Friday, July 3, 1931: Dow 151.48 -1.18 (0.8%)

Assorted historical stuff:

US and France positive on progress of debt relief negotiations; Under-Sec. of State Castle says “negotiations ... are continuing in an admirable atmosphere and we feel very optimistic as to the outcome”; note from Pres. Hoover reportedly makes good impression in France as leaving way open to compromise on disputed points. Editorial: The US and France seem to be talking in circles, each insisting that the Young Plan (for reparations) must be preserved while at the same insisting on their own modifications, and likewise insisting that the Plan must be resumed in a year. However, the US and French positions are so fundamentally similar that eventual agreement seems likely. Both recognize the Young Plan is currently unworkable; their next step should be to recognize that it's impossible to predict what will be possible in a year. Without a moratorium, the Young Plan “is already in the discard”; what's being negotiated isn't preservation of the Plan but salvage of as much as Germany is able and willing to support. The French seem to dislike the Hoover proposal because it so clearly modifies the Young Plan “and therefore opens the way to tampering with the Versailles Treaty.” However, Pres. Hoover has “wisely urged that the nations deal first with immediate necessities and leave the rest on the knees of the gods.” National City Bank supports Hoover plan as helping restore stability, which in turn will allow free flow of capital needed to reestablish prosperity; if one year isn't enough to restore normal conditions, “the purpose which has prompted the one-year moratorium will dictate the action then to be taken.” Another Woodlock editorial charging that France, while its people “have a desire for peace perhaps more intense than can be found elsewhere in Europe,” has attempted in the Versailles Treaty to continue the war by other means, in particular by reducing “her ancient enemy” to a permanent “condition of enforced impotence” and securing for herself “a perpetual superiority of military power.”

Census Bureau estimates annual US population growth rate has declined to 0.7% from 1.2% due to fewer births, more deaths, and much lower immigration. US population on July 1 estimated at 124.070M.

Chinese govt. will establish national economic planning commission patterned after Soviet planning body.

British Royal Commission, after 2-year study, attacks labor conditions in India; recommends limiting hours, eliminating child labor, and improving living conditions.

"All of Southern Peru reported in revolt."

Building railway locomotives larger and larger has finally made some of them too long to go around sharp curves. A British builder has now developed a new type of locomotive made in three sections, enabling it to "bend" around the sharpest turns.

Over 100 whales, "groaning mournfully," were recently dashed to death near the North Island of New Zealand, after being overtaken by a terrific storm as they moved down the coast. It will cost the New Zealand govt. over $2,000 to tow the dead whales out to sea.

Cafe Procope, the oldest cafe in Paris, recently closed after 246 years in business. Opened in the Latin Quarter in 1684, the cafe's patrons included Voltaire and Rousseau. Two years ago it became a vegetarian restaurant, but apparently was unable to survive on a clientele of "impecunious students."

A South Carolina bank has joined those trying to increase cotton use by adopting cotton stationery. The cotton-based "paper" takes writing and engraving sharply and clearly, but erasures are a problem; however, it might also have the advantage of being usable as a substitute handkerchief.

Ralph Budd, Great Northern Railway pres., attributes success of his railroad's board of directors meetings to their location - they're held on office cars while the board is out traveling on the railroad for up to a week.

W. Atterbury, Pennsylvania RR pres., on education: "The evolution of our race has been so closely associated with the development of the marvelous human hand that I think anyone who grows up without having acquired some degree of manual skill in a productive process has missed something. I do not think it makes the slightest difference that in the case of some particular boy, there is no likelihood he will ever have to make his living by manual work. In becoming proficient at a branch of manual work he gained something invaluable which I do not believe can be built into his character and personality in any other way."

Market commentary:

Market wrap: Stocks again fluctuated along with perceived progress of the US-France debt negotiations. After opening little changed the general list rallied sharply following optimistic announcement of French Premier Laval; buying may have also been due to shorts covering before "leaving the street for a prolonged week-end holiday." As the session progressed, volume dropped sharply and stocks lost most of earlier gains. Weakness developed in the fourth hour, and prices trended down, with rails particularly weak. Bond trading somewhat less active, prices steady to firm; US govts. dull and firm; foreign list somewhat higher, led by "rallying tendencies" in German issues; rails "crept upward"; industrials "displayed better tone"; oils continued uptrend; highest-grade issues benefitted from reinvestment demand. Commodities mixed; grains moderately higher on reports of frost in Canada; cotton down substantially. Copper buying very dull, with large producers still asking 9 cents but small amounts sold at 8 1/4.

Conservative observers advised staying out of the market today, and taking profits on long positions if stocks move up; predict stocks can be replaced at lower prices after technical reactions next week.

Rails were subjected to bear pressure on prospects higher rates won't arrive for some time. Preliminary reports indicate June car sales may have shown a smaller seasonal decline from May than in 1930. Sugar securities have rallied on improving prices and outlook; Chadbourne plan appears to be "drawn a little finer than former agreements of its kind."

Radio Corp. rose sharply on proposed consent decree setting up open patent pool and ending govt. antitrust suits. "Important interests have resumed activities in Woolworth"; rumors are circulating that "something special will be done for stockholders at a meeting next week, probably Wednesday or Thursday."

Bulls have been encouraged by "scale support" in evidence during recent market reactions.

It's believed interest and dividend payments now being received by investors may come back into the market in the next few days, particular with so many stocks selling at attractive yields.

Incorporated Investors [large investment trust, similar to mutual fund] believes it's a good time to buy sound stocks due to attractive prices, lowest interest rates in over a decade, and signs of approaching business improvement; added substantially to holdings in June.

Market observers point to diligent work by leading industrials on increasing efficiency and cutting expenses; this may result in Q2 earnings above the most pessimistic estimates, and, more importantly, may lay a foundation for higher profits when normal conditions return.

Demand for farm machinery has shown moderate improvement recently. J. Kurn, St. Louis - San Francisco Rwy. pres., expects record crop movement in 1931; sees more optimistic feeling in people along the railway's lines, which has led to a small improvement in buying.

Economic news and individual company reports:

Chicago Mayor A. Cermak writes letter to Lehman Brothers to combat the "tremendous amount of garbled, adverse publicity that the City of Chicago has been receiving in the public press for the past few years." Says financial status sound; current difficuties traced to effort in 1928 to correct obvious inequities in taxation by making a complete reassessment of all real estate; this took two years instead of the anticipated 6 - 8 months, putting tax collections for the following years way behind schedule. Argues tax warrants are safe based on anticipated collections. Points to reforms in budget law that should reduce spending; "it is the sincere and honest desire of this administration to decrease and not to increase taxes." "Gov. Emmerson of Illinois turns tax crisis situation over to 11 representative men in effort to avoid default on bonds in certain sections."

Farm Board announces new policy limiting sales of wheat holdings to 5M bushels/month over the next 12 months (current holdings estimated at 200M; sales "will be conducted in such fashion as not to depress the movement in prices"; limit excludes foreign sales). Vice Pres. Curtis and Kansas Gov. Woodring criticize policy. Texas Gov. Sterling telegraphed Pres. Hoover urging drastic action to prevent any Farm Board sales for at least 6 months, citing large crop in Texas. Editorial praises Farm Board policy as "doing now the right thing to get out of the results of a wrong thing." Approves of decision not to announce minimum price, since "immediately that would become the maximum price." Similarly, sometimes "social workers, distressed at bad labor conditions, have demanded a minimum wage fixed by law. These demands have come to nothing because of the realization that the minimum would become the maximum," leaving workers worse off. Farm Board chair. Stone lashes out at critics in the grain trade; says they had argued that a definite statement on policy would increase prices; “now that they have their statement, let them go ahead and raise prices, Mr. Stone said.” Charges “old wheat traders are trying to discredit everything the Farm Board does ... and behind that is that they don't want farmers to organize.” Says current world conditions should benefit wheat prices.

Canadian Premier Bennett says condition of grain in Western Canada threatens greatest natural disaster in country's history. Will take relief measures since at least 100,000 people are faced with lack of food for themselves and fodder for livestock. Forecasts of five private grain experts as of July 1 indicate a bumper US wheat crop of 881M bushels, 30M above 1930, in spite of extensive drought damage in the Northwest. Bureau of Agric. Economics estimated world wheat crop excluding Russia and China at 3.075B bushels, about 225M below last year; however, sees year of continued low prices due to large carryovers.

Western rails will appeal decision of Chicago Federal court in favor of ICC-ordered cuts in grain rates; rails claim the cuts would lead to large revenue losses.

More detailed estimates of Federal revenue in fiscal year just ended: total $3.317B, down $861M. Corporate income taxes $892M, down $226M. Individual income taxes $731M, down $330M, with collections in the 6 months ended June down $258M or about 49% (decline partly attributed to capital gains/losses). Customs duties $378M, down $209M. Misc. internal revenue and receipts $569M, down $59M.

Bank of England passed end of first half with little of the usual tightening in money markets due to "tremendous amount of short-term funds seeking employment in London plus the striking increases in gold reserves over the past few weeks." Bank of England, in a surprise, held rate steady instead of cutting it. However, it's believed the bank is just postponing action until the US-French negotiations are settled; it's feared that if the negotiations fail, France might make large-scale withdrawals of its foreign balances, and “the Bank of England might find itself in an embarassing situation.”

Banque de Geneve, with capital of 20M Swiss francs and founded in 1848, in difficulties; aid being arranged by consortium of Swiss banks headed by National Bank of Switzerland.

State of New South Wales again fails to make interest payments, with Commonwealth govt. meeting the payments as previously this year.

Hoboken demands return of $713,769 in city funds at the closed Steneck Trust Co., charging officials knew bank was insolvent when they accepted the funds.

Money in circulation July 1 was up $107M to $4.840B, total Reserve Bank credit outstanding down $10M to $950M. Member banks in NY City report brokers' loans up $73M to $1.479B; loans on securities to non-brokers up $7M to $1.733B. Fed. Reserve continued policy of expanding credit, buying $45M in additional govt. securities after buying $20M in prev. week; the Reserve banks had previously refrained from such buying “on the grounds that neither banks nor business has sufficient confidence to use more credit.” NY City banks increased loans and investments $223M, including a $92M in “all other” (commercial) loans; however, banks outside NY seem to have used the additional Reserve credit mainly to reduce rediscounts at the Reserve banks.

Dow average of 8 iron and steel products rose $.67 to $44.25, first gain since Jan. 14. Scrap markets showed definite improvement in the past week, though firmer tone was attributed more to technical factors than improved demand.

Chicago wholesale gasoline prices up 1/8 cent to 2 5/8 - 2 7/8 cents/gallon.

Operating income of 106 telephone cos. in first 4 months of 1931 was $94.0M vs. $91.8M in 1930 and $92.7M in 1929.

NY State commission for tax law revision continued conferences; main objective is to revise tax system "to bring about decreased taxes on real estate (which now pays 70% of the state taxes) without encouraging local extravagance."

Bethlehem Steel stockholders approve modified executive bonus plan; lawsuit against previous plan to be dropped. Unlike previous plan, new one deducts depreciation from earnings used as basis for bonus calculation; bonus amounts will be published in annual report.

Musical:

Ziegfeld Follies of 1931 - Presented by Florenz Ziegfeld, at the Ziegfeld Theatre. Twenty-third edition of the revue, and the first since 1927, "may not give off any one lasting ... impression," but is, by and large, entertaining and does offer "several individual effects that are by themselves highly meritorious." Hal LeRoy, "the lanky young dancer," follows up his showstopping debut on Broadway a few months ago with some more fantastic hoofing. Mr. LeRoy also debuts as an actor in an elaborate sketch entitled "Broadway Reverie," in which he's shot and mortally wounded in a hijackers raid on the Club Piccadilly, dying in the arms of Ruth Etting playing a "world-weary cigarette girl"; both of those performers can make a major impression unassisted on a large stage. Helen Morgan sings a Singapore song, "Half-caste Woman," by Noel Coward, and also appears as a bride in a "rather typically smirking" sketch entitled "Victim of the Talkies," in which she and her new husband, both movie actors, have to send for a director on their honeymoon. As usual, "the girls are many and beautiful," with a variety of costumes and "now and again very little at all." An ensemble dance with parasols "is one of the prettiest numbers ever staged in a musical show."

Jokes:

Physical Culture Expert - All these exercises must be taken in front of an open window. Student - That's rather awkward. P.C.E - Why so? Student - Well, I need the increased strength first so I can open the window.

Thursday, July 2, 1931: Dow 152.66 +2.48 (1.7%)

Assorted historical stuff:

France and the US continue wrangling over terms of compromise on the Hoover debt moratorium plan. Pres. Hoover warns that if negotiations fail Germany will "unquestionably" seek postponement of reparations as provided for in the Young Plan. Since France would be liable for war debt and guarantee fund payments, this would leave her worse off than under the Hoover plan by over $100M. Observers doubt that either the US or France is ready to risk a rupture over the plan. France has “received two blows to her pride” - First the much-praised decisive action of the Bank of England in stepping in to rescue Austria when “days of wrangling” for a French credit threatened an Austrian default, and now the Hoover proposal. “Painfully it is sought to save appearances by keeping a semblance of life for the Young Plan ... but the Frenchman is sore at heart. ... He begins to see that it is not all to his advantage to earn a reputation for prosperity and wealth in the middle of a suffering Europe, even though that reputation was acquired by sacrifice of four-fifths of the value of his money,” and by high taxes and hard work. “In particular he loves his neighbor across the Rhine even a little less than he did before.”

Editorial: When middle-aged men of today were boys, the popular work "Around the World in Eighty Days" seemed like extravagant fiction. The Graf Zeppelin went around the world in 22 days; now, Wiley Post and Harold Gatty have performed the feat by plane in a mere 8. When the telephone was first put into a Western Union office, it's said Jay Gould ordered it removed because "it would have no commercial value"; now Pres. Hoover uses it to talk to officials in Paris in trying to avert world crisis. When the first car came sputtering along, no man who saw it dreamed 30M of them would be in use within his lifetime. Similarly, this achievement "opens a new vista ... it gives a glimpse of what lies in the future with further development and perfection of the airplane, which even now seems to be but it in its infancy." Accord believed near between US, France, Britain, and Portugal to form group for development of first commercial seaplane route from NY to Paris and London; route would go from NY to Bermuda (740 miles), to the Azores (2,070 mi.), to Brest, France (1,250 mi.); flight time about 30 hours. Negotiations are proceeding between the major US air lines and the Railway Express Agency to reduce air express rates and expand the system nation-wide.

Justice Dept. and defendants in radio antitrust suit (including RCA, GE, Westinghouse and AT&T) are negotiating on a proposal to end the suit and create a patent pool opening use of their patents in radio and related fields to the public on reasonable terms to be fixed by independent trustees.

Pres. Hoover is embarking on campaign to cut $400M in spending for new fiscal year, in attempt to offset deficit of about $860M incurred in fiscal year just ended.

Sen. J. Davis (R, Pennsylvania) is formulating plan for rehabilitation of coal industry through consolidation of weak companies into a few strong concerns, a process similar to that in the steel industry 30 years ago; says plan would eliminate cut-throat competition causing the industry's troubles.

Treasury Dept. admitted shipment of Russian pulpwood held at NY pending investigation; labor and lumber organizations had argued shipment should be barred due to use of convict labor. Russian aviation program expected to carry about 30,000 passengers in 1931, vs. 11,700 in 1930; Russia claims can now produce own aircraft engines.

In an effort to check a growing Chinese crime wave, the Canton municipal govt. recently returned to the old system of death to all lawbreakers, or at least those with two or more previous offenses. The edict applies to "burglars, kidnappers, footpads, murderers," and other criminals; once convicted, they're "paraded to the old execution grounds, kept on public view until sundown, and then shot." This partially reverses the Western-influenced reforms of a decade ago, which treated criminals who stole less harshly than those who killed; the Western idea is still applied to first and second offenders.

A recent report to the French Parliament complained of the low quality of convict labor in the colony of French Guiana, which includes the notorious prison on Devil's Island [note: famous from the Dreyfus case and later from Papillon; closed in 1952]. It was estimated that five convicts can't do the work of one able-bodied free laborer. The colony has been unable to meet expenses in spite of rich natural resources.

The first truck just arrived in Canada's northernmost seaport, Churchill, Manitoba, near the Arctic regions. Churchill is to be officially opened in 1932; it's to be a "model city," with "central heating, fireproof public buildings and semi-fireproof residences, and boulevards, parks and squares"; there will be "wide streets for through traffic, ... and generous space for recreation such as tennis courts, football fields and golf links."

Article on the Osage hydroelectric project now nearing completion in the Ozark mountains of Missouri. Dam is a "monolithic giant of concrete and steel," standing 148 feet above bedrock and 2,543 feet long. Construction began Aug. 6, 1929; first concrete poured 8 months later; dam closed Feb. 19, 1931; first main unit of power station in operation about July 1. Lake of the Ozarks formed by the dam is largest artificial lake in US, 95 sq. mi. in area and with 1,300 mi. of shoreline. During construction, 72 cemeteries were moved to higher ground.

Market commentary:

Market wrap: Stocks fluctuated along with reported progress of US-French negotiations; Leading stocks opened weakly on news of continued difficulties. However, shares were well supported on the initial setback and bullish operations continued in Woolworth and J.I. Case. A sharp general rally started at mid-day after the French Premier's statement that US govt. wanted to continue discussions. Some hesitation came after news negotiations had been adjourned until Thursday night, but buying reappeared in the last hour and stocks closed at the day's highs. Bond trading active; prices rallied after early weakness; US govts. steady to firm; German govts. lower but other Europeans steady; S. American very irregular but mostly higher; rails slightly irregular; many strong spots in the industrial list. Commodities mixed; grains plunged on relief of hot weather and failure of the Farm Board to reach a satisfactory decision on selling policy; cotton closed substantially higher after recovering from early dip. Copper offered at 8 1/2 cents with buying sluggish; larger producers holding at 9 cents.

Conservative observers more cautious; advise using stop-loss orders, but urge against going short; some recommend customers be prepared to take most of profits during rally likely to follow announcement of debt agreement.

Some of the big bears who "caused many of the sharp declines in the market earlier in the year" are still holding out; "it is their intention to continue to fight the advance"; they contend the market can't rise much further without substantial business improvement. Traders active in the recent advance reportedly were actively taking profits late last week on concerns the advance was much more rapid than anticipated. "The profit-taking was widely distributed and well concealed."

GE continues to sell at a relatively high earnings multiple; earnings declined in 1930 and so far in 1931, but the company remains in a strong position in its field, and "accounting policies of the management are recognized as highly conservative." Hershey Chocolate seen benefitting from 30% increase in cocoa prices since the May low, since they bought a good quantity at lower levels. Vanadium is reportedly subject of a new bull pool operation, but "as far as can be learned, the group does not include interests close to the company" and leading brokers have been keeping customers out of the stock.

Reaction that developed at start of the week came at the expected point for a technical setback, as industrials had regained 48% of the losses on the previous decline from Feb. 24 - June 2. Bulls have been encouraged by good support during the reaction; ability of leading shares to push into new high ground would now be a strong bullish signal, while failure would suggest need to find a lower base.

Apart from the Hoover plan, an important factor in market's June rally has been expected improvement in Q2 earnings (compared to Q1) at some major companies including GM, Chrysler, Johns-Manville, Wrigley, Westinghouse, and Montgomery-Ward.

Investment trust [similar to mutual funds and ETF's] first-half statements should be materially helped by recent rally. Net asset values of investment trusts are gaining thanks to the rally, but many continue to trade at large discounts, as opposed to premiums two years ago. However, executives are confident that with continuation of the advance investor interest will spread to trust shares.

Despite small increase from prev. week, rail freight loading report was disappointing to those hoping for indications of a definite upturn.

Editorial: It's high time Eastern rail executives complete the unification plan supposedly all but agreed on 6 months ago. While ICC action on the plan will likely take close to a year, it's important for the rails to tell the ICC and public exactly how they propose to end "eight years of civil war over mileage control in the East." Rate increases are "only a palliative"; it's essential they be followed up by greater efficiency, technical improvements, and curbing of wasteful competition.

Sudden deterioration of Reichsbank position from one believed strong before the Creditanstalt crash, and still sustainable on May 31, attributed to two unexpected developments. First was heavy withdrawal of foreign credits and liquidation of foreign holdings of German securities; this was "entirely unexpected because it was not foreseen that the Vienna crash would cause a feeling of uneasiness about Germany as well as Austria"; bankers also believed reopening the reparations question wouldn't cause restriction of foreign credit "except possibly French." Second, June brought capital flight due to political uncertainty after the severe emergency tax measures.

Economic news and individual company reports:

Reichsbank successfully passed June 30, day of highest seasonal demand for credit and currency; use of $100M central bank credit enabled it to stay above the 40% minimum reserve requirement. Observers say situation was serious, but deny reports Reichsbank was within 48 hours of collapse before announcement of Hoover plan, pointing out it had emergency options including temporarily lowering reserve requirements and unused $50M credit from Gold Discount Bank; now believe Reichsbank has "weathered the most severe strain it will be likely to meet for some time." However, long term outlook remains serious; will depend on settlement of reparations question and political uncertainty. Continued German capital flight (15M marks Tuesday) is causing uneasiness. Reichsbank is "beginning to discriminate severely on paper offered for rediscount by private banks and contemplates a rationing of credit"; daily money in Berlin is 8 1/2% - 11% and monthly 7 1/2% - 8 3/4%. Situation will crimp economic activity already at a low level. "The BIS campaign for a levelling of interest rates and getting money from where it is cheap and superfluous to where it is dear and scarce has become ineffective."

Fed. Reserve of NY monthly review says money market conditions and volume of bank credit showed little effect from large gold influx in June. This is partly due to unseasonal increase of $100M in demand for currency, likely due to banking disturbances; however, the main NY banks held more excess reserves in June than in any month in recent years. Bank and trust condition statements as of June 30 generally showed substantially lower earnings in the first half compared to 1930; this had been expected due to low money rates and yields on high-grade securities.

Pres. Hoover's Emergency Employment Committee reports general improvement in business and employment conditions in the past week in regions across the US, including New England, NY City, Philadelphia, Chicago, Minneapolis, Kansas City, and Memphis; definite signs of improvement also reported in S. America.

Steel production for week ended Monday was 33 1/2% vs. 35% prev. week, 38% two weeks ago, 63 1/2% in 1930, and 93 1/2% in 1929; production this week will be lower due to Independence Day holiday. Weekly steel reviews report sentiment in the industry still improving. Seasonal production decline has continued and output has fallen below last Dec.; at least another month of very low operations is likely. However, improvement in general business sentiment due to Hoover plan has resulted in “sufficient revival of buying interest” to suggest adoption of the plan “might well mark the end of the long decline and possibly ... at least a moderate turn for the better.” Buying interest hasn't yet translated to improved orders but a number of projects are being revived and may lead to future demand.

US electric output for week ended June 27 was 1,593 GWHr, down 3.9% from 1930, vs. a 4.6% decline prev. week and 4.9% two weeks ago.

Views and figures on the East Texas situation presented to the Texas Railroad Commission varied so widely that the method of curtailment to be adopted by the Commission remains uncertain. Almost all interests now agree on need for a new law enabling the commission to enforce strict limits on production. Unconfirmed rumors have been heard of sales of oil at 5 cents/barrel in East Texas; current official price is 20 cents. Standard Oil of NY cuts wholesale and service station prices of gasoline throughout NY. Chicago wholesale gasoline prices up 1/8 cent to 2 1/2 - 2 3/4 cents/gallon.

Bank of England expected to lower discount rate today (was cut 1/2% to 2 1/2% May 14); in better position to lower thanks to recent buildup of gold reserves.

Prices in fall catalogs of large mail-order houses will be 3 1/2% - 5% lower than in the spring and 12 1/2% - 15% lower than last fall; however, officials of both Montgomery Ward and Sears Roebuck believe bottom prices have been reached.

Mastick Commission for Revision of Tax Laws in NY State recommends cutting over $200M annually from real estate taxes by spreading that sum over taxes on a number of luxury items including cigarettes, lipstick and rouge.

Rails in both the US and Europe are offering the best bargains to summer travelers in many years.

Amer. Radiator & Standard Sanitary Corp. conducting "build now" campaign urging taking advantage of current low construction costs and mortgage rates; C. Woolley, company chair. and Fed. Reserve of NY dir., notes "increased residential construction has led the country out of almost every business depression."

Int'l Shoe expects significantly better earnings in second half; continues to be lowest cost producer in the country.

Bristol Manufacturing of New Bedford, Mass. declared additional liquidating dividend of $2, bringing total paid to $41 since Jerome A. Newman and his interests took control of plant for $39/share. [Note: Newman's partner was Benjamin Graham, who later became mentor to Warren Buffett and many other investors. This transaction sounds like one of the "net-net" plays typical of Graham and of Buffett's early career, which are still occasionally to be found today.]

New books:

A fair crop of new investing books, including: "Arbitrage In Securities," by M. Weinstein, "Keane's Manual of Investment Trusts" by C. Keane, and "Twenty-Five Hand-Picked, Low-Priced Speculative Stocks," by J. Frederick.

Theatre:

The Pirates of Penzance - revival by the Civic Light Opera Company, at Erlanger's Theatre. The renewed fashion for Gilbert & Sullivan is like nothing that has happened in recent times. "It signifies something as to the popular taste. Last winter many producers of musical plays appeared to have decided that theatre-goers would not only prefer salaciousness, but demanded it." Instead, audiences are having a "thoroughly good time" at the G&S revivals.

Jokes:

Comedy Writer - This joke ought to be good, I've had it in my head for ten years. Editor - Ah, aged in the wood ...

Patient - Can you do anything about my snoring? Doctor - Does it disturb your wife? Patient - My wife? Why, it disturbs the whole congregation.

Wednesday, July 1, 1931: Dow 150.18 -2.49 (1.6%)

Assorted historical stuff:

Editorial: Official figure for US deficit in the just-ended fiscal year will be $850M, more or less [note: another estimate below]. After adjusting for the "sinking fund" (subtract $440M) and for veterans' bonus payouts (add $575M), the year's real deficit reaches a sobering total close to an even billion dollars; next year will also bring a reduction of $246M in incoming war debt payments due to the Hoover plan. Relieving this grim picture somewhat are a number of spending cuts "fairly crying to be made." The "futile Farm Board" should not be given any more money, and Congress ought to rescind the $100M already provided for this year. Also, amortization of govt. liability on veterans' compensation certificates can safely be omitted due to the large payouts already made. These two items alone add up to $400M; "if Congress has the will, they will be only the beginning of a program by which the country can avoid new tax measures, despite the deficit and the moratorium." Federal deficit now estimated at $905M, an improvement from earlier $1B estimate; spending $4.207B vs. earlier $4.435B estimate and vs. $3.994B prev. year; receipts $3.310B vs. $4.178B prev. year, of which income taxes were $1.860B vs. $2.411B; public debt increased to $16.796B from $16.185B but average interest rate fell to 3.58% from 3.80%.

John L. Lewis, United Mine Workers pres., requested Pres. Hoover call a conference on problems of the coal industry; Hoover responded the Administration wished to lend every possible assistance to any constructive program put forth by coal operators and miners; referred communications from Lewis' organization to the Secretaries of Commerce and Labor for advice.

A. Iselin & Co. prepared survey of Russia based on extended trip in April - May by “trained observers from the firm's Paris office.” Predicts popular dissatisfaction as it's realized Five Year Plan isn't producing the results hoped for, but believes “character of the population and the power of the Communist party will probably prevent a general uprising. ... Possibly the country will have to pass through a period of chaos accompanied by famine and local violence.” In any case, in nearer term world is likely to face unmanageable amount of Russian raw material exports. Govt. printed about 3 times more currency than planned but controls many prices; currency can be bought abroad at 10%-15% of official rate. Believe trade situation unsustainable in long term since Plan requires huge imports which can't be paid for by exports and probably will be financed through foreign credits. Living conditions poor, though this was also true before the war; population “insufficiently fed and clad”; note “very poor conditions of public and private buildings and the prevalence of filth”; rail stations “crowded with multitudes of poor people going from one point to another in the hope of finding better living conditions.” However, population largely bearing up thanks to “very clever and incessant propaganda.”

Acting Treasury Sec. Mills says Treasury won't make any "sweeping decision" under the tariff provision barring products of forced labor that becomes effective Jan. 1 [aimed at Russian products]; under the law, each commodity must be decided on its own merits.

Editorial by T. Woodlock concerning horrendously unjust position of Gov. Roosevelt favoring original investment rather than reproduction cost as basis for calculating fair utility returns. Stand is “profoundly discouraging ... 'return' is but the wage of capital, and if that wage does not go up when prices go up the value of that capital is decreased.” [Note: something tells me these impassioned positions will be reversed as the long-term trend switches to deflation ...]

The aviation industry continues to expand in spite of depression. Airplanes consumed 35M gallons of gasoline in 1930 vs. 3.3M in 1926; over 3,000 miles of airways will be electrically lighted this year; 20 more radio communication plants will be installed. By the end of 1931 airplane pilots will be able to receive weather reports by radio in almost every square mile of the US. Second Asst. Postmaster Gen. Glover predicts sharp rise in air mail to 1M pounds/month within next few months; says airline passengers won't be satisfied with speeds of 90 - 100 mph, but will demand 135 - 170 mph.

Elmer G. Sperry, gyroscope wizard, just before his death a few months ago invented an electric appliance to detect cracks in steel rails, which have caused so many rail wrecks over the years they have become known as "rail cancer." Recent tests have shown that by applying electric currents cracks can be detected that otherwise would grow until the rails fell apart.

Remington Rand, in spite of recent lean earnings, is maintaining its extensive R&D programs; new products incude a noiseless portable typewriter, an electric accounting machine, and the first tabulating machine supporting "direct subtraction mechanically."

United Air Lines cuts transcontinental airfares from $215 - $245 to $200.

Nome, Alaska is a far cry from the glory and glamor of 30 years ago during the mining excitement. Its population has declined from 40,000 then to less than 2,000 now, but it's still important enough as a business center to have a bank, since considerable gold and copper mining is still done in the area.

R. Randolph, Chicago Assoc. of Commerce pres., estimates rackets cost Chicago $165M annually, or about as much as the city budget.

Census Bureau reports NY City contains 103,623 retail stores, with annual sales of $4.403B, of which 87,234 are single-store independents. Types of stores: 42,947 food, 13,639 apparel, 5,529 automotive, 8,438 restaurants.

Market commentary:

Market wrap: Stocks were weak in early dealings following reports "the French continued obdurate" in negotiations on the Hoover plan; leading shares dipped but drew "good support on a scale down." Stocks showed some improvement from mid-day through the fourth hour, but selling resumed following a decline in copper price and forecast for a 3% reduction in steel output; final dealings showed "pronounced unsettlement." Bond trading quiet, prices somewhat reactionary; US govts. steady to firm; foreign issues "inclined to sag"; industrials and second-grade rails irregularly lower while highest-grade utilities and rails were steady. Commodities weak; grains and cotton lower; copper weakened to 8 3/4 - 9 cents, demand lower.

Market sentiment continues cheerful, though some bulls are more cautious and believe "the market should be allowed to prove ability to hold on rallies before large blocks are taken." Conservative observers warn against short selling, favor using stops to protect current holdings.

Some believe the market may react when an agreement is reached on the Hoover plan in a case of selling the news, since a substantial anticipatory rally has already taken place. Some observers believe the market's technical position has been weakened by the recent rally, attributing much of the upturn to short covering. "However, those who watch market conditions closely insist that a substantial short interest still exists." A number of bear traders seem to have been "feeling for the top" in recent sessions, "putting out lines" but then covering when the market shows good resistance.

J.I. Case was strong on reports W. Danforth (longtime bear operator recently turned bull) was buying and a short squeeze was planned. Johns-Manville was in demand on sharp improvement in second-quarter earnings.

With yesterday's session being the last of the first half, assorted institutions naturally would have preferred a strong finish to improve the appearance of first-half statements. However, nothing developed to compare with the sharp late rally on the corresponding day a year ago.

Editorial: Govts. of three western provinces of Canada are now getting a $22M lesson in the "so-called 'orderly marketing' of wheat," which turned out to be a failed speculation on the possibility of a crop failure in 1930. "If misery loves company western Canada can look toward the US where the same folly is being reenacted on a larger scale," not only in wheat but in cotton and other products. The direct costs in our case are still unclear, but from the effect on new crop prices, it's a safe bet the indirect costs will be even larger. For both the US and Canada the lesson will be costly, but if "legislators learn anything by this experience the expenditure will not have been in vain."

Amer. Metal Market reports sentiment in steel industry further improved due to outside developments [Hoover plan]; production has continued decline but this is almost inevitable at this time of year; attitudes stronger on maintaining and improving prices. Amer. Machinist reports "mounting spirits" in machinery and machine tool markets thanks to the Hoover plan; "word from various districts in the past week show inquiries and a few more orders."

Confidence continued that the Hoover plan would be followed "by other far-reaching steps toward economic stability," possibly including "huge international credits," a steady rise in silver prices and in other commodities including coffee, rubber and silk, and impounding of govt. wheat and cotton to keep it off the market.

Economic news and individual company reports:

"Run on the Reichsbank's foreign currency reserves, emanating from US bankers, increased"; losses amounted to 40M marks Tuesday and 90M since last Saturday; three-fourths of recent $100M central bank credit used; withdrawals attributed to uneasiness over negotiations on Hoover plan. Local bankers [note: I think this means NY] "not disturbed" over withdrawals, explaining they "were anticipated and provision made for them." “Bankers in close touch with German affairs” believe difficulties are gradually clearing up, see more normal credit position by fall; point to additional $50M credit obtained from Gold Discount Bank to defend marks. Sensational rally in Berlin stocks last week has been followed by considerable profit-taking, leading to declines so far this week; money markets are tight, with daily money at 8 1/2% - 11%.

Detroit gets $5M loan from Ford Motor Co. at 3 1/2% interest rate until Sept. 15.

Meeting of Eastern rail executives on consolidation adjourned without agreement; progress reported, will meet again July 7. ICC will have initial hearings on 15% rate increase starting July 15, and more hearings Aug. 31. This schedule dashed hopes of an emergency increase as early as Sept. 1; any increase likely wouldn't become effective until late in the final quarter. Rail freight loadings for week ended June 20 were 739,116, up 6,663 from prev. week, down 19.7% from 1930 week, and down 30.9% from 1929. Operating income of class 1 rails in May about $41M, down 41% from 1930 and 60% from 1929; gross $368M, down 21% and 31%. NY Central reported May revenues down 23.3% and operating income down 51.4%; report was disappointing, showing declines worse than for the first 5 months as a whole, and worse than the average of other major rails for May; stock declined.

Refineries ran at 66.3% in week ended June 27; stocks of gasoline fell 432,000 barrels to 41.868M (prev. week revised up to 42.300M). Crude oil production in week was 2.442M barrels/day, down 40,400 from prev. week and down 169,000 from a year ago. Texas Railroad Commission considering new oil production curtailment plan for East Texas; seen likely to limit output to 240,000 barrels/day vs. current 360,000 and put curtailment "on the well basis"; major producers say will accept any plan approved by the Commission.

US new car registrations in May were 247,727, down 6.8% from Apr. and 28.2% from 1929; first 5 mos. 975,219, down 29.9%. US automotive exports in first 4 months were $72.0M vs. $141.4M in 1930 and $254.1M in 1929; drastic decline attributed to extreme depression in best markets and foreign tariffs.

Money markets remained easy, showing no sign of the usual temporary tightening due to bank “window dressing” for June 30 statements.

Hudson County member banks of NJ Clearing House Assoc. raise $5M fund to protect depositors of county banks from effect of closing of Steneck Trust of Hoboken on Saturday.

NYSE volume in June averaged 2.256M shares/day, smallest June average since 1927; heaviest full session was 5.066M and smallest 916,901. Total volume in first half was 332.0M shares (average of 2.213M/day), vs. 493.3M in 1930 and 537.6M in 1929.

Oklahoma wheat harvest featured better quality and increased quantity.

Discussions by leading copper producers on curtailing output broke up without definite decision.

Dr. G. Vissering, Bank of the Netherlands pres., says so far Holland is one of the countries that has suffered least from the depression; foreign trade was maintained well in 1930 and business failures were only slightly above 1929; money rates are at record lows.

French budget deficit for 1931 to reach at least 2.3B francs ($92M).

Japanese govt., despite storm of protest and threatened strikes, cut salaries of all workers earning 1,200 yen annually by 10% effective June 1; walkouts were threatened but workers eventually accepted the cut. However, savings made were relatively modest and the cuts seem to have been mainly a test case to "determine whether really radical reforms will be possible." Govt. has appointed three commissions to "smooth the way for sweeping administrative, fiscal and taxation reforms." These will "effect tremendous savings" touching every department and are bound to be unpopular.

S. Untermeyer will ask NY City Board of Estimate to exercise city's right to recapture subway lines from BMT and IRT.

Philip Morris Ltd. is expected to show substantially higher profits for the 6 mos. ended Sept.; sales of their main cigarette, Marlboro, are up sharply due to anticipated narrowing of the price difference between leading brands (likely to rise to 15 cents/pack) and the premium Marlboro brand (20 cents).

Companies reporting decent earnings: IBM, Philip Morris Ltd., Consol. Gas of Baltimore, Parker Rust-Proof.

Report from Paris:

Baggeson, the Danish clown, AKA "the man of 100,000 plates," has passed away. Like Severin, the beloved French Pierrot, he died far from the greasepaint, on his estate, "for he, too, had coined laughter into gold." Baggeson's specialty, which he never changed through more than a generation, was the breakage of crockery - the 100,000 plates in his nickname referred to his annual consumption. This prompts another melancholy review of the rise and fall of the circus clown. "Among the earliest memories [note: and deep psychological traumas] of most men and women is the whitened face of a laughing clown." First clown, Bill Saunders, was a feature of the first circus - Astley's, established in 1770 on what is now the Waterloo station in London. For the next 100-odd years, the clown's costume was that of the court buffoon; "those were the days of literate, not to say literary clowns." Clowns wrote their own dialogue, and hurled real wit at the crowd; rulers feared their topical quips. The whitened face with scarlet markings was first adopted in 1860 by the Price Brothers. About the same time, Tom Belling, an American clown, invented the auguste, "a frock-coated type of pantomimist" performing "finely etched jesting" that became the dominant type for many decades. There followed the golden age of the star jester; for example, Dan Rice, who flourished 50 years ago, was the highest paid circus performer of his time, making and losing several fortunes; George Fox played Humpty Dumpty on Broadway for 2,000 nights, applauded by Edwin Booth. In France and Germany, clowns can still get top circus billing, but in the US and England "Pierrot's candle is almost dead." With the widening of the tent, US circuses switched to the "clown in mass production," tumbling and clowning in groups of 10, 20 or more. By 1910, no clown but the tragic Marcelline was paid more than $100/week. Salaries in all branches of theatre have increased since the war due to the demand from movies, but with a few exceptions, such as Grock in London and the Fratellinis in Paris, the big-time clown head-liner is no more.

Joke:

'Getting this fifty dollars from my husband was like taking candy from a baby.' 'Honest?' 'Yes, he put up an almighty holler.'

Tuesday, June 30, 1931: Dow 152.67 -4.26 (2.8%)

Assorted historical stuff:

Agreement not yet reached on Hoover debt plan in negotiations between Sec. Mellon and French officials. However, delay was attributed to technicalities and negotiations continue positively. British PM MacDonald announced acceptance of plan in principle by govts. of Canada, Australia, New Zealand, South Africa and India. Belgium and Austria also accepted plan. Pending meetings of Commission on European Union adjourned until outcome of Hoover plan settled.

German people, "Cabinet ministers and taxicab drivers, worried directors of the Reichsbank and humble merchants, ... high and low await word from Paris and from Washington that the last obstacle to Herbert Hoover's debt moratorium proposal has been removed. ... Three roads lie before the Germanic peoples today - the Hoover road to normal rehabilitation as mapped out by centuries of capitalistic experience; the Fascist road as defined by the Hitlerites, which means debt repudiation and a revival of the nationalistic, swashbuckling, imperial spirit; and the route to thorough communism, leading down the red Russian road to complete collapse of the existing Germanic social order." Although acceptance of the plan will only reduce a heavy tax rate by about 7%, the gesture has had a tremendously positive psychological effect throughout the land. Current German predicament is "not new in economic history," being a classic story of boom followed by "inevitable ... deflation and collapse"; current situation is serious, with over 4M unemployed of the total 60M population; however, there are some optimistic signs including recent revival of output in many branches of industry and trade surplus in the face of worldwide depression.

Sen. Smoot (R, Utah), after visit to White House, says doesn't foresee any Congressional opposition to Hoover debt plan, or need for extra session. Doubts anything can be done about silver situation at present due to time being taken by consideration of debt plan.

Editorial: The "suddenly awakened interest" of some Midwestern congressmen in Philippine independence appears to be due more to their desire to erect tariff barriers against Philippine products including coconut oil and sugar than to the "star-spangled cloak of freedom." Filipino leaders themselves have said they want independence but with a transition period of military protection and access to US markets. We shouldn't abruptly abandon "13M islanders to a chaos like that of China" and set up one more "focus of disorder" in an already unsettled Asia.

Honduran govt. officials predict end of revolution after killing of revolutionary leader Gen. Ferrera.

Editorial by T. Woodlock reviewing article by C. Edge in current issue of “World Petroleum” containing a number of interesting assertions backed by statistical evidence, including that the oil industry has “reached the highest possible demand for its products that can be supported continuously by the people of the US,” that the farmer can't support a car on his income and is paying for it by mortgaging his property, and, most intriguingly, that the car is responsible for the decline in average birth rate from 24.2 in 1915-21 to 18.3 in 1930. Woodlock is dubious on whether the last item represents causation or just correlation, but acknowledges the industry has “social implications of profound importance ... Mr. Edge's suggestion as to one of these implications has certainly the merit of originality, and it may contain at least some truth.”

After 14 years of breeding experiments, USDA scientist Dr. John Parker has developed a promising new variety of wheat resistant to cold, drought, and disease.

Deepest mine in the world is a gold mine in Morro Velho, Brazil. The miners' journey 7,500 feet below the surface takes four hours and must be done in three stages - elevator, cable car, and "iron dump car attached to strong steel cable." An average of 17,000 tons of ore is lifted to the surface each month. Gold mine at Perth, Australia called the Sons of Gwalia, which Pres. Hoover helped found 33 years ago, has yielded total of 50 tons of gold valued at $32.5M.

Catch o'the day - A fisherman on the Seine River in France recently hooked a fine pair of church bells which had been thrown there at the time of the French Revolution to prevent their being cast into cannon.

Melvin Traylor, 52, pres. of First Nat'l Bank of Chicago, one of the largest banks in the US, was raised in the "Kentucky backwoods"; he didn't get his first pair of shoes until the age of 7, and saw his first railroad at 19.

Bank and trust officials have grown to detest bad weekend weather even more than the general public; they've found that clients forced to remain indoors will often spend at least part of the time going over their securities and checking their financial status; "the thousand and one questions which arise must be answered Monday."

Market commentary:

Market wrap: Stocks opened weakly, following European markets lower on news of delay in agreement on Hoover plan; major industrials and rails experienced good-sized setbacks. Trading slackened as prices worked lower, and general list settled into narrow range at mid-day, remaining "listless and largely devoid of special features" for rest of the session. Bond market turned dull with prices mildly reactionary; US govts. steady; foreign issues slightly lower; rails irregular; public utilities firm; industrials mixed with continued gains in some weaker issues. Commodities mixed; grains up strongly on reports of hot, dry weather in US and Canada; cotton down sharply on technical setback. Copper rose 1/4 cent to 9, making a rise of 1 1/4 cents since some metal was sold at 7 3/4 on June 20; foreign buying continued in good volume while domestic was very light. Silver fell 3/8 cent to 29 1/8.

Conservative observers continue to favor accumulation of standard shares on reactions, protecting accounts with stop-loss orders.

Observers were encouraged by lower volume during reactions. Brokers report many customers are still on the sidelines, even though they are carrying large credit balances in their accounts. The public has apparently been more cautious than traders in entering the market, although those who missed the sharp recovery starting 10 days ago are picking up shares on minor reactions, and "a good sized setback would increase such a demand."

Apparent govt. determination to remedy conditions that have unsettled business has caused many to speculate farm relief may be next; one authority suggests govt. purchase of cheaper farmlands for reforestation in order to reduce acreage planted.

While "optimism ruled in important quarters" on the chances for further stock gains later on, a "breathing spell" was expected by many based on the rapid gains in the past two weeks, and by market's reaching the important technical level of a 50% recovery from the previous decline, which would be expected to draw some resistance to further advances. In addition, price movements so far in 1931 have consistently paralleled those in the 1919-21 bear market, which hit bottom on Aug. 24, 1921, had a similar sharp rally to the recent one until Sept. 13, and then moved sideways for over a month before resuming the uptrend.

Saturday marked 10th anniversary of the NY Curb Exchange's [later the Amex] move indoors from the "picturesque outdoor market which prevailed for many years on Broad Street." During that decade, the Curb has grown in size and prestige beyond the most optimistic predictions. 10 years ago the Curb list was mostly non-dividend paying, low-priced issues; now more than half pay dividends and are accepted as collateral by banks; the list includes almost every important US industry and many foreign businesses. The new addition to the Curb Exchange building will be dedicated in mid-July.

Although scrap prices are the lowest in many years, recent substantial buying by US Steel and Bethlehem is encouraging since “the large interests usually know when scrap is at bottom, and as a rule take the lead in a buying movement.”

Harvard Economic Society says conditions now favorable to stabilization of commodity prices; prices in June "were already showing some signs of stabilization" before the Hoover plan; adoption of the plan "will probably improve commodity markets ... considerably earlier than could otherwise have been expected."

Editorial: Fisher's commodity index has now advanced two weeks in a row. While the rise, from 69.7 to 70.3, is admittedly modest, and "one swallow is not regarded as the herald of summer," this turn at least "gives hope that the downward course that has been proceeding all too rapidly has been arrested and may turn upward." Commodities may have been "a more sensitive barometer of world conditions than anyone realized"; they hit a low point before the public was aware of the international crisis, and have promptly rebounded as the Hoover plan was proposed "almost at the zero hour," and enthusiastically received. The decline in commodities has in fact strained the world credit system. Many explanations are advanced for the great price declines, and for surpluses of "wheat when people are hungry, of cotton when people need clothing." However, at least one very large reason is "lack of confidence," on which credit depends, and which is "changeable as thought." This now seems to have been helped, and successful conclusion of the plan should be reflected in improved commodity demand.

J. Raskob (GM exec., Democratic Nat'l Committee chair.) says Hoover plan a very constructive move, should help materially in stabilizing the world economy. Names two main issues for the 1932 election as Prohibition and tariffs; believes tariffs must be lowered to restart world commerce.

Economic news and individual company reports:

The US govt. will close the fiscal year with a deficit of about $860M, the first since Treasury Sec. Mellon left private business to take his office 10 years ago. Govt. faces a difficult test in the coming year, with another and probably much larger deficit expected. The Administration is expected to avoid a tax increase at the next session of Congress by cutting spending and issuing long-term bonds. However, a new tax plan is likely to be put before Congress after the 1932 elections, which will increase taxes and to some extent switch to more stable forms of taxation offering revenues that fluctuate less with the ebb and flow of business. Prohibition opponents have again advanced repeal as a means of closing the deficit and even cutting income taxes; estimated revenue from 17 states alone would be $906.4M.

Central banks have reportedly arranged for their deposits with the BIS to provide “a permanent emergency fund of about $40M for intervention in any menaced market.” Reichsbank lost about 30M in foreign currency Monday, but this was believed due to withdrawal of maturing short-term loans at end of first half rather than capital flight. Marks were slightly higher on the day; guilders continued to decline but Swiss francs rallied sharply. Stock prices in Berlin were lower, but this was held to be a normal technical reaction to the very sharp rally last week, in which some stocks rose as much as 40%. British pound was lower, but this was held due to an anticipated bank rate cut made possible by a stronger gold position rather than to any unsatisfactory condition. Election victory of Spanish conservatives didn't cause much movement in pesetas.

White House request that Farm Board decide on a more definite policy on disposing of its surplus wheat has caused much comment in grain circles; the request was interpreted to mean Pres. Hoover wants the Board to hold the surplus for a designated time, but the Farm Board reaction is still uncertain. Three Western Canadian provinces will give banks $22M in provincial bonds as compensation for losses on guaranteed advances made by the banks to the Wheat Pool.

Eastern railroads probably will hold final meeting on consolidation Tuesday, at which all remaining details will be worked out; plan likely to be presented to ICC on Wed. or Thurs.; this would mark end of merger conferences begun almost 7 years ago.

Automotive output in US and Canada in May was 327,853 cars and trucks vs. 352,867 in April and 444,699 in May 1930; first 5 mos. 1.378M vs. 1.960M.

Arguments heard for “certificate of reasonable doubt” for convicted Bank of US officials, which would allow them to go out on bail pending appeal. Counsel for S. Singer complained that the trial judge practically directed a verdict. NY State Republican chair. Macy asks Gov. Roosevelt to reconsider decision to retain J. Broderick as State Supt. of Banks.

US Veterans Bureau announces new soldier bonus loans disbursed in the past 4 month have reached total of $793M, to 2.064M world war veterans.

Some definite action expected on NY City transit unification in the next 10 days; Transit Commission is making determined effort to prepare plan for adoption before July 7; progress reported on BMT demand for $7M more than provided for in Untermeyer plan. S. Untermeyer working on new NY City transit unification plan removing BMT as operator of city subway system now being built (8th Ave).

Commerce Dept. estimates US investments in securities and industrial development in Europe at $4.4B-$5B; largest part in Germany, $1.350B-$1.525B.

Colombian Pres. E. Herrera assures his Congress Colombia will meet all her financial obligations. Argentine Fin. Min. E. Uriburu says country can meet all financial obligations without need of moratorium or other arrangement. Chile will bring US and British banking interests in to investigate the country's financial situation, particularly its govt. obligations; will attempt to avoid moratorium on debt payments.

Companies reporting decent earnings: Sierra Pacific Electric.

Jokes:

Attorney 1 - Well, how's business? Attorney 2 - Rotten. I just chased an ambulance twelve miles and found a lawyer in it.

Amateur poet - Dear Editor, will you please read the enclosed poem carefully and return it with your candid criticism as soon as possible, as I have other irons in the fire. Editor - Dear Sir, please remove the irons and insert the poem.

Monday, June 29, 1931: Dow 156.93 +2.89 (1.9%)

Assorted historical stuff:

Sec. of State Stimson, sailing for Europe aboard the Conte Grande, said vote of confidence by the French Parliament was a clear indication France and the US would reach a satisfactory agreement on the debt moratorium. Fed. Reserve of NY Gov. Harrison says believes $100M credit to Germany not first of a series, since it should be enough to "turn the trick." However, if needed further credits could easily be extended. White House says Pres. Hoover doesn't contemplate any statement on South American fiscal affairs. Report that the S. Amer. situation has come to a head and requires immediate action was discounted. One official said there's no anxiety expressed by interests involved in S. Amer. over current conditions. There were reports independent bankers had asked the NY Fed to supply a man to look over the situation; conditions are naturally being watched closely due to large amount of S. Amer. bonds carried in the US. Under-Sec. of State Castle discounted a moratorium, pointing out it's impossible to declare one on private loans. However, bankers in NY confidently expected some concrete action.

Editorial in favor of development of international law, particularly US participation in the World Court (the Senate has refused to agree). We now smile at the childishness of the old system of settling disputes through "trial by combat"; "will not future generations smile at our ideas of the settlement of international disputes, or rather, will they not wonder at our lack of intelligence in acting as if right and justice were with those best able to kill, maim and destroy? ... A hundred years ago Sydney Smith wrote: 'All the atrocious crimes committed in years of peace, all that is spent in peace by the secret corruptions or by the thoughtless extravagance of nations are mere trifles compared with the gigantic evils which stalk over this world in a state of war.' Why perpetuate such a system in preference to one founded on justice? Why should there not be justice between two nations as well as between two individuals?"

When William H. Seward, Sec. of State in the 1860's, negotiated purchase of Alaska for $7M from Russia, his deal was denounced as "Seward's Folly" across the US. In the past 19 years, two Alaskan mines alone have yielded $200M worth of copper; gold, timber, furs and fisheries have added many millions more.

Another new use for farm products has been found by Agriculture Dept. scientists: an owner of a fleet of trucks reports using honey in an antifreeze solution. Honey has a lower freezing point and higher boiling point than water; however, a disadvantage "is that if gaskets are not absolutely tight the honey will leak into the cylinders and cause considerable damage." [Note: It's a delicious beverage! It's an antifreeze! It's new Prestone-ade!]

Editorial by T. Woodlock: By coincidence, London is now engaged in an even more complicated transit unification than NY City, but is doing so on equitable terms and with remarkably less animosity and noise. Part of the greater heat in NY must be laid to the history of misdeeds in transit development on both the private and public sides. However, much of it is due to the current political environment, in which “the most convincing demonstration that a politician can give of his devotion to the 'public interest'” is an attack on utility or transit rates. “To borrow the slang of the theatre, this kind of thing is universally recognized as 'sure-fire-hokum' in a political sense. It is indeed the 'Abie's Irish Rose' of political politics, and it is playing to crowded houses all over the country!”

The chain store appears to be catching on abroad; it's already popular in Britain, as reflected in the success of Woolworth there; Woolworth is also operating in Germany, though on a smaller scale. Woolworth doesn't operate stores in France, but even there, in the traditional land of the small family-operated boutique, the cold figures indicate that the chain store is now significant; there are large chains in the grocery and wines/spirits categories, as well as four department-store chains.

At request of the Post Office all Irish banks agreed to return money received in future from sweepstakes subscribers in the US.

Editorial praising the NYSE Institute, an educational institution now in its 10th year that's operated for the benefit of employees of the Exchange and member firms. The Institute has a large full-time faculty; there were 1,677 students registered there in the past year.

King George of England recently sent a Mrs. Rachel McArthur of Edinburgh greetings on her 103rd birthday. Confirming his reputation for "rare tact," the letter he sent contained "best wishes for a long life." "Mrs. McArthur is said to be in excellent health, ... so perhaps his majesty's wish will be fulfilled."

Week in review:

Stocks around the world enjoyed a rip-roaring rally sparked by the Hoover plan for a year's moratorium on war debt and reparation payments; leading US stocks experienced their sharpest advances since the fall of 1929. NY City bank stocks ended the week trading at 19.1 times earnings vs. 16.9 a week earlier. Strength spread to commodity markets, with sharp recoveries from the lows in diverse commodities including silver (9%), cotton (17%), lead (13%), zinc (10%), hides (7%), and cocoa (19%); copper price advances were smaller but demand improved substantially; grains were more mixed, with wheat becoming irregular later in the week but corn strong. Rise in commodity prices stirred hopes that their persistent decline, which had been a most disturbing factor in the past 22 months, had finally ended. Steel production was worse than expected, falling close to the mid-Dec. low (excluding the Christmas week). However, sentiment was improve by the Hoover plan and prospects for a rail rate increase. Foreign currencies showed little net change in spite of the eventful week; however, hopeful signs included extending of $100M credit to Reichsbank to maintain reserve ratio, a better tone in mark futures, and decline in Swiss francs, indicating return flow of capital to Germany. Money market remained relatively dull. However, $20M purchase of govt. bonds by the Fed. Reserve was seen as highly significant; this policy had been urged by economists and bankers for some time to increase the supply of credit, and action by the Fed. indicated new confidence the credit would be used for loans and investment “now that economic winds seem blowing favorably.” Currency circulation fell $23M, indicating relief of Midwestern banking “misconfidence.” US gold holdings rose over the $4.950B level. Bonds developed "pronounced strength" with rising prices almost across the list. German govts. rallied sharply, leading an uptrend in European issues extending to many obscure state and city bonds. South American bonds "gave a spectacular demonstration of strength throughout the week" with strength in almost every country; reports circulated that Pres. Hoover would help in stabilization. Australian issues also rose sharply. US govt. issues bucked the general trend to decline on the week, though they continued to sell at premiums. Municipal bond trading was dull most of the week, and prices somewhat easier; Dow average of 20 long-term city and state bonds was at a 3.81% yield vs. 3.78% two weeks ago. Industrial bonds, which had been weakest on the decline, showed marked strength with spectacular recoveries in many parts of the list; oils and amusements showed particular strength, while convertibles rose in response to the stock rally. Rail bonds rose on optimism regarding a rate increase. High-grade utility bonds were firm around the year's highs.

Market commentary:

Market wrap: Stocks opened weakly on an accumulation of sell orders, but firm resistance developed, followed by a vigorous upturn. Utilities moved up briskly, while US Steel and Westinghouse were features of strength among the industrials; rail shares were more irregular, though they closed with fractional gains. Bond rally slowed somewhat; US govts. dull and steady; foreign issues quieter, with prices somewhat irregular; domestic corp. list featured continued rally in railroad bonds, as highest-grade rails were at record highs while second-grade rose strongly; high-grade utilities held around yearly highs. Commodities mixed; corn up substantially but other grains mixed; cotton closed somewhat lower after recovering from early setback. Copper remained at 8 3/4 cents with little metal available; foreign buying continued in good volume. Zinc, tin, crude rubber and silk were strong. Silver rose 5/8 cent to 29 1/2.

Market sentiment cheerful; predictions after the close were for higher prices this week, barring unforeseen developments. Conservative observers favor buying standard stocks on technical reactions, and using stop-loss orders to follow the rally higher.

NYSE volume totaled 1.9M shares, highest since Mar. 28.

Strength in stocks attributed to positive statement by Sec. of State Stimson on prospects of debt agreement with France. Good buying support has been in evidence on recent minor reactions. Leading brokers report increased public buying since the middle of last week. Increased foreign buying has also been evident, attributed both to investment buying and short-covering.

Canadian Pacific hasn't joined in the rail rally, possibly because Wall Street believes the road won't get the benefit of higher US freight rates. Editorial discounting rumors that the ICC will grant the rails an immediate rate increase due to urgency of their problems. These appearances of "Dame Rumor" are similar to those in 1920 and 1910 when previous applications to the ICC were pending. Wall Street never takes the rumors at "full face value," but does "take a degree of anxious interest in them which betrays a will to believe" possibilities that are in fact remote. The President is very unlikely to pressure the ICC, and the ICC is unlikely to be more panicked about the rail situation than the rails themselves. The financial community should at least "attempt to distinguish between the possible and the impossible when it lends ear to rumor."

Copper inventories are expected to rise again in June, though talk of production curtailment has died down since the price started rising.

Wall Street continues to be flooded with rumors of a more liberal view on prohibition from Washington in the near future. Conservative observers point out this would be most surprising, considering what's gone on in the past, but advocates say the step could be taken out of "economic necessity."

Edmund Stinnes calls for international tariff removal; says war debts in long run can only be paid if creditor countries accept goods from debtors.

Guaranty Trust uncertain on war debt plan's importance as economic factor in itself, but believes "as a stimulant to constructive effort and thought it carries great weight and may well mark the change in business attitude which precedes and helps to vivify business recovery." US business went through first half of 1931 at "practically unchanged level of activity". Although no definite improvement has yet developed, there's some basis for the growing belief that bottom has been passed or is near, "and that some degree of tangible recovery" should arrive in the second half. "The very fact that six months have passed without bringing further significant recession can reasonably be regarded as a sign that the process of readjustment is nearing completion." Financial situation strengthened by "elimination of certain weak spots," notably in Midwest; wave of bank failures in Chicago, while unsettling, was fundamentally favorable since it corrected a dangerous situation. "The removal of such an obstacle without greater ill effects should, in the end, contribute to the restoration of confidence."

Cleveland banks optimistic; Midland Bank calls Hoover plan “outstanding event of the year”; Union Trust sees evidence of business upturn in early fall.

Economic news and individual company reports:

Automotive trade has felt a quick revival coinciding with the market rally of the past week, with retail demand felt for low-priced cars, tires and accessories. Chevrolet sales seem to have returned to normal, with June to show the second consecutive monthly gain vs. 1930; rest of year expected to remain above 1930.

Continued decline in Swiss francs and guilders seen as encouraging reversal of earlier rise that gave first warning of German capital flight and crisis. Nordstern A.G., second-largest private German insurance co. and ally of Deutsche Bank, will come under new management due to loss of public confidence following recent large losses. Total Austrian govt. guarantees in connection with the Creditanstalt affair have reached 920M schillings, including 500M in foreign loans, 300M in savings deposits, and 120M in discounts of the National Bank.

Chicago City Controller announces all bond payments of principal and interest due on July 1 will be promptly met; shortfall reported earlier has apparently been corrected; much of needed funds will come from sale of tax warrants to Illinois Bell Telephone Co. First Detroit taxes to be collected after July 15 will be pledged to bankers in NY in return for $6M loan to carry city payrolls until after July 15. Important Ohio Supreme Court decision upholding validity of some $210M special district bonds will be appealed to the US Supreme Court.

Steneck Trust of Hoboken closed; deposits of $19.1M at year-end. Over 400 depositors gathered in front of the bank half an hour after the usual opening time; "police reserves were called out and there were some arguments between police and the depositors."

Chamber of Commerce says 1932 will witness unparalleled effort by business organizations to help reduce cost of government. S. Strawn, pres. of the Chamber, and J. Barnes, chairman, conferred with Pres. Hoover at the White House but wouldn't comment on the conversation.

East Texas oil curtailment efforts ineffective; production somewhat lower at 359,727 barrels/day in week ended June 24, but still far above the 200,000 target; many violators of Cranfill plan to limit production to 300 barrels/day from each 20-acre unit, including some of the major companies. Standard Oil of NJ says effective East Texas curtailment essential, calls for new legislation. Chicago wholesale gasoline prices up 1/8 cent to 2 3/8 - 2 5/8 cents/gallon.

Nat'l Industrial Conf. Bd. reports cost of living in Apr. 1931 was 4.8% below Dec. 1930, and 11.8% below the base year of 1923. Present decline was not as great as in the 1920 depression, though public is inclined to overestimate the decline due to drastic price cuts in many individual lines.

Fisher's wholesale commodity index rose for the second consecutive week for the first time in 1931, to 70.3 vs. 70.0 prev. week.

Amer. Farm Bureau Fed. says will oppose rail rate increase after learning rails don't plan to exempt agricultural products.

Improved sentiment following the Hoover plan was reflected dramatically in the cotton goods market, which had sales in the past week among the highest in history; total volume may have run over 100M yards; this was a sharp reversal from the buyer's market prevailing a little over a week ago.

Youngstown district steel production will remain at 41% this week.

Free Press reports Canadian crop conditions in most critical state, current conditions "worst known to the Free Press' observer in 44 years experience."

Offering of Taiwan Electric Power Co. bonds marks the "first long-term foreign loan of note in this market in about a year." However, the issue has the advantage of being backed by a strong company and also guaranteed by the Japanese govt.; opinion was divided whether this would mark the opening of a much-desired revival of foreign financing; bankers feel process of revival will be slow.

British House of Commons increased govt. borrowing limit for unemployment fund by 25M pounds sterling to 115M; fund would have run out within two weeks.

Canada will postpone 15 cent duty on US magazines "to determine what magazines shall be exempted as religious, scientific and educational" [Note: I guess my Atheist Superstitious Know-Nothing Monthly is out of luck.]

Australian budget for coming year will raise sales tax from 2 1/2% to 5%.

NY Transit Commission reports 1930 total of 3.325B passengers carried on NY City subway, elevated, street railway and bus lines and Hudson tubes, down 30.7M from 1929.

North Pacific whalers will not operate this year due to current low price of whale oil, attributed to competition from Norwegian whalers and large surplus.

"If the 'kitties' of the gambling tables are any criterion, prosperity must be just around the corner." After two poor years, the board of the Society of Sea Baths at Monte Carlo "almost gloated in reporting to stockholders that since April 1 the profits of the green tables have been 5M francs more than during 1930."

J. Wilson, IBM VP, reports Asian sales in first half 1931 considerably ahead of 1930. Says US business equipment, cars and machinery now dominates Asian markets, and still sees practically unlimited field for expansion there; Japan gradually securing some Chinese markets, mainly by adopting US business methods.

Sales and earnings of Century Ribbon Mills are up substantially over 1930, as ribbons return to style for women's wear for the first time in 5 years.

Company earnings reports: Archer-Daniels-Midland 9 mos. ending May $0.65/share vs. $1.74; Bangor & Aroostook RR 5 mos. ending May $5.84 vs. $8.50; Wesson Oil 9 mos. ending May $1.50 vs. $1.73; International Shoe 6 mos. ending May $1.12 vs. $1.75; Century Ribbon Mills first half about $0.60 vs. $0.08.

Companies reporting decent earnings: Canadian Hydro-Electric Ltd.

Joke:

Prosecutor - Have you any occupation? Youth - No. Prosecutor - Don't you do work of any kind? Youth - Nope. Prosecutor - What does your father do? Youth - Nothin' much. Prosecutor - Doesn't he do anything to support the family? Youth - Odd jobs once in a while. Prosecutor - As a matter of fact, isn't your father a worthless fellow, a deadbeat and a loafer? Youth - I don't know. You better ask him - he's sitting over there on the jury.