Friday, July 17, 1931: Dow 141.99 +4.13 (3.0%)

Germany special:

German situation improved. All German banks, including even the Darmstadter, reopened on limited basis; wage, unemployment and tax payments were met throughout the country. [Note: I couldn't tell for sure what, if anything, banks were allowed to pay out to depositors.] Crowds of depositors were already assembled when banks reopened, with policemen at every branch and emergency squads in school buses at strategic points. However “though crowds expostulated at first concerning the new decrees, there was no serious disorder.” “Public feeling remains unusually calm. Continuation of the improvement noted thus far, however, is believed to depend largely on foreign aid.” “Communist or Fascist uprising scare waning. Tendency to change money into goods disappears. Hopes expressed currency crisis will be overcome in few weeks. Two years held necessary for gradual liquidation of foreign debts.” German measures were received favorably in banking circles in NY and abroad and “calmed the fears of troubled investors.” Herman Schmitz, I.G. Farben director, appointed govt. commissioner of business and finance; to supervise all banks.

German Fin. Min. Dietrich said he considered it a matter of course that payments would be made on long-term German loans, refuting press reports that Germany was contemplating a moratorium. French cabinet considering loan to be divided equally between US and Europe; France not pressing political claims and hope is seen for French-German compromise at Monday meeting in London. Reports to local bankerrs from Paris indicate loan the French cabinet is considering for Germany will amount to $500M and be guaranteed by customs receipts.

Sterling recovered sharply against dollars and francs and francs fell back against dollars, in a return to more normal levels; Swiss francs declined; marks rose as high as $.2275. Bank of England lost 5M pounds sterling in gold but found it unnecessary to raise rate, although sterling remained below the gold export point to Paris, NY and other centers. Sharp pressure on sterling in a largely external crisis was attributed to huge amount of foreign funds on deposit in London, estimated at over 400M sterling, with net liability over 250M. Commercial banks are giving Bank of England statements of all foreign liabilities; “where necessary, the Bank of England will give any support required and is already understood to be assisting some houses.”

Stocks rose in London, Paris and Amsterdam. German bonds rose very sharply in NY and other European bonds were strong.

German crisis will be taken up at meeting of US, British, French and German statesman. Following conference with Sec. of State Stimson and British Foreign Sec. Henderson, France invited German Chancellor Breuning and Foreign Min. Curtius to Paris for a conference, probably to take place tomorrow. General meeting will take place in London Monday; Sec. of State Stimson will represent the US; Pres. Hoover asks Treasury Sec. Mellon to attend if possible. "Developments gave hope that Germany's troubles would be solved by concerted international action, with the US represented."

Many US bankers and industrialists believed at start of the week that Germany's situation could be helped quickly by a plan for new loans combined with German internal measures. Developments in the past few days, however, "have led to the opinion that while the worst of the German situation may have been seen, whatever improvement comes will be slow and tiresome." Chase Nat'l Bank granted judgment against property of Darmstadter due to failure of German bank to meet bills totalling $50,484 due July 14. International Silver Council asks Pres. Hoover to loan 200M - 400M ounces of silver to Germany as move to improve silver situation while helping German financial conditions. No comment forthcoming from the White House on the proposal.

German imports from the US in 1930 were $311M.

German crisis causes withdrawals from two Brazilian banks. Private banks in Riga, Latvia limit payments to 5% per week as result of bank runs.

Meeting of steel cartel scheduled to be held in Brussels Friday postponed due to inability of German members to attend.

Assorted historical stuff:

Washington report: Ferocious political attack is seen gathering against the Farm Board. Wheat belt farmers are said to be in open revolt against the Board, and high officials including VP Curtis and Senate Republican leader Watson are in open disagreement with Board policy. The Board may face radical changes or extinction if farm conditions don't materially improve by the time Congress convenes in Dec. Based on Washington news and interest, “this country is thinking in international terms to a greater extent than for ten years”; the German crisis has received more official attention and newspaper space than several pending domestic situations put together. Dispute between Commerce Dept. and Dr. Ray Hall on charges of doctored statistics, whatever its resolution, highlights less-than-perfect record of govt. agencies in providing clear and frank information over the past 2 years; in fact, there were even “cases where there were attempts to put obstacles in the way of agencies which were trying to tell the clear truth about business and financial conditions. In the recent past, however, the idea that the depression could be overcome by hiding the facts seems to have been pretty well eliminated.”

Farm Board chair. Stone, pressed for solution to problems of Southwest wheat farmer, said he believed they would do better by holding some wheat off the market; if followed by acreage reduction, prices should rise. Believed Kansas farmers would do well to use wheat as animal feed, even at current low livestock prices. Stresses this is just his personal opinion, not official advice from Farm Board.

Chinese Fin. Min. T. Soong says campaign of armies of Nationalist govt. against Kiangsi communists is only a prelude to a life-and-death struggle between the Chinese social and economic system and the Communist system introduced from Russia. China seen likely to import wheat this season, though there's little reliable information on wheat consumption by that country's 400M people.

Russia and France take reciprocal actions cancelling restrictions on imports from each other.

Navy Dept. awards secret contract for development of powerful high-speed airplane engine on appropriation of $220,000.

Editorial: The recent court decision preserving the nickel fare on IRT lines may be seen as a triumph of "municipal statesmanship" in other cities that pay more for less transportation. The decision admittedly may advance the cause of city ownership and operation by ending the IRT's "last hope of wrangling a little longer and ... more successfully over terms." However, the nickel fare is preserved at high cost to the city, since "no court decision can alter the fact that subway and elevated operation costs substantially more than five cents per passenger" and that by contract the city absorbs most of the loss; a higher fare would, on the other hand, mostly have gone into city coffers. The nickel fare is a bargain to the several hundred thousand daily commuters and to out-of-town visitors, at the cost of all city taxpayers. IRT seen likely to end further litigation on 5-cent fare.

Henry Habersaat of Waupaca, Wisconsin has a whole field of pre-baked potatoes available for the digging up. It seems a fire burning in peat beds near his farm "crept underneath the tubers and did them to a turn."

Market commentary:

Market wrap: Stocks rose early on less active trading as foreign news was more hopeful; active stocks showed good recoveries from Wednesday's lows. Rally encountered renewed resistance around noon, and trading became "highly irregular," with rails particularly pressured after poor NY Central earnings. However, trading dried up as leading industrials fell back to Wednesday's closing levels, and another rally set in during the final hour; Steel, Can and other leaders rose well above the morning highs. Bonds strengthened; German issues rallied very sharply after a weak opening and other Europeans generally were strong. Chilean bonds fell after news of official action on withholding external debt payments until trade surplus is restored. Domestic high-grade bonds notably steady, while some speculative industrial issues showed strength. Commodities very strong; grains up sharply, led by corn; cotton up strongly. Copper remained at 7 3/4 - 8 cents with somewhat better domestic inquiry. Silver up 1/8 cent to 28 1/4.

Conservative observers unmoved by yesterday's rally; "insist that a waiting attitude is best under existing uncertain conditions."

Encouraging factors included Berlin bank reopening, mark strength, indications of more constructive French attitude, and Bank of England decision not to raise rate, which was seen as indicating confidence decline in sterling is temporary. Wall Street seemed to view German developments "in a calmer light"; Reichsbank rate hike to 10% recalled a hike to 9% that was effective in a "similar emergency in early 1925"; Germany's trade surplus in the first half of 1931 was $195M, or about 2 1/2 times the 1930 figure. Liquidation from foreign sources seen in domestic securities; some appeared forced by sharp declines in European bonds.

Tobacco stocks have been supported better than other sectors during this week's reaction. Lorillard has been strong, reflecting activity of a new bull pool. J.C. Penney sales have been running below 1930, but first-half earnings are expected to compare favorably with the record $1.32/share shown in 1929 and $1.14 in 1930, due to higher profit margins; "some quarters familiar with the company's affairs" believe at least $1.60 will be reported. Chrysler has been subject of some "persistent buying" on apparently favorable public reception to new low-priced car put on the market a little over a week ago.

By contrast with "extensive declines" in industrial and rail stocks from the recent rally highs, bonds have turned in a much steadier performance. The Dow average of 40 representative bonds hit a low of 93.74 on June 2, the same day as the Dow industrial and rail stockaverages hit their 1931 lows; it reached a rally high of 96.02 on July 11 and has only declined to 95.63 as of Wednesday's close. Bulls are encouraged by the good support in bonds, since "improvement in bond prices is one of the forerunners of business revival."

Recent declines broke through the previous trading range, bringing more liquidation into the market. Chart students are concerned since the breakthrough took place relatively easily, "without great effort on the part of the big bears."

Yet another editorial pointing out looming vast oversupply of cotton and taking Farm Board to task, "not ... for the business depression but ... for advising against selling at a reasonable price, discouraging exports as well as domestic consumption and encouraging the use of more foreign cotton."

Banking difficulties in Europe seen "likely to retard the business recovery" in the US; at the least, it has lessened the improvement in sentiment following first announcement of the Hoover plan. Industrialists are still confident of some improvement in the fall, though it may not reach normal seasonal proportions. "At the moment, everyone is watching conditions abroad."

One leading corporation's president comments on lessons learned regarding corporate extravagance: "We have learnt a thing or two out of all this business, and have even gone so far as to do without our back collar button and undershirt." [Note: I understand Goldman Sachs has cut back to lighting their cigars with fifty-dollar bills ...]

Economic news and individual company reports:

Middle West Utilities noted general improvement in crop, business and industrial conditions in June across its territory, which includes practically the whole Eastern half of the US. Crops throughout the area look to run well ahead of last year; industrial activity is still well below normal but a general pickup was noticeable; retail trade showed a slight uptrend in most states and further improvement is expected when crops are marketed.

NY Central first-half earnings were about $.60/share vs. $4.63 in 1930 and $7.77 in 1929 (dividend requirements for the half are $3). ICC rail rate increase hearing continue. J. Pelley, spokesman for Eastern rails, testified rails are not trying to escape their fair share of the general depression or asking for the full "fair return" provided by law, but just for enough revenue "to tide them over the present emergency"; reminds ICC that in 1930 rails gave lower emergency rates for drought relief traffic and actually increased traffic expenditures in order to minimize the depression. Editorial by T. Woodlock criticizing the railroad "reparation industry" in which "numerous agencies ... in different parts of the country" have been organized with the "principal or sole business" of getting freight bills from shippers so they can bring complaints to the ICC that rates are "excessive"; usually an agreement is made that whatever reparation is recovered from the railroads will be split by percentage. While awards are not a huge drain on railroad treasuries, the complaints are "strangling the ICC's usefulness" and causes rail to waste considerable time and expense in defending cases.

Ford worldwide production in June was about 80,000 cars and trucks vs. 102,095 in May and 174,528 in June 1930; first half 538,500 vs. 988,000. Decline of 45.5% in first-half Ford production was considerably worse than 29.2% decline in total N. American output. Ford output of about 75,000 expected in July.

First effect of wide shutdown of oil wells in Oklahoma, Texas, and Kansas seen, as one company raised buying price in West Texas from 10 cents/barrel to 25.

Money in circulation July 15 was down $28M to $4.806B, total Reserve Bank credit outstanding down $9M to $951M. Member banks in NY City report brokers' loans down $25M to $1.430B; loans on securities to non-brokers down $10M to $1.703B. New Treasury issue of $51.2M in bills was oversubscribed about 4 times and bears 0.49% interest.

NY State Superintendent of Banks Broderick announces settlement of 100% for depositors and other creditors of World Exchange Bank closed last March.

Dow average of 8 iron and steel products held at $44.25. Scrap markets showed mixed trends in different areas.

Agriculture Dept. reports wholesale commodity prices made a 2-point recovery in June after falling 4 points in May; prices little changed in first week of July.

US electric output in the first half was down only 4% from 1930, remarkably stable considering 74% of total consumption is normally for commercial and industrial purposes. Homes continue to increase demand, and industry is switching to electricity from other energy sources. Consolidated Gas of NY (mainly an electric utility) is selling for about 19 times last year's earnings, and yields 4%. [Note relatively high valuation compared to other sectors.]

Negotiations to extend world nitrate cartel fail; Chile to resume open market sales; higher worldwide production and price war seen inevitable.

Merchandise transported through the Suez Canal in 1930 was 28.5M tons, down 17%.

Canadian revenues in June from customs, excise taxes and duties were $17.8M, down 20% from 1930.

Earnings reports: E.I. du Pont de Nemours Q2 $1.22/share vs. $1.33; half $2.23 vs. $2.84. American Chicle Q2 $1.25/share vs. $1.21; half $2.22 vs. $2.16. Connecticut Electric Service year ended June 30 $3.68/share vs. $3.45. Alpha Portland Cement year ended June 30 $.57/share vs. $1.78. Gillette Q2 $.43/share vs. $1.20; half $.95 vs. $2.18. General Baking half $1.46 vs. $1.40. Bigelow-Sanford Carpet half $1.91 vs. $1.41.

Companies reporting decent earnings: American Chicle (chewing gum), Connecticut Electric Service, General Baking, Bigelow-Sanford Carpet.

Movie:

Sherlock Holmes' Fatal Hour - produced in England for Warner Bros., at the Warner and Beacon theatres. "The fascinating detective again walks the screen of local theatres in the person of Arthur Wontner," whose "impersonation is polished and commanding. He seems to breathe new life into a character that has become almost too familiar to persistent playgoers." [Note: Fortunately, Hollywood in our time has found the one foolproof way of rejuvenating any worn-out character - add kung fu.] Film is "quietly effective. It will not please those Americans who have grown to love the sound of machine guns and the brutal maneuverings of rival gangsters in the recent series of melodramatic racketeering films, but it will please many others craving a relief from such an atmosphere."

Historical jokes:

Shortly after the fall of Richmond, Pres. Lincoln and members of his cabinet were being driven in a stagecoach along a bumpy road to the fallen capital. The driver, a war-weary private, was "lustily cursing his steeds," leaving few epithets unused. As the stage came to a stop at a crossroads, Lincoln leaned forward and asked the driver "I beg pardon, my good man, but are you an Episcopalian?" The youth turned, saw who was addressing him, and turned very red. "Why, er - no, Mr. President. At home I was a Methodist, but I guess I ain't much of anything in the Army." "It's all right," responded Lincoln, reassuringly. "No offense intended, but you cuss just like Seward and he's a church warden."

Henry James was once asked whether some young actresses who had come to see him were pretty: "He replied, 'Pretty? Good Heavens,' and then with the air of one who will be scrupulously just, he added, 'One of the poor wantons had a certain cadaverous grace."

Thursday, July 16, 1931: Dow 137.86 -2.99 (2.1%)

Germany special:

Reichsbank raised discount rate to 10% from 7%, and rate on security loans to 15% from 7%; also reduced minimum legal ratio for note circulation to 30%, allowing urgently needed issue of up to 1B additional marks to meet currency demand anticipated when banks reopen today. Cabinet is working on a decree to regulate banking transactions when banks reopen; withdrawals will be limited, with wages having priority. At insistence of foreign bankers, particularly US, cabinet will also decree rigid control over foreign currency sales in Germany, giving Reichsbank a monopoly. Cabinet apparently has shelved proposals for a new internal currency and a moratorium on private debts. It was officially denied that H. Schacht is being considered for position of “dictator of the currency.” “General opinion” in Germany now reportedly favors definite moratorium on foreign payments except on external bonds.

Editorial: Germany now finds itself "financially under under a species of martial law." Failure of international bankers thus far to alleviate the crisis is disappointing, but "by no means indicates that the situation is hopeless. Rather, it suggests that the French obtained about what they wanted" at the BIS meeting Monday, in that bankers will not organize a rescue alone but "the politicians must come along. ... The German govt. must submit to a foreign political tutelage as the price of financial and economic salvation." France is proceeding on the conviction it has "less to fear from a bankrupt and prostrate Germany, swinging between Hitlerism and Bolshevism, than from a Germany rescued from financial disasters"; it stands for "subordinating the success of the Hoover plan to her task of suppressing ... German nationalism." How successful the French approach will be remains to be seen; "days, and possibly weeks, must elapse before the next phase of German history begins to take definite shape."

Otto Kahn returned from 3-month trip abroad. "Speaking of the German situation, Mr. Kahn stated that while a lot could be said it is such a grave subject it could not be discussed lightly."

Commerce Dept. says investments in Germany by US citizens are $1.35B - $1.5B, second in value among all foreign countries.

Sterling broke sharply, while francs scored a sensational advance and Swiss francs rose sharply “as money sought a safe refuge”; marks and minor currencies were quoted nominally. Trading was heavy and movements most spectacular since currencies were stabilized after the war. Franc-sterling ratio is now below level of last year when French balances were being withdrawn heavily from London. Exports of gold from London expected; exports are also possible from NY to Paris. Market is discussing possible rise in the Bank of England rate tomorrow; the gold reserve position of the Bank is quite strong, though London is vulnerable to withdrawal of foreign short-term balances. Bankers in London are “meeting the situation without any alarm but are quietly making preparations to meet any eventuality.” “Reports and rumors of all sorts circulated freely, adding to the uncertainty.”

Swiss banks reportedly are refusing to pay out on German deposits because they are unable to draw on Swiss deposits in Germany. “Rumors in German newspapers that certain Dutch banks are in difficulties ... are untrue and without foundation.” Mercurbank, Austrian subsidiary of the closed German Darmstadter Bank, will reopen on limited payment basis with loan from Austrian central bank.

Berlin Stock market will remain closed until Monday. Stocks in Paris and London were weak. European bonds fell sharply.

French Fin. Min. Flandin denied rumors of 1B franc loan to Hungary.

Assorted historical stuff:

Editorial on recent decision by US Circuit Court of Appeals that officers of the law can't search a premises without a warrant. Particular case involved arrest for Prohibition violation, after which agents searched and found "a considerable amount of liquor." However, principle is general and one of the "fundamental rights which neither statute law nor officials enforcing it can violate"; such a search requires a warrant unless "fairly incident to the arrest." For several years, this principle has "been more honored in its breach than observance. ... Zeal in enforcing the law is well, but our free institutions are endangered when such zeal is so great as to deny or violate those rights. ... The Fourth Amendment stands as a bulwark against official tyranny; officials sometimes forget it but the courts do not. They preserve for the individual the rights guaranteed to him in this, our government of laws."

AFL Pres. Green says organization will oppose any general move for wage cuts with all its "might and vigor"; says social unrest and industrial discontent growing as country approaches third winter of unemployment.

H.G. Wells revises opinion on prospects of Soviet five-year plan, saying it appears to be staggering due to lack of managers and educated men. Official Soviet press, in line with Stalin's recent stirring address acknowledging value of the “intelligentsia,” is finally “admitting ... Russian engineers and specialists are working under disheartening conditions.” Wholesale arrests of past 2 years may have been largely justified as the few cases brought showed Russia victim of extensive sabotage. However, inevitable result was to spread panic among even honest specialists; “the panic has by no means subsided though effort is now being made to assure specialists of just treatment.”

Canadian PM Bennett says govt. bought 2M bushels of wheat to supply flour to farmers in West; purchase necessary due to acute situation caused by crop failure.

NY City is using an "effective expedient" to crack down on users of “raw fuel” within the city. “Automatic cameras, concealed here, there and everywhere” take pictures every 30 seconds, showing accurately up to a 300 foot distance which industrial and private chimneys are generating too much smoke.

Canadian officials will use ingenious method to attempt control of the Larch Case Bearer, an insect parasite attacking Larch forests of Canada. 10,000 specimens of Mesoleius Tenthredinis Morley, a parasite that attacks the parasite, are being shipped to Canada from Britain, the advance guard for an army of 100,000.

Commerce Dept. reports it had 10,235 aircraft on record in the US on July 1, vs. 9,818 on Jan.1; states with most: NY - 1,190; Calif. - 1,160; Illinois - 685. Air mail transported in first 5 months was 3.717M pounds, up 13.3% from 1930; express shipments 325,000 poiunds, up over 200%.

Washington officials skeptical on supposed threat of jute shortage in upcoming year.

The Chicago City Comptroller has gone out of his way to avoid the common social embarassment of the mispronounced name. His business card carries his name, M.S. Szymczak, in normal type; underneath, in small print, is the helpful pronunciation guide M.S. Sim-chak.

The US Mint in San Francisco, because of the large amount of gold stored in its vaults and underworld rumors of an impending robbery, has barred visitors.

NY Court of Appeals rules IRT must abide by 85-year contract specifying 5-cent fare until 1985; decision was unanimous and appears to end long legal battle.

Market commentary:

Market wrap: Leading stocks fell sharply on heavier volume following continued unfavorable foreign news; US Steel led decline in industrials; rails were better supported on rate optimism, but also suffered extensive declines; AT&T and Consolidated Gas led setbacks in utilities. Selling picked up around noon on sterling weakness, catching stop-loss orders in large numbers. A good rally developed in the last hour on news of strenuous German efforts to strengthen credit position; good-sized recoveries took place in major shares, aided by short-covering. Bond trading more active, German issues plunged to record lows, though some recovery took place late. Rest of foreign list showed effects of "decimation of German bond values," with S. American and European issues generally weak and some sharp declines. US govts. steady; domestic high-grade slightly lower while setbacks in speculative issues were somewhat wider. Commodities mixed; wheat was weak most of the session, with Chicago July wheat hitting a record low for futures of 50 1/4 cents; however, a sharp late rally left wheat higher on the day while corn was up sharply; cotton ended only slightly lower after late recovery, but sentiment remained "rampantly bearish" on favorable weather. Copper remained at 7 3/4 - 8 cents with buying inactive; "owing to the European situation, the fact that copper is selling at lowest price in its history does not seem to make it any more attractive to buyers."

Conservative observers continue to recommend the sidelines; admit sudden favorable news from abroad might bring substantial recovery, but still favor postponing any buying until market has digested unfavorable earnings reports.

Disturbing foreign news included German difficulties, spread of credit troubles to Hungary and Romania, and break in sterling below gold export point.

Increased public liquidation seen in yesterday's session for the first time in the recent decline. Weakness in copper metal has been "one of the disturbing influences in the domestic situation. ... Conservative metal circles" had questioned rise in the metal right after announcement of the Hoover plan, attributing it to speculation in the London market. "One beneficial result may be further consideration of production curtailment." Gillette expected to report poor Q2 earnings; a large short interest exists in the stock. Some observers believe the company may do better in the near future due to introduction of a new type of razor.

Yet another editorial by T. Woodlock arguing that "fair return" allowed to utilities must be adjusted along with changes in prices. For example, if a plant is built for $1M with a return on investment of $50,000 or 5% when the price index is 100, and the index then rises to 200, then the return of $50,000 is worth, in goods and services, only half of what it was when the plant was built. To produce the original return, either the "fair return" would have to be raised to 10% or the plant value raised to $2M. Sees adjusting plant value based on reproduction cost as fair solution.

Indications seen that "bearish activities are being kept under careful surveillance" as a result of unsettled conditions. "Instances are reported where large scale operators have been asked by important banking interests to refrain from offering stocks in large volume while the present uncertainty continues. Stock Exchange authorities are also said to be scrutinizing transactions closely with a view to curbing raiding tactics."

C. Barney & Co. say recent pattern of lower volume on market declines normally would indicate drying up of selling pressure, but now probably doesn't signify "much more than rather general bewilderment in the face of a most unusual situation. We find it extremely difficult to decide just what the practical results would be in this country" if Germany had to face its troubles without any further outside aid. Payments on German bonds and short-term loans would stop; value of bonds would plunge, and short-term credits would be frozen. "Psychological effect" of this "might lead to a flight from securities in general," particularly from foreign bonds; this "might result temporarily in sympathetic weakness for domestic securities." However, fundamental reason behind world financial difficulties offers "an important argument for the purchase of many sound" US stocks. While outside world got into debt in 1925-29, many US companies were getting out; "these companies are going to ride through the rest of the depression with credit unimpaired" and should be in strategic position to take advantage of "the first revival of demand ... after the final phase of debt deflation."

Economic news and individual company reports:

ICC hearings on 15% rail freight rate increase opened to capacity crowds jamming the top floor of the ICC Building in Washington. Due to temperature of about 98 degrees, ICC chair. immediately announced “it would not be regarded as a breach of professional ethics for those so desiring to remove their coats.” J. Parmelee, Bureau of Rwy. Economics, was first witness for the rails; warned bonds of many railroads are in danger of losing “legal” status as savings bank investments (generally require earnings to cover interest charges 1.5 times); situation likely to have great effect on future railroad financing.

Kreuger & Toll seems reasonably secure from European troubles. Only $112.5M or 30% of total assets are in foreign bonds, many of which are secured by match monopolies from whose revenues payments are deducted before turning any balance over to the govts. Assuming an average rate of 6%, even a complete end to interest payments on the bonds would leave about $26M in earnings available to Kreuger based on 1930 net, or about $10M more than needed to cover its interest payments. A large part of Kreuger's earnings comes from holdings of leading European cos.; these have been selected with a view to stability of earnings and long-term capital appreciation rather than immediate high yield; Kreuger has also accumulated substantial undistributed earnings in associated companies.

West Palm Beach and bondholders' committee agree on debt revision; city commits to raise $1M annually in taxes, of which $400,000 can be used for operating expenses and the rest applied to defaulted bonds. City attorney says the city won't be obligated to raise taxes materially.

J. Murray, CBOT pres., says following investigation in response to Pres. Hoover's criticism of excessive commodity short selling, it was found that short selling on the Board has been below normal for a few months and “is much too small to have been an important influence on the market.”

Survey by Indiana Limestone Co. finds about $2B was spent on new construction in the US in first half 1931, vs. $2.8B in 1930 and $3.25B in 1929. Sees steady rise this year since “a substantial volume of necessary construction has piled up.”

Steel production for week ended Monday was about 31% vs. 32% before the July 4 holiday shutdown in previous week, 33 1/2% two weeks ago, 57% in 1930, and 95% in 1929. Weekly steel reviews discouraging. Widespread industrial shutdowns for vacations and inventories together with poor business conditions further restricted steel buying and production. While the steel industry believes manufacturing upturn in August will lead to moderate improvement, no sign of increased demand is yet seen. Price situation has turned irregular with concessions in some products.

US electric output for week ended July 11 was 1,655 GWHr, up 0.3% from 1930, vs. a 2.8% decline prev. week and 3.9% two weeks ago. This was the first year-over-year increase in more than 12 months, but may have been due to July 4 holiday influence.

Southwest farmers ask debt moratorium for 30 days or more so wheat need not be sold at current prices as low as 25 cents/bushel to pay creditors. Cash prices for wheat are reported as low as 18 cents/bushel in Colorado and 20 cents in some parts of Kansas. Price of 20 cents is about $6.60/ton, whereas July bran at St. Louis is quoted at $10.50/ton. Kansas City Star asks govt. to spend $60M to hold back its surplus wheat. Arkansas Gov. Parnell says crop prospects best in many years, unemployment reduced to normal proportions. US Cotton crop estimated at 13M bushels vs. 13.9M last season; carryover is 9M and estimated consumption 11M, making surplus likely to grow in spite of the smaller crop.

France negotiating for trade pact with Russia; considering providing 2 to 4 year credits in return for orders of $66M in manufactured products.

Italian unemployed June 30 totaled 573,000, a drop of 62,000 from May 31.

Lloyd's Register reports world shipbuilding now lower than any time since prewar days; bulk of decline accounted for by Britain and Ireland.

Better Business Bureau reports short-sellers victimized out of town branches of several NYSE firms by sending out fake telegrams attributed to Magazine of Wall Street, successfully driving down stock of Savage Arms.

Walgreen reports strong sales increase of 11.5% in June sales vs. 1930; no special sales were held and number of stores was only up 5%. [Note: I'm not saying this was definitely the reason, but liquor was a prescription item then ... ]

7M copies of Sears new fall and winter catalog now being mailed; contains 1,192 pages or about 24 more than last year; prices "show a much smaller rate of decrease from spring and summer catalogue prices than in either 1929 or 1930" indicating decline in commodity prices "has been, to a large extent, checked."

Earnings reports: Paramount Publix Q2 $.70/share vs. $1.21; half $1.82 vs. $2.98. Underwood Elliot Fisher Q2 $.50/share vs. $1.33; half $1.44 vs. $3.22. Scott Paper Q2 $1.02/share vs. $1.10; half $2.65 vs. $2.64. Kimberly Clark Q2 $1.01/share vs. $1.66; half $1.97 vs. $3.05. Canada Dry Ginger Ale Q2 $1.02/share vs. $1.10; half $2.65 vs. $2.64. United Biscuit Q2 $.95/share vs. $.98; half $1.68 vs. $1.92. Zonite Q2 $.25/share vs. $.30; half $.65 vs. $.65. Arthur G. McKee half $4.21/share vs. $3.47. Emil Klein half $1.29/share vs. $1.22.

Companies reporting decent earnings: Scott Paper, American Home Products, Zonite (antiseptic and household drugs), Arthur G. McKee & Co. (contracting engineers), Emil Klein (cigars).

Movie industry report:

Despite generally depressed business conditions, Hollywood movie producers "continue to announce production plans of no mean proportions." Upcoming Universal productions include Frankenstein, adapted from the play now running in England, starring Bela Lugosi; Strictly Dishonorable, adapted from the popular local play; and The Spirit of Notre Dame, starring Lou Ayres and the "Four Horsemen" of Knute Rockne's famous team. Columbia Pictures is working on Arizona, starring Laura La Plante and John Wayne. MGM will release Susan Lenox, Her Fall and Rise starring Greta Garbo; This Modern Age starring Joan Crawford; And Sidewalks of New York with Buster Keaton. Howard Hughes, following up his success with Hell's Angels, which has already returned over $4M in revenue, is planning two more aviation films, Sky Devils and Cock of the Air; both will be comedies. Scarface, the underworld expose on which Mr. Hughes has been working for several months, has just gone into production.

Joke:

Old Lady - Why don't you work? Hard work never killed anyone. Tramp - You're wrong, lady. I lost both of my wives that way.

Wednesday, July 15, 1931: Dow 140.85 -1.58 (1.1%)

Germany special:

German govt. has been forced to declare a two-day banking holiday after failing to get more aid from central banks. Berlin stock market likely to remain closed for the week. Reichsbank has obtained a short breathing spell by refusing to sell foreign exchange or issue banknotes, but Thursday brings a large demand for currency for weekend payrolls and unemployment doles. Banking circles in Basel believe Germany needs a credit of at least $500M. Central banks continue discussions there; US bankers are “awaiting construction of some definite plan by European bankers before extending cooperation.”

Breuning govt. seen carrying on without convening Reichstag. Former Reichsbank pres. H. Schacht, who reportedly recently joined the Hitler Party, has offered his services to Breuning and participated in recent discussions but there's as yet no question of him joining the govt. Nationalist Party requests reconvening of Reichstag; demands reconstruction of cabinet on “broader basis,” interpreted as demand to include Nationalists and possibly Fascists.

Reichsbank is discussing proposal to issue "Rentenbank notes" which would be good only for internal circulation and could be backed by the industrial guarantee to the Gold Discount Bank. Alternative is a moratorium, but govt. fears resulting "political and social disturbances." Some official circles are bitterly opposing the proposal due to inflation concerns.

Reichsbank reserve ratio is down to the legal minimum of 40% for the first time since reorganization of the Reichsbank in Oct. 1924; banknote circulation is 4B marks and reserves 1.6B, including 600M of foreign credit.

German banknote circulation hasn't gone down in the normal seasonal way since June 30. [Note: I wonder why ...] “Commodity prices are unchanged, with transactions infrequent. Hoarding of mark notes is general.”

Washington - “The present German situation is viewed here by informed quarters as a banking crisis inside Germany. There is no occasion for exaggerated anxiety.” While the banking situation has caused “a panicky feeling among the German people, ... the German govt. itself is in no financial difficulty.” Hoover plan is now definitely in effect, and this is believed to have “taken most of the dangerous strain off the general situation.” Confidence is felt that steps taken by German govt. will halt capital flight and “pave the way for assistance to Germany on a sound basis.” “Sen. Copeland (D, NY), after discussing ... the German financial situation with Pres. Hoover, declared that he felt better ... than he did before his visit to the White House. He called at the White House mainly” to invite Pres. Hoover to the opening of the Waldorf Astoria on Sept. 30.

German crisis traced to three causes: “over extension” of some German banks; general German banking practice of financing foreign bills; and previous experience of German people with mark depreciation, leading to capital flight. Panic was temporarily stopped by Hoover plan, but delays in finalizing it renewed the flight.

C. Moret, Bank of France Gov., returned to Paris from Basel, informed govt. he was in complete accord with decisions of the BIS on the German crisis.

State Dept. said it had word from Vienna that Austria didn't expect to declare a moratorium. Austrian banks and the stock exchange remain open; the Mercurbank, a Darmstadter Bank affiliate, was closed to prevent a run but it was announced the bank was solvent and would reopen in a few days. Banks in Hungary closed until Friday by government decree. Action was a shock to business world; it was reportedly taken on advice of the BIS to prevent crisis similar to current German situation. Two Latvian banks suspended; govt. guaranteed deposits except those in foreign countries. Banks in free city of Danzig [now Gdansk] restricted withdrawals and payments to 10%; shipping seriously hampered.

Foreign exchange “highly irregular” as traders awaited German developments; sterling fell sharply and more gold was exported to Europe. Quotations on marks continued to be “highly nominal” about $.2150.

Assorted historical stuff:

Sec. of State Stimson expressed deep satisfaction with visit to Rome; said discussed matters of interest to US and Italy with Premier Mussolini and FM Grandi “fully and frankly and with the utmost friendliness”; despite earlier insistence he was only in Italy on informal vacation trip [note: sneaky!]. Particularly satisfied with Italian position on upcoming arms conference in Geneva and Italian agreement with the US on many aspects of arms limitation.

Lord MacMillan's Committee on Finance and Industry calls on world's central banks to cooperate in breaking back of depression; insists prices must be raised toward the 1928 level; calls for giving Bank of England greater freedom of action. Recommends central banks act together to maintain stability of world prices, with frequent coordination to decide whether “general tendency of their individual policies should be toward relaxation or tightening of credit.” At present, “central banks should favor a persistent and determined policy to maintain an abundance of cheap credit,” and persuade member banks to reduce rates paid on deposits in order to discourage the public from “withholding their resources from the investment market.” Says Fed. Reserve can help other central banks by buying securities, driving down long-term interest rates and bringing revival of new enterprise. Hits French and American gold hoarding; argues gold standard no longer works automatically but needs international management. Lord Bradbury dissents, blaming Britain's troubles on unproductive debt, lavish govt. spending, and too high a living standard.

Shipping traffic at Shanghai, world's third-largest port, tied up by pilot's strike; disagreement concerned changing of fees from silver to gold basis.

Denmark protests Norway's "occupation" of East Greenland to Permanent Court of International Justice.

Bolivia and Paraguay accept Argentina's offer to negotiate dispute over Chaco Boreal.

Labor Sec. Doak and Commerce Sec. Lamont met with John. L. Lewis of the United Mine Workers and other officials of miners' unions regarding coal industry problems, following up earlier conference with coal operators.

Pittsburgh coal operators are experimenting with a new process for cleaning coal using petrolem, which is said to reduce sulfur content to 1/2% and ash to 5%.

Snail beats plane. The British Royal Air Force field at Lake Habbaniya near Baghdad recently was overrun by countless snails. After all means failed at eradication, the Royal Air Force had to pack up, planes and all, and move to another base.

Absence of US visitors to Europe is very noticeable this year; in the West End of London, streets like the Haymarket that normally swarm with tourists at this time are visibly deserted; British theatres and restaurants are markedly lacking in American business. One musical comedy in London features a skit in which "an American visitor to a night club is made much of and pointed out as ... almost extinct."

The Mexican army reportedly pays little attention to deserters since recruits are easily had and most rejoin the service anyway. Most of the shifts occur when soldiers are assigned hard labor such as building roads; another cause is transfer of officers, since loyal troops desert and reenlist at the officer's new location.

Life Magazine notes that gifts to Vassar in the past year were about a third of a million dollars, while at Harvard they were $14.5M. "Women are supposed to control the spending of 85% of the nation's income. When are they going to insist that the education of girls is worth at least as much as the education of boys?"

"Flapperism dates back at least 3,000 years" according to the contents of a prehistoric grave recently excavated near Egtveed, Denmark by the archaeologist Thomsen. Relics in the grave revealed that "girls of 3,000 years ago bobbed their hair, wore short skirts that barely came to their knees [note: gasp!], used rouge and lipstick of a sort, and donned flashing ornaments to lure the attention of members of the opposite sex."

NY City's black population increased 115% in the decade vs. 21% for the white population. Most NY'ers under 34 are US-born, most over 34 foreign-born.

Richard T. Campbell, veteran floor supervisor of the NY Stock Exchange, given 3 month leave of absence after completion of 50 years' continuous service.

Market commentary:

Market wrap: Stock traders again appeared to be in "watchful waiting" mode regarding the European situation; prices dragged lower on trading that, for most of the day, was the "in the smallest volume for some time past." A brief rally took place in the final hour on news France had notified the BIS it doesn't expect Germany to make reparations payments Wednesday, making the Hoover plan immediately effective; however, gains didn't hold and trading again turned dull. Bond trading showed only a moderate total volume, but foreign issues broke severely with all but the highest grade issues carried into new low territory in a series of sharp breaks; losses of five to 15 points were numerous. German bonds led the plunge, but the reaction extended to other European and to Asian issues, while the S. American group "showed wide losses in an almost unbroken wave of liquidation." Domestic issues were quiet and irregular, with the list showing many moderate losses. Commodities soft; wheat fell to new season lows for the sixth straight session; other grains narrowly mixed; cotton slightly lower. Copper held at 7 3/4 - 8 cents; with consumers covered for months ahead, buying is light in spite of record low price.

Conservative observers less cheerful than a week ago, as market action has not encouraged public participation. Advise remaining on sidelines, while admitting market has shown good resistance to recent foreign developments. Most interests believe reaction to Q2 earnings will indicate what to expect in near future.

Professional traders were "conspicuously absent in the market" as most preferred to wait for actual news developments rather than let speculation run ahead; "disappointments of the last two weeks in debt negotiations were factors contributing to this mental attitude." "Several important operators" remain on the sidelines; optimists are awaiting the publication of Q2 earnings reports before buying, while pessimists are still inclined to look for lower prices, believing industrial improvement this fall will not be as strong as anticipated.

Krueger & Toll certificates were pressured, falling as low as 18 1/8 or 2 points below Monday's close; International Match was also lower; these companies hold substantial foreign govt. obligations and so are suffering from foreign uncertainty.

IBM is one of the companies that reported higher earnings in 1930, and "interests close to" the company say results have continued to improve in the first half; outlook for immediate future considered bright. NCR has lost some advocates on concerns over foreign sales due to disturbed conditions. General Foods is growing more popular with investors; first-half earnings were slightly down but revenue is stable and the company is seen doing well in depression years.

"With oil prices down to almost an irreducible minimum, fundamental conditions in the industry are such as to favor improvement, although it still is problematical as to how soon betterment will develop. ... There is no question of the ability of the great majority of the well-managed and conservatively operated oil organizations to emerge from the current situation with their physical assets intact and their liquid condition sound." Leather and shoe shares have been more active, based on improvement in the industry. Hide prices last week rose to a new yearly high of 11 cents/pound vs. a low of 6 1/2. Shoe production has gained substantially in recent months, with May above the 1930 level. Shoe prices have been declining until recently but manufacturers have now warned retailers a price rise may be near.

Volume is now being closely watched, with bulls attaching some significance to recent tendency of volume to dry up on reactions. In the past, volume has frequently indicated the next trend, "but this is not a sure sign by any means."

Editorial: Wisconsin, "laboratory of law and social control," has passed a state law regulating sale of fixed investment trusts [similar to ETFs] that goes well beyond the NYSE policy of enforcing full disclosure. It includes arithmetic limits for charges and prohibits some dividend-related practices. Most strikingly, it also makes the state securities commission responsible for setting a "reasonable price" for trust shares based on earnings of the underlying securities and other relevant facts. If other states adopt similar laws this could lead to absurdities such as arbitrage operations across state lines. "It may seriously be questioned whether any state tribunals are competent to assume the function of security price-fixing." The NYSE approach of "searching publicity and a reserved and continuing power of criticism" should lead to "a more practical and effective standardization."

C. Classen, Farmers Nat'l of Omaha pres., points out encouraging factors in farm situation; notes about 60% of farms are owned clear of mortgages and only 20% of remainder are giving trouble, meaning 92% of farms are "managed well enough to weather depression, low prices, drought and political foot-balling." Says farming, like any other business, responds to good management. A. Legge, Int'l Harvester pres. and former Farm Board chair., says farm income currently down, but "looking ahead, I cannot see any industry which has a better future than the great basic industry of agriculture." Believes solution to farm problems lies in collective regulation of production and distribution; process is under way and definite progress is being made. Charges "noisy criticism" of govt. efforts to aid farmers comes largely from a small number who would profit "if the farmer really did become a serf or a peasant."

"Profligate" British "dole" seen likely to undo Labor govt. The unemployment fund deficit is mounting at 1M pounds sterling a week; "at the same time, the annual budget is carrying an appropriation of nearly 40M pounds a year to pay doles to those persons who should by all actuarial tests have ceased to receive benefits from insurance long ago." "Finance has more than once proved the Achilles heel of Democracy as ex-Premier Baldwin warned ..."

Letter to the editor arguing that "high wage theory" of maintaining demand is counterproductive since it leads to substitution of "capital investment and ingenuity of management for the high-priced labor," and to switching to lower-priced alternatives.

G. Putnam, Incorporated Investors pres., says due to widespread stock ownership by people who have better things to do ("are primarily concerned with their regular occupations"), the market has apparently switched from anticipating changes in business to reacting after they take place.

Economic news and individual company reports:

Encouraging signs have appeared that the Fed. Reserve policy of buying govt. bonds to increase volume of credit outstanding is meeting with some success. In week ended July 8, "all other" (commercial) loans increased, against the usual seasonal trend, and holdings of non-govt. securities rose $61M, the first significant increase since Apr. 22; it had been hoped the Reserve policy would "cause member banks to invest more boldly in non-govt. bonds, since such investments would tend to distribute credit where it was most needed and would also help the bond market."

The electric industry is now the fifth largest in the US, with total fixed capital of $9.5B invested. Earnings and operations have been relatively stable in spite of the severe depression of the past 18 months; despite very low industrial production, total sales of electricity are running only a few percent below the record highs of 1929. As a result, securities of the leading electric utility and holding companies are highly regarded and the better companies have little difficulty in financing themselves on favorable terms. French electric industry has continued to show gains in earnings although the depression "began in earnest for France during the second half of 1930."

Sales and earnings of leading department stores including R.H. Macy and Federated are holding up fairly well this year considering business conditions; in most cases unit sales are up but dollar sales are down due to lower selling prices. Business in June showed encouraging upturn after a poor May. Earnings for the full year are hard to predict since 75% or more are made in the fourth quarter.

New securities listed on the NYSE in June were $314.0M vs. $236.1M in May and $783.8M in June 1930, of which bonds were $279.4M vs. $214.3M and $122.2M and stocks $34.5M vs. $21.8M and $661.6M.

Refineries ran at 65.9% in week ended July 11 vs. 63.8% prev. week; stocks of gasoline fell 1.356M barrels to 38.342M (decline prev. week was 2.170M). Crude oil production in week was 2.545M barrels/day, up 62,150 from prev. week and up 13,850 from a year ago. East Texas oil area seen dominating the oil situation for some time due to low drilling costs and huge size; the latter makes curtailment more difficult. Texas Legislature convened in special session Tuesday; Gov. Sterling urged enactment of laws to conserve oil, gas, water, minerals and soil of the state; urged action to prevent further depletion of the soil, which has deteriorated badly in some sections. Major West Coast oil cos. took one of their "most decisive and cooperative moves" to stabilize retail gasoline prices by placing distribution under tight control, with no price concessions and retail prices dictated by the companies.

Rail freight loadings for holiday week ended July 4 were 667,879, down 91,411 from prev. week, down 15.6% from 1930 week, and down 26.6% from 1929; decrease from previous years would have been greater if not for July 4 falling on Saturday this year. Interesting Q&A with T. Woodlock responding to a number of rather heavy-breathing accusatory questions about the railroads from a reader.

Machine tool market seasonally softer in past week; there's hope for a pickup in the fall but some centers aren't expected to show real upturn until 1932.

Sen. George of Georgia joins Democratic colleagues urging Pres. Hoover to lower tariffs using flexible provision of law.

Corn crop is in excellent condition; depending on weather over the next six weeks, a near-record crop over 3B bushels may develop. Agriculture Dept. reports index of farm wages July 1 was 123 vs. 127 in April and 160 a year ago; lowest level in 15 years. Return to the farmer on rye is about 10 cents/bushel (price at Chicago is 31 cents, minus 10 cents shipping, and minus other charges). At estimated yield of six bushels/acre, return per acre is about 60 cents.

Russian grain outlook doesn't appear very promising; condition of crops is reported average or below average in most sections.

Fourteen major industrial lines in Japan are operating under agreements to curtail production. There are now 132 industrial guilds in Japan; these are “district organizations of small manufacturers of similar products who band together to eliminate competition, standardize production,” etc.

Johns Hopkins Univ. of Law survey of 527 cases finds about average of about 70% of judgements awarded in civil cases goes to pay cost of litigation.

Earnings reports: AT&T Q2 $2.38/share vs. $2.77; half $4.89 vs. $5.72. Colgate-Palmolive-Peet half $1.69/share vs. $1.66. Western Union Q2 $2.93/share vs. $3.05; half $4.15 vs. $4.81. Otis Elevator Q2 $.64/share vs. $.66; half $1.33 vs. $1.49. Lincoln Printing half $2.15/share vs. $2.12. Dresser Mfg. half $2.12/share vs. $2.14. Sweets Co. of America half $.72/share vs. $.45.

Companies reporting decent earnings: Colgate-Palmolive-Peet, Otis Elevator, Dresser Mfg. (pipe fittings and couplings), Lincoln Printing (largest financial printer), May Radio & Television, Sweets Co. of America.

Vaudeville:

After a successful season as co-producer and star of You Said It, Lou Holtz returns to the Palace this week to resume his popular role as "master of ceremonies and perpetrator of comical nonsense." He brings Lyda Roberti, the comedienne from You Said It, who sings hits from the show and "renders in her own intriguing manner one of the 'hot' numbers recently made famous by Cab Calloway." Mr. Holtz is on and off the stage throughout the largely comic show, "introducing acts, pointing the spotlight at ... notables in the audience, adding his personal word to the applause ..., telling Jewish jokes, enacting sketches ... and even distributing ice cream to the favored few in the front rows of the orchestra.

Joke:

Farmer's Wife - Dear, tomorrow is our 10th wedding anniversary. Shall I kill the turkey? Farmer - No, let him live. He didn't have anything to do with it.

Tuesday, July 14, 1931: Dow 142.43 -1.45 (1.0%)

Germany special:

[Note: This information is strangely fragmented, i.e. rather than being a big page one story it's scattered throughout the paper.]

Darmstadter Bank in Germany closed; this was followed by runs on other banks. Govt. reportedly decided to guarantee deposits at Darmstadter Bank but not the bank's capital. All banks restricted payments, even in marks (typically limiting withdrawals to 5%-10% of deposits) and refused transfers abroad. The Reichsbank didn't sell foreign exchange or rediscount bills. It was almost impossible to buy exchange in German banks Monday morning, and Germans found it hard to cash mark checks. Govt. “issued proclamation demanding that the people keep their nerve.” Presidents of mortgage and savings banks issued reassuring statements to the public. Darmstadter Bank chair. “sharply criticized the behavior of foreign creditors who, after extending all manner of credits in the past five years, then suddenly demanded complete repayment within a few weeks.” Nordwolle forced into bankruptcy after creditors refused to accept 40% reduction and extension of loans.

Position of German savings banks, with total of 11B marks in deposits, was “alarming” as of Monday night; banks had paid out almost all their cash despite restriction of withdrawals, and will be forced to close their doors if unable to rediscount with the Reichsbank today.

Dr. Hans Luther was in Basel appealing to BIS directors for a large new credit. The BIS agreed to extend the $100M credit previously granted by 3 months and was examining the plan presented by Luther. Discussions of political aspects were going on between Washington, Paris, London and Berlin. It's believed that a $300M credit from the BIS would be enough to avoid disaster; otherwise, a banking moratorium seems inevitable.

Berlin Stock Exchange trading was suspended; German bonds of all types broke sharply. Foreign exchange markets were “completely demoralized” as result of German developments; session “had no equal in the experience of many old-time traders.” Market was “completely in the dark” with no confirmed information during the session. Fluctuations in the mark were “reminiscent almost of the days of the inflated paper mark.” Marks closed on Saturday in NY at $.2370, and broke in London at the opening to equivalent of $.1675; rate rallied in NY to $.2250, but quotations were "purely nominal" as little actual business was done. Marks were, of course, well below the gold export point but “shipments of gold by the Reichsbank are hardly to be considered at this time.” Francs fell below the gold export point to the US but sterling dipped sharply, leading to some shipments from London to Paris.

France is on holiday until Wednesday, so their reaction to the crisis won't be completely clear until then. Direct losses should be small compared to the US and Britain; short-term loans were almost all withdrawn in past 2 weeks, while there are almost no long-term loans to Germany for political reasons. This is likely to make France more reluctant to extend further credit.

Washington officials "clearly indicated that they believe the situation in Germany Monday was better then had appeared likely. They do not talk about a sudden 'collapse' of Germany," but merely of the danger that some large German banks will be unable to withstand runs by citizens or from abroad. Pres. Hoover spent the entire day at the White House studying the situation, receiving reports from various govt. departments.

Regarding the German crisis, "it was felt that while the situation was extremely grave, the real prospects had been exaggerated by acute fear on the part of individuals and other investors."

Assorted historical stuff:

Editorial: Pres. Hoover's attack on commodity short-sellers reveals he continues to be "badly advised in matters of agriculture." Commodity markets are regulated by law, and a "Grain Futures Administration" has the power to examine books; if there was a conspiracy to depress prices, it would have been discovered. The price situation shows no such conspiracy; in fact, the domestic price is above parity with that in Liverpool, the largest international market. Low wheat prices are largely due to "world conditions," but the Administration made things worse by "turning in an enormous bear into the wheat market disguised for a little while with the hide and horns of a bull. It stands unmasked now: the name of the bear is Farm Board ..."

Editorial by T. Woodlock on proposal by California Railroad Commissioner Whitsell that utilities gradually become "self-regulating" at least as far as rates, by having regular conferences with regulators when they believe a rate hike or reduction is in order (i.e. when they see their rate of return is rising above or falling below the level specified by regulation). Woodlock is intrigued but skeptical: "Common sense of the 'commonest' (because most uncommon) kind! But what are you to do about it when on the one hand commissions are afraid to talk across the table with utility companies lest they be accused of trafficking with 'public enemies', and on the other hand company managers are afraid lest they be walking into the spider's parlor? Your bureaucrat is of all men the timidest; he must shelter himself always behind formalities the while he professes to dislike 'star chamber' methods and talks gallantly of 'dealing in the open.'" In any case, this method is likely to work well when rate reductions are in order but to be greeted by howls of rage when a rate hike is called for.

Ray O. Hall, formerly of the Commerce Dept., charges deletion of statements from a Dept. report on topics including stimulus of tourist traffic to Canada caused by Prohibition, and influence of the impending tariff on imports.

Salvador Congress declares state of siege on request of the President.

This month marks the 100th anniversary of exhibition of the first successful reaper by Cyrus McCormick. An acre of wheat required over 64 hours to harvest in 1830; today it can be done in two hours 23 min. In 1820, over 83% of US workers were agricultural; by 1920 that fell to 26%.

US Geological Survey estimates world water power capacity at end of 1930 at 46M horsepower, up from 23M in 1920. N. America has 21.8M horsepower developed, and estimated potential of 69M; S. America 900,000 developed and potential of 44M.

"The man watching the ticker in San Francisco ... gets the results of a New York dividend meeting a fraction of a second after it is put on the wires; or before the sound of the New York director's adieu has reached his friend's ear. However, the inhabitants of Proxima Centauri, the nearest star (25,000,000 million miles away) have to wait about 4 1/2 years to get the same result."

New German light plane, the "Storm Bird," to sell for $228, $50 less than the cost of the average German motorcycle. The inventor, Fritz Koch, claims you can learn to fly it in less than an hour and has offered to qualify anyone as an amateur pilot for $1.25.

Japanese scientists have recently been investigating life histories of 14,000 citizens over 80 years old who were awarded special recognition by Emperor Hirohito when he gained the throne. The studies revealed that: 1) most came from families that also lived to old ages; 2) must belonged to the middle class, neither rich nor poor; 3) about half eat both meat and vegetables, with rice the staple of their diet; 5) about half of the men and 90% of the women never used intoxicants.

New building of Fidelity Nat'l Bank & Trust of Kansas City will be second-highest in Missouri at 453 feet (35 stories).

A member of the CBOT who owns a farm in North Dakota, after having a lunch consisting of a sandwich, pie and coffee, figured out that it had cost him what he would get for five bushels of rye from his farm.

An exclusive NY hotel is attempting to take advantage of the fascination guests seem to have with learning they are at the same hotel that "a Coolidge, a Lindbergh or an Einstein" previously selected. The hotel's president has commissioned several noted artists to preserve guests in oil, painting portraits for a "Gallery of Noted Guests" which will occupy a room just off the hotel's main lobby.

NY City death rate from Jan. 1 to July 4 rose to 12.24 per 1,000 from 11.72 in 1930 as a result of epidemics of influenza and measles.

Market commentary:

Market wrap: Wall Street was "riveted" on conferences regarding Germany at the BIS, but stocks "put up a good fight" considering disturbing developments overseas; major shares "at no time displayed disconcerting weakness." Stocks opened with substantial setbacks in major shares, and selling was fairly heavy. However, trading quickly slackened after the initial selling had been absorbed. "Rallying tendencies" developed at noon on unconfirmed reports of a $300M credit for Germany, but buyers didn't follow prices up; rally subsided in early afternoon, and prices settled into a narrow range with very light trading. Bonds generally lower on moderate volume; US govts. and highest-grade domestic were steady, but rest of the domestic and foreign list was heavy. Drastic declines took place in German issues, with many hitting record or several-year lows, but other issues showed "no evidences of unreasoning liquidation ... rather the list merely moved down gradually." Commodities very weak; grains down sharply, with July wheat hitting a new season low for the fifth consecutive day and, at the day's low of 50 7/8 cents, only two cents above the record low; Liverpool July wheat hit post-1593 low; cotton down substantially. Rubber, coffee and cocoa down sharply. Copper buying small; most producers ask 8 cents but some metal available at 7 3/4, equalling the record low of late June. Silver down 1/2 cent to 27 7/8.

Resistance of stocks to disturbing German news indicated "an undercurrent of confidence existed in American financial circles that a workable solution would be found for Germany's troubles." "At the same time nobody cared to extend market commitments on either side, preferring to await news."

Brokers report there's still plenty of bearishness among professionals, while public is largely on the fence. Those long the market are "very timid and are averse to increasing their holdings"; "at the moment, it is considered as a waiting market" until German financial status is more settled. "The timidity shown for the long side made for quick profits and rapidly changing market positions." The margin situation remains "as satisfactory as it has been in many a day."

"Interests in the Street" are accumulating amusement stocks on belief most of the industry's bad news is out of the way, and earnings in rest of year will make a much better showing. Dairy observers holding off on buying stocks due to uncertain price situation in dairy products; milk and butter have set new lows due to heavy overproduction. Meat packers' earnings likely to decline this year due to lower prices, though volume has recently been running ahead of 1930. IT&T believed likely to maintain dividend even though it's not currently being earned, "particularly in view of the fact that future financial needs undoubtedly will be looked after at times with stock issues." Telephone and telegraph business has recently shown "faint improvement from the low ebb of the last few months."

Even if bears are correct that the upswing since June has been "a rally against the main trend, and will be followed by resumption of the major decline," the general list still seems in line for a higher summer. Over the last decade, July and August have been months of rising stock prices; this was true even in 1930. With stocks in "the most liquidated position on record," they're well positioned to respond to seasonal improvement in business. This improvement could be stronger than usual due to the impact of the Hoover plan, to the "prolonged reduction in consumer buying to actual necessities," and to the purchase of govt. bonds by the Fed. Reserve, which "has in it elements of inflation," and, "if continued in good volume, ... could have a stimulating influence through pumping credit into industrial channels."

Analysis disputing Farm Board's solution to wheat problem consisting of reduction in wheat acreage to domestic requirements together with protective tariff. Argues that 20% cut in wheat acreage would do farmers more harm than good and also cause losses for business in general.

J. Edgerton, Nat'l Assoc. of Mfrs. pres., advocates thrift campaign on national scale as surest method of preventing another aggravated business slump.

Spencer A. Miller, Workers Educational Bureau of America pres., calls current depression worst since 1873, predicts another economic slump in 1938 equalling the current one in severity and breadth.

Economic news and individual company reports:

US Steel directors' meeting on July 28 seen facing far-reaching decisions on maintenance of dividends and wage rates. There is growing opinion that any cut in wage rates must be accompanied by one in dividends. It's still believed possible both will be maintained; while current level of business would seem to require cuts, US Steel management has shown courage in the past, and may act boldly to maintain optimism sparked by the Hoover plan.

Directors of the Bank of Geneva reached agreement with main creditors for immediate appointment of receiver; bank will remain closed meantime. Geneva State Council ordered investigation of the bank's activities in recent years. Losses in liquidation estimated at 40M Swiss francs ($7.740M); 18,000 depositors affected.

After months of delay, Australia seems to be adopting the “sound measures” recommended by Sir Otto Niemeyer almost a year ago to meet the financial crisis, including spending and wage cuts, a conversion loan for internal debt, and arrangements to ship gold to London to meet short-term debt that matured June 30. Problems attributed to “largely fictitious” postwar prosperity based on high wheat and wool prices and availability of foreign loans to maintain imports.

Canadian officials say Parliament will vote at least $50M in relief for farmers of Western Canada.

New Chilean cabinet being formed will commit itself to maintaining gold standard and fiscal discipline in order to ensure monetary stability.

Minnesota commissioner of state banks has established a department to help state banks improve their bond accounts and "to attempt to prevent the banks from again getting in the unfortunate position in which many have found themselves."

Life insurance cos. with assets of $18.9B and savings banks with $10.6B, through recently formed Emergency Committee, filed petition in favor of the rail rate increase with the ICC on grounds they own a combined $4.7B in rail securities in imminent danger of losing value.

Success of legislation against short selling believed uncertain at next Congress, in spite of two recent statements by Pres. Hoover indicating support.

Laborers on highway projects in White Plains guarded by state police "because of attempts of strikers to persuade them to join"; strikers ask $5/day instead of 40 cents/hour contractors are paying. Two Rhode Island textile mills on strike, over 2,000 workers affected; strike looms at third mill.

Federal Bureau of Roads estimates total Federal, state and local road construction programs for 1931 at $1.616B, up about $15M from1930; Federal aid for 1931 is $259.9M vs. $105.6M. First Nat'l Bank of Boston says annual cost of govt. has increased 300% over last 15 years, while population rose only 24% and national income 135%. Census Bureau reports cost of state govt. in 1929 was $2.061B, total revenue $2.059B, and total net indebtedness $1.662B.

California oil production increased 12,755 barrels/day in July 11 week. Pan American Petroleum has recently increased production of Venezuelan oil by 20,000 barrels/day; this is seen possibly disturbing the oil import situation; agreement between four major cos. operating there to curtail production and imports expired June 30. Conferences on shutting down Oklahoma City field continue. Operators in Kansas agree to shut down wells.

Rather technical editorial on the ICC's release of its valuation of railroad property, and on whether the rate increase case is an "emergency relief" or "fair return" case; upshot is that even under the ICC's conservative "fair return" assumptions, rails are entitled to the increase they ask for and now must simply prove an emergency to get an expedited decision. ICC total valuation for purposes of calculating fair return is apparently about $30B, or 25% over rails' total book value. Anticipated operating income of about $586.5M in 1931 would be a return of 1.95% on the ICC figure or 2.43% on book value, vs. the "statutory return" of 5.75%. In conjunction with rail rate increase case, ICC also launched investigation into practices of railroads that may cause "revenue leaks," such as services the rails perform free for shippers or consignees. ICC decision on rail plea seen possibly as far away as end of year. One of final obstacles to agreement at long last on Eastern rail consolidation is Pennsylvania RR's insistence on trackage rights over the NY, Chicago & St. Louis Rwy. (popularly known as the Nickel Plate) from Ashtabula, Ohio to Brocton, NY.

Mexican nat'l. employers' assoc. says production costs will be greatly increased if the proposed Federal labor law is enacted in current form. Mexican govt. says the law "is far from a menace to capital," and provides it with "guarantees which it merits"; defends collective bargaining provision and right to strike.

Philippines not nearly as hard hit as other countries by depression, says Gov. Davis; benefits from access to US markets; govt. maintaining balanced budget though 1931 tax revenues are declining and depression continues; total trade was 512M pesos in 1930 vs. 623M in 1929.

Canadian auto production in 1930 was 153,372 cars, down 42% from 1929.

Commerce Dept. says British iron and steel industry, despite strenuous efforts to rationalize industry in past few years, showed few favorable results this year.

Motorcycles registered worldwide at end of 1930 were 2.751M, up 5%; in the US 110,750, down 7%; world production 351,529; US production 23,500.

Reports indicate further delays in drawing up of NY City transit unification plan as disagreement on prices for IRT and BMT persists.

Glidden reports June sales were largest in company history, with increases throughout the country.

Companies reporting decent earnings: Kroger Grocery, Niagara Wire Weaving, Cream of Wheat Corp.

Movie:

The Secret Call - Paramount film, at the NY and Brooklyn Paramount theatres. Peggy Shannon is "fairly catapulted into stardom" as Wanda Kelly, replacing Clara Bow after she was removed from the cast. Vehicle is an old play that the adaptors "have endeavored to bring up to date by inserting references ... to the vice squad, city contract scandals and the like. The melodramatic conflict still remains the eventual discovery that the girl who once occupied a room at a hotel with the reforming Senator whom the graft ring is now fighting is none other than the daughter of the principal grafter, the wife of his political henchman, and the sister of the hero ... with whom Wanda Kelly, who is bent on exposing the grafter for framing her father and causing his suicide, is in love." [Note: Oldest plot in the book ...]

Jokes:

Customer - Do you give a guarantee with this hair restorer? Barber - Guarantee, sir? Why, we give a comb.

Teacher - What happened in 1809? Student - Lincoln was born. Teacher - Quite right! And what happened in 1813? Student - Lincoln was four years old.