ambassador to Britain, disputes idea that the stock market is in any way an accurate index of current economic or business conditions; says action of the market no longer reflects feeling of the masses. Recovery will be slow, but will begin when there is a general change to optimism, which is about due; stock market will lag this change, as it did the change to mass pessimism in 1929.

Asst. Commerce Sec. J. Klein disputes idea US is suffering from trade reprisals; says “we have held our export trade as well as any nation, and have suffered a smaller relative loss in export than in domestic sales.” Notes that in 19 representative countries, US share of total imports in 1930 was 20% vs. 20.7% in 1924-27.

R. Stephenson, Amer. Bankers Assoc. pres., says US will move on to greater industrial and agricultural prosperity than ever before; denies bankers backing move for wage cuts. E. Stevens, Chicago Fed. chair., says country at bottom of depression, signs pointing to start of recovery.

Economic news and individual company reports:

Goldman Sachs Trading Corp. is close to its record low around 5; a large part of its assets "consist of enterprises whose shares are not listed on any exchange" [this was an investment trust started by Goldman Sachs at the end of 1928; as in current times, GS sold the product it created to unfortunate buyers and it lost almost all its value; as in current times, it did provide an opportunity for a dramatic Congressional grilling of a GS bigwig, in this case Mr. Sachs himself in 1932].

It's reported that the failed $8M Newfoundland bond issue that started the recent crisis there found no bidders "due to unwillingness of banking interests to sponsor a loan which apparently would have been used merely to pile up ... indebtedness." After a deficit of $3M in the last fiscal year, the govt. budget had called for another huge deficit this year. Negotiations are under way for "a bond issue on terms which would meet with the approval of banking interests."

Austrian Chancellor proposed bill under which the state would assume responsibility for any new funds needed by the Creditanstalt and "practically guarantee all Creditanstalt deposits"; “persistent withdrawals” of deposits continued. BIS and leading European central banks promised help for the schilling [Austrian currency], but the crisis is now seen taking "much time" for the Austrian govt. to resolve. British banks involved are expected to “take concerted action” to support Creditanstalt. German bonds and currency have been weak, though capital flight is reportedly small; however, other foreign currencies were generally higher, except Spanish pesetas which hit a record low on continuing inflation fears. Wall Street remained nervous about further foreign liquidation while the situation remained unsettled.

Proposals for Australian difficulties include reducing all adjustable govt. spending by 20%, reducing interest on all govt. securities by 22 1/2%, cutting old age and soldier pensions, and raising various taxes.

AFL pres. Green estimates unemployment reduced by about 1.5M since reaching 6.3M in Jan., but sees more serious situation during summer layoff period.

Money in circulation May 27 was down $5M to $4.634B, total Reserve Bank credit outstanding down $8M to $886M. Member banks in NY City report brokers' loans down $57M to $1.574B; loans on securities to non-brokers up $23M to $1.778B.

First 64 rails reporting April earnings were down 37.2% from 1930; the same rails reported an 23.5% year-over-year decline in March. Nat'l Retail Drygoods Assoc. strongly opposes efforts to increase rail freight rates.

Dow average of 8 iron and steel products held at $43.58, post-1922 low. Scrap market weak but "more talk is being heard that bottom has really been reached."

Loans to veterans under the new 50% bonus loan were $745.7M as of May 23; total applicants were 1.959M, of which 1.951M have been acted upon.

1930 losses of 62 stock casualty and surety insurance cos. licensed in NY were a record $41.5M on $642.6M in premiums, more than previous 5 years combined.

Former Bank of US pres. Marcus testified bank had loaned $17M-$20M on unsecured real estate paper and also held $7M-$8M in mortgages when it failed.

Calif. oil industry takes important step toward stabilization as operators' committee accepts plan to cut output quota to 427,500 barrels/day from 500,000.

Several thousand coal miners strike in Penn. and West Va. charging low wages and poor working conditions.

Over 2,600 workers responded to general strike call in the pocketbook industry, over demand by employers to cut wages 25% and lay off 20% of workers.

NYSE seat sold for $210,000, down $20,000 from previous sale. NYSE Governing Committee adopts resolution praising R. Whitney's success in piloting the Exchange through the “great crisis of 1929” and the current depression.

Westinghouse Electric and Matheison Alkali said showing improving earnings trend, benefitting from expense cuts and some improvement in orders.

Companies reporting decent earnings: International Match [Ivar Kreuger-associated].

European theatre special:

Since The Adding Machine [1923 play by Elmer Rice; acclaimed revival in 1989 using puppets; accountant at large faceless company is to be replaced after 25 years by adding machine; snaps and kills boss; experiences afterlife] US audiences have seen "a procession of plays" concerning man's conflict with the machine; the Machine Age has now arrived in Europe and drama has followed. Munich's festival season features the pessimistic Chase Him - He's a Human Being, that "has for its premise the machine-made doom of man"; it has some parallels to Oswal Spengler's recent statement that the "white race stands on the threshold of extermination ... nature is taking fearful revenge by making man the slave of his own machines." On a lighter note, the latest French revues have dancing episodes glorifying electricity, and a tractor at center stage, imitating the latest theatrical "novelty" from Moscow, and the Foire de Paris at the Porte de Versailles features 32 countries exhibiting every variety of labor-saving device, including multilingual typewriters and wine presses so delicate they won't bruise the acidic grape skins. Some European dramas are also more optimistic on the role of machines, but the "preponderance of opinion" is in the gloomier Chase Him camp.

Jokes:

Two New York brokers recently went out for lunch, and in crossing Broadway noticed an open manhole. Surrounding it was the usual iron fence, with the painted notice "Men at Work". Said one to his companion: "Don't pay any attention to that sort of junk. "It's just Hoover propaganda."

She - What an elegant overcoat you have. But I can't understand why you wear such shabby trousers. He - I never take off my trousers in the restaurant.

Thursday, May 28, 1931: Dow 130.76 -2.35 (1.8%)

Assorted historical stuff:

“Authoritative sources” say Germany will take “definite action looking to the revision of the Young Plan for reparations” at the Anglo-German conference starting June 6. It's expected that Pres. von Hindenburg will issue a dictatorial decree imposing severe austerity cuts beforehand, and the hardship this “would inflict ... can only be eased by a promise of swift action in curtailing reparations ...” It was insisted that debt service on loans outstanding and govt. debts won't be affected. German sources deny knowledge of reported 2M mark loan to be guaranteed by England, France, and Italy; Berlin Foreign Office says loan wouldn't help solve reparations problem; what's needed is reduction of burden, not continuing to pay obligations with new loans.

Editorial by T. Woodlock engaging in a little good-natured ribbing of Sen. Brookhart and his advocacy of inland waterway development. “Sen. Brookhart is sui generis ... after Nature produced him she broke the mold. But there are not a few people in this country who share his hatred of the rail carriers and have an unlimited appetite for public money to be spent on waterways. If it were proposed to cut a canal from coast to coast on the Chicago parallel of latitude at a cost of a billion dollars ... there would be plenty of people to back it as a government project and saddle the cost on the 'higher income tax brackets.'” Criticizes record of Inland Waterway Corp. (govt. sponsored waterway co).

J. Farrell, US Steel pres. and Nat'l Foreign Trade Council chair., addresses the Council. Minimizes role of tariffs in depression; notes similar conditions in countries with low or high tariffs and free trade; other causes are the major factors in worldwide imbalances. Rise in commodity prices essential, hits uneconomic and unfair competition. While US must find export market for at least 10% of production, economic foundation is home market with high living standards and efficient industry; calls for intense study of ways to stabilize domestic conditions during world depressions.

Editorial on close Supreme Court decision denying US citizenship to D.C. Mackintosh because he wanted to retain the choice of whether to bear arms in any future wars [Note: Canada-born professor of theology at Yale; case also involved wartime nurse Marie Bland; became cause celebre, decision was reversed 15 years later]. Mackintosh, not content with the exemption for conscientious objectors that Congress has so far allowed, asks to be granted a special class of citizenship denied by the Constitution to others. Chief Justice Hughes, in his dissent, bemoans exclusion of a man of such undeniably high character and achievement when "a host far less worthy" are admitted, but this doesn't justify "purchasing ... allegiance with whatever variety of citizenship the applicant happens to prefer."

H. Cullman, Port of NY Authority commissioner, says US foreign trade hampered by unnatural barriers including high tariffs, immigration bars, and Prohibition; says barriers will cause US production to move abroad and make repayment of US loans abroad less likely.

Pres. Hoover orders restriction of timber sales from national forests for duration of the depression.

The new Hoover Dam in Arizona will be of staggering proportions. It's estimated the combined length of the drill holes required for rock removal will be 15,000 miles, or about twice the earths diameter. The basin created by the dam will take 1 1/2 years for the Colorado River to fill, and the surface area of the lake formed will be 193 square miles, containing enough water to cover the state of Connecticut to a depth of 10 feet.

A recent poll of 1,705 female students at the University of Kansas, Lawrence on their plans after graduation resulted a total of 36 desired professions; 879 wanted to be teachers, 84 journalists, 80 nurses, 60 business women, 16 doctors, 15 lawyers and a mere 7 wives and home makers.

The French telephone system, renowned worldwide "for its particular way of getting on the nerves of American tourists," is finally getting some badly needed upgrades. Many sections of the country are still unable to communicate with one another, even though they can telephone New York, Buenos Aires, Tokyo etc. However, new circuits are now being installed all over France, and service in Paris is expected to be fully automatic by the end of 1937.

NJ Republican and Democratic parties both adopt platform planks demanding repeal of Prohibition amendment and restoration of state option.

Tomorrow is 20th anniversary of Supreme Court decision breaking up American Tobacco as an illegal monopoly in 1911; it produced over 80% of US tobacco products and also monopolized licorice and tin foil. The industry has grown tremendously since; total net income in 1930 was about 5 times the best trust year.

Satirical issue of the Bawl Street Journal produced by the Bond Club sells 15,000 copies [Note: if anyone knows where to find one, let me know ...]

Interesting anecdote from H. Alloway about establishment of the Pennsylvania RR's pension plan about 1900 - plan was sponsored by Alexander J. Cassatt, "saltiest of expanders in the Pennsylvania presidential line," after considerable argument from his sister Mary Cassatt [the painter].

Market commentary:

Market wrap: Stocks suffered day of violent fluctuations with periods of heavy selling. Rails broke badly following the ICC's refusal to initiate rate increase investigation; new bear market lows in major rails including NY Central, Union Pacific, and Atchison. Selling broadened as the session progressed; news of decline in steel output brought another flood of selling into US Steel; new bear market lows in major industrials including Steel, Westinghouse, Allied Chemical; bad breaks in trading favorites including Auburn; utilities sold off after reported decline in electric output. A moderate rally broke out near the close, but market remained unsettled. Bond trading more active, prices generally lower; sharp irregularity in many parts of the list; US govts. and highest-grade corp. issues relatively steady; lower-grade rails weak; foreign issues irregular, with weakness in German and S. American; heavy selling broke out in the last few minutes of trading. Commodities weak; grains down substantially on beneficial rains in Northwest spring wheat area; cotton down moderately to new lows in spite of bad weather report. Copper remained at 8 3/4 cents, but news came that a record low of 8 1/2 was set last Friday in unpublicized sale of about 12M pounds by a large producer; domestic buying quiet; foreign buying large after 1/4 cent price cut to parity with domestic; outlook believed weak. Raw sugar prices approached record lows of last fall.

Conservative observers say there might be short covering in the next two sessions leading up to the holiday weekend, but urge remaining on the sidelines until next week, and giving "the market an opportunity to indicate its next important movement."

Market may have been technically weakened by short-covering in last session following NYSE action.

Stop-loss orders are increasingly in favor on Wall Street; conservative interests cite the market break on Monday as showing the wisdom of protecting long positions; at least part of the recent decline can be attributed to uncovering of stop orders that increased selling at a time when buyers were few.

Rail loadings report for May 16 week was slightly improved, showing a decline of 19.4% from 1930 vs. a 19.8% decline prev. week; however, initial reports of individual rails for the May 23 week are poor. Rail authorities don't look for much improvement in earnings in the next few months, but anticipate a much more encouraging showing in the fall when crops will be moving and industrial activity should be increasing.

American Can has been drawing buying support from interests close to the company and traders after being a bear target this year; "in semi-official quarters" it's said net profits have been running only slightly behind last year. US Steel may be a laggard when the market recovers; in the past it's been the last to suffer during a decline and also lagged the market when a recovery started.

While reports have been circulating of investment trusts [similar to mutual funds] selling stock, a survey of ten major trusts received almost universal response that they have recently been buyers on balance.

Editorial: Refusal of the ICC to ask for investigation into need for higher rail rates is unsurprising; it means the ICC is "disposed only to help those who help themselves." Rails must now end their "personal differences," come up with a specific and unified plan for higher rates, and be ready to answer objections from shippers and defend current practices on maintaining wages and possibly excessive passenger service. Carriers must convince the ICC that, as in 1920, an emergency rate increase is required, and any resulting problems can be sorted out afterward.

A. Wood, Chicago Stock Exchange pres., praises development of the Exchange; calls for Chicago to develop into financial center able to serve Midwestern businesses; calls upon bankers to take more liberal attitude on accepting stocks and bonds of Midwestern businesses as collateral for loans.

Edward B. Smith & Co. note current downtrend has lasted about 3 months; believe stocks not yet at levels where they can be confidently bought for the long term, and recovery will be slow and halting; do see trading opportunity for a technical recovery if a "clearly defined climax" occurs with the Dow in the 125-135 range. A number of brokers believe several stocks may be entering "buying zones" attractive for long-term investment, but aren't yet willing to advise extensive accumulation; most are "inclined to wait for evidence of important buying by banking and corporation interests." Recent steady decline on low volume has been "disturbing and discouraging ... a day or two of heavy trading at lower prices would convince many that the time had arrived to buy for at least a good technical recovery."

Col. L. Ayres of the Cleveland Trust says outlook for summer not encouraging but “real basis for hope that definite recovery may get under way after Labor Day.”

Dow industrial average closed at a new bear market low; there were 3 new yearly highs and 206 new lows.

Economic news and individual company reports:

Austrian govt. action on Kreditanstalt apparently only warded off immediate disaster; Finance Min. official has been sent to Berlin to "endeavor to interest German govt. and banks in supporting Kreditanstalt," while Nat'l Bank of Austria is attempting to gather consortium of Bank of England, German and Dutch banks, Rothschild's of London, and Lazard Freres to prevent withdrawal of foreign credits and put large sum at bank's disposal. An informal committee has been formed in London representing interested parties in Kreditanstalt to deal with “the policy to be adopted in the near future”; it's stated this “is not a creditor's committee in any form.” Berlin market calmed following sharp decline Tuesday, but additional foreign capital was withdrawn from Germany and mark remained weak.

St. Petersburg, Florida bondholders committee says city defaults and financial difficulties present complicated problem far beyond normal refunding operation; ask all bondholders to deposit their securities with the committee so that unified action and negotiation can be undertaken.

About $121M of the total $276M Cook County tax bill for 1929 remains unpaid; 3,000 property owners have sued to prevent collection on grounds assessments are "confiscatory and discriminatory."

Steel production for week ended Monday was about 43% vs. 44% prev. week, 46% two weeks ago, 73 1/2% in 1930, and 96% in 1929. Weekly steel reviews reported "frank airing of views" at the Steel Institute meeting had improved sentiment among executives, making them more aware of industry straits and consequences of further instability. However, industry conditions were little changed. Estimates of production from different sources varied more than usual, from 41% to 44%, but decline apparently has continued; construction is holding its own but not showing expected improvement; automotive may be off a little further. While producers seem more determined to maintain prices, weak areas remain in the price structure.

US electric output for week ended May 23 was 1,600 GWHr, down 4.4% from 1930, vs. a 3.3% decline prev. week and 2.4% two weeks ago. While electric output in Q1 was down 5.3% from 1930, utility revenues were only down 1.7% from 1930 and were 4.8% above 1929. Industrial use of electricity is down, but home and light commercial use has been resilient.

Govt. weather report: cotton conditions unfavorable; winter wheat fair to very good; spring wheat belt still in need of moisture, soil blowing still reported in places.

A list of 20 large industrials and rails covered preferred dividends in 1930 earned by a range of 1.8 times to 55 times; yields are 4.5%-8.7%. While earnings are down in 1931, all have continued to earn preferred dividends, in most cases by a good margin.

Spanish pesetas weak on inflation fears after reports govt. may permit increasing note circulation from current 4.983B up to legal limit of 6B.

J. Calder, US construction engineer, appointed advisor to Russia on all construction; built tractor plant at Stalingrad, will attempt to speed current projects.

Commerce Dept. reports economic conditions in the Far East and S. America remained dull.

Small California oil producers making progress in organizing to curtail production; objective is to cut state production from 536,700 barrels/day to 427,500.

Consolidated Gas of NY $60M 4 1/2% bond issue quickly oversubscribed, offered at 101 and rose to 101 1/4 bid.

GE and Westinghouse receive $16M order for 150 electric locomotives as part of Pennsylvania RR's $150M electrification program; largest single order for electrical equipment in months.

Auburn Automobile reports shipments in year to May 25 were 22,759 cars, which exceeds total 1930 shipments by 9,066, and the record 1929 full year by 10.

Companies reporting decent earnings: Kansas City Power & Light, McIntyre Porcupine Mines.

Film:

A Son of the Land - in Russian with English subtitles, at the Cameo. “It is interesting to note the way in which Russian producers are developing stereotyped plots which are as highly romantic as the American Westerns.” A poor peasant, exploited by his overlord, harkens to the message of the Soviets and rebels. The local peasants are starving from lack of water; our hero goes to a nearby city, learns modern irrigation at a government school and returns in time to help build a new dam which will assure all the peasants a steady supply of water. Rich landlords attempt sabotage but are thwarted by the hero. “Plot is related without the usual subtlety of the Russians and without their customary dynamic treatment”; a feeble sermon, poorly edited; however, Boris Ivanitski is “extremely forceful” in the lead.

Always Goodbye - a Fox picture, at the Roxy. An unworthy vehicle for the promising Elissa Landi; padded and unconvincing. Story of Lila Banning who is “always saying goodbye to suitors”; first to Sir George Boomer who offers her a house in the country to marry him; then to John Garrick, romantic but poor young Englishman; then to a shady character she previously met on an ocean liner; finally she discovers true love with her cultured host at Lake Como, Italy.

Jokes:

[Note: it's funny because it's true.] A mechanic who has lately started buying small lots of stock asked his banker for some suggestions on railroad shares. The banker suggested Pennsylvania Railroad and presented a list of statistical information. The investor perused the information, and was particularly drawn to the huge number of shareholders reported. "Well, there's one sure thing," he remarked, "if I am making a misstep I'll not be alone."

A corporal was marching in front of his squad when he overheard a voice in the rear rank say: "This squad is like a flivver [old, cheap car]. The crank is in front." "Yes," snapped back the corporal, "but the nuts are all behind."

"How's business?" a traveling salesman asked the new barber. "Boy," replied the barber, "it's so quiet here you can hear the bonds drawing interest at the bank."

Wednesday, May 27, 1931: Dow 133.11 +0.24 (0.2%)

Assorted historical stuff:

White House says Pres. Hoover's advisors see many favorable indicators in the business situation. Inventories of both merchandise and raw materials have declined since Dec. for the first time in the depression, showing almost a 10% reduction in Q1; reduction of inventories usually begins at the bottom of depressions. Hoover's advisors also cited improvements in cars, food, department store sales, cotton and wool textiles, shoes and leather, cement, tobacco, and chemicals.

Sen. J.H. Lewis, speaking to Illinois State Bankers Assoc., advocated govt. financial aid for cities on verge of bankruptcy due to "inadequate borrowing facilities."

NYSE, for third time in recent history, will ask members for information on their short positions (first two times were in 1917 and Nov. 1929). Members will be asked for detailed report of short positions as of May 25 and for daily updates until further notice. Current conditions are in some ways similar to those in Nov. 1929 when the NYSE previously launched an inquiry into short selling; after that inquiry, the NYSE pres. announced short selling during the crash was found to be "inconsequential." Editorial: The NYSE's recent decision to ask members for reports on their short positions is wholly justified. NYSE facilities may be used "to express ... any variety of personal judgment as to the reasonableness of security prices but not for organized attempts to depress them through the terrorism of mass selling." Distinguishing between "legitimate and reprehensible shortselling in specific cases" is difficult but far from impossible; NYSE governors have shown their ability to do so in the past. Security owners "may well take this action ... as a timely warning ... against substituting their emotions for their reason."

Interesting series of full-page all-text ads starts today, making a case for fixed investment trusts [similar to ETF's]. “Growth has been the dominant economic force in American life” ... stock prices reflect this in the long term ... “periodic depressions have always proved to be only temporary interruptions in long-term growth ...”

Sen. Couzens says tax increase inevitable at next session of Congress; favors enactment of gift tax, raising estate tax, and extending graduated surtax past $100,000; says statistic that 380,000 people pay 97% of income tax indicates excessive concentration of wealth; opposes sales tax.

Editorial by D.C. Harrower: Farm Board policy of working for drastic reduction in wheat acreage is “not only dangerous but vicious” since it puts wheat supply in danger from bad weather and crop pests.

The USDA warns of severe soil erosion. The Mississippi River is estimated to transport 400M tons of mud each year into the Gulf of Mexico, most of it from cultivated fields in the valley; it's likely that a hundred times as much is washed each year from farms along the banks of the Mississippi and tributaries. In Oklahoma, 13M of 16M acres devoted to farming are suffering from soil erosion.

Editorial by T. Woodlock citing cautionary case of govt. owned electric plant in Mapleton, Iowa (pop. 1,500); an auditor found there were no proper books or filing system, and that a claimed profit of $34,128 was in fact a loss of $13,620.

Portugal's recent census ran into trouble as peasants supplied with forms suspected a trick to obtain more taxes and destroyed them.

A. O. Smith recently conducted a test of the heavy steel spheres, about 8 feet in diameter, used to store helium gas by the Navy. First, the sphere was pressurized to 2,360 pounds/sq inch. It was then put on a turntable and subjected to powerful blows by air hammers for 72 hours, a total of 30M blows being struck. It was then pressurized to 2,620 psi, placed on a steel foundation, and subjected to blows from a "skull cracker" weighing 1 ton and dropped from a height of 23 1/2 feet, delivering a blow of 11M psi. This made a dent about 13 inches wide and 3/16 inches deep. Finally, pressure was raised until failure; this happened at 5,700 psi.

Consolidated Gas of NY recently detected a clog in one of its uptown lines and discovered it was caused by the bond section of an old newspaper. The trouble apparently took 46 years to develop since the paper was dated Feb. 9, 1884. No word on whether the work crew compared bond prices with current quotes.

Market commentary:

Market wrap: Stocks opened under heavy pressure; selling again converged on Steel, which broke to a post-1923 low of 93 1/4; other majors also declined. A brisk and broad rally set in at mid-day after report of the NYSE action against bear "raiding tactics" caused "increasing nervousness" in bear quarters; Steel rebounded over 3 points and "the whole market enjoyed momentary relief from pressure." However, renewed irregularity cropped out as the afternoon progressed; Steel weakened, and sharp breaks took place in trading favorites including Auburn and Vanadium; selling increased late. Bonds mixed in quiet market; US govts. slightly irregular but not far from recent record highs; European issues steady but S. Amer. heavy; corp. issues resumed pattern of firmness in highest-grade issues (particularly public utilities) and "readjustments" in other parts of the list. Commodities mixed; grains up sharply on short-covering following poor crop news; cotton down substantially, again hitting new season lows; July down to 8.62 cents. Copper held at 8 3/4 cents; little available at that price but buyers aren't willing to go higher; outlook uncertain. Cocoa set another record low.

Conservative observers unmoved by NYSE action, continued to recommend sidelines until market demonstrates it can hold on its rallies.

The stock loan market at Monday's close had indicated a heavy short position, with 24 stocks loaning at a premium and almost all active stocks loaning flat; traders apparently covered today after news of the NYSE action.

Bull operators discouraged by decline on low volume, feeling this indicates unwillingness of "important interests" or the public to buy stocks despite materially lower prices. Brokers report even customers carrying credit balances are unwilling to buy during reactions as they usually would. Investment trusts [similar to mutual funds] have reportedly shifted their buying to senior (preferred) shares this year for greater safety. Many chart students are now bearish for the near future based on the Dow averages breaking through previous trading ranges.

Many keen observers discount long-term impact of anti-chain store taxes, saying the chains have been so successful at reducing living costs that the public is unlikely to approve of discriminatory taxes. GM has materially strengthened its position this year, resulting in more stable earnings than competitors; other lines such as the Frigidaire division also seen helping. Cigarette industry this year "has been forced to accept only a moderate increase in total production"; most of this increase is likely to have gone to just two companies, American Tobacco and Reynolds. Wrigley seen benefitting from higher profit margins due to lower raw material prices; 1931 earnings seen matching or possibly exceeding 1930.

Considerable comment has been heard recently contrasting the extreme enthusiasm in 1929 with extreme pessimism now; however, many have held back from buying since they remember "how long the bull movement continued after it was clear that it was exceeding the limits of safety." On the other hand, the NYSE may provide a "safeguard against carrying things to extremes on the bear side" through its action to prevent undue depression of stocks by organized bear raids.

Most severe liquidation in lower-grade bonds has been in the industrial division; many NYSE-listed industrial bonds are now selling to yield over 7%, with some as high as 37%. While some face strong possibility of default in the near future, others are seen offering good speculative possibilities.

Editorial: Over the past week, the market for Colombian bonds acted like a herd of cattle that stampedes without knowing the reason and then settles down again; the bonds plunged and then recovered close to their former level. There seems to be "no just reason" for the decline. Unlike Russia, which is rich in natural resources but "lacks in the great asset of character," Colombia is entitled to confidence in this respect. The govt. is relatively stable, having had only one revolution in the past 30 years; Pres. Olaya is able and commands confidence. While Colombia overborrowed in the past as many other countries did, it's amply demonstrated a determination to pay its debts with a program of spending cuts more severe than the US, and is now living within its income.

Liquidation in bank credit continued last week, and bank holdings of non-govt. securities declined. To date, the Fed. Reserve's easy money policy has failed to cause expansion in general bank credit or to induce banks to seek higher returns in the general bond market. There was a $45M increase in "all other" loans, but this was entirely in the NY district and it's unclear if it was due to loans made to businesses or to bank buying of bankers' acceptances.

G. Sheridan, Ohio Council of Retail Merchants dir., warns Indiana anti-chain store tax may be "the entering wedge for retail store taxation of all kinds," particularly for discriminatory taxation against large volume retailers.

D. Kelly, Nat'l Retail Dry Goods Assoc. head, endorses J. Farrell's stand in favor of maintaining wages.

Royal Dutch Co. 1930 annual report says future of oil industry depends on cooperation; “if all pull together the near future will be a good one ... but should there be a lack of cooperation, then the near future will be very dark for many ...”; calls for production restriction and expense cuts.

H. Petry of the NY Produce Exchange says business in the US has been improving steadily for the last three months and is now in a definite uptrend.

Economic news and individual company reports:

Berlin stocks plunged in first session after 3-day holiday; break attributed to nervousness over Austrian banking situation, "which is not thought to be completely solved yet." Other unfavorable factors included fall in NY stocks and political developments; some new emergency decrees are rumored. Foreign exchange featured sharp drop in marks and surge in Swiss francs; capital flight was blamed; as far as could be learned no NY credits were withdrawn. Pesetas also fell sharply.

Some nervousness attributed to news of the failure of two small London Stock Exchange houses, though they didn't affect prices in London.

Newfoundland govt. making strenuous efforts to solve crisis; many depositors withdrew money after the weekend but all demands were being met; Canadian savings banks not affected; govt. negotiating for loan with Bank of Montreal, has made temporary arrangements with them to honor current checks.

Bank of US trial likely to end within 10 days. Tennessee House votes to create committee to consider impeachment of Gov. Horton. Cyrus Eaton and Continental Shares sued for $1.1M based on allegation of illegal loan made by Continental Shares in June 1930.

Despite worldwide gold production at highest rate since the war and the cooperative efforts of central banks, gold holdings in the US and France during the first 4 months of 1931 rose by more than double the amount of new monetary gold produced in that period; US and France already hold over 60% of world's monetary gold (first 4 months output was 6.758M ounces or $139.7M, of which about 65% went to monetary use; US gold increased $128M and French $73.4M).

ICC refuses request of Eastern rail executives to initiate investigation of whether general rate increase should be ordered; rails will have to present definite proposal themselves, though it's believed the ICC will give it expedited consideration [rails had hoped a request by the ICC would be better received by the public]. Rail freight loadings for week ended May 16 were 747,732 up 283 from prev. week, down 19.4% from 1930 week, and down 28.5% from 1929. First 31 rails reporting April earnings were down 24.4% from 1930; the same rails reported an 18.1% year-over-year decline in March.

Major oil cos. cut buying price for oil from East Texas fields by about 50% due to overproduction and oil market conditions. Price cuts expected throughout midcontinent region. Gasoline prices in Chicago market weakened. Refineries ran at 68.4% in week ended May 23; stocks of gasoline fell 214,000 barrels to 45.449M. Crude oil production in week was 2.437M barrels/day, up 10,350 from prev. week and down 142,350 from a year ago.

American Machinist reports machine tool markets continue "to present a picture of unrelieved dullness"; demand light and irregular, no visible change in outlook.

Youngstown district steelmakers seen opposing rail rate increase since it would favor other steel areas with access to waterway transport.

Fairchild Cotton Service forecasts this season's cotton area at 40.983M acres, down 11.1% from last season.

Hog prices plunged 39 cents to $6.46/100 pounds in the week ended May 23, vs. $9.99 a year earlier and lowest price in 21 years.

Cigarette production dropped less than 1% in April vs. 1930, but first 4 months were up slightly. Cigar production showed a pronounced shift from the higher-priced 8-15 cent class (down 16.1% in April) to the 5-cent one (up 6.6%).

Commerce Dept. reports economic conditions abroad continued generally dull in the past week.

Brazil expected to shortly use proceeds of export tax for first incineration of a part of the country's heavy coffee surplus; coffee conference seen unlikely to reach any definite agreement for international coffee cartel.

Canadian steel production in first 4 months was 331,037 tons vs. 441,980 in 1930.

Japanese Ministry of Railways agrees to avoid layoffs and makes concessions on worker pay, avoiding a strike.

Spanish Cabinet votes to cut peacetime army from 16 divisions to 8, saving $20M/year.

Massachusetts House votes to increase inheritance tax to finance old-age assistance measure that becomes effective July 1.

Companies reporting decent earnings: Public Service of NJ.

Vaudeville:

Appearing at the Palace: Harriet Hoctor held over, with a new dance version of Louis Alter's "Manhattan Serenade," performed before a grouping of skyscraper sets designed by the Art Guild that sway with the music as the ballerina dances among them. James Barton offers "a new drunk impersonation and a dance and pantomime number called 'The Ballroom Lizzard.' He also sings a song about being 'all dressed up with a broken heart.'" Master of ceremonies is "the leisurely Jack Benny." Also on the bill are "Doctor Rockwell, the 'medical quack,' and Armida, the Mexican dancer."

Movies:

Kick In! - Clara Bow, "America's 'It' girl," triumphs over typecasting, giving an outstanding performance revealing "previously hidden dramatic propensities" in this melodrama that gives the "reliable old situation of the police hounding ex-convicts" some new trimmings. Male lead Regis Toomey acts superbly.

Shipmates - "Robert Montgomery is elevated to stardom" in this tale of life in the navy and on shore leave, where romance develops between the admiral's daughter and his character, a humble sailor who masquerades as a young oil magnate from South America. Highly romanticized but good entertainment.

Jokes:

Visitor to Jail - What terrible crime has this man committed? Warden - He didn't commit any crime at all. He was going down the street a few days ago, and saw one man shoot another, and he is held as a material witness. Visitor - And where is the murderer? Warden - Oh, he's out on bail.

Policeman - What's your name? Suspect - Smith. Policeman - give me your real name. Suspect - Well, put me down as William Shakespeare. Policeman - That's better. You can't bluff me with that "Smith" stuff.

Technician 1 - What should I use to light the Noah's ark scene? Technician 2 - The flood light.

Tuesday, May 26, 1931: Dow 132.87 -5.03 (3.6%)

Assorted historical stuff:

Newfoundland faces grave crisis, with default on bonds apparently inevitable without British aid. Situation arose May 22 after failure to obtain underwriters for $8M bond issue. Bank of Montreal then refused govt. checks, and govt. depts. have been told to stop issuing them. Officials making frantic efforts to arrange loan to meet pressing obligations at end of June. National debt is now $90.3M for population of 265,000. Rumors of sale of Labrador denied.

Dr. S. Miller, Nat'l Assoc. of Credit Men exec. mgr., warns small businesses face an uphill battle due to easy money policies; these will widen the gap with large, financially solid concerns who can usually borrow funds much more easily than their smaller competitors.

Editorial in favor of Treasury Sec. Mellon's argument that the tax base must be broadened. Govt. revenue fluctuates too much depending on economic conditions; the govt. "is now in the position of a man whose income has been seriously reduced at the same time that his expenditures greatly increase." Income taxes are collected from a sliver of the population; about 380,000 people pay 97%. Revenues should be collected from a broader base; this would "serve as a check upon reckless spending" and make revenue less sensitive to economic conditions.

P. Engel of Libaire & Co. returns from European trip, says "Europe shows everywhere a good picture to the traveler and is getting through the general business depression without any serious upset of routine life." Economic position of Italian population satisfactory; no direct poverty; govt. carrying on public works in commendable manner. Germany presents better appearance than reports; extremists of both right and left have lost ground; political situation quieting down. France suffering more in past 5 months than previously; govt. taking measures against unemployment. British govt. has tough row to hoe; "fiscal situation gives much cause for worry"; some slow improvement in sight. Reduction of military spending now an economic necessity. Stock markets oversold as in the US.

Editorial: "European statesmen" apparently were unimpressed with Pres. Hoover's strong argument for disarmament as key to solving the depression. As one example, M. Theunis, former Belgian premier, says Europe is spending more on its military than before the war because it insists on security, flatly denying military spending could be a cause of the depression. Yet, he separately blamed the maldistribution of gold on "the uncertain political situation and ... protectionist policies"; is not military spending an inseparable part of that "uncertain political situation"? This same situation apparently has caused the BIS to conclude the time is not right for extensive credit arrangements. Pres. Hoover spoke not merely of the cost of armaments, but of the "malign inheritances from the Great War" that they perpetuate.

Sen. Brookhart drafts bill that would conscript industry on the same basis as manpower in event of war; would recapture through tax all profits except return of 1 1/3% on value of physical assets.

South Wales Miners committee says low wages in British coalfields "have reduced hundreds of thousands of families to intolerable conditions and semi-starvation."

Post Office says Pres. Hoover's economy drive won't curtail spending on air mail.

Waters of St. Lawrence River reach record low level; heavily laden boats imperiled.

Supreme Court finds Irving Langmuir's vacuum tube patent invalid, reversing District Court ruling that would have given GE and group of other large manufacturers control of radio tube manufacture [decision apparently ends litigation lasting 10 years in patent office and almost 5 in court].

“Autogiro” [first successful rotorcraft] plane development continues; designers believe large transport planes of this type can be built. Advantages include ability to land in as little as 10 feet of runway with much lower speed than a normal airplane; also, in case of engine failure, craft just “slowly settles back to earth.”

Although most domestic airlines now use multi-motored planes, trend is now to single-engine craft due to greater speed and efficiency and easier maintenance.

Supreme Court decides FTC has no jurisdiction to prohibit Raladam Co. from advertising its Marmola fat reducing tablets as safe and scientific.

A new observatory was recently built at the peak of the Jungfrau Joch mountain near Basel; it will maintain weather records for the studying of "various phenomena of weather and climate, and their influences upon the various forms of life." Studies of glacier movement will also be inaugurated.

Workmen wrecking an ancient Yugoslavian building found an earthen pot containing several hundred gold coins, some dating back to the second century BC. The money is believed to have been buried by Hannibal of Carthage during his Second Punic War against Rome.

India's railways offer a private coach boasting country club appointments, a tiled bathroom, a kitchen with electric refrigerator, and servants quarters. It may be detached at any point along the line for a stopover. Charge for a party of up to 8 passengers, with 6 servants, is $9.25/day + $0.46/mile; rates lower in summer.

Canada boasts a 1,700 mile air route extending 300 miles north of the Arctic Circle, from Fort McMurray via several stops in frontier outposts to Aklavik; the mail trips, which used to take 70 days by dog-team, are now completed by plane in 48 hours, and the long route has been covered in about 11 hours flying time.

Henry Ford opens new 108-room Dearborn Inn, built to help preserve early American traditions and hospitality, opposite Ford Airport. The inn will be convenient to businessmen and tourists visiting Detroit or his nearby Edison Institute of Technology that contains Greenfield Village, a reproduction of an early American village.

Leo, the large African lion whose huge head is the trademark of a certain major film company, is to go on a world tour. When he gets to Africa, they are going to release him for three or four weeks and watch his reaction to being back in his natural setting after many years of captivity.

Market commentary:

Market wrap: Week opened with "further persistent selling"; large orders appeared at the opening, again converging on US Steel which broke to a new post-1924 low; other leading shares worked slowly down on low volume, with only 500,000 shares traded in the first 2 hours. Trading picked up in early afternoon as pressure spread to other leaders; AT&T led a decline in utilities, and rails also reacted; selling in the industrial section "was growingly insistent." Decline broadened further after Steel broke again to below 95, and sharp breaks took place in trading favorites; market heavy into the close. Bonds trended downward in very dull trading; US govts. narrowly irregular; highest-grade corp. relatively steady near recent highs while other issues turned heavy; German govts. firmed while S. American were weak. Commodities very weak; grain prices down substantially, with Sept. wheat below 58 cents, a new post-1895 low, and corn at a new post-1922 low; "general feeling of despondency prevails in both grain trade and farming circles"; cotton prices down sharply to new post-1915 low. Copper at 8 3/4 cents with larger producers asking 9; buying more active. Cocoa hit new record low.

Conservative observers pessimistic; say market's recent action indicates "generally cautious attitude was more than justified."

During the market's "phenomenal advance in 1929," some conservative observers cited a warning signal that bonds were yielding much more than stocks. These same interests now believe conditions must be closer to normal since things have reversed, and stocks are now yielding much more than bonds. However, just as in 1929, stock market participants don't seem to be paying attention. Buying during the session attributed largely to short-covering; public demand "almost entirely lacking"; lower prices caught stop-loss orders. In spite of some short covering by big operators and the public, the short interest remains large; technical rallies haven't frightened bears into covering, and it appears some unexpected positive news would be needed to force them to retreat.

Steel sentiment appears grimmer after US Steel pres. Farrell's remarks late last week; many who had predicted improved revenues in the second half now believe earnings will lag due to low prices. Rails have been more stable in recent sessions, and are drawing some interest after long neglect from observers who believe they may be oversold. Favorable factors include rumored change in attitude of govt. authorities, and prospect of rate increase, though this will take time.

Woolworth has returned to favor after its rally was interrupted a week ago by the Indiana anti-chain store tax decision. Brooklyn-Manhattan Transit has been strong on NY City transit unification prospects. Allied Chemical dividend in doubt as first 4 months barely covered requirements.

Bear leadership remains "vested in a relatively small group of operators," but they will now have to soldier on without William Danforth, who has been prominent in that group since turning bearish in mid-summer 1929. He now feels the main body of stocks has gone through about 98% of its probable readjustment and is unwilling to play for the last 2%. In fact, he has begun gradually accumulating Steel, Can, and other leaders on expectation of some business improvement in the fall.

Some observers were encouraged by very low volume in Saturday's session (only 550,210) shares. This was seen fitting into a pattern of progressively lower volume in successive phases of the bear market. Volume in the week of the initial crash in Oct. 1929 was 37.5M shares; each following important week in the decline has had smaller volume, falling to only 12.1M in the past week during which the Dow industrial and rail averages hit new bear market lows. This is seen indicating smaller amounts of forced liquidation as the readjustment proceeds; "bear markets customarily wind up in dullness" as forced selling ends.

G. Verity, Amer. Rolling Mill chair., says times have changed since antitrust law was enacted 40 years ago; control of industry has passed from hands of a few to the "public-at-large"; it's now up to the millions of stockholders in modern corporations to demand revision of antitrust law to allow needed cooperation.

L. Boysen, Chicago Mortgage Bankers Assoc. pres., calls for corporations with adequate capital to sell guaranteed mortgage bonds under State Banking Dept. supervision in order to restore investor confidence in mortgage bonds.

Dow industrial average closed at a new bear market low; there were 3 new yearly highs and 129 new lows. The utilities, after holding above their 1930 low far longer than the industrials and rails, broke to a new bear market low.

Economic news and individual company reports:

Financial difficulties of Ausbit-Lieben, Viennese private bank, cause director to commit suicide and chairman to attempt it.

Tennessee Gov. Horton likely to be impeached after legislative committee attributed poor condition of state affairs to undue political influence by the recently indicted Rogers Caldwell [large Southern investment house that collapsed in Nov.] and Col. Luke Lea.

At Bank of US trial, defendant H. Singer admitted I. Kresel, bank counsel, had full knowledge of securities repurchase agreements figuring in indictment; agreements were allegedly devised to avoid taxes.

East Texas oil area is producing 290,000 barrels/day vs. its 160,000 allowed quota; price cuts by major companies imminent barring drastic action. International Great Northern Rwy., (Missouri Pacific subsidiary), in addition to benefitting from East Texas oil traffic, now actually has oil discovered along its right of way, as its main line fortuitously goes through the East Texas oil area; it's leased 7 miles of its right of way for drilling.

Some are suggesting a Federal gasoline tax as means of smoothing revenues and broadening the tax base.

Fed. Reserve Board's index of industrial production rose to 89 in April from 88 in Mar., helped by larger than seasonal increase in car production. Both security and commercial loans at member banks continued liquidation; investments continue to increase. Increase in currency demand in 6 weeks ended May 16 attributed to banking disturbances in Midwest.

R. Whitney, NYSE pres., says was misunderstood on new rules for fixed investment trusts [similar to ETF's - see May 9 and May 22]. Didn't intend to imply that fixed trusts generally pursue unsound methods; large proportion of fixed trusts are expected to gain approval for marketing by NYSE members.

BLS reports general level of wholesale prices declined 1.6% in April and has continued decline in first half of May.

F. Tilton, third Ass't. Postmaster General, says increase of 3% in May postal receipts from April indicates improvement in general business conditions.

Some large sellers of gasoline begin offering third grade of gasoline at lower price to meet competition by cut-rate dealers.

Texas Railroad Commission warns East Texas oil production is endangering proration [curtailment]; asks oil purchasers to help enforce it.

Leaders of major industries to be invited to nonpolitical meeting and dinner in NY City Oct. 21 under auspices of Columbia Univ. and Institute of Amer. Meat Packers; sponsors include Thomas Edison, Henry Ford, Orville Wright, George Eastman, Harvey Firestone, Charles Schwab, and Adolph Ochs.

Argentina has been largest source of US gold imports this year (supplying $81.1M of total $177.3M), after provisional govt. began authorizing shipments for debt service last fall.

Canadian report: Bank of Canada says govt. may save $10M annually in interest after exchanging over $1B in 5 1/2% bonds maturing up to Nov. 1934 for new issue at 4 1/2%. Foreign trade in April totaled $85.1M (exports $33.9M, imports $51.2M). This was down $55M from Mar., down $47M from Apr. 1930, and the lowest volume for Apr. since 1922.

French car production in 1930 was 225,000 units, down 9.3% from record 1929 total; sales decline has intensified since Oct.

Shubert Theatre Corp. working with bankers on financial plan; bond interest payment due June 15 "and the current price of the bonds around 7 indicates doubt that the payment can be made."

Diamond Match [Kreuger-associated] to diversify into chemical field to ensure continued stable earnings; finances extremely liquid after recent recapitalization.

Companies reporting decent earnings: Allianz (largest German insurance co).

Catholic special:

18-point summary by T. Woodlock of recent encyclical by Pope Pius XI on current social and economic problems. Some highlights: Man's right to own property granted by the Creator to provide for personal and family needs and so that humanity as a whole may benefit from earth's resources; denial of property rights on one hand and of limits to those rights on the other are equally false. Right to own and transfer property can't be taken by the State, either directly or through crushing taxation; however, State has right to control use of property to bring it into harmony with the common good. Possessor of wealth beyond his needs is obliged to charity; productive employment of labor is commendable. Capital and labor should act more as partnership, with each necessary to the other; share of capital has tended to be too large and of labor too small; workers should receive wages sufficient to live in decent conditions. Capitalism not wrong in itself, but extreme concentration of wealth in hands of a few due to unrestrained competition can corrupt the State and make it a “slave of greed,” making economic life “hard, cruel, and relentless in a ghastly measure.” Cooperation between nations needed, as is reasonable relation of wages in various economic groups. State “syndical” (Fascist) organization has advantages but also dangers of becoming bureaucratic and interfering with private initiative. Communism and Socialism incompatible with Christianity though modern Socialism has elements of truth. Main disorders of world arise from unrestrained greed and disregard of man's purpose, which is God.

Movie:

The Smiling Lieutenant - Satire of royalty, directed by Ernst Lubitsch, starring Maurice Chevalier, music by Oscar Straus. Reveals the director's touch unmistakably. The Viennese music is also an indispensable part of the show, as in a scene where Lieutenant Nicki walks pensively downstairs as bass strings play a descending scale, each note falling precisely on the beat of his steps. Nicki is a young Austrian in love with Franzi, a violinist in a Viennese beer garden. One day as the king of Flausenthurm is visiting, Nicki winks to his sweetheart as the king's carriage passes. Naturally, this leads to his involuntary betrothal to the princess of Flausenthurm who was in the carriage (after he amazes and delights the king by spelling Flausenthurm correctly). Nicki proves unhappy in marriage; one day he again happens across Franzi and begins an affair that the princess learns of. In the expected happy ending [for this kind of film] Franzi is summoned to the palace; she and the princess become friends, and Franzi makes the "customary romantic sacrificial act" of giving up Nicki, after first teaching her to dress better and play jazz "instead of 'Cloister Bells' and similar compositions" so she can keep Nicki happy.

Jokes:

Daredevil Driver - Had wonderful luck on our run today, wonderful. Friend - In what way? Driver - The machine smashed up right in front of a doctor's office.

Visitor: Why is that beautiful urn in the living room always covered? Hostess - Oh, it contains my husband's ashes." Visitor - But I had no idea you were a widow. Hostess - I'm not. My husband is just too cheap to buy ashtrays.

Deadbeat Tenant - I trust you will allow me to leave with my laundry. Landlady - Certainly. Your other collar is downstairs.