June 19, 2010

Friday, June 19, 1931: Dow 130.56 -3.12 (2.3%)

Assorted historical stuff:

Editorial questioning Prof. Keynes' recent lectures that argued the way out of depression was to restore commodity prices to a level that could support "the vast credit structure - in other words, the massive public and private indebtedness" built up in the past 20 years; he also supports maintenance of wages. "To many Americans this will sound like an impossible admonition to salvage the new era." It expects workers who've already suffered deflation to "contribute through their purchases ... to the preservation of pre-depression wage scales for that part of labor which has so far been able to shelter itself." Keynes admits liquidation is the normal consequence of a boom era but says we don't have to accept it fatalistically. "More pertinent is the question whether we have to accept it in fact."

Editorial: Crisis in Germany appears to have passed "for a little time" as, under threat of govt. resignation, new elections, and more gains by radicals, the main parties decided not to call the Reichstag back into session. This gives the Breuning cabinet some breathing space until the Reichstag meets again in Oct.; hopefully, "some constructive action both within and without Germany will be taken in the meantime" to make the gains permanent. Business recovery "will come more quickly and be more complete if we and other nations recognize and act upon the fact that we cannot have great prosperity and security ourselves while all others lack it." As result of recent British-German meeting at Chequers, British Foreign Sec. Henderson has reportedly requested all European foreign ministers to meet July 13. Henderson and British PM MacDonald will visit Berlin July 17. Foreign currency market was quiet as “European affairs appeared to be working slowly back to a more normal basis.” That sneaky old Treasury Sec. Mellon, in spite of repeated assurances current European trip was purely personal, has conferred at length with British officials including PM MacDonald and Montagu Norman (Bank of England head) regarding war debts and reparations.

Dr. O. Ender abandons attempt to form new Austrian cabinet as all parties but his own refuse to accept proposed semi-dictatorship.

Soviet Communist Party Central Committee reprimands Commissariat of Railroads for failure to effectively use experience of foreign experts. US experts in particular have frequently complained that their highly paid advice was often disregarded.

Advertising Federation of America says business can only reach its fullest development through “widest possible distribution among the creators of wealth of an equable share of the profits and of time economies made possible by the development of machinery.”

Bruce Barton, editor, says radio, television and similar inventions offer no serious threat to newspaper advertising revenue. "Radio, even television can never achieve the permanence of the printed page. It comes and goes with the speed of light. Hence, its impression must be, to some degree, transitory and ephemeral."

"Two Frenchmen" have invented "non-inflammable gasoline" and made six journeys between London and Paris by airplane using the fuel.

Bethlehem Steel subsidiary is low bidder for construction of Golden Gate bridge superstructure, at $10.494M.

About 48% of General Foods' 44,400 stockholders are women, either owning the stock individually or jointly with their husbands; this is up from 33% in 1928.

William Randolph Hearst and David Lawrence Inc. have made competing $3M bids for the Washington Post; several new bids expected.

Intensive "Stop, Look & Listen" safety campaign appears to be bearing fruit. Number of deaths due to accidents at railway crossings was 2,020 in 1930, down almost 19% from 1929; number of deaths per registered car has declined from 1/6,600 eight years ago to 1/13,000 in 1930. While rails are gratified over the improvement, "the tripartite injunction still stands. The US Supreme Court also has ruled that if you don't so act, and you get hit; it's your funeral!"

Largest and in many ways most remarkable diamond on record is the Cullinan diamond, discovered in 1905 near Pretoria. The stone weighed 3,024 3/4 carats, or 1.37 pounds, and measured 4 inches x 2.5 inches x 1.25 inches; its value has been estimated at $2.5M - $5M. The original diamond was cut into nine stones and presented in 1908 to King Edward VII, to be placed among the crown jewels; the largest, weighing 516 1/2 carats, is now in a removable setting in the scepter.

Market commentary:

Market wrap: Trading remained very dull, dragging along at lowest level in five years; price movements in leading stocks were narrow for most of the session, but stocks generally drifted steadily lower, and what activity did develop was mostly on the downside; market was generally heavy in the last hour. Bond trading quiet, prices generally steady to firm; rails showed buoyancy after filing of rate increase application with the ICC. Commodities broke badly; grains very weak, with wheat down sharply to post-1895 lows; cotton also down sharply. Copper at 8 cents with little buying; outlook seen weak.

Conservative observers change opinion; now recommend reducing long positions during rallies and remaining on sidelines; those maintaining long positions are advised to protect accounts with relatively tight stop-loss orders; any further decline is seen indicating market trend will be downward until new base is established.

Sharp decline in railroad stocks disturbed investors who had been watching them for clues to the general market trend. Unusually small volume in recent sessions has also discouraged bulls. This is seen as reflecting inability of groups working for higher prices to attract a public following, leaving market "entirely in the hands of the professional element." Market seems to have reached a stage where the public and some important traders are adopting a cautious attitude, not renewing their buying until leading "shares definitely indicate a readiness to renew their upward trend" by moving into new high ground for the rally.

NY traction [mass transit co.] shares were notably strong on optimism conferences now being held between city and company representatives would lead to a workable unification plan. Public utilities have done relatively well in the past month or so, with Consolidated Gas the apparent "favorite in responsible quarters." Shares of farm machinery companies sold off on wheat price weakness. Westinghouse fell to a new bear market low on dividend nervousness; stock is said to be subject of active contest between traders. Chrysler gaining support based on upcoming "vibrationless" 4-cylinder car.

Bond dealers report more buying by individuals this month, though total isn't large; spreading buying activity considered encouraging; investors turning more to second-grade bonds. More financing is under discussion, particularly by public utilities.

NY State Comptroller Tremaine touted safety of Land Bank of the State of NY bonds for purchase by bankers; "secured by mortgages on homes"; enough security to "never permit default"; no instance of bonds selling below par. [Note: interesting ... not sure what happened to these through the Depression.]

Investment trust [similar to mutual funds] semi-annual reports will start appearing soon; it's likely most will show limited market operations in the first half. In spite of many conferences on mergers between investment trusts, number of actual consolidations has been small so far. However, it's still expected many of the most well-known trusts will “disappear from the picture in due course” since their sponsors “would be glad to retire from ... a thankless and unremunerative task.”

Editorial by T. Woodlock: Britain is never afraid to try economic experiments, such as the radical recent proposal of the Royal Transport Commission for consolidating rails and eliminating competition countrywide. However, its latest experiment is "little short of revolutionary," letting the North Eastern Rwy. charge a flat rate by weight, regardless of commodity type! It's time for the US to likewise reconsider many questions long regarded as settled; the tradition of competition should the first to take a long hard look at. "It is all very well to demand an expensive service (competition is tremendously expensive ... ) but it is another thing to pay for it. We have, metaphorically speaking, a Rolls Royce car in our garage, but apparently we think that our bills should be on a Chevrolet or a Ford scale."

Baar, Cohen & Co.: "The time is past when important political, banking or financial events can bring about any wide-open breaks. Stocks have been shifting from weak to strong hands, and unless something of a major unfavorable character develops we would not expect any drastic decline from this point." Expect market during the summer to feature ability to resist bad news. Sees market in "typical accumulating" phase, dull with an "imperceptible upward tendency, sudden reversals, and many minor unfavorable developments to befog the picture." Groundwork being laid for more a substantial advance starting "some time this summer and running throughout the fall, probably longer."

C. Kettering, GM VP, says business will have to be coaxed back, as it's apparently not going to come back by itself. "Suggests new ideas to vary present monotony in products."

Economic news and individual company reports:

More examples given of security prices that seem to bizarrely underestimate value of company assets, including Gulf Oil; B.F. Goodrich bonds (selling in the market for a total of $45.4M, or almost $28M under working capital); US Steel stock and bonds (bonds selling below working capital); Savage Arms (firearms - at 12 1/4, selling for 79% of net current assets, earned $1.96/share in 1930). Most intriguing example - National Distillers, which is selling below 20 though co. has about $90 worth of whiskey backing each share (after balancing other assets and liabilities - the company is allowed to sell whiskey for "medicinal" purposes).

Bank of US trial likely to go to the jury today. Defense contends defendants did not profit by transaction in which two bank affiliates paid off $8M in debts to the bank using the bank's money [note: huh?] while prosecution says person misapplying bank funds is guilty of fraud even if not personally profiting.

Most striking feature of Bank of England weekly report was 5.699M pound sterling increase in gold holdings, bringing holdings to 161.986M sterling, highest since May 1930. Bank has gained 21.845M sterling since low on Jan. 29, and "end to the acquisition is not believed to be in sight yet. ... It now appears that the Bank of England will enter the seasonal period of strain in the fall in good shape, so far as gold reserves are concerned and the strain at that time should not be unduly great." On the other hand, “a sudden shifting of French balances” could “disturb all calculations as has happened many times in the past.” [Note: England was forced to abandon the gold standard in Sept.] Total gold held in Fed. Reserve vaults “under earmark” for foreign central banks has declined by $84.5M this month, to $36.8M; this system is used to avoid shipments of gold by ocean liner, which can take weeks to arrange.

US internal revenue in May was $76.9M vs. $93.7M in 1930; 11 months ending May $2.082B vs. $2.460B.

City of Detroit financial statement for the year starting July 1, filed with Detroit bankers, estimates spending of $191.6M against receipts of $107.9M. Merced Irrigation District, with largest funded debt of any district in California, will default on bond interest payable July 1. St. Louis-San Francisco Rwy. successfully issued $10M 6% bonds to refinance $9.3M in debt coming due; this "relieved one of the most difficult situations overhanging the market."

A few prime names in the commercial paper market sold at 1 3/4%, though most remained at 2%.

Nat'l Industrial Conf. Board monthly report (based on survey of over 8,000 industrial firms) finds May business showed more than the usual seasonal drop from April; first reversal since start of the year and wiped out a considerable part of the gains since then; slowdown continued in early June.

Nat'l Retail Credit Assoc. reports retail business uneven, with volume in some sections of the country exceeding 1930 but others as much as 25% below; countrywide average down 15%.

Money in circulation June 17 was up $33M to $4.756B, total Reserve Bank credit outstanding down $22M to $907M. Member banks in NY City report brokers' loans down $71M to $1.419B; loans on securities to non-brokers down $14M to $1.727B.

State railroad commissions seen likely to oppose rate increase. Business interests and chambers of commerce have generally been against the increase, though there is scattered support from banks. Many of the protests were addressed directly to Pres. Hoover, who referred them to the ICC.

Dow average of 8 iron and steel products held at $43.58, post-1922 low. Scrap markets "practically at a standstill," making price trend hard to judge.

US electric industry budget for 1931 is $702M vs. $853M in 1930, but decline is partly due to lower material and construction costs.

British index of industrial production was 95.4 in Q1, down 3.6% from Q4 1930 and down 15.6% from Q1 1930; average industrial unemployment was 20.9% on Apr. 27 vs 14.2% a year earlier. German index of industrial production for Q1 was down 25% from a year earlier.

France reported heavy trade deficit for the first 5 months of 1931; imports were $771.5M and exports only $548.9M.

Considerable further wind damage reported to Canadian wheat since May 31; rain far below normal.

International Coffee Conference closed Wednesday; "only positive result" was asking for another meeting of exporters by July 1932.

Retail installment sales of jewelry fell 26% in 1930, though unit volume was much less affected; profits were down 83.4% due to excessive inventories.

Six independent oil refineries in California have closed within the past month due to "a demoralized gasoline price market structure."

Likely combination of IT&T and L.M. Ericsson offers interesting possibilities for consolidation of operations; each has far-flung telephone system and manufacturing operations across much of the world, including Eastern and Western Europe, Asia, S. America, etc.

Libbey-Owens-Ford wins huge contract to supply GM with almost all its glass need for 7 years; will expand plants and buy new ones. Improved showing in recent months attributed to increased demand for shatterproof safety glass.

Ford Motor points out it spent about $374M in the Detroit area in 1930, including $159M in salaries and wages, and $210M for materials, services, etc. purchased from over 450 Detroit firms. [Note: apparently part of ongoing publicity squabble with city officials.]

Companies reporting decent earnings: Connecticut Electric Service, Brazilian Traction Light & Power, Universal Leaf Tobacco.


As European theatres install modern devices such as "revolving stages, mechanical orchestras and talking screens," they are also discarding some old traditions. "Perhaps the least of these, but certainly the most vociferous" is the claquer, or professional applauder, "whose horny palms and metallic voice have been the joy of prima donnas and the despair of music lovers." Many French theatres have dismissed their claquers, and Vienna Opera House just prohibited the practice, asking audiences to defer applause until curtain calls after each act. Claquers in France attribute their decline to the talkies; "exuberant applause ... has been greatly subdued since audiences have become accustomed to the unresponsive talkie." Reaction to the loss varies. Artists at the Vienna Opera have refused to take curtain calls in protest against the ban there, while audiences seem to generally welcome "this innovation of unapplauded performances." However, one impresario predicts "opera 'regulars' will miss the seemingly spontaneous audience-enthusiasm which claquers so adroitly simulate."


"'What makes you think I was intoxicated last night?' 'You were trying to get the cuckoo clock and the canary to sing a duet."

June 18, 2010

Thursday, June 18, 1931: Dow 133.68 -1.79 (1.3%)

Assorted historical stuff:

Prof. John M. Keynes, "British economist and publicist," gave lecture at the New School for Social Research, 66 West 12 St. Disagreed with economists who feel equilibrium can only be restored through further deflation; noted "we have returned to prewar price levels, but not to the prewar level of debts and not to the prewar level of wages"; called for efforts to raise commodity prices. His arguments against futher deflation: drastic wage cuts would cause resistance from labor and threaten stability; fall in prices is against social justice since it makes debt burden intolerable. Disputes idea raised by questioner that it's necessary for a period of deflation or liquidation to follow one of inflated business; "this is the tendency, but we do not have to accept it fatalistically."

Washington report: Pres. Hoover, in recent speeches, seems to be outlining his Administration's approach to the next session of Congress and the 1932 campaign. Main theme is the choice between the "American system which holds ... that the basis of all happiness is in development of the individual," and "the other idea" to "directly or indirectly regiment the population into a bureaucracy to serve the state"; the first alternative relies on cooperation, the second on coercion. Therefore, while Hoover favors some reforms in taxes, banking, and other areas, he's against paternalism such as govt. gifts to "special groups," huge programs of public works paid for by borrowing, or Federal unemployment insurance. Administration sources insist "the President's speeches should not be given a political interpretation," but "the President's well-wishers think that this particular pose should be dropped speedily"; the presidency "can never be separated from politics," still less when a reelection campaign is nearing. Former Pres. Coolidge's decision to stop writing his daily newspaper column has heightened speculation he's considering pleas to run again in 1932, but weight of evidence is against this. Fewer statements are to be expected from politicians in the Capitol now that the thermometer is reaching into the nineties.

Editorial by T. Woodlock on NY City transit unification: "New York's transit problem has come to the place where it must be solved if ever it is to be solved." All the facts are out, and it's now merely a question of common sense, but that may not be an easy matter. Mr. Untermeyer has skillfully created a plan for the city to buy the securities of the companies now operating transit lines, and transfer operations to a new city agency. However, there's bound to be sharp differences over the price paid; "it is matters of the sort which make it almost impossible for a business transaction to be arranged upon fair terms between a civic entity and private persons." Mr. Untermeyer has ably defended the city's interests, "and as he has taken his compensation in the form of adjectives and hot temper, ... we need not grumble much over his honorarium." NY City Board of Transportation will start new series of unification conferences today to try to break deadlock with BMT. over terms of purchase by city; S. Untermeyer says will decide whether to resign as special counsel in next day or two.

J. Herbert Case, Fed. Reserve of NY chair. and Nat'l Assoc. of Community Chests pres., to head campaign to raise $82M for unemployment relief and welfare work next winter in cities of over 25,000.

New peace negotiations raise hope of settling coal strikes in W. Virginia and Western Pennsylvania; Gov. Pinchot involved. Some friction reported between United Mine Workers and National Miners Union in Eastern Ohio; coal operators there have said they will recognize the UMW.

Glenn L. Martin Airplane Co. of Baltimore is low bidder on Navy contract to supply "23 giant patrol-type flying boats" for $1.354M.

"Science, shatterer of illusions," recently spoiled another, concluding that the 300 odd islands collectively known as Bermuda are not coral islands after all, but "formed of fine sand, composed of pulverized fish shells and cemented by time and moisture." This composition does allow digging a cellar and building up a home from the workable "stone" dug out of the ground.

NY Edison will use over 60,000 tons of lead in manufacture of sheathing for underground cables to be installed during 1931-40.

The Columbus Circle location of Childs restaurant starts new "60 cents for all you can eat" policy today, becoming fifth location to do so.

"Few die, and none resign." This famous remark was made many years ago about US govt. civil servants; it remains as applicable today. So many young men are now eager for government jobs that the US Civil Service Commission is immediately filling vacancies even in the most technical positions. However, educators now realize govt. service offers "little opportunity for enduring success or adequate financial compensation" and are advising college graduates to seek other employment.

Advertisement for the “Radiumator,” a home machine for treating drinking water. “Each RADIUMATOR is thoroughly tested and is guaranteed to contain real radium, producing daily a high therapeutic dosage of Radium Emanation. Diffused in water it will produce daily a far greater dosage ... than is found in the waters of the world's most famous Radium Springs.”

Market commentary:

Market wrap: Stock market session was dull and generally featureless, except for a renewed drive on the major rails attributed to disclosure in their petition to the ICC that maintenance had been drastically cut this year, possibly overstating earnings. However, industrials remained fairly steady in spite of continued bad steel news. Bonds moved narrowly in quiet session; US govts. dull, firm; only notable movement in foreign issues was continued gain in German bonds; domestic corp. showed moderate strength. Commodities narrowly mixed; grains firm; cotton somewhat lower. Copper offered at 8 cents but practically no metal changed hands.

Conservative observers continue warning against short selling; favor purchase of stocks only on reactions and using stop-loss orders for protection.

NYSE volume was 900,000 shares, first time a 5-hour session fell below 1M shares in almost 5 years. Brokers, while acknowledging market dullness might make it hard to meet their overhead in the near term, were generally encouraged by the dullness, since "bear markets invariably are followed by a time of sluggishness, reflecting the exhaustion of the liquidating movement ... As a matter of fact, the development of a period in which discouragement ruled as to whether speculation would ever be revived, has usually been the best sign" a recovery was about to begin. Current fundamentals are poor; business continues to plumb the depths, foreign uncertainty is acute, and bank failures widespread. This would induce active selling if any liquidation was overhanging the market. "Consequently, the more dullness becomes intensified in coming weeks, the greater confidence will be that the end of the severe bear market over the last 22 months is at hand."

Yet another subtle positive sign of a turn in the market is the ability of some individual stocks, including Woolworth and Chrysler, to respond to good news. During previous dull periods in the bear market, individual stocks generally broke out of range to the downside, but bears have recently had little success in producing "airholes" of this type.

Freight car loadings have also shown signs of subtle improvement; aside from the holiday week of May 30, year-over-year decline has steadily declined from 19.8% in the May 9 week to 18.6% in the June 6 week. However, some financial district observers had anticipated a somewhat higher figure for the last report.

New bond offerings seen remaining low in second half; industrial borrowing likely to remain small until business recovers; real estate “still awaits ... corrective factors and the return of confidence”; rails likely to minimize borrowing; foreign issues “practically barred” due to political and economic uncertainty. Municipal and utility issues likely to dominate new bonds for near future.

Movie company stocks have been drastically deflated; at recent lows, all of the leading stocks were selling at less than 3 1/2 times 1930 earnings. This decline is probably excessive. Movie earnings showed striking increases in 1929 and 1930 due to the novelty of sound films and higher ticket prices. The novelty appears to have worn off, and a number of cuts in ticket prices have been made; in the near future the average admission will likely fall from 35 cents to 30. However, there seems to be plenty of room to cut costs; "the film industry traditionally is extravagant, so current developments may prove a blessing in disguise ..."

H. Parson, Woolworth pres., says company reports from all sections of the country show gratifying improvements in sales; gauged by Woolworth sales, believes business generally has turned the corner and is on the uptrend. In Germany, where Woolworth operates 63 stores, Parson said business also continued to be good.

Economic news and individual company reports:

Germany is reportedly seriously considering declaring a reparations moratorium under the Young Plan in July instead of waiting as had been earlier reported. Reichsbank has had to continue defense of mark, selling 60M marks of foreign currency Tuesday; total sales of gold and foreign currency estimated at 1B marks. Evidence accumulates that US and British banks have been recalling German loans despite official assurances. Flight of capital into Switzerland particularly heavy.

Recovery of mark seen dependent on clearing up of political situation and definite settlement of the Creditanstalt's affairs. Hopeful news on that front comes as danger of a moratorium [on bond payments] by Austria appears to have been averted by agreement of Creditanstalt's foreign creditors to extend credits for two years, and by offer of Bank of England for temporary loan of 150M schillings renewable weekly. This relieved anxiety over the prolonged wrangling with French bankers on terms for discounting 150M Austrian Treasury bill issue; the French govt. reportedly was demanding Austria abandon plans for economic union with Germany. Creditors of Amstelbank of Amsterdam met in London; Amstelbank is an affiliate of Creditanstalt, with liabilities of about 10M sterling. Marks were higher and stocks rose in Berlin; leading bankers in NY believe worst of German crisis passed; expressed satisfaction at latest Austrian developments; France drew some criticism for delay in providing credit, charged with using wealth to “further her political desires.”

Security-Home Trust of Toledo, Ohio closed due to heavy withdrawals attibuted to “undue fear caused by the business depression”; over $20M in deposits, including county, city and school board funds.

Railroads file application with the ICC for 15% increase on all freight rates; ICC says will give the petition its prompt attention. Representatives of life insurance cos. and savings banks [note: large holders of rail securities] considering cooperative action to improve rail situation; Nat'l League of Commission Merchants announces opposition to rate increase on fruits and vegetables, pointing out freight charges are already up to 80% of farm value. Editorial: Rail case is not about getting a "fair return" on property, but about practical consequences of situation approaching an emergency. As admitted in their petition, rails are now deferring maintenance, "grinding up their roadbed and equipment," in order to overstate net operating income; this is the only way many can cover interest charges and remain solvent, but it's "an emergency expedient." Insolvency of rails and resulting decline in their bond values would seriously hurt millions of savings bank depositors and insurance policyholders. Shippers and state rail commissioners who may oppose the rate increase must contemplate whether it's better to suffer these drastic consequences or to pay the rails "a little more for performing three-fourths of the transportation service which the country must have." Railroads are trying to reclaim some traffic from trucks using faster freight trains, including the new "Maine Bullet" from Portland to NY City and the "Speed Witch" between Boston and Baltimore. The "Maine Bullet" travels from Portland to NY City [about 300 miles] in 12 1/2 hours.

Commerce Dept. reports May exports $205M vs. $319.4M in 1930, and lowest monthly total since Oct. 1914; imports $182M vs. $284.6M, and lowest since Sept. 1921; important factor in decline believed to be loss of buying power in main US export markets, which are largely commodity producers.Agriculture Dept. reports prospects for US agricultural exports poor; no significant turn seen in European economic or demand conditions up to latter part of May; contrary to usual seasonal trend, unemployment increased in some countries, notably France and the Netherlands.

Steel production for week ended Monday was under 38% vs. 39% prev. week, 41% two weeks ago, 68% in 1930, and 96 1/2% in 1929. Youngstown district steel production dipped 2% to 40% at midweek. Weekly steel reviews were rather dismal, giving pessimistic outlook for midsummer with prospects of temporary shutdowns in the automotive industry and in parts of the steel trade itself; demand was down in all lines but structural. However, sentiment was reportedly "distinctly more buoyant" on "intangibles" including prospects of higher prices; Bethlehem and a number of other large producers have already steel increased sheet prices. Steel industry is increasingly favoring rail rate increase; it's believed resulting increased costs could be passed on, and rails might then increase steel buying.

US electric output for week ended June 13 was 1,581 GWHr, down 4.9% from 1930, vs. a 2.9% decline prev. week and 3.8% two weeks ago.

Govt. weekly weather report: beneficial showers in some parts of the Northwest but insufficient to generally break drought; spring wheat condition poor. Winter wheat conditions good in many sections. Cotton weather favorable. Administration says drought not yet serious enough to call special session of Congress.

News of earthquake in Japan had little effect on yen exchange.

Polish budget reduced to $272M, or $55M less than voted by Parliament; govt. salaries to be cut 15%.

International Tin Committee sets worldwide production quota of about 125,000 tons/year vs. about 173,000 in 1930 and 188,000 in 1929.

Ford executives and Detroit officials trade charges; Mayor Murphy denies administration of city unemployment relief "honey-combed with graft"; T. Dolan, supt. of public welfare dept. that was attacked by Ford as "antiquated and inefficient" sends letter to Edsel Ford asking the company to assume responsibility for thousands of workers allegedly destitute due to Ford layoffs.

NYSE seat sold for $200,000, down $7,000 from previous sale.

R.J. Reynolds cigarette sales in May rose to a record high, attributed to advertising campaign; stock has been well supported.


I Take This Woman - Paramount film, at the NY Paramount. Fairly entertaining in spite of "hackneyed plot" and "mechanical" acting by Gary Cooper and Carole Lombard, thanks to skillful direction and good photographic technique. Lombard regrettably "permitted herself to assume Garbo poses in the film, for they are so undeniably the art of the Scandinavian actress that they detract from the work of others who affect them." Kay Dowling (Lombard) falls in love with Tom McNair (Cooper), manager of her father's ranch. After a lonely winter at the ranch, she leaves him and goes back East; she returns after seeing him injured in the rodeo. Stage act includes Rudy Vallee and Libby Holman in On Ze Boulevard.

The Viking - Shot on location in Newfoundland by Varick Frissel before "ill-fated second voyage into the icebound Arctic waters" [to shoot more action sequences for the movie; boat exploded, killing 27 men including Frissel]. Little to be said regarding old-fashioned plot including "a stalwart hero, a bewhiskered, swaggering villain, and a lovely heroine who waits at home"; acting is "on a par with that in the average high school graduation play." Does contain some striking sequences of seal hunters trekking over the broken ice in search of the seal herd, and of the seals themselves; in one scene, a mother seal hears the cry of her baby in distress when the shooting begins, glides rapidly over the ice and drags her into the water "beyond reach of the bullets of the great enemy, Man."


'Did you hear about Johnson making $1,000,000 in US Steel?' 'Yes, yes, I heard all about it, but you haven't got it quite right. It wasn't Johnson, it was Thompson. It wasn't US Steel, it was Anaconda. It wasn't $1,000,000, it was $100,000. And, he didn't make it, he lost it.'

June 17, 2010

Wednesday, June 17, 1931: Dow 135.47 +0.21 (0.2%)

Sober common sense dept.:

Editorial by T. Woodlock arguing current security prices are a “golden opportunity” for investors.
Opens with oft-told tale of a Rothschild who advised a friend to buy bonds during a time of political “instability” in Paris. “'But,' his friend protested, 'the streets are running with blood!' 'Certainly,' was the banker's reply. 'If they were not you could not buy ... at these prices.'”

Three times so far in the bear market (Nov. 1929, Dec. 1930, May 1931) “we have had conditions in the market which can be described truly as ... unreasoning fear” or panic, with prices reaching lower levels each time. “But what is all this other than the golden opportunity for the prudent investor? ... How can he expect to get bargains except when most other people are, through fear,” selling for whatever price they can get? Bonds on which interest continues to be paid are selling to yield 6%-12% or more; stocks are trading at the value of short-term assets, with no value assigned to factories or future earnings prospects. There can be little doubt we now have a multitude of bargains on offer, barring “a really world-wide collapse of the financial and economic structure”; as dark as that structure looks when painted by “the most extreme among observers of today, precedent and experience” argue against such a collapse.

It seems easy looking back on previous panics to recognize all the bargains available then; as we can see now, it was not in fact easy because of “the tremendous power of the prices themselves (either at top and bottom) to inhibit the right action.” As the old Wall Street saying goes, "bulling stocks at the bottom is hard work."

There have been times in the past when "large portions of the planet suffered secular changes and what we call 'civilization' was temporarily eclipsed"; these may come again but it's futile to plan for this, "for there is no way to protect oneself in such a contingency." Short of another such episode, it's likely "at least the preliminary preparations for a beginning of the commencement of the foundation for a return to reasonably normal conditions are being made" [note: whew!] and that's all an investor needs to know.

Assorted historical stuff:

Pres. Hoover speaks to Indiana Republican Editorial Assoc. Rejects idea of advance "plan" for US development as infection from Russian 5-year plan; instead, "I am able to propose an American plan to you. We plan to take care of 20M increase in population in the next 20 years. We plan to build for them 4M new and better homes, thousands of factories ... to provide new parks, schools, colleges and churches for this 20M people. We plan more leisure for men and women and better opportunities for enjoyment ... we shall by scientific research and invention lift the standard of living and security of life of the whole people." [Note: Ya know, Hoover wasn't such a bad speaker ...] Favors "expansion of useful public works in hard times" but against huge bond issue or tax increase to finance public works since this would rob industry of capital. Opposes Federal unemployment insurance as leading to dole, instead advocates insurance through industry-labor operation. Opposes tariff revision, saying mechanism for correcting tariff problems is functioning. Condemns "raids on our [security and commodity] markets" by small groups who increase fear, but doesn't mention any preventive legislation. Does mention strengthening Fed. Reserve system and banking reform; condemns capital gains tax; real estate tax burden too heavy. Says revolutions in many countries have spent themselves; stability is increasing and forces of recovery are asserting themselves.

Editorial praising Pres. Hoover's speech rejecting idea of a "plan" for the US and offering instead an "American plan" based on flexibility and individual initiative. A planned economy in Russia "is the natural and even necessary successor to the ancient autocracy which decayed and disappeared." However, despite fear-mongering, the people of the US should stick to "their own flexible scheme of ideas" that has "worked marvelously well on the whole" over its history.

German crisis averted again as Breuning convinced members of Reichstag steering committee not to call special session. Observers feared recalling the Reichstag would lead to debate on the highly unpopular austerity decrees, and possibly to fall of the govt. and new elections; this in turn “would probably result in another startling gain in radical strength, probably precipitating another financial crisis.” As matters stand, Reichstag won't reconvene until Oct. 13, giving Breuning govt. several more months to work out difficulties without “political hindrance.” German govt. sources said would postpone declaring reparations moratorium until August, hoping to reach debt holiday agreement with creditors instead. Berlin stocks and bonds were higher, while pressure on the mark seemed to ease. However, continued heavy international transfers of gold took place Tuesday; attributed to Reichsbank's defense of marks.

Editorial: The NY Fed's report of Monday the 15th revealed over $41M in gold released from a foreign account, assumed to be by the Reichsbank to support currency; there have been other heavy releases of gold lately. Germany is hard-pressed, and making strenuous efforts to maintain her position. "When a horse is struggling to pull uphill a load that taxes his strength, platitudes and words of encouragement of those in the wagon do not help him. Real help would be to get out and lighten the load. The nations that are the most interested in seeing Germany get to the top of the hill are all in the wagon. ... Germany has shown that she deserves the world's faith in her; she also deserves something more substantial than mere faith."

Commerce Sec. Lamont appoints Donald Sawyer of NY City to new Federal Stabilization Board set up by Congress at last session. Board is to do advance planning of all Federal construction to prepare for future unemployment relief.

Pres. Hoover and former Pres. Coolidge dedicate memorial to former Pres. Harding; Hoover calls him a man of fine character whose administration had many accomplishments, but who was betrayed by a few he believed to be devoted friends. Hits betrayal of public trust as worst of crimes.

Herald Tribune reports William Randolph Hearst may make bid for the Washington Post; price put at about $3M.

"Henry Ford planting cantaloupes on experimental farm in effort to produce alcohol for automobile paint. Will attempt to grow every raw material necessary for an automobile."

Chrysler demonstrates new “vibrationless” 4-cylinder car; patented development “amounts to a basic change in the construction of a car,” approaching “smoothness of an electric motor.” Some observers believe “the innovation may rank equally with four-wheel brakes, the self starter, and the closed body.”

William Rockefeller's long-ago response to a hostile Congressman's question “What do you regard as Standard Oil's greatest achievement?” - “Dividends!”

Japanese women "recently won the right to become full-fledged Buddhist priestesses"; development seen likely to "revolutionize the priesthood." Training schools have already been established in Tokyo and Kyoto. Will not be required to shave heads.

The Seamen's Bank for Savings is exhibiting a collection of old toy savings banks showing a variety of ingenious strategems for inducing children to part with their coins. Coin-snatching figures include a circus elephant, a soldier with a cannon, an eagle guarding her eaglets, and William Tell "who shoots a nickel over his son's head, never braining that staunch lad regardless of how hopeful may have been the young spectators."

Market commentary:

Market wrap: Leading stocks opened weakly, with rails again subject of profit-taking. However, trading turned very dull on the decline, with volume in the first 3 or 4 hours reaching the lowest level since July 1926. Stocks turned "virtually motionless" through mid-day, with trading remaining very small. Firmer tone developed in afternoon; trading picked up quickly the moment prices turned up; rally gained considerable momentum in the last hour, led by strong comeback in rails. Bond market unsettled by severe slump in second-grade issues, particularly rails, while highest-grade rails only suffered small losses; US govts. steady to firm; European list featured continued strength in German bonds, steadiness elsewhere; S. American mixed with break in Chilean on default rumor while Brazilian and Argentine issues rose. Commodities mixed; grains narrowly mixed despite Farm Board announcement on continued sales; cotton up sharply on short-covering despite continued good weather. Copper remained at 8 - 8 1/4 cents with little buying; some consumers are asking for Q4 and Q1 1932 deliveries but are unwilling to pay more than 8 cents.

Conservative observers say market action satisfactory, continue to recommend careful accumulation on reactions, with stop orders for protection.

Low early volume was encouraging to observers who believed market "would have to pass through a period of intense dullness before it could be concluded that liquidation had run its course."

Financial district is convinced rails will receive an increase in freight rates, though it's likely to be less than the requested 15%. NY City traction [mass transit] shares declined after surprise action of IRT and BMT in rejecting Untermeyer unification plan as basis for hearings. Situation now unclear, with "several courses of procedure" now possible. Transit Commission will continue hearings without company participation. A broker reports information from a source accurate in the past that Woolworth will declare a 25% stock dividend and raise its cash dividend after completing offering of its British stores.

While business conditions haven't significantly improved, business sentiment appears better thanks to the market rally; businesses are making plans aiming at improving their operations; "view is held that the stock market may be reflecting an improvement in business later in the year."

Interest on the long side of the market seems to be increasing, though it's reflected more by inquiries from the public than any evidence of larger buying. Many interests continue to look for a secondary reaction; they will be more likely to adopt the long side if stocks draw impressive support near lows of the last decline.

Bond dealers and investment houses note investors are concentrating on best-grade bonds, marking them up to high prices while neglecting almost completely bonds not as widely known but offering reasonable security; this marks "swing of the pendulum to ultra conservatism from the late era of speculation."

G. Cortelyou, Consol. Gas of NY pres., cites "need for public understanding of the utility business"; calls for advertising to "create an intelligent and enlightened opinion." W. Hodge, Byellsby Engineering VP, hits "advocates of the collective ownership and operation of business and industry"; says they want to risk hundreds of millions of public money on unsound projects such as Muscle Shoals "merely for the sake of harassing the power companies and moving forward toward political control and the general scheme of socializing all American industry, including agriculture."

Sir James Salter, former League of Nations economics section director, says industry and finance must take collective action before next boom in business develops in order to avoid even worse depression afterward; calls for restraints on speculation and loans to unsound governments.

Economic news and individual company reports:

Weekly bank reports indicated “getting out of debt still seems to be the primary concern in finance.” Loans have declined almost uninterruptedly since start of year; earlier in the year both commercial and security loans were liquidated but lately commercial loans have only declined slightly. Fed. Reserve June bulletin reports commercial loan rates charged by banks have declined in much of the country, though trend is less visible away from “principal money centers.”

Review of 1930 gold movements shows unusually large addition of $600M to central bank gold reserves vs. total gold production of $400M; however, most of the increase went to the US and France, while “outlying raw-material producing countries” lost gold and “other large commercial countries” were steady.

Contrary to recent rumors of extensive layoffs, Ford Motor Co. factory employment is a little over 79,000, up several hundred from last week and compared to 84,000 during peak operations in April. About 50% of employees are on a 3-day week, 18% on 4 days, and 32% on the full 5-day week.

Supreme Court decides representation that City Trust Co. stock was worth $325 a share three months before the bank failed did not constitute fraud in selling stock, and stockholders who gave notes for their shares must now pay the defunct bank.

S.W. Straus reports May construction permits in 555 cities were $139.5M, down 30% from 1930 and down 18% from Apr.; average seasonal decline is 11.8%.

Rail freight loadings for week ended June 6 were 760,890, up 49,956 from prev. holiday week, down 18.6% from 1930 week, and down 27.9% from 1929.

Refineries ran at 67.5% in week ended June 13; stocks of gasoline fell 587,000 barrels to 43.410M. Crude oil production in week was 2.463M barrels/day, down 11,850 from prev. week and down 108,400 from a year ago.

Farm Board announced it would continue to sell wheat abroad as long as it doesn't disturb world markets; believe drought in Northwest and Canada will have bullish effect on wheat prices. Much of Canadian wheat acreage too badly damaged to recover regardless of rain. Farm price index as of June 15 expected to show further decline from 86% of prewar level reported on May 15.

Russia and France open negotiations on Russian demand for 2 to 5 year credits for purchases totalling 1.5B francs with 100% guarantee by French banks.

Spanish Fin. Min. Prieto says stabilization of currency needed, but due to its provisional nature current govt. is unable to carry out previous stabilization plan; must first insure stability of new Republican regime. In meantime, national spending will be drastically cut and all ambitious plans abandoned. Bankers state Spain represents “perfect example of the so-called gold fallacy”; large gold holdings don't ensure stable currency unless monetary authorities are ready to freely use it; contrast Spanish attitude with unhesitating action of Reichsbank to support marks, avoiding “chaotic condition.”

Canadian income tax receipts in May were $36.8M vs. $50.1M in 1930; customs and excise taxes $19.8M vs. $25.8M; imports $73.5M vs. $101.5M; exports $48.5M vs. $64.1M.

Many Mexican workers' organizations have petitioned the govt. to replace 8-hour shifts with 6-hour to relieve unemployment, pointing out the 6-hour system is being used successfully in many US industries.

As it already has in the US, transport by trucks is making increasing inroads on rail freight revenues in Japan and Mexico; gain attributed to better highways.

Production of new life insurance in first 5 months of 1931 was 12.3% below 1930.

Nat'l Confectioners' Assoc. says Russian candy of inferior quality and with misleading labels is flooding the US market.

A firm and competitive municipal bond market has led to some premature gray hair among syndicate men charged with submitting sealed bids for new issues. In a recent auction, one group outbid another for a $5M issue by one cent per $1,000 bond.

NYSE seat sold for $207,000, down $5,000 from previous sale.

IT&T will take “a dominant interest” in L.M. Ericsson Telephone of Sweden, buying 600,000 nonvoting shares for $7.1M.

General Foods earnings for first 5 months about at 1930 level; new flavors help Jell-O sales; distribution of Birdseye quick-frozen products extended to 6 Eastern states. Scott Paper expected to report record highs for both sales and earnings in the first half; record 1930 business attributed to intensive advertising and sales campaign. US Tobacco seen having good prospects of adding to its record of 16 straight annual earnings increases; sales are running even with 1930 and the company is operating more efficiently. Vacuum Oil has rebounded to over 40 from low of 22 1/8 before govt's favorable merger action.

Companies reporting decent earnings: General Foods, Scott Paper, US Tobacco, Telautograph (machines transmitting diagrams by wire), Sweets Co. of America.


Just a Gigolo - MGM film, at the Capitol. Career of star William Haines continues to take off thanks to the talkies; in this film, he plays Lord Robert Brummell, "a bounder, even though a charming one ... He prefers the company of married women, although there ... is the risk of encountering errant husbands." His affairs "come to a climax" when his uncle refuses to support him further unless he settles down and marries Roxana. Brummell makes [somewhat mystifying] counterproposal that he will agree if he's unable to seduce her within a month; promptly falls in love. "A charmingly executed film."


Appearing at the Palace: Willie and Eugene Howard reunite, adding "new and amusing gags" to their "Interview" act; Willie repeats "his familiar characterizations of George Jessel, Al Jolson, Eddie Cantos, and Maurice Chevalier." [Note: I think that Willie guy is still appearing in Vegas ...] Audiences are equally enthusiastic about the return of Cab Calloway and his Missourians; the band leader is "continuously more resourceful in eliciting unusual harmonies from his players and in producing curious blues effects with his wailing, high-pitched voice"; band closes with "the ever popular 'St. James Infirmary Blues.'" New acts include J. Fred Coots, the song writer, sitting at the piano reciting "lyrics introducing Frances Upton, tall and pulchritudinous 'Whoopee' girl discovered by Florenz Ziegfeld."


'Why did you call your second twin Encore?' 'Well, you see, he wasn't on the program at all.'

June 16, 2010

Tuesday, June 16, 1931: Dow 135.26 -1.77 (1.3%)

Assorted historical stuff:

[Note: That's crazy talk! dept.] Sir Basil Blackett, Bank of England dir., sees world faced with partial repudiation of debts. Urges abandonment of gold standard and varying volume of money as needed to keep prices stable. Henry Ford calls present depression a recovery from prosperity founded on stock speculation; sees annulment of German war debts by next generation. L. Zimmerman, head of Zimmerman & Forshay bank, urges concerted action by US and allies to cancel or at least substantially reduce German reparations. Chancellor Breuning's Catholic Party advocates reparations revision plan as “only means of saving Germany and other European nations from revolutionary upheaval and untold misery.”

Asst. Commerce Sec. J. Klein hits “utterly false notion that we have not played fair in money matters with other nations of the world.” French Foreign Min. Briand asks League of Nations to discuss unsatisfactory German execution of the Versailles treaty, particularly with regard to military matters.

Editorial: “A 7 per cent rediscount rate at Berlin means that Germany is fighting with her back to the wall”; at stake is not just the reparations situation but threatened “withdrawal of foreign liquid capital without which her industry and commerce could hardly carry on.” Normally, higher rates might lead to resumed long-term loans, but as the German govt. pointed out they've already gone to the limit of safety in borrowing to meet reparations. Germany is likely close to conditions that allow her to postpone reparations under the Young Plan; unfortunately even that moratorium offers too little relief to help with the near-term emergency.

Editorial by T. Woodlock: Unemployment this winter is almost certain to be even worse than last year. Experience then made clear that private charity, while generous, will be inadequate; govt. funds will be needed, “to a considerable extent”; much may have to come from Federal sources due to “orgy of borrowing and spending in which so many states and cities have engaged”, leaving finances “approaching an unsound position.” The existing private and public agencies should be coordinated under “unified command” to avoid waste, though this should be done with “extreme tact and discretion.” Much legislation of doubtful soundness is likely to be considered; it's time for business leaders to consider solutions in form of some type of unemployment reserves on a national scale, rather than labelling and dismissing such schemes; unemployment problem is likely to be a long-term one, caused by both business cycles and automation.

Ford Motor refutes charges of indifference to workers' welfare; says welfare work by Ford started in Jan. 1930, 6 months before unemployment appeared in the industry, and thousands of visits have been made to check on condition of workers' families; visits resulted in medical and other aid, mostly jobs. Cites Henry Ford Hospital, with expenses borne by Ford family. Checked list of 3,960 men provided by Detroit Welfare Dept. who claimed Ford as last place of employment for over 6 months; found 1,315 never worked there, 324 were still working there, over 300 had left voluntarily, and 164 had been fired for cause.

US govt. submits report on military strength to League of Nations, which in Jan. asked all countries to make such reports to prepare for disarmament conference in Feb. So far only other govt. to comply is Russia. Land forces were 139,957 officers and men; defense spending in year ended June 1930 was $835.8M; Army had 965 fighting planes, 550 trainers and 49 transports; Navy 787 planes, 18 battleships, 3 airplane carriers, 15 cruisers, 227 post-war destroyers, and 90 submarines.

US Weather Bureau reports another drought prevails this year in a large part of the Northwest, including Idaho, Oregon, western half of the Dakotas, and parts of Montana and Washington; drought appeared earlier than the one last year; winter wheat crop almost all gone in Oregon and Washington; spring wheat in poorest condition on record. Farmers in parts of Montana have applied to the Agriculture Dept. for drought loans, but appropriations for that purpose have expired.

League for Independent Political Action, headed by John Dewey, files protest with the ICC against 15% rate increase, on grounds rails are generally owned by wealthy people who "have not been seriously affected by the economic depression" while a rate hike would "plunge the farmers and consumers deeper into distress."

China builds first “automobile truck” using “parts largely imported from the US and the expert advice of American automobile engineers.” Truck was made in plant at Mukden, which will now turn out 15 trucks a month; some parts will be made in the factory.

Thomas Edison ends 48th annual Florida vacation with announcement he has successfully vulcanized rubber made from goldenrod; will soon construct large scale factory and plant 1,000 acres on Henry Ford's plantation near Savannah, Ga.; plans to donate project to govt. for emergency wartime supply.

Internal Revenue Bureau reportedly refuses $4M offer for settlement of Al Capone tax case, wanting to carry case to jail sentence.

Pennsylvania Gov Pinchot calls conference of United Mine Workers and Pittsburgh Terminal Coal Corp. for Thursday.

British Labor govt. suffers surprise defeat on land tax as Conservative amendment is approved by House of Commons; exempts estates based on agricultural value even if not used for farming; PM MacDonald said govt. would accept the amendment, preventing immediate crisis. "The vote indicated a well-planned tactical maneuver by the Conservatives to muster their supporters at an hour when the Labor and Liberal attendance is normally low." Labor government has been defeated frequently since taking office 2 years ago, but MacDonald has always decided issues weren't important enough to bring down the govt., leading Winston Churchill to refer to him earlier this year as “the boneless wonder.”

W. Glover of the Post Office says radio is cutting deeply into mail revenue by reducing volume of mail advertising.

The Oberammergau Passion Play of 1930 has ended its run. Gross receipts were about $1.250M and profit about $500,000. There were 1,156 people paid, with leading actors getting $250 and young walk-ons $10-$15. his covered 79 performances and months of rehearsal; the musical part alone was rehearsed 300 times before the first performance.

The first Protestant church in the world, the Schlosskirche in Prussia, built in 1544 under Martin Luther's direction, is to be restored as a memorial.

An English rubber Company tests boots and shoes by employing two girls to walk around in them. In the 4 years they've been employed, they have walked 12,000 miles, or an average of 12 miles per workday; the exercise is said to have given them perfect health.

The "tonic properties of ... healing springs may be made available right in your own office." A US company has invented a practical way of capturing and using "the emanations of radium, that most valuable possession of the famous thermal springs of Europe and which is so efficacious as a treatment in the ills of mankind. This precious quality has been translated into gaseous form ... and rendered easily applicable to ordinary drinking water. The consoling idea of radioactivity, at least in the water cooler, might offer some little stimulation to the trader long bored by a sluggish market."

Market commentary:

Market wrap: Stocks opened the week moving higher on quiet trading, but became irregular again as the morning progressed, with mixed movements in individual issues; trading was in a narrow range at midday but picked up activity on the downside in early afternoon after several more Midwestern bank failures; Steel and other major industrials suffered setbacks, and extensive profit-taking came into the rails. However, support appeared on the decline, and late trading was again in a limited range. Bond market featured broad and strong rally in foreign issues, led by German; US govts. slightly irregular; domestic corp. issues moved in a narrow range but ended mostly higher, with notable improvement in various second-grade issues. Commodities soft; grains off moderately; cotton little changed. Copper still at 8 - 8 1/4 cents with little metal changing hands.

Observers see market under professional control, likely to "continue irregular within its recent range." Advise against adopting the short side, favor buying gradually on reactions, protecting accounts with stop-loss orders.

Coca Cola has been subject of "important buying" on reports of well-timed large purchase of sugar at around the low price.

NYSE volume for Monday was 1.3M shares, lowest since Feb. 2.

Market last week demonstrated encouraging ability to ignore unfavorable news; several news items which would have previously "upset the list" didn't cause any heavy liquidation. Observers closely watching for any resumption of public selling, which may indicate a renewed downtrend. Indications are that the relatively small group of operators working to advance the market has attracted a following among NYSE floor traders; they're now believed working to encourage the public to join in. "If they are able to build up an outside [public] demand, it would go a long way toward establishing higher prices for many of the standard shares."

Market observers are watching the current rally closely since it has lasted about 10 days, or about the same as the technical rally starting in late April that gave way to a renewed bear movement. It's believed "ability of the rising trend to carry on for several days more would strengthen indications of a definite turn in the main trend of prices." An important point in favor of the current rally is that it's been led by the rails; last time, rails failed to confirm the upturn in the industrials which, as throughout this bear market, indicated a renewed downtrend. "This greater vigor on part of the carrier shares has been the most stimulating influence that bullish sentiment has enjoyed a long time." Rails should continue to be well-supported on prospects of a freight rate increase.

R.W. Pressprich & Co. point out that "in the past 10 years no reaction of any consequence ... has started between June 24 and Sept. 10"; the industrial averages showed a gain between those two dates in all 10 years, even though this includes the bear market years of 1921 and 1930.

It's unlikely any new managed investment trusts [similar to mutual funds] will be launched until the market turns. However, plans have been made for new types of trust to be launched when possible. One new feature would be greater assurance of dividend payments, since income is now almost essential for most investors. Also being considered are formulas that would force trusts to shift money from stocks to bonds when prices rise “so that the end of the bull market will not find them loaded up with common stocks”; “it is hoped that some method may be worked out by which they will be forced ... to take profits near the height of a bull market.”

C. Hanch, Nat'l Assoc. of Finance Cos. GM, sees potential US demand for over 5M cars because of obsolete models now in use; "practically all the cars manufactured prior to 1927 are obsolete and many of them should go to the junkyard"; there are 5.126M cars made before 1925 now in use.

Economic news and individual company reports:

Gold continues to pour into the US; June imports have been running at annual rate of $1.8B. Influx seen likely to keep “credit rates in this country at abnormally low levels for a long period.” Austrian discount rate raised from 6% to 7 1/2%. Hungarian discount rate raised from 5 1/2% to 7%. Berlin stocks continued Saturday's rally on Monday. Marks were steady. German trade balance continued to improve in May thanks to lower imports; surplus was 162M marks ($38.6M) vs. 126M in Apr. German Fin. Min. Dietrich says reparations burden has forced govt. to drastically curtail imports, including wheat and crude oil.

West Palm Beach bondholders committee representing holders of over $5M in bonds rejects settlement proposed by the city.

A large number of industrial bonds trading on the Curb Exchange [later Amex; small cos.] now yield between 10% and 25%.

Several small to medium size banks in Illinois, Indiana, and Michigan closed; largest was Pontiac Commercial & Savings Bank with $16M deposits.

Bank of US trial likely to go to jury Wednesday or Thursday.

US Steel makes first move to reduce salary expenses by ordering cuts in clerical forces.

The cigarette industry, which already yields the Federal govt about four times as much income as cigarette manufacturers get, has increasingly been looked to by states in recent years for additional tax revenue; 12 states now tax them, though the most populous states have so far rejected cigarette taxes. Where it has been possible to track sales volume, no effect on sales is yet visible from the state taxes.

Rails to file 15% rate increase petition with ICC tomorrow; will ask for increase effective Sept. 1; will say wage cuts a last resort, may be impractical due to time required and possibility of labor trouble; only asking to be assured earnings at 1930 level, which would cover fixed charges by the 150% margin needed to maintain their credit. ICC issues supplement to recent oil report allowing railroads to lower freight rates on oil to meet truck and pipeline competition.

Automotive shipments to overseas markets in April were $19.427M vs. $37.444M in 1930.

Copper "producers would like to curtail ... but they do not know what their workers would do with so many men idle and hunting work as none but married man and men with dependents are being held on the payrolls. These men are working only part time at wages that make it barely possible to support their families."

Crude oil production somewhat lower in California and East Texas.

Editorial: Based on cotton consumption for 10 months ended May, carryover of cotton into the new season will be over 6M bales, up from 4.5M a year ago and 2.3M two years ago and most since the postwar deflation in 1920-21. Welfare of the cotton industry requires stimulating foreign demand rather than discouraging it.

Canadian Nat'l Rwy. says purchases of Canadian coal under govt. pressure are costly; paying $4.31/ton vs. $2.34 for US rails. Eight-year deficit of the railway was $111.3M, not including interest on govt. advances.

Russian cotton sowings for 1931 are estimated at 6.2M acres, up 61% from last year.

US citrus crop this season estimated at record high of 170,000 railcars, up 58% from 1930.

State Dept. estimates 156,715 new and renewed passports will be issued by June 30, over 50,000 below last year and the first sharp decline in eight years.

Boston sells $5M 111-day tax- anticipation notes at 1.09% yield, a record low rate for the city.

About 18,000 men are employed on 285 NY State highway projects or in maintenance force, largest total ever.

BMT and IRT refuse to appear before NY City Transit Commission regarding revised Untermeyer unification plan; situation now confused.

IT&T stock has been strong in recent weeks; rumors include option to buy the L.M. Ericsson Telephone Co. of Sweden from Kreuger & Toll; IT&T officials refuse to confirm or deny negotiations. Ivar Kreuger arrived in the US about 10 days ago and is still here. Ericsson is one of the world's leading telephone manufacturers and the pioneer for the industry in Europe.

American Chicle (chewing gum) sales are running slightly behind last year, but earnings remain higher.

Companies reporting decent earnings: American Chicle, Abbott Laboratories.


Transgression - RKO-Radio film, at the Mayfair. Ricardo Cortez "has hung up a record for at least one kind of motion picture activity." In the past week, he's been viewable in Big Business Girl playing an employer and lover; in The Maltese Falcon as a shrewd detective-lover; in White Shoulders as confidence man and lover; and now, in Transgression, as a nobly born Spanish lover. The film, however, is "another unimaginative version of the familiar triangle." Robert Maury leaves ancestral English country home for year in India on mining business, arranging for wife Elsie to spend the year in Paris. She runs into the busy Mr. Cortez as Arturo, who "tampers with Elsie's emotions and lures her to his Spanish castle"; after Paris has turned Elsie into a "sophisticated, well-garbed and more emotionally responsive woman of the world," her formerly neglectful husband finally wins her back.


Jenkins - I say, you've got a tremendous lot of luggage. Brown - Yes, but all but two of the trunks are empty. You see, we always manage to lose one full of things, but we hope it will be an empty one this time.

'Have you made every conceivable effort to collect this account? Isn't there anything we can do?' 'Well, sir, what about buying him an Irish sweepstakes ticket and hopin' for him to win?'”