July 10, 2010

Friday, July 10, 1931: Dow 144.91 +1.08 (0.8%)

Assorted historical stuff:

Former Sec. of State B. Colby says Hoover moratorium plan is "belated recognition of our inextricable involvement in the world situation"; says plan can't succeed with only temporary and limited relief for Germany; calls Young Plan "dead as Caesar." Editorial suggesting "the long habit of American political thought is incompatible with the new role of the US as world creditor" and that an approach more oriented to international cooperation and free trade may be called for, as advocated by Sir George Paish ("The Way to Recovery") and Paul Mazur (" America Looks Abroad"). Sees sign that this approach has begun to catch on in the prompt and ungrudging support for Hoover plan from both sides of the party line. Treasury Sec. Mellon's cold much relieved after day at Cap Ferrat.

Editorial by T. Woodlock on proposals for Fed. Reserve to increase supply of credit by purchase of govt. bonds, with object of increasing prices of commodities and second grade bonds. "Highly respectable authority" has come down on both sides of the idea. Notes problem that prices at this time seem to be dictated by "abnormal ... lack of confidence ... This being so, a merely physical impulse from ... the Federal Reserve ... would meet 'metaphysical' resistance." Points to Federal deficit spending and veterans' bonus payments this year with little visible result. However, allows that the idea might be worth a try, particularly since Hoover Plan has increased general confidence. In any case, "we are certainly not yet ready for 'managed' currencies however appealing may be the theory ..."

An international meteorological conference will be held this year in Havana to seek improved methods of predicting hurricane formation and movements; the US Weather Bureau will attend. Hurricanes have caused "excessive damage" to life and property in the "West Indies" [Carribean] and the US Gulf Coast in recent years; some US insurance cos. refuse to write windstorm policies on Florida coastal property.

British Columbia plans to plant over 800,000 seedling fir trees to reforest areas along the coast, though the province has 8.5M acres in timber reserves.

French wine industry in desperate straits. Trouble apparently started in 1927, when “artificial price measures” raised wine prices; “many thrifty Frenchmen ... cut down sharply on their wine quotas,” and lighter drinks gained popularity. Since that time, there have been 10 decrees and laws attempting to bring prosperity back; this is now culminating in an “amazing” law working its way through Parliament that would: tax new vineyards out of existence, tax those producing extra heavy crops on a steep sliding scale, and provide for govt. control of wine shupments by all growers when oversupply threatens. With most French still living on farms, “farmer protection” is a standard plank in political platforms, and “each succeeding govt. adds a new list of protectionist measures to the already crammed folio.”

Dr. H. Eckener says will delay plans for trans-Atlantic zeppelin service for one year due to unfavorable economic situation.

Actuarial Society says chance of death to passenger on scheduled airplane flight in 1930 was one in 17,000 vs. one in 10,000 in 1929 and one in 4,000 in 1928.

William "Coin" Harvey is coming out of retirement to form a new national party. During the dramatic 1896 contest between McKinley and William Jennings Bryan, Harvey was about as well known as the two candidates, gaining his nickname after the runaway success of his book ["Coin's Financial School"] promoting the Bryan position of free coinage of silver at a ratio of 16:1 to gold.

Since opening of the Panama Canal in 1914, about 65,000 vessels carrying 300M tons of cargo and paying over $250M in tolls have passed through.

Oldest operating race track in the US is at Lexington; next is Saratoga, providing you include the "little Horse Haven track across Union Avenue"; otherwise it's Pimlico.

Market commentary:

Market wrap: Stocks fluctuated through a rather dull, professional session, possibly reflecting "perplexities in the foreign situation." Opening was weak, but declines were checked after early selling. Trading turned very dull, but moderate rallying set in, lifting market to a small gain by noon. Activity picked up slightly as bears resumed operations in early afternoon, but selling dried up abruptly and a brisk rally developed in late afternoon; closing tone was better. Bond trading featured "disturbing breaks" in German issues with weakness extending to weaker European and S. American bonds. US govts. and high-grade corp. issues were firm; some speculative issues rallied along with stocks but many continued to reflect a lack of demand. Commodities weak; wheat again fell substantially to new season and post-1895 lows, while other grains were soft; cotton fell sharply on weather reports and "absence of support from any particular source of importance." Copper remained at 8 cents with buying small and producers holding at 8 1/2; price outlook seen weak due to current overproduction. Silver down 1/4 cent to 28 3/8.

Conservative observers continue to advise sidelines, stop-loss orders to protect accounts, and against shorting.

Short interest has reportedly increased in the past few sessions. Even the usually volatile Auburn Automobile failed to stir up excitement with its bang-up earnings report of $11.05/share for the quarter ended May 31. Diamond Match [Kreuger-associated] has been subject of increased activity on rumors dividends may be initiated on the common stock. American Tobacco (makers of Lucky Strikes) sales have been increasing so rapidly this year that a dividend increase is believed almost certain before year-end.

Bears may have been restrained by firm tone in rails yesterday and late Wednesday. Action of rails in past two years has frequently predicted movement of the general list; rails have also entered a period where they can expect seasonally improved earnings. Car loadings have shown an improving trend; for the week of June 27 declines of 18.9% and 30.7% from previous two years were the lowest since the June 6 week; increase of 20,174 cars from previous week was an improvement over the gain of 16,045 reported in 1930.

Technical observers with a "long-range view" who are still somewhat optimistic now expect the reaction may continue until at least half the ground gained in June is lost; there could then be a period of accumulation laying the ground for a fall rally, "providing, of course, signs of better business conditions appear later in the year."

British capitalists have reportedly been heavily buying second-grade US bonds for their attractive yields and possible price appreciation.

Universal Trust Shares, a "semi-rigid" investment trust [similar to ETF's], which holds 30 "blue-chip" stocks, has an interesting feature by which any trust shareholder can apply for elimination of any stock or stocks in the portfolio and substitution of others; requests are decided on by three independent investment counsel, and other shareholders can decide whether to also switch or keep their existing shares.

Editorial: Govt. report on cotton acreage reveals "how flat the Farm Board has fallen in its efforts to improve the condition of the cotton farmer"; it has concentrated efforts on reducing acreage, but the 10% cut shown was less than usually happens when prices become very low. Barring bad weather, it looks like total supply of cotton will be about 22M bales, or 10% over last year and a record high excepting the 1926-27 season.

While admitting the debt moratium is "highly constructive, many conservatives in the financial district say that other developments are necessary before a substantial improvement in business" in the US, pointing particularly to large supplies of copper, oil, wheat, and other commodities which must be disposed of. This will require "material improvement in general business ... but at the moment no one is willing to predict when it will be accomplished."

Sir Charles Gordon, Bank of Montreal pres., sees general business improvement in Britain; says conditions not as bad as in the US.

Slow motion s**t hitting the fan dept.:

Dr. Hans Luther, Reichsbank pres., left London for Paris after meeting Gov. Norman of the Bank of England; officials were reluctant to comment but it's believed negotiations are in progress for a loan to the Reichsbank by central banks together with a syndicate of private banks. German govt. reportedly won't agree to foreign political demands as basis for the “urgently needed” new loan, including giving up Austrian customs union or construction of second “pocket battleship.” “The Reichsbank and other German banks are determined to prevent any German banking collapse and it is believed they will be able to avert trouble of this nature. Financial circles hold that the most difficult moments already have been passed.” German capital flight rose to 50M marks from 25M on Wednesday. Nordwolle [large German wool firm] reportedly needs about 50M marks in new credit to survive; Reich will probably grant credit to avoid insolvency, but require creditors to renounce 40% of claims. In all 37 banks are involved, 14 in London.

Austrian issue of 150M schillings in Treasury bills is still pending, with Bank of England renewing credit week-to-week; French bankers reluctant to participate until German situation is clearer. Bank of England and Bank of France considering Hungarian Treasury issue of 5M pounds sterling to relieve Treasury deficits and foreign credit withdrawals; some observers doubt this will suffice. Bank of Spain, together with private banks, are coming to the aid of banks in trouble. Bank of Cataluna suspension followed by those of two affiliated banks. Barcelona Stock exchange was closed temporarily, but "banking leaders assured the public that the difficulties would soon be under control." Finance Ministry reiterated necessity of a plan for stabilization of Spain's currency at value below par, noting importance of "abandoning the illusion still maintained by many that our peseta can reach a value par with gold coin"; blamed currency weakness on errors of the monarchy.

Uruguay's provisional govt. will advance funds to city of Cordoba to prevent default on two city loans of $6M and $11M held by NY bankers.

City of Chicago and school system still owe $38.7M from 1929 loans.

Economic news and individual company reports:

Union Oil of California Q2 earnings report gives disturbing indication for the industry; one of the leading integrated oil companies on the West Coast, it showed net profit of 2 cents/share vs. 59 cents in 1930; first half 43 cents vs. $1.20; "other companies ... in the same territory have probably fared no better and the smaller organizations have done considerably worse." East Texas oil price cuts were extended to rest of Texas, Oklahoma and Kansas. Texas Gov. Sterling called special session of legislature for July 14 to tackle oil and gas situation. Gasoline in the Chicago wholesale market firmed to 2 3/4 - 3 cents in spite of crude oil price cuts. Retail gasoline cut 1/2 cent in Detroit. Texas district court rules railroads can't drill oil wells on their rights of way, overturning Texas RR Commission; affects Texas & Pacific and Missouri Pacific RR.

Nat'l Auto. Chamber of Commerce estimates June production in US and Canada at 254,760 cars and trucks vs. 327,853 in May and 349,596 in June 1930; first half 1.633M vs. 2.309M.

Nat'l Assoc. of Real Estate Boards says few US cities are overbuilt; of 381 representative cities throughout the US, 49% report their market the same as or more active than this time last year; 72% of cities report supply of single-family residences about equal to demand, 17% a shortage, and only 11% an oversupply.

Money in circulation July 8 was down $6M to $4.834B, total Reserve Bank credit outstanding up $10M to $960M. Member banks in NY City report brokers' loans down $24M to $1.455B; loans on securities to non-brokers down $20M to $1.713B.

Corporate financing (domestic and foreign, including refunding) in June was $280.3M vs. $392.9M in May and $557.4M in June 1930; almost all of the total ($244.8M) was by public utilities.

Dow average of 8 iron and steel products held at $44.25. Scrap markets continued to show firmness.

Coal operators conferred with Commerce Sec. Lamont and Labor Sec. Doak seeking solutions for problems confronting the industry.

US internal revenue collections for year ended June 30 were $2.428B vs. $3.040B; NY State contributed $615M, down $257M. only states showing increase from previous year were Virginia and Colorado.

US Post Office reports June postal receipts in 58 cities were 5.41% below 1930, an improvement from the year-over-year drop of 11.24% in May.

Commerce Dept. reports conditions in British cotton industry improved slightly in latter part of June.

Farm Board rejects Russian offer to buy cotton on credit. US govt. circles expressed concern that British extension of credit to Russia could hit US exporters. Germany is currently by far the most important source of credit to Russia, offering $125M-$150M; a total of 9 countries now guarantee their manufacturers on Russian orders. Russia is now reportedly offering effective competition to British and Japanese cotton prints in Chinese textile market.

Discussions on curtailment of copper output end without action. Cartel of foreign lead producers agrees to additional 5% cut in output, on top of 15% cut two months ago.

Threatened crisis in French coal industry averted as result of drastic action taken by Premier Laval; production will be reduced 10% and import licenses cut.

Charitable gifts in five main cities of the US in the first half of 1931 were $188M, of which $27M was for "organized relief work." NY City led with $155M.

New Montgomery-Ward fall and winter catalog will carry price cuts averaging more than 10% below the spring and summer catalog.

Fox Film earnings have fallen below dividend requirements so far this year. Continental Can reports substantial recent improvement in sales, with June shipments exceeding the 1930 month. Western Union operating income in May was $994,813 vs. $825,914 in 1930.

Drug Inc. stock about 74; annual div. $4 (yield over 5%); sales running about 10% ahead of last year, and some expect earnings to exceed the record $6.90/share in 1929; balance sheet very strong. White Rock stock about 39; annual div. $4 (yield over 10%), also paid extra 50 cent dividend Apr. 1; earnings in 1930 were $4.78/share vs. $4.42 in 1929. Sales slowed earlier in the year with first half net estimated at $2/share. However, business has improved recently; June profits were close to a record, and July so far is running 10% ahead of 1930.

Companies reporting decent earnings: Corno Mills, Lindsay Light.


The Mystery of Life - "Clarence Darrow, noted criminal lawyer and homespun philosopher," and Zoologist H. Parshley "discourse amiably on the screen about the theory of evolution, between shots from old Ufa nature films." Film is "poorly put together and is a total loss as cinema entertainment." Parshley "lectures in the dull professional manner not unknown to freshman college courses in science, and Mr. Darrow interrupts him at occasional intervals to interject a facetious remark or a pessimistic observation concerning the lot of human beings ..."


Minister - Where's your father? Little Willie - Pa ain't home. He went over to the golf club. Minister - On a Sunday?? Little Willie - Oh, he ain't gonna play any golf. He just went over for a few highballs and a little stud poker.

Young Wife - Going out again? Two years ago you said I was your whole world. Husband - Well it's surprising how much geography you can learn in two years ...

July 9, 2010

Thursday, July 9, 1931: Dow 143.83 -2.09 (1.4%)

Assorted historical stuff:

Editorial arguing against proposal by "prominent political leader of a Southern state" to make the Hoover plan conditional on German purchase of cotton and wheat from the US. "If there is anything calculated to give the US the appearance of a mean little money grabber, it would be just such an effort ... The one great thing now is not alone to give Germany a breathing spell but to help her get on her feet permanently, and to bring to an end the economic war that is costing the world so much distress. The initial step has been taken unimpeded by narrow partisanship. If the remaining steps can be taken in the same way ... with no strings in the hand that is held out to the world, the US will accomplish something for the ... world that cannot be measured in terms of wheat and cotton."

Joint order from Stalin, Premier Viacheslas, and Politbureau head Ordjonikidze makes effective the new "Stalin economic era" giving higher pay to better qualified and more productive workers. Order mentions "extremely unsatisfactory fulfillment of coal production in the Don Basin" and makes shocking reference to possible failure of Five-Year Plan. 25 of the most capable Communist leaders will be dispatched to the Don basin to personally help direct the reorganization.

Editorial by T. Woodlock: World faces a looming conflict between two seemingly irresistible forces. First, of course, is that "gold is the only substance in which man at present reposes that kind of universal confidence which makes anything money." The second is that credit is an essential part of the economy, and that stable prices are needed for the credit system to function properly (general price decreases hurt debtors since money becomes more valuable, while price increases hurt creditors). In our current situation we're faced with very heavy debts that are already largely impossible to pay off, while the value of money seems to be inexorably rising; this will generate demands for "cheap money" or "inflation" from debtors (who are now largely farmers and entrepeneurs - corporate and individual - with borrowed capital, while creditors are largely the "middle class" with bank deposits, insurance policies, bonds, etc). In 1896-1900, the gold standard was saved less by arguments for sound money than by discovery of the Rand gold mines; no such help seems likely now, "and a battle sooner or later seems to be looming."

Of 66 nations invited by the US to adhere to the Kellogg treaty for the renunciation of war, only six have so far failed to sign; all six are in South America.

Treasury Sec. Mellon arrived at Cap Ferrat from Paris; admitted Sec. of State Stimson might visit him on his way north from Italy but said "it will not be of great importance" and that he was only there for his health and to see his family. He appeared "extremely tired after his work in Paris and was coughing considerably."

MIT announces invention of “'mechanical brain,' a calculating machine using light rays ... intended to serve scientists ... as an adding machine does bankers.”

Elevators in the newest skyscrapers have reduced the role of the operator to a minimum. When the up or down buttons are pressed on any floor of the new RCA building, the command is automatically transmitted to the next car to pass the floor; an automatic mechanism not only stops the car at exactly the right level, avoiding the need to watch your step, but also opens the doors! The operator is reduced to simply seeing passengers are safely in or out before doors are closed.

A shipment of 256 Canadian horses destined for the horse meat trade in France landed recently at Le Havre, the first of weekly shipments to be made through the summer. Apart from the advantage of cheapness, horse meat is believed free of tuberculosis, and so is used extensively in several hospitals.

Over 3,000 feet above the floor of Death Valley, the former "boom town" of Ryan, California has joined the ranks of "ghost cities." Created when borax was discovered nearby, it's now down to a single inhabitant who plans to leave as soon as the narrow gauge railway tracks to Death Valley Junction are torn up.

An interesting letter from Thomas Jefferson to a Gen. Muhlenberg, duty collector at Philadelphia: "Mons. d'Yrujo, the Spanish minister here, has been so kind as to spare me 200 bottles of champagne, part of a large parcel imported for his own use and consequently privileged from duty; but it would be improper for me to take the benefit of that." Encloses check for $22.50 to pay duty, but mentions that if payment "could be done without mentioning my name, it would avoid ill-intended observations."

Market commentary:

Market wrap: Stock market suffered further heavy selling for most of the day, as "considerable liquidation came into leading stocks"; negative factors included disturbing news from Spain and Germany and, on the domestic front, lower steel production and copper prices; "a slump in the grain market did not help." A rally in the final hour recovered substantial ground but left leading shares below Tuesday's close. Bond market recovered somewhat from early weakness but remained unsettled; foreign issues reflected "uncertainty in the bank situations at various centers," with many showing "varying losses on the day"; US govts. and highest-grade utility and rail issues were firm, while "dominant tone in other ... issues was soft." Commodities weak almost across the board; wheat fell substantially to new season and post-1895 lows while other grains were soft; cotton down very sharply following govt. weather and acreage reports, with all 1931 months falling below 10 cents. Rubber, silk, cocoa, hides, sugar and coffee lower. Copper sold at 8 cents; buying continued small; producers ask 8 1/2; price outlook seen poor as production curtailment is unlikely. Silver fell 3/4 cent to 28 5/8.

Conservative observers continue advising clients with long positions to use stop orders for protection; others are advised to remain on sidelines until market conclusively demonstrates resistance.

US Steel was pressured on lower production and anticipated lower unfilled orders report; other leading industrials also sold off. US Steel dividend is subject of considerable speculation, though nothing has come from "authoritative quarters." Copper shares were pressured on price decline. GM was well supported on June retail sales showing improvement vs. 1930. Kreuger & Toll is rumored likely to obtain the match monopoly in Colombia in return for a $20M loan. Int'l Nickel business reportedly improving, 1931 earnings estimate may be revised up.

Some traders have tried to take advantage of sharp movements in more speculative bonds; for example, Int'l Great Northern RR "adjustment 6s" have fluctuated between a high of 65 and a low of 37 this year.

Dow theory students believe nothing has happened to take back the bullish indication given by simultaneous new recovery highs in both the rail and industrial averages on June 12 and again on June 27. After rising 35 points from 121.70 on June 2 to 156.93 on June 27, the industrials closed Wednesday at 143.83, down 13 points from the rally high. "This retracement was less than the market was entitled to on technical grounds. Hence, analysts feel that further setbacks could be seen without destroying the prospect that the general list was preparing the groundwork for a further advance to discount autumn business improvement."

Bears have taken advantage of public surprise at market decline after agreement on the Hoover plan, though "professionals" had expected it. Operators from "the same group of bearish professionals who had been prominent in the raiding tactics of April and May" launched aggressive drives on Steel, Can, Case, and other shares that had attracted public followings in June; bears were "successful in forcing sweeping breaks" in those issues. However, Danforth [former major bear turned bull] interests began accumulating shares in Steel and Case late Tuesday, remaining convinced the "long-pull trend" is now upward.

Despite recent reaction, record low 2.93% ratio of loans to total value of listed stocks indicates that stocks "are held strongly" and "only a gradual improvement in trade would be necessary to start the market upward. But no one is willing to predict definitely when this change for the better will come."

Upcoming earnings reports are expected to produce "sorry showings from many important industrial companies" based on activity in past 3 months. Economists will be paying more attention to evidence of cost cuts, which should be reflected in the reports.

C. Gray, Union Pacific RR pres., returns from tour of Plains states; believes trend in business is upward; indications point to slow but steady improvement.

C. Schwab says moratorium “will help considerably, not only as an economic stimulus but by way of fostering more friendly feelings between peoples.”

Economic news and individual company reports:

German Pres. Von Hindenburg issued emergency levy on all important German businesses putting a total of 500M marks ($119M) in guarantees at disposal of Reichsbank to protect German credit. Idea for guarantee originated with Ruhr industrials but was adopted by Reichsbank; it was "underwritten in a few hours under pressure." Guarantee was greeted by a late rally in Berlin stocks though Wall Street bears took a more negative view. Withdrawals of foreign currency from Reichsbank gold reserves fell to 25M marks from 40M Tuesday and 75M Monday. Dr. H. Luther will go to London soon to negotiate a large loan for the Reichsbank. German unemployment June 30 was 3.962M vs. 4.067M May 31, 4.389M Apr. 30, 4.772M Mar. 30, and 2.636M June 30, 1930.

Following failure of a major Barcelona bank, trading was temporarily suspended on the Barcelona Stock Exchange and the Bank of Spain raised discount rates. Finance Dept. of Switzerland and other Geneva banks will support Bank of Geneva, which is suffering from run by depositors. British rate cut now seen unlikely in near future due to continued financial difficulties in Germany. However, "opinion is generally held that the worst is over and that with further international aid to the Reichsbank difficulties will be surmounted." Foreign currencies were mostly lower on concerns over the German situation, while Swiss francs and guilders moved higher, possibly due to German capital flight. Many London banks are involved in Nordwolle [large German wool firm in difficulties], but losses are “widely spread and have been grossly exaggerated.”

Detroit, in attempt to cut cost of relief operations and maintain credit, will transfer almost 1,000 homeless men to the Wayne County Infirmary from city rooming houses. Bankers have warned drastically spending cuts are needed to maintain financial rating. Detroit must raise $62.4M to meet short-term obligations due in Sept.; spending in the last few months has been supported largely through short-term loans used to meet payrolls and other current requirements, such as a $5M advance by Henry Ford last week. Chicago School Board's plan for payment in scrip hits snag due to legal opinion by Corporation Counsel Sexton. Orlando will vote Aug. 18 on three proposals to sell or mortgage the city utility plant. NJ State Receivership Commission, supervising affairs of North Bergen, denies request of closed Steneck Trust of Hoboken to guarantee payment of $5M in North Bergen notes.

Steel production for holiday week ended Monday was about 23% vs. 33 1/2% prev. week, 35% two weeks ago, 48% in 1930, and 78 1/2% in 1929. It's unlikely that the rate this week will return to the pre-holiday level. US Steel report of unfilled orders as of June 30 will be published at noon Friday; expected to show decrease due to new business in June falling below even the low 37%-38% average level of operations in that month. Weekly steel reviews somewhat optimistic in spite of production decline; belief gaining ground that July will see a bottom in steel demand. Steel production in June fell to a daily average of 79,843 tons, lowest since July 1924 with exception of last Dec.; in past, such extremely low levels “have almost invariably been followed within a short time by fairly decided gains.” Continued improvement in scrap markets was also encouraging. However, demand from consumers is dull; auto output will fall to about 200,000 units in July, and rail buying appears slower, though construction is still fairly active.

Some strong spots in the automotive industry: GM June retail sales were 103,303 units, up 6% from June 1930; Q2 sales were 371,139, down only 2.5% from 1930. Studebaker Q2 sales were 18,037 cars, up 9.5% from 1930; first-half sales also exceeded 1930. Auburn Automobile Q2 earnings were $11.05/share vs. $1.06 in Q1 and $4.25 in Q2 1930.

Rail freight loadings for week ended June 27 were 759,290, up 20,174 from prev. week, down 18.9% from 1930 week, and down 30.7% from 1929.

US electric output for week ended July 4 was 1,576 GWHr, down 2.8% from 1930, vs. a 3.9% decline prev. week and 4.6% two weeks ago.

East Texas oil situation has broken down severely; production is topping allowed quota by 100,000 barrels/day; "ten-cent crude oil is now a reality" throughout Texas, and "in East Texas the crude goes practically for what it will bring." Humble Oil cut official buying prices in the East Texas field and further price cuts are expected in the midcontinent fields and other areas East of California. Gasoline in storage at refineries fell over 2M barrels due to Fourth of July demands. US crude oil production for week ended July 4 was 2.483M barrels/day, up 40,550 from prev. week and down 99,000 from a year ago.

Total known security loans (more comprehensive total than brokers' loans) have declined continuously for 14 months and are now $7.085B vs. $13.205B on Sept. 30, 1929. Current level is $133M below that at end of 1926 in spite of $20B increase in stock and bond values since; there are "sound grounds for believing that security loan liquidation has very nearly run its course."

Commerce Dept. reports US net capital exports in 1930 of $733M vs. $306M in 1929, $944M in 1928, and average near $450M in 1922-29. Only $290M of total was for long terms. Gold flowed into the US during 1930 in face of increased capital exports and lower trade surplus.While movements of goods were greatly curtailed, receipts from interest, bond redemptions, etc. reached a record of $1.3B. “Foreigners last year made an 'unparalleled' use of their opportunity to repay their debts to Americans ... at discounts.” Tourist spending abroad fell to $811M from record $868M in 1929, though number of tourists reached a new record.

USDA estimates cotton acreage July 1 at 41.5M acres, down 10% from 1930.

Bureau of Agric. Economics sees 1931 Russian wheat crop somewhat smaller than 1930, even though acreage has been increased; reports on conditions, though very incomplete, indicate lower yields. British govt. has reportedly decided to extend up to 10M pound 2 1/2-year credit to Russia to buy British-made heavy agricultural and industrial machinery.

Mexican consumption of gasoline has increased steadily from 106.0M liters in 1925 to 326.5M in 1930.

US exports of rubber footwear in the first four months were down 53% to 1.3M pairs as cheap foreign footwear took a severe toll, particularly Japanese exports.

NY City Transit Commission continued to meet with IRT and BMT representatives; substantial progress has reportedly been made, and a revised transit unification plan will probably be ready by July 21 when the commission is scheduled to resume hearings. NY City now constructing 31 school buildings at cost of $20.3M.

Companies reporting decent earnings: Auburn Automobile.


Laughing Sinners - MGM film, starring Joan Crawford, at the Capitol. "Torch Song, Kenyon Nicholson's play about the psychological associations between religion and sex," has been adapted into effective romantic melodrama by toning down the viewpoint of the original play and concentrating on simple and forceful narration. Joan Crawford has never acted better than in the role of Bunny Stevens, "dance hall blues singer who changes her name to Ivy and her occupation to street-corner soul-saving when her lover jilts her to marry a wealthy woman." Clark Gable departs from his customary gangster roles to give a strong performance as a Salvation Army man who saves Bunny from suicide. Neil Hamilton is "much better than usual" as the lover.


Wife - Don't you know that stuff you're drinking is slow poison? Husband - That's all right; I'm in no hurry.

July 8, 2010

Wednesday, July 8, 1931: Dow 145.92 -6.88 (4.5%)

Germany special:

German govt. response to US-French agreement on Hoover plan expresses joy, "spiritual relief and hope for improvement"; acknowledges sacrifices by creditor nations, particularly "American people's most high-hearted decision." Pres. Von Hindenburg telegraphed thanks to people of the US, hopes for a "new era of peaceful and confident cooperation."

French govt. and press stress that France has made honorable compromise with the US, particularly in maintaining in principle the continuity of the Young Plan [reparations]; note impossibility of US isolating itself from rest of the world; say further negotiations should be in "spirit for reestablishment of international confidence ... we took our share of sacrifice, now others must take theirs." French public reaction is largely indifferent; there's no enthusiasm about the "gift made to Germany," nor any expectation she will use it to "put her financial house in order"; French are generally convinced "latest sacrifice is not the last that will have to be made to Germany." Editorial: France's perceived sacrifice in the reparations moratorium is not just a monetary one; many "French people, for perfectly understandable reasons, ... live in fear of a powerful Germany"; French citizens had hoped, roughly speaking, for "military security ... through economic repression of Germany."However, "one cannot 'sacrifice' something which one never had and never could obtain"; what Germany can give is determined not by abstractions such as war guilt but by "what the German nation is willing and able to do in preference to political revolution at home."

German govt. stresses that though "some hardships may be alleviated" by reparations holiday, "Germany will in no wise be relieved from its economic ... distress" and "may not relax her immense efforts to economize." Relief will be applied to consolidating position of govt. finances; this will ease credit markets and benefit German business; have assured US that govt. spending won't increase. Long-term financial problem is still acute; crux of the problem is converting short-term credits that can and have been withdrawn on a large scale to longer-term loans. "The question that remains ... is whether a year's postponement of reparations will be sufficient ... to balance the German budget, take care of unemployment, quiet down social unrest of the Hitlerites and Communists and thus restore foreign confidence ... to a degree which will induce foreign capital to refund short-term loans on a long-term basis."

Hoover Plan announcement, together with $100M central bank credit, enabled Germany to tide over a crisis that "might otherwise have developed into revolutionary chaos" and even to "a general breakdown of European credit with a moratorium on all private debts." As US-French negotiations dragged on, the German crisis again became acute due to large withdrawals of foreign credit. However, "it is confidently hoped that agreement on the debt postponement will reverse the immediate situation."

Marks rose slightly; German capital flight continued, but at a substantially lower rate; "cessation of the flight of capital is not looked for until confidence is completely restored but it is stated that a gradual dwindling of the efflux can be expected." Reichsbank credit of $100M from central banks will reportedly be renewed. Stocks in Berlin were higher.

German exporters and industrialists are outspokenly disappointed with Russia; renewal of economic troubles blamed on Soviet "trickery." After negotiation of credit guarantees by Reich for up to 70% of goods bought in Germany, Russian orders have only come to 50M-60M marks vs. 300M promised; breakdown blamed on Soviet dumping of goods in German markets at 25% or more below production costs [note: I don't quite follow that].

Over 100,000 posters addressed to "Mothers of Men" were recently posted in Paris and Berlin; printed in "flaming red letters," they said that if women had the of courage to oppose "the criminal maneuvers that are leading Europe rapidly to a new and greater catastrophe, there will be no war."

Germany's first real skyscraper to be built on grounds of the Zeiss Optical Works in Jena. At 280 feet and 24 stories, it will be the tallest office building in Europe.

Assorted historical stuff:

Hoover plan drew more praise from business leaders: E. Webster of Stone & Webster - "should have a very beneficial effect on the market, and on business in general." W. Bucklin, Nat'l Shawmut Bank pres. - "an extremely constructive step." H. Bancroft, Wall St. Journal pres. - "the finest piece of constructive work accomplished in the world for a great many years."

Washington report: Acceptance of Hoover plan seen marking start of important worldwide political and economic changes; “economic revival ... is confidently hoped for.” If the apparent improvement in prices and sentiment brought by the plan “proves merely an interlude, high Washington officials will be deeply disappointed. ... It is pointed out that much smaller events have marked the turn of past depressions.” It's generally believed the subject of debt and reparations will need to be revisited with an eye to permanent solution; disarmament may also enter the picture, though many are skeptical of its prospects. Pres. Hoover has made a radical change from the isolationist policies of the past decade and become a world figure; this, together with economic revival, is likely to “strengthen him immensely” and shake up the Democratic Presidential race, weakening Roosevelt and strengthening Owen Young. While the plan will increase the deficit by $265M, there's “little disposition to endanger a revival by increasing taxes.” Treasury experts from interested powers will meet to work out details of Hoover plan; State Dept. foresees little difficulty, though opinion here is that it may take months to settle all points.

Editorial by T. Woodlock: It's natural that in the face of worldwide crisis, South American debts have received little US attention. This region largely depends on raw materials for income and is, like other debtors the world over, facing severe difficulties. The US view is generally ignorant and condescending, with many thinking “revolution” and “repudiation” are all we can expect. In the first place, “revolution” has a different meaning in S. America, being a more or less customary way of changing parties in power. The US also doesn't appreciate efforts some countries are making to meet obligations, and has a feeling of superiority that's quite unfounded, since “in almost every one of the S. American countries there is a class of cultivated men for whom the history of the civilized world, its traditions ... mean much. ... How many Americans know that a book was printed in Mexico City a hundred years before Harvard was founded and that there was a flourishing university there to receive it? ... A liberal dose of intellectual humility" is in order so that we can understand S. American customs, ideas, and politics; we can start by "dropping the word 'Nordic' from our conversation book. After all, there were a few brave men before Agamemnon, and it is not strictly true that the world's civilization began at Plymouth Rock."

NY Gov. Roosevelt says local govts. account for half of $12B annual US taxes; sees simplification and reduction of local govt. as only hope for lower taxes. Gov. Roosevelt sees possible solution of agricultural problem in "factory-farmer"; tells of experiments in placing industrial plants in rural sections, with "a business program planned to utilize the farmer's time when his crop has been harvested."

Editorial: Commerce Dept. report of 35.805M cars registered worldwide on Jan. 1 vs. 35.128M in 1930 and 32.029M in 1929 shows cars continue to gain despite the depression (world production was 4.109M). In the US, there were 4.59 people per car on Jan. 1 vs. 4.87 in 1930, while the rest of the world had 200 per car vs. 216 in 1930. "There is a great potentiality in markets which are yet practically untouched. Depression may cause a temporary decrease in purchases, but the automobile is its own advertising agency. Wherever it is used its value becomes apparent and further demand is stimulated. ... Every automobile placed in China or other undeveloped countries is a pioneer for American business; it not only creates a demand for more automobiles but is opening the way for business of every kind. What we wish to see is a world on wheels; looking into the future its day seems near at hand."

One European nation consumes more tobacco per capita than the US, making talk of saturation premature - the Netherlands, at 6.27 lbs. per capita in 1930 vs. 5.84 in the US. In consumption of cigarettes alone, US was also second, this time to Britain (998 in the US vs. 1,033 in Britain - 1,000 cigarettes = 2.2 pounds).

Natural gas seen entering period of growth similar similar to that of electric industry in the past decade. In 1930, industry produced and sold 1.940 trillion cu ft, up 1.2% from 1929, which in turn was up 22% from 1928. Transportation of nat. gas is relatively cheap, and it's displacing other fuels due to significant savings made possible by its use. One of fastest-growing uses is as fuel to generate electric power.

Century Pacific Air Lines, a new entry in the air transport field, ignites West Coast fare war by posting fares considerably below those of existing air lines; Los Angeles to San Francisco is $18.95 one way, and Los Angeles to San Diego $4.95.

The US Navy is auctioning off 1,000 binoculars, telescopes, and sextants loaned to it by individuals during the World War for which it couldn't track down the owners. Of 52,000 instruments received in response to a nationwide appeal, 32,000 were found usable.

Scientists have discovered in the waxlike coating of the humble apple a resinous, water-repellant substance, ursolic acid, "whose existence and potentialities have been for ages unsuspected." Added to paint, it may broaden the apple's function from keeping the doctor away to keeping water away from the woodwork.

Dr. Edward G. Acheson dead at 75 - discoverer of artificial graphite and carborundum [silicon carbide, second-hardest surface next to diamond - still made by method he developed].

Dr. Eugene L. Fisk, medical director of Life Extension Institute, dead at 64.

John D. Rockefeller celebrates 92nd birthday today; day will be spent as usual except for family gathering at dinner. Mr. Rockefeller says he's in excellent health, thanks many friends for "kindly regard" and wishes "all the world a large measure of health and contentment which are the basis of real happiness."

Market commentary:

Market wrap: "Yesterday was the one occasion in a long time when the stock market acted as a majority of traders and others anticipated." Stocks initially were strong following overnight announcement of agreement on Hoover debt plan. Declining tendencies spread toward end of first hour and picked up momentum toward noon; major industrials including Steel and Can suffered extensive setbacks; issues including J.I. Case and Westinghouse in which short interests had been squeezed last week broke badly; rails were under severe pressure; volume increased over Monday. Selling slackened in late afternoon, but slight rallies gave way to another selling wave that swept across the market in the last hour; close was weak. Bonds fell on heavy volume after opening higher on debt agreement; foreign list irregular, with price movements mixed; US govts. dull and slightly lower; corp. high-grade steady to slightly lower while second-grade trended down and speculative issues showed marked declines. Commodities mixed; grains steady to slightly lower; cotton down substantially after losing early rally. Copper buying remained close to a standstill, some metal available at 8 1/4 cents with producers holding at 9. Silver fell 3/4 cent to 28 5/8.

Conservative observers point to their anticipation last week of selloff on the good news and advice to reduce long positions. Clients who maintained long positions are now advised to use stop-loss orders for protection; buying isn't recommended until "the market has proven its ability to resist selling."

"Experienced trading circles" not surprised by selling on the news of debt agreement, since news was expected and had been discounted by the recovery of almost 25% from June lows. Interests who took advantage of initial bulge to sell believed process of recovery would be "slow and tedious," offering opportunities to reacquire shares at lower prices during the summer; uncertainty over upcoming earnings reports was also a factor. "However, the best opinion continues to be that the lows of the bear market have seen, and that setbacks on poor reports ... will not endanger the resistance levels established on June 2."

Most authorities now anticipate a period of dullness in the market rather than a resumption of the downtrend; worldwide sentiment has been improved by the Hoover plan, and further measures are expected in order to ensure ample credit supply to debtor countries. Many standard stocks now offer attractive dividend yields, and investment accumulation seems likely to come in response to further market reaction.

Coca-Cola sales have improved along with warm weather; "interests familiar with the company's affairs" expect net of $12/share this year vs. $11.15 last. J.I. Case was pressured after reports Danforth interests who had been conducting bull operations had liquidated a considerable amount of holdings. Savage Arms has been subject of numerous positive rumors, all denied by official sources; market interests believe stock is subject of pool activity. US Pipe & Foundry hasn't benefitted from cheap money to the extent expected as many municipalities are having difficulty financing construction projects.

Many in the financial district expect additional bullish news out of Washington in coming months, including relief for railroads and aid to farmers, many of whom are "almost prostrate." However, in both cases actions may not be decided upon until fall.

Industry is now in midst of typical midsummer slack period, with "little likelihood of any material change" in basic lines. However, "because the rates of operations in steel and other industries are so low, the reductions in activities in the coming months will be smaller" than in previous years.

T. Chadbourne says believes international sugar agreement will restore industry to normal, also restoring "many millions of people to prosperous and happy conditions in place of ... privation and suffering." Approves of Hoover plan "but one swallow does not make a summer, and constructive measures will have to be piled one upon the other if the capitalistic structure of society under which you and I and our forbears have lived is to justify itself." Blames Cuba's plight on tariff barriers erected against its main (sugar) industry "by its self-appointed guardian, the US."

Lawrence Stern & Co. finds large majority of security dealers now optimistic on immediate outlook for both bond and stock markets, a striking reversal from pessimistic forecasts of recent months. Parsly Bros. reports yield spread between high-grade and second-grade bonds as wide as any time in the past 30 years; note that in the past, second-grade bonds bought during periods of stress have yielded investors the best profits.

Economic news and individual company reports:

Commerce Dept. report, issued before final agreement on debt plan, finds sentiment improved in several countries and actual business "stimulated in several regions" including Britain, Italy, Hungary, Czecho-Slovakia and Japan; conditions worsened in Egypt and Canada.

Bank of Cataluna in Spain, with deposits of about $34M, suspends payments, creating difficult situation throughout the province; other banks report heavy withdrawals. Rise of 1/2% expected in Bank of Spain discount rate (now 6%) due to increasing circulation and heavy credit demands. Hungarian National Bank appealed to Bank of England and BIS due to disturbances caused by Hungarian General Credit Bank problems, which were in turn caused by the Amstelbank losses [which were in turn caused by the Creditanstalt]. Hungarian gold reserves are now $30M, vs. foreign loans at private banks of $100M. Situation reportedly relieved by $20M credit at BIS and issue of 5M pounds sterling treasury notes; "liquidity of all Hungarian banks is now assured."

Coral Gables, Fl. bondholders committee reports enactment of legislation needed to solve debt problem, as well as election of Mayor believed to be committed to debt refunding plan that fully recognizes rights of bondholders; asks deposit of all outstanding bonds with committee.

Last week's Fed. Reserve member bank report showed $151M increase in loans countrywide, though bulk was in NY City banks. Encouragingly, $108M of the increase was in "all other" (commercial) loans. It will probably take several weeks to tell definitively whether increased credit being released by the Fed. Reserve through purchase of govt. bonds is being used by the country at large. Banks sold substantial amounts of non-govt. securities; holdings were down $43M in the week ended July 1 and $241M since Apr. 29. Midyear Chicago bank statements show deposits of $2.500B vs. $2.615B on Mar. 25, decline of 4% [Note: location of bank crisis starting in June].

Standard Oil of NJ cut retail gasoline prices 1 cent/ gallon throughout territory; Standard Oil of Ohio cut prices in some sections; further cuts expected. Chicago wholesale gasoline prices are steady at 2 5/8 - 2 7/8 cents/gallon but East Coast prices have been falling for some time and are now at 5 1/4 - 5 1/2.

American Machinist reports automotive sales a strong point in machine tool market, buying by Chevrolet and Chrysler; conditions otherwise remain slow.

Eastern rail executives again report "very substantial progress" in consolidation talks; another meeting planned in near future.

New England Council reports index of general business activity in New England continues steady rise since start of year, during which it has improved from 29% below normal to 10.6% below normal.

West Virginia Mine Workers called strike in Kanawha County coal fields; about 23,000 responded to call.

British House of Commons passes new coal bill maintaining status quo in industry and staving off danger of strike in mining districts.

Canadian prairie provinces report some beneficial rain, though serious drought damage remains.

Japanese silk interests concerned over large surplus of raw silk in storage; silk was stored last year in unsuccessful govt.-backed effort to support prices.

North Atlantic Steamship Conference to be held in Paris today; 10%-20% cut in first-class transatlantic passenger fares expected.

Retail sales reports: J.C. Penney - June $14.8M, down 6.3%; half $77.4M, down 10.5%. National Tea - June $6.3M, down 5.8% from 1930; half $38.7M, down 10.3%. Walgreen - June $4.8M, up 11.5%; half $27.2M, up 4.9%. F. & W. Grand-Silver Stores - June $3.1M, down 2.2%; half $16.7M, down 0.2%.


The Black Camel - A Fox film, at the Roxy. Features "Warner Oland again delivering himself of shrewd Chinese aphorisms while hunting clews as Charlie Chan, the Honolulu detective." Contains "the requisite amount of suspense and ... an unexpected climax." Film takes place three years after murder of Hollywood actor; suspects gather in Honolulu to be examined by Charlie Chan; two more murders ensue. Cast included Bela Lugosi playing a "mystic in his accustomed mysterious manner," and Victor Varconi as "the most suspicious subordinate character."


Smith bought a parrot, which he was assured was a good talker. A month later, he returned indignantly to the store. "What's the matter with the parrot?" asked the dealer. "W-w-why," replied Smith, "the d-d-darn b-b-bird s-s-stutters!"

July 7, 2010

Tuesday, July 7, 1931: Dow 152.80 -2.46 (1.6%)

Assorted historical stuff:

Pres. Hoover announces debt moratorium proposal accepted in principle by all important creditor govts. French acceptance involved some technical changes that must be approved by other countries, but substance of proposal retained. Agreement "morally in effect as of July 1." Proposal means some sacrifices by US and allies to lighten load on Germany and Central Europe. Hails almost unanimous support in US as evidence of "sincere humanity of the American people." Plan is mainly economic, "yet economic means the swinging of men's minds from fear to confidence, the swinging of nations from the apprehension of disorder and government collapse to hope and confidence of the future."

Editorial: "Grandiose schemes of public works ... to pull the US up out of depression are steadily increasing in number"; while still vague, they "are gaining somewhat in the respectability of their support." The next session of Congress will certainly spend much of its time considering such measures, so an advance examination is in order. "It should begin with the fact that 5M or 6M workers are unemployed at present," most of whom are likely to remain so through winter; "next comes the justifiable assumption that these men and their dependents are going to be fed and sheltered, as they ought to be, by one means or another. Whatever the country can obtain from them in useful services ... will be net gain for all concerned." Therefore, supporting them through public works that produce "results of economic or social value is preferable to outright charity." However, financing such a program without creating hardship for existing private businesses "presents huge difficulties" that "proponents ... like Norman Thomas and William Randolph Hearst ignore. Bond issues and taxes mean the withdrawal from private enterprise of funds which would otherwise be available to it"; they also increase "difficulties which states and municipalities have already begun to encounter in balancing their budgets. ... Nor can the extremely slow pace at which all government machinery moves be overlooked." An AIA officer estimates $500M has been appropriated for federal buildings that won't be used "until the emergency is passed. ... Why talk of federal bond issues in gorgeous sums ... while the government has hundreds of millions ... authorized which it cannot get in motion in any quicker tempo than that of a glacier?" Proponents of a huge new program should instead try to cut "the red tape which binds what Congress has already tried to do" or concede that reemployment is a task govt. "should encourage and assist private enterprises to perform."

Indiana Sen. Watson, Republican floor leader, says most important legislation confronting next Congress will be bills to put trucks and buses under ICC authority.

Worldwide total of motor vehicles registered Jan. 1 was 35.805M, of which 26.697M was in the US; US has 4.59 people per vehicle vs. 200 in rest of world; Canada and New Zealand were second to US with 8, followed by Australia with 11; fewest vehicles per capita in Yemen, Oman, China, and Ethiopia.

[Note: Stalin - inventor of perestroika?] "Under the impetus of a pronouncement by Joseph V. Stalin," Russian industrial policy is making some important changes, including: 1) "obliging every Soviet enterprise to justify its existence by earning profits"; 2) giving higher wages to workers of greater ability, ceasing discrimination against efficient non-party workers in favor of Communists, and giving "wider scope ... to individual initiative"; 3) abandoning "unwieldy trusts" in favor of "smaller, centralized management." Soviet officials denied any compromise with capitalism, saying the proposals, on the contrary, were intended to complete more quickly the process of industrialization in order to form the basis of a real Socialist state.

M. Petsche, French Under-Sec. of State for Beaux Arts, announces annulment of French licensing plan for film imports and free entry of foreign films originating in any countries which impose no restriction on entry of French films.

Corn Products Refining Co. fined $5,000, in victory for Federal effort to penalize companies providing supplies for making of illegal alcohol.

The newest Army "single-seater pursuit plane," the smallest craft produced by Boeing, contains over 30,000 different parts. There are "519 different kinds of raw material and 813 different kinds of finished or semi-finished parts," not including engines and instruments.

One agricultural industry that seems to be on the upswing is sod. Many farmers in NY and NJ have recently switched larged acreages from grain crops to growing and selling sod for golf courses, cemeteries, lawns and parks; prices are 2 - 6 cents/sq ft, and some farmers claim to be making $500 - $1,000 an acre.

Pennsylvania RR broke all records for Fourth of July travel, carrying over 140,000 passengers to and from New Jersey resorts over the weekend; this more than doubled the total from last year.

Editorial: "The other day the British House of Commons staged a genuine rough-and-tumble row." This story was a welcome diversion from the grim run of everyday news; "few there are who will not wish they might have had ringside seats." On a deeper level, however, "this row should make us feel that the British are our brothers. They act just like us and even conduct their parliamentary proceedings much after the manner of our own Congress. ... It is true we have seen others act as we do; we have read of free-for-all fisticuff discussions in the French and Italian chambers. But of England, the country of the author of Martin Chuzzlewit, who could have thought it?" One of the 8-day around-the-world fliers "said that so far as he could see people were the same the world over regardless of race or nationality. That was a pretty hard thing for a great many Americans to understand who, perhaps from an inferiority complex, try to make themselves believe we are superior to all others. ... that incident in the House was ... of great benefit to American conceit, for if it did not raise us up it at least pulled the Briton down to our level of correct parliamentary procedure."

Market commentary:

Market wrap: Stocks again fluctuated along with progress of debt negotiations. Opening was weak on reported hitch in the talks; however, initial setbacks in first hour gave way to extreme dullness and then a recovery about 11 o'clock. Rally strengthened around noon after optimistic statement by Under-Sec. Castle; Chrysler and Woolworth were subject of bullish demonstrations. Unsettlement returned in late afternoon following sharp break in wheat markets, and market turned generally reactionary. Bond trading quiet, prices somewhat lower; foreign issues accounted for much of the trading and showed particular weakness, led by German bonds; US govts. steady; domestic corp. high-grade issues were fairly steady while second-grade were weaker, though second-grade rails held relatively strong. Commodities weak; grains off, with wheat hitting new season lows on heavy receipts of new winter crop - Chicago July wheat hit post-1895 low of 55 cents; cotton down substantially. Copper remained at 8 1/2 - 9 cents though it was reportedly "offered ... quietly at 8 1/4"; buying small. Silver fell 3/8 cent to 29 3/8.

"Conservative observers see little in the present market upon which to base new trading commitments." Market will apparently require "new stimulus" to continue recent gains; at the same time, customers are warned against short sales until business response to efforts to improve German situation is clearer.

Q2 earnings estimates are coming more frequently, and the first reports will appear within a week or two. These are widely expected to be unfavorable, and some traders are shorting stocks in anticipation. "However, there is a growing opinion that dismal earnings statements will not prove to be the shock bears expect" since stocks "have had ample time to adjust themselves to the outlook"; also, greatly improved sentiment in the past two weeks has produced "many potential investors ... anxious to acquire representative shares on price recessions." On the other hand, there is the disturbing example of Q1 earnings reports in April, which were followed by a selloff in spite of generally being no worse than predicted.

Trading was very dull, with total volume of about 1M the lowest since the 900,000-share session on June 17. Friday's session ended with good gains in rails and industrials, but both fell short of attaining new highs on the recovery since June 2; analysts believe a move beyond this level would indicate further general gains. Short interest appears considerably reduced; many traders who tried to pick the top of the rally apparently were discouraged by the market's good support and covered their commitments. National Biscuit broke to record low for current shares on expected unfavorable Q2 earnings.

Bears believe positive influence of the Hoover plan has been "fairly well spent" and market will sell off sharply on announcement of a final agreement. Bulls admit market may "sell off on the good news" but believe improved sentiment due to Hoover plan should be a continuing factor in helping to accelerate world trade.

Rather technical editorial by T. Woodlock on the rail rate decision facing the ICC; case is difficult with "room for infinite dialectics on both sides"; however, "heart of the matter" is "whether carrier revenues are not so far below a sufficient amount as to make it its duty under Section 15a to permit an increase in the freight rate structure" and "no amount of argument will avail to obscure or remove it" [Note: well, that clears that up!]

Letter to the editor asking "why, with an excellent decimal system of currency ... are stock and ordinary bond quotations given in whole numbers and eighths ... US govt. bond quotations in whole numbers and thirty-seconds, and foreign exchange rates in mongrel forums such as 4.86 11/32?" Calls for using straight decimal system to simplify records and computations. [Note it only took another 70 years to do this for NYSE stocks.]

Harvard Economic Society says Q2 had "brought some signs that the great depression had about run its course ... but in June the outlook was suddenly clouded by an acute situation which developed in Germany which has now led to Pres. Hoover's proposal for a moratorium." Believes the moratorium will "probably restore exchanges to a balanced condition for the coming year, check the inflow of gold into the US, remove pressure from commodity markets, restore confidence, and, finally, impress everyone with the need of solving permanently a major difficulty which for a dozen years has hampered the trade of the world."

Long-term effect of the Hoover plan is "likely to come chiefly from its firming influence on commodity prices" which is already apparent in many commodities and has caused increased activity in some lines. "Psychology has a tremendous influence on material purchasing. The spectacle of firmer prices is counted upon to have a cumulative effect on demand pent-up by the paralysis of fear that existed for so many months. Once the buyers' strike is broken, momentum should accumulate on the constructive side" as it did during the downward cycle. Increased credit for debtor nations may also improve demand.

Observers optimistic on world trade "contend that some measure of inflation, of necessity," must follow the debt moratorium, concentrated in "commodities with a worldwide market." Many economists believe "the signal for inflation has already been given in the increase in this country's national debt," pointing to the decline in commodity prices in 1921-30 "in sympathy with the new contraction of credit resulting from the Treasury's reduction in the war debt."

A. Robertson, Westinghouse chair., notes “paternalistic proposals that big business, or the government, assume many of the obligations formerly recognized by the individual as ... his own responsibility.” However, business, far from being immune to depression, is “just about as helpless as the employee.” Rights of stockholders are also in danger of being ignored. Country will weather the storm; “certainly the worst is behind us” and at least some lines have started to improve.

Nat'l Conf. of Business Paper Editors survey finds business now in "the condition that generally precedes an upturn"; replacement buying can't be delayed much longer; increase in production and distribution already apparent in some lines.

Economic news and individual company reports:

German capital flight intensified, with a loss to the Reichsbank of 60M marks ($14.4M) reported Monday; attributed to drawn out debt negotiations that harmed confidence both in and out of Germany. Reichsbank drew for the first time since 1924 on the $50M credit that its Gold Discount Bank subsidiary had with a syndicate of 30 US banks. Marks dipped close to the gold export point and pounds were soft while guilders and Swiss francs advanced sharply.

Drought in Western Canada has reduced wheat crop to not much more than half of normal. Some estimate population in dire need at 100,000 while others place it much higher; Federal assistance expected soon; discussions ongoing on “financial tangles” of wheat pools, which are near collapse.

Rogers Caldwell, formerly one of the South's leading financiers (as head of the large Caldwell & Co. investment bank that collapsed last Nov.), found guilty of fraudulent breach of trust in connection with $200,000 bond transaction; verdict carries sentence of up to three years.

Market value of NYSE-listed shares July 1 was $47.417B, up $4.883B from June 1; borrowings by NYSE members fell $43.4M to $1.391B or 2.93% of total share value, both record lows.

Col. Robbins, Amer. Life Convention pres., notes recent improvement in insurance business from early months of the year; "much lapsed business has been revived ... and many policy loans are being paid off."

East Texas oil producers generally dissatisfied with new Texas Railroad Commission order setting limit of 250,000 barrels/day with limits based on 20-acre units. Oil being sold as low as 8 cents/barrel, average about 12 cents. East Texas has favored the special legislative session to be called by Gov. Sterling, and oil men are confident of quick passage of a tougher curtailment law.

Fisher's wholesale commodity index rose for the third consecutive week for the first time in 1931, to 70.6 vs. 70.3 prev. week.

Following conference of almost 2 hours with Vice President Curtis and Sen. Capper, Farm Board chair. Stone says Board won't make any immediate sales of wheat at current prices. Curtis says not entirely satisfied, would have preferred Board name a minimum price of 85 cents or $1. Heavy rains in drought-affected areas of North Dakota and Montana arrived too late for crops but should help revive ranges and lessen emergency movement of livestock.

Swedish Board of Trade reports no sign of improvement in conditions in past quarter; position of some industries has deteriorated further. Industrial employment in Q1 fell to the lowest level since 1922. Export trades are main sufferers, but domestic industries increasingly affected.

Dow Service reports new building permits filed in NY City in first 6 months of 1931 totalled $194.6M vs. $162.0M in 1930.

NY Gov. Roosevelt says highway construction has been speeded up, and is providing work to thousands more than in previous years; state will spend about $58.3M on highways this year vs. $50.7M last year.

Alaskan mineral output in 1930 totalled $13.812M vs. $16.066M in 1929; gold was $8.476M vs. $7.761M.

450 employees of Northern Indiana Rwys. make voluntary request for wage cuts until company business improves.

Chase Nat'l Bank reports first-half deficit from operations of $14.8M.

Retail sales reports: Woolworth - June $22.0M, up 6.1% from 1930; first half $130.3M, down 0.8%. S.S. Kresge June $11.9M, up 4.3%; first half $67.2M, down 0.3%.

Procter & Gamble likely to report record earnings of about $23.250M or $3.50/share for year ended June 30 vs. $3.37 prev. year; sales will be about equal to prev. year's $203.4M; higher profit margin attributed to control of operating expenses and low raw material costs; increased dividend anticipated.

Household Finance likely to report record first-half earnings of about $2M, up 7% from 1930; has 295,000 loans outstanding, up 12% from a year ago; average loan size $202; collections continue at a normal rate.

Companies reporting decent earnings: Procter & Gamble, Household Finance, Alaska Juneau Gold Mining.


"'I don't see what you find so attractive in that young man. He is neither handsome nor intellectual.' 'No, but he has the reputation of buying lovely engagement rings.'"