Friday, July 24, 1931: Dow 142.63 +0.11 (0.1%)

Assorted historical stuff:

Interesting exchange between Francis Welch and T. Woodlock regarding Gov. Roosevelt's position on utility rates. Welch says Roosevelt recognizes the utilities may be entitled legally to higher rates based on reproduction cost, but that if utilities insist on "their full pound of legal flesh" they may be "committing financial suicide"; "there is a mightier court" than the Supreme Court - "the court of public opinion," and it may demand competition for the utilities even if public money is required. "The Governor has not indicated his disbelief in capitalistic society or private initiative. On the contrary, he would have capital train itself into better condition by reducing unnecessary profits and improving its relations with the public. ... Personally, I do not believe Gov. Roosevelt is a Red. I do not believe he is even blushing pink. I believe he has far more respect for capitalistic society than those who would stand idly by and see it commit suicide." Woodlock sets Welch straight in no uncertain terms: "how can a municipality enter into competition - fair competition - with the existing plant on any basis other than that of reproduction cost ... By what magic can it ... create a plant at a cost equal to the 'prudent unimpaired investment'?" [standard backed by Roosevelt, based on original investment]. The two also clash somewhat heatedly over whose side Pope Pius XI's recent encyclical supports.

"With all the tides of statistics which flow from Washington and seldom ebb," there is a lack of useful information on public works projects for unemployment relief. "Figures there are aplenty ... but there is too little light on the field as a whole." Pres. Hoover's Emergency Employment Committee reports contract awards for "public and semi-public construction" since Dec. 1, 1930 are over $2B; this sounds impressive but leaves unclear whether it's a gain or loss in construction volume compared to the previous year. Also unclear is whether the next 3 or 6 months will provide more or less construction jobs than were available last fall and winter. This information is particularly important before the next session of Congress, which can be expected to open with "demands ... from half a dozen quarters for the appropriation of billions to make work. The first test of the merits of such schemes, if they have merit, will lie in the present facts about the building industry ..."

Rep. Howard (D, Neb.) called on Pres. Hoover in effort to win backing for his plan for a five-year extension on payments of principal of all mortgages on homes of US citizens; under the plan, however, interest payments would have to be continued.

"Respect for debts among many wheat farmers has declined with distressingly low returns from grain. At some points in Oklahoma, which are largely affected by the oil credit situation, a state of moratorium has almost been reached." Oklahoma Gov. Murray declared moratorium on payments of 1930-31 rentals on 340,000 acres of farmland owned by state, affecting 2,120 farmers. Southwestern wheat movement to markets has declined to "subnormal proportions" for the season as result of farmers holding for better prices and postponing shipments to Aug. 1 when lower Western grain rates are scheduled to take effect.

Commerce Sec. Lamont, after meeting with Pres. Hoover, announced govt. is inviting coal miners and operators to a joint conference.

US marriages decreased 8.5% in 1930, while divorces decreased 4.2%.

French Colonial Exposition at Vincennes has received an average of 1M visitors a week since opening on May 6; number is increasing with warmer weather.

Canada will complete another milestone in progress this year when telephone lines of the 7 major Canadian systems will be linked. This will allow conversations between Eastern and Western Canada to be carried entirely over Canadian territory, at greater speed. Currently, a call from Montreal to Calgary is routed through Toronto and Windsor, through a submarine cable under the Detroit River, to Chicago, to Helena, Montana, and back across the border to Calgary.

New oil-burning locomotive tested by Canadian Pacific Rwy.; pulls load of 7,691 tons, or about three normal trains; weighs nearly 400 tons and is 100 feet long.

Thomas Young of Bound Brook, NJ became interested in growing orchids many years ago. This is a painstaking job; they require 6 to 8 years of careful coaxing to bring into bloom and must then be handled "like a sickly child." Young mastered the art, and for years has received $3 to $10 apiece for them; last year he sold 11,000 from his 33 greenhouses. He recently sold the business for over $1M.

Travel in Russia "is now regarded by the inhabitants as an exciting adventure." To buy a ticket, you stand in line for 12 to 24 hours, and this must be done at least 2 weeks before the trip. Two men sell tickets at different windows; one is for odd dates and one for even, so care must be taken to avoid getting into the wrong line and wasting an entire day. Once on the train, the adventure has just begun; there were over 15,000 breakdowns and wrecks reported on Soviet railroads in 1930.

Germany special:

London conference ended with agreement on the three-point US program (see yesterday - renewal of existing central bank credit for 3 months; "concerted measures" to maintain existing short-term foreign credits to Germany; BIS to set up committee without delay to examine further German credit needs). Participants in the conference expressed satisfaction that "real progress" had been made toward solving the German crisis and starting a new era of international cooperation. PM MacDonald, conference chair.: "We are very well pleased"; Sec. of State Stimson: "Mr. Mellon and I are very well satisfied"; Chancellor Breuning thanked the US delegation for "what it has done to help Germany" and stressed importance of cooperation and frequent meetings between France and Germany; Premier Laval emphasized good results of French-German conversations in Paris and also hoped for cooperation; Italian FM Grandi hoped conference would serve as start of new era for the whole world, and particularly of better relations within Europe.

London bankers were less positive on the conference, believing the only real result is notification to Germany that she can't count on further foreign aid and must rely on her own resources to overcome the crisis; provided the Germa govt. can remain stable, this could be done using methods similar to those used by the US in 1907. "The conference avoided all the vital issues for fear of unpleasantness and thus it was able to claim that the sessions were remarkably harmonious." "Foreign circles" also saw the conference as a stalemate producing "cheerful statements but few tangible results."

Bank of England raised discount rate 1% to 3 1/2%, higher than any other major central bank but the Reichsbank; observers believe action was made imperative by inconclusive conference results; money market rates rose sharply. Bank of England weekly statement reveals drastic deterioration in the Bank's position. Gold holdings dropped 15.1M pounds sterling in the week, to about 150M or the "Cunliffe minimum," and the Bank has lost about 5M since. The Bank purchased 4.3M of govt. and 1.8M of other securities in effort to combat withdrawals of foreign balances; its reserve ratio dropped to 49.3% from 57.2%. [Note: pretty rough week ...] "How long this will continue is problematical." Bank of France statement showed contrasting trend, as gold holdings increased 419M francs and money in circulation fell 230M. Irish Bank rate raised 1% to 4 1/2%. Bank of Austria raised discount rate 2 1/2% to 10%.

Sterling rose after the Bank of England rate hike but remained below the gold export points. A large gold shipment valued at $4.3M arrived by airplane from London to Paris Wed. evening. S. American currencies were pressured.

One "cheering feature" of the foreign situation was defeat of a joint Nazi-Nationalist-Communist-Landvolk motion to convene the Reichstag immediately. This gave Chancellor Breuning "a further breathing space in which to work for Germany's improvement"; Breuning's retention seen as "essential to European stability."

Leading NY banks stress they have signed no written agreement on maintaining short-term German loans, but that this is a day-to-day working policy also adopted in other financial centers; "in some quarters the ... plan is characterized as ... a course of action which sound bankers had already adopted." NY banks don't contemplate additional credits to Germany, pointing out they would have to be short-term and this would only increase the worry about withdrawal of these credits.

German restrictions on bank withdrawals were relaxed slightly, to 10% of deposits up to 200 marks per day. Germany bought a substantial amount of silver in the US market Thursday for the first time in years, possibly due to announced intention of German govt. to coin silver marks. Britain reportedly plans to extend credit to India, making further silver sales to meet Indian demand for sterling unnecessary. Hungary extended July 16 emergency banking restrictions to July 30.

German unemployed July 15 were 3.956M, down 6,000 from June 30.

Treasury Sec. Mellon will resume his vacation in France which was interrupted by White House request.

Dueling analyses:

Washington report: It's hoped and believed “that the more pressing aspects of the German financial crisis have been met by the decisions of the London conference.” Negotiations on a final settlement were postponed “until a more favorable time. During the period of postponement, certain fundamentals, which are now obscured by ... technicalities, may become plainer than they are.” Premature to say what form final settlement might take, but readjustment of entire intergovt. debt structure is believed essential. Readjustment of German bonds might involve a haircut to a new total within current German capacity to pay, followed by creation of new bonds to capitalize those payments that could be sold to investors, removing political aspect of the debts.

Berlin report: Current crisis came not because of “Hitler politics” but as a reaction to the Creditanstalt collapse; German capital was scared by this failure, but foreign banks, particularly US and British, also began immediate withdrawal of short-term funds; rumors of German bank instability and “inordinate” length of US-French discussions to settle Hoover moratorium plan made matters worse. “No real improvement is looked for until further very heavy foreign credits are obtained. Estimates of the immediate needs run from $150M to $500M”; European opinion generally holds the US must supply most of the funds. “It is generally felt that while the situation is serious, it is by no means irreparable and that, with one further generous credit grant from abroad, confidence will be restored.”

Market commentary:

Market wrap: Stocks absorbed considerable selling early after announcement of Bank of England rate hike. Trading then slowed, and price movements turned narrow. A slightly firmer tone developed around 11 o'clock, and the recovery extended in early afternoon; majors generally reclaimed earlier losses, but trading remained limited. Bond trading featured declines in the foreign list; German issues were under moderate pressure; other Europeans were lightly traded with highest-grade steady but speculative weaker; S. American bonds suffered general decline, with liquidation in Argentine, Brazilian, Chilean and Colombian issues. Domestic bonds were narrowly lower. Commodities mixed; grains narrowly lower; cotton moderately higher. Copper buying small; price 7 3/4 - 8 cents.

Conservative observers remain cautious, favoring sidelines and stop orders to protect long positions; advise against buying even on setbacks.

Early selling attributed to disappointment over results of London conference, particularly failure to produce definite solution for Germany's credit problems. Encouraging afternoon news items included rally in sterling and increase in Youngstown steel rate.

Major bear operators reportedly maintaining positions, being inclined neither to cover nor put more shares out. "They express confidence that eventually the market again will reflect business conditions in this country." With little prospect of business improvement in the fall, see no great incentive to take in short positions.

"Better buying" reported recently in some of the leading bank shares.

US Steel expected to show nominal profit in Q2, pushing dividend questions to the forefront. Strong GM performance in first-half attributed to extensive gains in market share; retail sales were only 2.5% under 1930 vs. a decline of about 27% by the industry as a whole; co. has also tightly controlled operating expenses. Sears - Montgomery Ward merger rumors continue. Rumors are circulating widely of Drug Inc. expansion by acquisition of more companies. Brown Shoe strong; plants are operating about 95% and co. plans new girls' footwear line. Paramount fell after announcement management was considering paying dividends in stock instead of cash.

Economists expect no substantial improvement for commodity prices until "European and domestic affairs have improved."

Robert C. Lee of Moore & McCormack (ship operators) urges US-Russian trade, saying Russia presents greatest future possibility for US products in the world.

Martin J. Insull, Middle West Utilities pres., says German crisis has "completely overshadowed sharply defined improvement in the domestic industrial situation," citing "substantial improvement in the nation's kilowatt-hour consumption as definite evidence of business upturn."

Economic news and individual company reports:

Census Bureau reports total value of US farm lands and buildings fell to $47.9B in 1930 from $66.3B in 1920; number of farms fell to 6.289M from 6.448M; total acreage increased to 986.8M from 955.9M. Editorial: "Rapid inflation" of farmland prices "induced by war-boom prices" and subsequent deflation had the same effect on farmers as "a stock market crash would have on thinly margined speculators who had bought at or near the top ... Foreclosures must be the inevitable result ..., making it necessary for ... mortgage companies to operate many farms; they are finding that a sort of centralized operation under a competent management is the most profitable way in which they can operate a block of such lands until ... they can be sold to real farmers." Some regard increase in tenant farming as negative; however, "the Southern system is largely one of letting out small parcels of land" to black farmers "on a share basis, the owner furnishing the land and supplies and working hard to make the former do his work." In other parts of the country tenant farming allows young men without sufficient capital to get a start on becoming owners. One hopeful sign, considering "all that agriculture has gone through since 1914," is that half of farms are free of mortgages and owner-operated.

ICC advances date for resuming 15% rail rate increase hearings to Aug. 10; says requests for time at hearings have already exceeded practical limits; parties admonished to present evidence as concisely as possible. J. Scott, Kansas RR Commission chair., says rate question represents struggle between industrial East and agricultural West; rate hike would raise farmer's cost of shipping while farm product prices would remain the same. Rate experts from railroad commissions of 11 Western states plan organized opposition.

A. Legge, Int'l. Harvester pres., verifies report that many company dealers are accepting wheat as partial payment for some machinery, on basis of 75 cents/bushel for Dec. delivery.

US cigarette production in first half hit new record of 59.433B, 7M above 1930. Five-cent cigars grew to 70% of total cigar production in June vs. 58% in 1930.

After two failed attempts to sell $20M in NJ highway bonds, the sale has reportedly been postponed to Sept. in hopes of getting a better rate then. Steady progress reported in unraveling "tangled finances" of North Bergen, NJ under supervision of the recently created Municipal Finance Commission of NJ.

Money in circulation July 22 was down $16M to $4.792B, total Reserve Bank credit outstanding down $9M to $942M. Member banks in NY City report brokers' loans down $14M to $1.416B; loans on securities to non-brokers down $24M to $1.679B.

Texas Corp. matches Continental oil price hikes to 35-40 cents/barrel from 10-22 cents, extending the increases from midcontinent fields to West Texas. R. Holmes, Texas Corp. pres., testifying to the Texas House oil investigation, blames antitrust laws for depressed condition of oil and other industries. East Texas oil development continues with no signs of let-up; past week saw a record 135 drilling permits issued.

Youngstown district steel production now operating at 37%, an increase of 3% from the level starting the week.

Dow average of 8 iron and steel products fell $.27 to $43.98. Scrap markets improved at Pittsburgh, unchanged elsewhere.

Northern France textile strike "practically ended"; half the original 1.2M strikers have returned to work, accepting compromise offered by Premier Laval of 3% wage cut; mills expect almost all workers to return by Monday; outcome considered victory for mill owners.

S. Untermeyer charges BMT earnings report showing record profits was exaggerated in order to raise price for company in NY City transit unification; says report conceals substantial losses from elevated lines.

US exports of radio receivers in first 5 months were $5.191M, up 57% from 1930.

Diamond Match [Kreuger-associated] initiates dividend on new no-par common stock at $1 annual rate.

Montgomery-Ward swung to a small profit in Q2 from losses in Q1 and Q2 of 1930.

Chrysler balance sheet substantially strengthened in first half; net current assets increased from $62.6M to $72.8M; cash rose from $41.6M to $55.3M.

Earnings reports: Chrysler Q2 $.73/share vs. $.73; half $.51 vs. $.77. Brown Shoe 6 months ended April $1.72/share vs. $1.83. Butterick Q2 $1.36/share vs. $1.66; half $2.23 vs. $2.04. United-Carr Fastener Q2 $.29/share vs. $.27; half $.30 vs. $.18. Standard Cap & Seal half $1.63/share vs. $1.79. Mapes Consol. Mfg. half $4.78 vs. $4.66. Purity Bakeries Q2 $.70/share vs. $1.45; half $1.48 vs. $3.00. Loose-Wiles Biscuit Q2 $.88/share vs. $.75; half $1.70 vs. $1.73.

Companies reporting decent earnings: Brown Shoe, Butterick, United-Carr Fastener, Standard Cap & Seal, Mapes Consol. Mfg. (egg cartons), Loose-Wiles Biscuit.

Joke:

"How much are eggs?" "Fifty cents a dozen, thirty cents for cracked ones." "Good - crack me a dozen."

Thursday, July 23, 1931: Dow 142.52 -4.18 (2.8%)

Assorted historical stuff:

Nikola Tesla, on the occasion of his 75th birthday, looks back on his previous achievements including alternating current and "the wireless." However, "what I have in the past done I am now surpassing. The world is about to have machines that ... will attain speeds of around a mile a second [note: about Mach 5 or 6] through the rarefied medium above the stratosphere." Foresees time "not too distant" when wars will be carried out without a single soldier crossing the border; "at this very time it is possible to construct such infernal machines which will carry any desired quantity of poisoned gases and explosives, launch them against a target thousands of miles away, and destroy a whole city." This is likely to be the future of war if it's not done away with because "it is the most economical means of inflicting injury and striking terror ... that has ever been imagined. Densely populated countries, like England and Japan, will be at a great disadvantage" as compared with the US and Russia. George Westinghouse, Tesla's closest US business associate, says Tesla gives his company an edge over competitors: "What talent have they to match our Tesla? Erratic? I'll say he is. Creative? Since the Garden of Eden there's nothing beyond him!"

Interesting letter from reader proposing converting all German foreign govt. debt into 3% bonds guaranteed by the US, Britain and France that would then be freely convertible back and forth to an international currency with a fixed value vs. dollars, pounds, francs and marks. Believes Germany would then not need to pay interest since all the bonds would be converted to currency. "Gold and silver as money belong to the times of Abraham and not to our day ... You will note that this feeling is shared by some very prominent men in England. Write something to wake our leaders up. One-third of the population affected by unemployment ... Every debt ... has been increased 50%. The rich are not getting richer and the poor poorer; every person is getting poorer. ... Poverty and want in a country of plenty. Can you blame men for wanting a change?"

Sen. C. Glass says Senate subcommittee on banking won't investigate Fed. Reserve regarding bank failures in their jurisdiction.

Editorial calling the US Ambassador to Mexico to task for his recent "utterly ridiculous, ill-advised" statement that the US and Mexico were on the verge of war two years ago. [Note: don't know if this was actually the case.] Statement will have mischievous effect since "Mexicans have an inherited fear and suspicion of the US, the 'Colossus of the North.' Often their politicians represent this Govt. as an ogre waiting a favorable opportunity to devour them." It's important the US govt. disarm these fears not only on the part of Mexicans but all other S. Americans, and "win their trust and friendship. Ours is a different temperament and psychology from theirs, but that does not imply that we are thinking in terms of war and conquest when talking in terms of business."

Argentine govt. forces reportedly have lost a hundred men in battle with the rebels in Corrientes; 30 planes arrived to bombard the city. Argentine Pres. Uriburu declares revolt "of no importance." Buenos Aires and other parts of republic reported calm.

Serious riots took place in Santiago as Chile's third cabinet in less than two weeks was sworn in at 1:00 a.m. today; demonstrators sought to dissuade members of the new cabinet from accepting posts in the govt. of Francisco Gana by throwing stones at their houses. "Chile had been free from political turmoil until recently" when its foreign exchange position made it impossible to service debts, precipitating the govt. crisis.

In 1899, Paris had 12,017 horsedrawn cabs available to the public, and 4 of the newfangled motor taxicabs; now, it has 19,750 motor and 5 horsedrawn cabs.

NY City Board of Trade approves most expensive of three sewage disposal plans, to cost $377.9M and provide for 92.4% purification.

German titles of nobility have been abolished in the German republic. Confusingly, a court has now decided that the "von" indicating nobility can no longer be dropped from a name without legal procedure; "Nobility having been wiped out by the war, the syllable 'von' can no longer indicate nobility, because there exists no nobility. It is now an inherent part of the name proper." Republicans suspect the court is trying to preserve signs of the old monarchist regime.

Prof. A. Einstein, "of relativity fame," asked by a German newspaper to contribute to a collection of one-sentence philosophies: "The true value of a man is assessable by how far and in what sense he has succeeded in achieving freedom for himself."

Germany special:

Despite slow progress at the London conference, nervousness in Berlin “is diminishing as the general belief is that the worst days have been passed. ... Bank offices are again empty of unusual crowds.” However, “various financial decrees confuse German banks.” Bankers expressed satisfaction over voluntary extension of short-term credits but believed a more definite arrangement was needed since there's no prospect of a new international loan in the near future; it's believed such a loan will eventually be necessary, if only to consolidate short-term debts of local govts. estimated at 1.5B marks. German decree provides for issue of 500M silver and 100M copper marks to relieve currency shortage.

Finance ministers meeting in London have reportedly agreed on plan for German relief including: govts. to recommend central banks use all possible means to prevent withdrawal of short-term credits; formation of committee to examine further short-term credits and possibility of converting credits from short-term to long-term; and 3-month renewal of previous $100M central bank credit. The Belgians argued that the French proposal for a long-term loan was the only worthwhile one, but had been abandoned, while the US plan was superfluous because banks were already maintaining credits. An effort to direct the conference “toward investigating fundamental causes of the German crisis failed because it was felt such inquiry would take too long.” Sec. of State Stimson said conference was making progress; “it is not hopeless but it may finish tomorrow”; situation difficult but discussions friendly. An international advisory committee of bankers is leaving for Berlin “to help Germany restore its financial credit.”

Editorial: Pres. Hoover's proposal for freezing short-term loans indefinitely through govt. pressure on banks in all countries has "been received with some reserve in American banking quarters." However, there may be no alternative; it would be unacceptable to have a renewed exodus of capital the moment Germany relaxes its emergency controls. Although information from London is sparse, the French proposal of a new large long-term loan to Germany secured by "political and financial guarantees" appears to be fizzling. Unless confidence can be restored, new loans would be "pouring water into a sieve"; restoring confidence will be impossible if further political or financial concessions are demanded that seriously threaten the German govt. "At the appropriate moment, no doubt, Premier Laval will yield ground sufficiently to permit of agreement upon some plan of salvage, more or less along the lines of the Washington proposal." This will only be a start, "but a first step must be taken, and that without much longer delay."

Bank of England's heavy gold losses continued, with 3.5M pounds sterling sent to Europe. Since last Thursday, Bank of England has lost 15.2M, all to Europe (and most to France); it's now close to the so-called Cunliffe minimum of 150M. Sterling fell sharply, and London bankers expected further heavy gold losses this week. However, the money market apparently believes the Bank of England won't raise its discount rate. Of course, much depends on results of the London conference; a successful finish to the negotiations would likely end the Bank's problems, but failure would increase the flow of funds from London and make measures to protect the gold reserve inevitable.

Stocks in London and Paris were heavy on "growing belief that the London conference was unlikely to produce definite results." Many market observers seemed disappointed by delays in settling the German situation, maintaining each day a settlement is held up "takes away some of the potential bullish influence."

Market commentary:

Market wrap: Stocks opened weakly on apparent disappointment over developments at the London conference. After initial setbacks, trading turned dull and narrow. Decline picked up again briefly around noon, and again in the late afternoon; leaders including Steel and American Can hit new lows and the market was heavy in the final dealings. Bond trading somewhat more active, featuring sharp declines in German section; other foreign issues were weak. Domestic bonds, including both high-grade and speculative, were unsettled with the dominant trend slightly lower. Commodities soft; grains narrowly mixed; cotton again down sharply. Copper again became available at record low of 7 3/4 cents after small sales were made at 8. Silver down 1/8 cent to 27 3/4.

Conservative observers remain cautious; continue to advise sidelines "until something definite happens to affect the market."

Some market interests are carefully studying domestic business conditions, believing the market will be governed by fall developments in general business once the effect of the European situation has passed. It's believed fall buying will be smaller and later than usual, since consumers are more cautious than ever and the price structure remains uncertain. Steel interests are trying to strengthen and hold price quotations, and the outcome of this effort will be of great interest.

Technical traders were holding off on commitments as the market was seen at a "crucial point"; ability to cross the July 10 high of 146.70 would "convey bullish implications" while inability to overcome resistance there would give an unfavorable signal.

US Steel dividend prospects will draw great interest until the directors' meeting Tuesday; many traders have stepped out of the market entirely until the decision; "no intimation has come from responsible quarters as to what action will be taken." Earnings for Q2 will likely be poor, justifying a cut; many expect the annual payout to be cut from $7 to $5. Bulls believe directors may take the "courageous move" of maintaining the rate, which would be possible because of strong financial position. Goodyear was sold on expectation of poor earnings. Kroger Grocery continued recent advance after strong first half earnings report.

National Biscuit earnings somewhat lower in Q2 due to "slowing up in the sales of higher-priced fancy crackers." Coty sales have fallen off sharply as customers of cosmetics and perfume have switched to lower-priced and less well-known brands.

The past decade has produced plenty of excitement for traders in crude rubber, along with plenty of grief for the far-flung producers of this "commodity which has a larger number of physical properties and a larger variety of uses than any other raw material." Experts "see no severe price fluctuations ahead, but are often wrong." In particular, attempts to predict tire demand have been wildly off; a year ago, 1930 production was estimated at 78M but it wound up at 51M.

NY Trust Co. says rising costs of govt. at all levels "proving a serious obstacle to the restoration of economic prosperity." Point out high costs of US military spending and veterans' pensions, which together cost much more than all other Federal govt. functions put together.

Economic news and individual company reports:

Trial of lawsuit against Gillette directors saw some interesting legal argumentation. E. McLennen, defense counsel, defending against charges of incorrect figures in annual reports argued that "what was reported to stockholders is of no value, for the corporation was not hurt by what was reported to stockholders and this is a suit by the corporation, if it is a suit at all." D. Hall, for the plaintiff, pronounced this argument "ingenious but unsound ... Those reports that were issued to stockholders were the only basis upon which the stockholders and the public had to value the stock of the company." Directors, using the reports, "created an illusory price. If the public had known the truth, the stock would not have sold at anything like the high levels it reached." W. Thompson, also for the plaintiff, said that while the company's bookkeeping may have been honest up to 1924, it became dishonest after that date and got progressively worse until "finally the company was behind to the extent of over $10M"; charged that directors ignored reports of auditors.

Leading Chicago wholesalers report good buying from stores in rural districts, many of which are optimistic due to good current or expected crop yields; crop conditions have been favorable over most of the country, except the Northwest where drought still prevails.

Weekly steel reviews report sentiment moderately stronger in spite of further fall in output during week (however, another report says US Steel will maintain its output rate this week). Industry now expects current output level to be maintained through August with an upturn in Sept., though attaining even a 50% output by fall would be considered a noteworthy achievement. Success of industry efforts to stabilize prices difficult to judge since demand is so low. Scrap prices continue to strengthen. Canning operations have tapered off somewhat from early July though this is normally the peak season; tin plate mills have reduced output to 60% from 65%; one factor has been decision of California peach growers to limit pack to 9M cases and raise a fund to buy up the 8M case surplus and uproot trees.

Rail freight loadings for week ended July 11 were 763,581, up 95,702 from prev. holiday week, down 16.6% from 1930 week, and down 28.3% from 1929.

Editorial by T. Woodlock: Gravity of rail credit crisis is clear from a simple look at the bond list; many even among the rail "aristocrats" will be removed from the legal list due to lower earnings. Rail position that they now wish to raise rates across the board even though in past months they've requested ICC permission to lower rates on various commodities to meet highway competition has "a certain superficial inconsistency but also a certain elemental logic."

US electric output for week ended July 18 was 1,667 GWHr, down 1.6% from 1930, vs. a 0.3% rise prev. week and a 2.8% decline two weeks ago.

Oklahoma City oil wells continued to be closed in, with production down to 114,000 barrels from 251,000 before shutdowns started; further price increases seen possible; operators in Oklahoma City said to want price of $1/barrel. Texas House and Senate continued their parallel investigations of the oil industry. Prices paid for East Texas oil in past week averaged 13.8 cents/barrel, down 2.4 cents. Amer. Petroleum Inst. estimates increase of 3.7% in US demand for gasoline in second half of 1931 vs. 1930 and decline of 2.4% in total crude oil demand; warns refineries against entering 1932 with a "ruinous surplus of gasoline" as in 1931. Standard Oil of NY - Vacuum Oil merger seems assured based on proxy voting so far.

GM performance for Q2 even stronger than it first appears; income excluding nonrecurring item in 1930 rose to $1.22 from $1.17; cash position rose to $246M vs. $176M a year ago and $179M at start of the year, and working capital showed similar increases.

Earnings reports: GM Q2 $1.22/share vs. $1.34; half $1.83 vs. $2.32. Procter & Gamble year ended June $3.37/share vs. $3.37. Abbott Laboratories half $1.80/share vs. $1.83. Brillo Mfg. Q2 $.44/share vs. $.19; half $.83 vs. $.38. Anchor Cap Q2 $.88/share vs. $1.28; half $1.49 vs. $2.04. General Gas & Elec. year ended June $.40/share vs. $.54. Nat'l Cash Register Q2 $.72/share vs. $.65; half $.41 vs. $1.41. Household Finance Q2 $1.55/share vs. $1.18; half $3.01 vs. $2.56. Century Ribbon Mills Q2 $.44/share vs. $.17; half $.60 vs. $.10. Bickford's half $1.10 vs. $1.05. Deisel-Wemmer Gilbert Q2 $.59/share vs. $.70; half $1.11 vs. $1.20.

Companies reporting decent earnings: Procter & Gamble, Abbott Laboratories, Brillo Mfg., Household Finance, Century Ribbon Mills (benefiting from return of ribbons in women's wear), Bickford's (low priced restaurants).

Theatre report:

Theatre has suffered more than the usual seasonal decline this year, with only 12 venues occupied last week, 11 less than the low point in 1929. However, activity seems about to swing upward again. Rumors on upcoming Broadway productions include Whistler, based "more or less," on the life of the painter; Lord and Lady Byron, written by Michael Strange, who will play both parts; an adaptation of Sholom Aleichem's Yiddish play If I Were You by the author's granddaughter Tamara Berkowitz; and many others. Jed Harris' office is particularly active, with a black play, an Irish play, and two American plays "definitely in prospect," one of the American plays being Twentieth Century by Ben Hecht and Charles MacArthur. With some 30 summer colony theatres in full swing in NY and New England resorts, many featuring Broadway veterans, actors should be sufficiently tanned and rested by fall.

Joke:

Old-Dashioned Visitor - My dear, don't you ever nurse your darling little baby boy? Modern Mother - No, it's so very difficult; I'm always afraid of my cigarette ashes falling in his eyes.

Wednesday, July 22, 1931: Dow 146.70 +2.22 (1.5%)

Germany special:

Pres. Hoover proposes that banks and leading financial institutions worldwide maintain current short-term loans to Germany, that the Reichsbank keep strict control over foreign currency, and that a BIS committee be appointed to work out details of converting short-term loans to long-term and additional credit needs. Theory behind the proposal is that fundamental problem has been relieved by Hoover debt/reparations moratorium, but crisis has flared up due to heavy use of short-term foreign credit by Germany and to capital flight from within Germany; if these factors can be relieved, the emergency can be overcome. No new credit is contemplated until after the BIS committee studies details of the proposal. Sec. Stimson says "problems are becoming clarified. There are better prospects than ever for a successful solution."

Total outstanding short-term credits to Germany are about $1.2B, of which the US has about $600M and France $60M. Reports on reaction of US banks to new Hoover proposal are somewhat confusing. One report indicated willingness to cooperate, probably realizing that "to try to get money out of Germany now would accomplish nothing except to precipitate a crisis." Another was more skeptical, seeing the proposal as not marking any new development but merely official recognition of a policy NY City banks have already been following. Finally, it was observed that transfer of about $300M in NY City bank funds now loaned to Germany from current to long-term assets “would not be a step to be welcomed.” British bankers believe basic problem is excessive debt owed by Germany; before granting further loans, call for long-term extension of Hoover moratorium, or complete cancellation of debts if possible; this would reestablish confidence in Germany as a sound borrower. France rumored willing to replace German political guarantees with financial ones in exchange for long-term loan; also reportedly agreeable to new Hoover proposal.

German Fin. Min. Dietrich says by contrast with 1923 crisis, Germany now suffering from deflation due to loss of gold reserves to cover banknote circulation; for example France, with population a third smaller than Germany, has over twice the currency in circulation. Expressed hope for new era of French-German collaboration and said Germany is acting in good faith. Germany will give priority to paying private loans [I think this means bonds sold to private investors] rather than short-term foreign loans. Replies “diplomatically” to questions on French request for pledge that reparations will be resumed in a year (“to what extent payment of our political debts is possible in addition to our payments of the private debts cannot now be discussed”), on German attitude on suspension of “pocket battleship” (to avoid being left defenseless, Germany must take advantage of limited opportunities in Versailles Treaty), and on French request for 10-year “political truce” including pledge not to seek modification of Versailles Treaty (determined to pursue objectives only by peaceful means but can't state attitude on the request).

German inter-bank Clearing House began operations; transfers by bank clients between accounts at separate banks limited to 15,000 marks/day to protect less secure banks from complete loss of accounts to other banks.

The German crisis is causing all sorts of temporary hardships for individuals. People who are helping German relatives are scrambling to find sure ways to deliver funds to them; some are resorting to hand delivery through people living in neighboring countries or now leaving for Germany by ship. German lard imports, which had been running at 4M-5M pounds a week up to a month ago, were down to 263,000 pounds last week; lard is commonly used instead of butter in Germany, and is bought on a cash basis.

Heavy Bank of England gold losses continue; 2.8M pounds sterling was lost to Europe, making a total of 10M since the break in sterling a week ago, and London expects French withdrawal of 2M pounds daily for rest of week. Money rates rising in London and possibility again discussed of Bank of England rate increase. Strain attributed to conversion of sterling paid out by German banks into other currencies and to withdrawal of French balances. London banks “quietly preparing to meet any eventualities.”

Assorted historical stuff:

Over 100 injured by "bricks, chairs or fists" in free-for-all battle between members of United Mine Workers and National Miners' Union as group of almost 1,000 from the latter attempted to break up meeting of the former.500 striking miners, with their families, marched to Steubenville Ohio "demanding relief from starvation conditions in the mine fields. There were no disorders." Strike of 15,000 miners against the Pittston Co. believed averted by vote of the local unions. Editorial: In West Virginia, two miners recently were killed as they tried to abandon a strike and return to work; on the same say a member of the “insurgent” National Miners' Union was shot dead in Ohio when pickets collided with working miners. This continued the intermittent bloodshed of the past weeks in the “desperately 'sick' ... coal industry.” Notes study by the Russell Sage Foundation saying industry's can't be solved until both miners and operators are organized so as to be able to work together. However, mine operators have been wary of recent govt. efforts to draw them into conference on current labor troubles; this is likely due to fear of pressure to re-unionize mines while competitors in South remain non-union; in 1924, an agreement to maintain United Mine Workers wage scales led to heavy losses of business to Southern mines and also damaged the union, giving a foothold to the “apparently communist-inspired National union.” Operators should attend a conference but be given guarantees against a repeat of the 1924 episode.

Editorial by T. Woodlock: City-owned utilities should charge enough to give a fair return on investment; otherwise, consumers are favored at the expense of other taxpayers. "It is very important that, if we are going to have extensive experimentation in 'public' competition with 'private' clients, we have a proper 'ring' and proper rules with no favor to either contestant."

Argentine govt. sends batallion of infantry and several bombing planes to quell revolt at Corrientes.

Chilean cabinet resigns for second time in a month.

Assoc. Gas & Elec. has recently completed two large and unusual power projects: the Saluda Dam in S. Carolina that created the 78-sq mi Murray Lake, the world's largest man-made lake, with a 763B gallon capacity, and the Botocan plant 55 miles from Manila "in one of the wildest regions of the Philippines."

The US contributed $1.050M this year for an improved highway in the Panama Canal Zone, to be part of a highway extending from the Southern tip of South America to the Canadian border, and ultimately to the Northern edge of Alaska.

Michigan oil well fire that had blazed since Saturday afternoon finally extinguished using steam; fire took nine lives.

The Hoover debt moratorium plan cost Uncle Sam $7,000 in telephone bills, mostly for calls between Hoover and Sec. Mellon in Paris at $10/minute.

Miniature golf, that raging fad of last year, has passed from fashion with stunning speed, to the sorrow of thousands of course owners. Last year the wait to play was often hours at popular courses; now most courses only have one or two people playing.

NY Mayor Walker, marking start of work on the colossal $300M city sewage treatment plant, recalled happy days of his boyhood when, along with friends, he swam and caught fish off the metropolitan wharves, "that era of life giving way to pollutions not merely of the immediately local waters but of tides swinging far distances away."

NY Mayor Walker officially opens the Columbia Broadcasting Co.'s first nationwide television broadcast Tuesday; the station, W2XAB, "will give a daily sight and sound program beginning Wednesday."

Market commentary:

Market wrap: Stocks opened dull with narrow movements on report of adjournment of the London conference until afternoon. However, favorable foreign reports of a possible $1B German credit turned the market sharply upward about 11 o'clock; extensive advances came on relatively light volume, and new rally highs were reached in majors including Steel, AT&T, and NY Central. Setback came about noon on report of Hoover proposal that banks maintain current credits, which was taken to indicate possible delay in new loans. However, afternoon report of increased steel operations was followed by renewed buying and leading shares were firm in the last hour. Bond trading somewhat more active than yesterday but remained slow; German issues improved slightly while rest of the foreign and domestic lists generally quiet with narrow price movements. Commodities mixed; grains higher; cotton down sharply. Copper at 8 cents with buying small.

Conservative observers remain cautious; admit market has acted well in the past few days but not yet ready to recommend general buying. Advise using stops to protect long positions, moving limits up as the market gains.

Public interest in the market again appears negligible, and even the traders dominating the action are doing much less than usual. Many appear to be waiting for important foreign or domestic developments.

While some of the earnings reports so far have been better than predicted by the bears, the Street is waiting for statements of the larger industrials next week, particularly US Steel on Tuesday. Brokerage houses appears to be disfavoring rails at the moment; most advise clients to keep away until June reports are out of the way, warning liquidation could follow disappointing results. Sentiment on oil appeared better following news of lower crude oil production and price increase in Southwest. Good buying continues in Savage Arms, as rumors circulate on a new product in the near future. Bullish group active in du Pont; first-half earnings of $2.23/share vs. $2.71 considered excellent in view of low chemical prices.

"Chart students say an upward slant has appeared in the trend line. On three successive occasions, the lows were above the bottoms of the previous dips. This is considered significant. The trend line, of course, can change at almost any time." [Note: Of course.]

"Interests who have been furnishing bull leadership in the market since early June maintain an optimistic attitude regarding the market's immediate outlook." Believe German problems will be settled, providing "basis for rising stock prices over the next few weeks"; this will be followed by "a period of irregularity ... until autumn business prospects become more clearly defined."

J. Mooney, GM VP, says GM exports running about 25% behind 1930. Believes exports to Europe will never again reach volume of 1929 due to tariff protection and ability of foreign companies to develop their own markets; however, believes "this condition ... is only true of Europe and the rest of the world will continue to absorb ever-increasing numbers of our automobiles."

Editorial: Amount of new foreign bonds offered in the US in the first half, excluding refinancings, was about $208M vs. $660M in 1930. "There is no lack of money; in fact, its unemployment position matches that of labor, and it is ready to work for a lower wage than usual. ...It is desirable in every way that foreign conditions change for the better" so that foreign bonds can regain favor in the US.

Livingston & Co. note slowest trading on Monday since May 6, 1926; dull period then was followed by "one of the best ... markets Wall Street had ever seen." While not expecting a similar sensational upturn to develop now, believe current dullness "seemingly marks the end of heavy liquidation, unless something goes sadly wrong" and can be followed by fair improvement; note "signs that if the European situation can be ironed out, at least a seasonal improvement in business should start before the end of August." Several "well-posted observers" believe Hoover plan "only the first step in a series of attempts to improve sentiment and business."

Bureau of Agricultural Economics of the USDA finds "striking similarity between major business cycles of 1885-1894 and 1921-1930," suggesting "a revival in the near future similar to that of 1894-1895."

E. Grace, Bethlehem Steel pres., believes if business hasn't touched bottom it's certainly very close; however, sees nothing on the business horizon indicating an immediate uptrend beyond the purely seasonal one that should appear in the fall.

Economic news and individual company reports:

Banking reports indicated discouraging failure of banks outside NY City to make use of credit made available by Fed. Reserve expansion policy of buying govt. bonds. Commercial loans of out-of-town banks fell $20M, while investments in non-govt. securities fell $69M. "Expansion in these two items had been looked for as a possible signal that a change had taken place in banking psychology. Apparently, however, the prolonged uncertainties of the foreign situation, together with low business activity at home, have kept bankers in a frame of mind where deflation and liquidity are the prime considerations of policy." There's some question how long the Fed. Reserve will continue the expansion policy in view of the fact that banks outside NY City "appear reluctant to expand their commitments."

Continental Oil raised buying price for crude oil in Oklahoma, Kansas and N. Central Texas to 40 cents/barrel after widespread well shutdowns; this was the first advance since leading companies recently cut prices to record lows of 10 - 22 cents. Refineries ran at 67.8% in week ended July 11 vs. 65.9% prev. week; stocks of gasoline fell 965,000 barrels to 37.377M. Crude oil production in week was 2.447M barrels/day, down 97,850 from prev. week and down 53,300 from a year ago. Texas House continued its oil investigation; Texas Senate voted to open its own inquiry. Gasoline in Chicago wholesale market firm at 2 3/4 - 3 cents/gallon.

Steel production for week ended Monday was a little over 31% vs. 31% previous week, 32% two weeks ago, 57 1/2% in 1930, and 95% in 1929. This was the first upturn in four months.

BLS reports building permits issued in 344 cities in June totalled $105.4M, down 19.2% from May and down 35.9% from June 1930.

The ICC introduced its estimate of the reproduction cost of all US rails based on 1931 prices - $27.2B, or $21.6B less depreciation. Even using this valuation based on lower 1931 prices, rails are far short of the fair return specified by law of 5 3/4%, which would imply operating income of about $1.240B; the current estimate for 1931 is $600M. Youngstown District steel industry will oppose rail rate increase on grounds it will be extremely harmful to industry there.

New NYSE listings in the first half were $1.707B vs. 5.431B in 1930 and the record high of $8.056B in 1929; of these totals, bonds were $1.211B vs. $1.419 and $1.134B while stocks were $496M vs. $4.012B and $6.922B

F. Rentschler, United Aircraft & Transport pres., says general airplane replacement program by almost all air lines in the US can't be delayed beyond early part of next year since a large part of currently used planes and engines are almost "completely amortized and ready for replacement."

Federal grand jury at Baltimore indicts 58 corporations and individuals on conspiracy to divert industrial alcohol to bootlegging, including US Industrial Alcohol.

Nat'l Textile Workers Union, "affiliated with Trade Union Unity Council, which is supported by Communist party," calls strike in Patterson, NJ silk industry.

Sao Paolo, Brazil textile workers strike that started last week now involves 70,000 workers and almost every large mill in the district.

"Lord Kylsant, once the Napoleon of the shipping world, goes on trial at Old Bailey criminal court on charges of fraud."

"British govt. preparing to push British canned goods on British market in an attempt to supplant California canned fruits."

Canadian newsdealers plan organized protest against duty on US newspapers and magazines.

Nat'l Indust. Conf. Bd. survey of NY State tax system finds tax burden on real estate not disproportionate when compared to taxes of all kinds, including Federal. Rather than new taxes as favored by real estate interests, recommends reducing govt. costs by eliminating useless and wasteful duplication in local govts.

Gillette facing "many problems"; "it is no secret that when the Autostrop management assumed control after the merger last Nov., they took on a more difficult task than was originally anticipated." Earnings likely to remain depressed until Q4, when some improvement may be seen if general business revives.

Earnings reports: GE Q2 $.37/share vs. $.51; half $.75 vs. $1.01. IBM Q2 $2.82/share vs. $2.91; half $5.64 vs. $5.73. Lambert Q2 $1.95/share vs. $2.26; half $4.77 vs. $5.02. Hershey Chocolate Q2 $2.48/share vs. $2.16; half $5.43 vs. $4.36. Briggs & Stratton Q2 $.41/share vs. $1.07; half $1.06 vs. $2.07. BMT year ended June $8.09/share vs. $7.69. McKeesport Tin Plate half $4.23 vs. $5.04. Perfect Circle half $3.04 vs. $2.26. Union Carbide Q2 $.50/share vs. $.70; half $1.01 vs. $1.42. Monsanto Chemical Q2 $.97/share vs. $.80; half $1.56 vs. $1.51. City Ice & Fuel half $1.19 vs. $1.41. Waldorf System Q2 $.58/share vs. $.56; half $1.28 vs. $1.23.

Companies reporting decent earnings: IBM, Lambert (toiletries and medicinals), Hershey Chocolate, BMT, Perfect Circle (automotive piston rings), Monsanto Chemical, Waldorf System (restaurants).

Joke:

Wife - Isn't it dreadful about the pastor's son? I just heard he gave up the idea of being a minister and entered a well-known racing stable to be trained as a jockey. Husband - Well, he'll probably bring more people to repentance as a jockey than as a minister.

Tuesday, July 21, 1931: Dow 144.48 +2.06 (1.4%)

Germany special:

Statesmen of seven world powers assembled in the House of Commons in London “for a historic conference at which, in perhaps the greatest effort at international cooperation ever made, Germany's financial salvation will be attempted. At the same time, political peace in Europe will be sought, with a mutual understanding between France and Germany that will enable them to bury their ancient enmity and distrust and live as good neighbors.” PM MacDonald, in opening speech, stresses importance of conference in restoring confidence and credit to the world. Praises Hoover plan as “act of rare courage and statesmanship” but warns “time is against us”; urgent to halt withdrawal of foreign capital from Germany; “otherwise it will be difficult to stay the flood before it has overwhelmed the whole of Central Europe with consequences social, political, and ... financial which no man can estimate.”

Confirmation received that London negotiations will center around proposed two-part $1B loan to Germany, $500M to the Reichsbank to defend currency, and a later $500M loan to repay existing foreign loans; total foreign money in Germany is about 5.3B marks or $1.26B, and it's seen desirable to replace floating foreign capital with a fixed loan to avoid withdrawal in a future crisis. Considerable optimism expressed in Berlin; it's hoped US-British pressure will get France to moderate unacceptable political demands, though “it is recognized that French balances in NY and London place France in a strong position.”

US will reportedly make certain relief proposals at the conference. US position is that it's useless to loan money to Germany until withdrawal of foreign capital is stopped; Sec. of State Stimson said “There is no use pouring more water into a leaky tub. The first thing to do is to plug the leak.”

Editorial: Even taking the most optimistic view, the London debt conference now at best promises a "slow and gradual repair of international finance." Hopes of a "quick and positive change in the current of European and consequently of world affairs" have given way, a month later, to prolonged negotiations which, "after several of the most impressive meetings of government heads since Versailles," are still in the preliminary phase. Pres. Hoover remains apparently "determined to hold the US aloof from any but the financial emergency aspect of the German position." However, US involvement in political issues seems inevitable since restoration of German credit depends on a political accord with France. "Through no fault of the President's ... his move to help Germany has ... become a plea for a real reconciliation between France and Germany. ... The prospect is hopeful, but can hardly be thought to promise that quick regeneration of the world's economic activities it at first appeared to usher in."

J.F. Schroeder Bank of Bremen suspended; deposits about 165M marks; no progress in discussions with Reichsbank and foreign creditors to save the bank. “There is complete order in all banks and savings banks which are paying out the small amounts permitted under the emergency banking decree. Clearing house system set up to allow unrestricted transfers between accounts at the 40 leading German banks.

Bank of England lost 1.8M pounds sterling in gold to Paris; continued losses are now expected for some time. Spanish pesetas fell on intensifying inflation concerns; Bank of Spain statement shows circulation July 18 at 5.470B pesetas vs. 4.744B on Apr. 11, and gold reserves 2.275B vs. 2.426B on July 4.

Hungary and Germany sign new trade treaty giving preference by Germany to Hungarian wheat; US likely to object.

Romania to seek financial aid in Paris and Geneva as result of crisis arising from Banca Generale failure and agrarian depression. Czechoslovakia considering "strict banking supervision." Banco de Cataluna of Barcelona, recently closed, "reopened quietly and resumed operations on a restricted scale."

Assorted historical stuff:

Stuart Chase, economist, says centralized planning with mandatory powers is essential to control of mechanical civilization; warns US is headed "backward to a frightful cataclysm unless it adopts a national plan that will control and guide basic industries, govern investment of capital and keep purchasing power in step with production." M. Woll, AFL VP, says has received favorable responses from industry in reply to proposal for industrial congress to plan future guidance for industry.

Editorial by T. Woodlock: While some cases of abuses by public utilities can be found, the industry as a whole is "no better or worse than the general average of human performance." Real reason for all the political agitation concerning the industry is twofold: it directly serves perhaps 70%-80% of all US voters, making interest of politicians obvious, and, "as human nature is constituted ... we cannot endure to see public utility enterprises pay what looks like a large profit to their owners, no matter how cheap and efficient may be the service which they supply."

15,000 coal miners employed by the Pittston Co. are voting on a strike proposal endorsed by leaders of the United Mine Workers.

Editorial: In blaming the current marketing system for the low price of wheat, Sen. Capper is "threshing over old straw that has been turned and threshed times without number." The Senator is now backing three bills aimed at the futures markets for commodities, and, unfortunately, Pres. Hoover has been led into supporting his effort. Congress this winter is likely to spend a great deal of time on attacking the marketing system, ironically led by those who "put over the present Agricultural Marketing Act that has been such a ghastly and costly failure." The Senator should study Sir Josiah Stamp's recent report finding that speculation actually helped the farmer. It would be unwise and harmful to the farmer to restrict commodity markets. "No man will buy a commodity if there are restrictions upon the sale of it. It is impossible to devise a system of marketing where there are speculative buyers of wheat or cotton without speculative sellers also." Pres. Hoover wires Sen. Capper that debt moratorium will aid wheat prices by stimulating foreign markets. Farm Board chair. Stone agrees with Pres. Hoover that part of price difficulties of Kansas farmers is due to paralysis of export markets.

First anniversary of ratification of London Naval Treaty finds US with 11 ships being built, Britain 30, Japan 17, France 60, and Italy 19. Total European-US disparity in naval building since 1922 is even more pronounced.

Japanese population is 64.450M, up 7.9% from 1925 which in turn was up 6.7% from 1920. British population is 44.790M or 685 per square mile, highest density in Europe except Belgium. Numerical increase in population smaller than any decade since 1861 except the war period.

Louis French, retired official of Indian Civil Service, appointed director of Palestine development scheme that Britain will finance with loan of $12.5M.

Gen. Emilio Aguinaldo, former revolutionary, proposes US grant Philippines immediate independence but preserve free trade status for at least 10 years.

French govt. launches new submarine called L'Espoir with speed of up to 20 knots, believed to be a record.

J. Hall, NY broker, flies from NY to Havana in eight hours 35 minutes, breaking old record by 46 minutes.

Russia has reportedly perfected a machine that produces cotton-like textiles from flax, hemp and other fibers that grow in many parts of Russia.

As usual, NY led all states in value of foreign exports in 1930 with total of $698.7M; next were Texas and California.

Pennsylvania RR carried 55,000 people to and from Atlantic City and other South Jersey resorts, a record for one-day summer seashore excursion traffic.

"Canning Sound" - "Radio has been responsible for many new developments ... To give realistic color to the broadcasting of plays ... one of the country's pioneer stations has built up a library to meet every need." Directors can order "a can of street traffic, or a couple of hundred feet of ocean surf." The sounds are recorded at their source and may be used over and over. "Some folks enjoy a concert ... better if the number is followed by applause." It will soon be possible to end a studio-produced concert with applause worthy of the "prima donna at the Metropolitan, because the applause at the Metropolitan will be recorded and reproduced when and where desired." [Note: Someone once unnerved me with the observation that most of the people you hear laughing when you watch a sitcom are dead.]

Once again, Hollywood stops at nothing for authenticity. Peter Shaw, an native of England and world traveller who spent two years in Africa, has constructed a village in Hollywood that "conforms authentically with original African villages he knows."

Market commentary:

Market wrap: "Not since the dull days before the Coolidge bull market picked up momentum in 1924 has speculative interest had fewer features to feed upon than it did in yesterday's session." However, stocks were "distinctly firm" despite very light volume. Opening was higher on announcement "France and Germany had agreed to work in harmony" but lapsed into "pronounced dullness" after initial gains. "Some relief from the monotonous" was provided by spurts of activity in sugar and oil shares, but even these subsided by afternoon, and the tape was frequently motionless. Leading stocks receded in mid-day but mostly recovered to the morning highs later. Bond trading considerably less active and "for the first time in days .. displayed the characteristics of a dull mid-summer session." Both foreign and domestic list moved within a narrow area; highest-grade domestic issues showed a firm tone, in some cases extending previous gains slightly. Commodities mixed; corn down sharply while other grains were somewhat lower; cotton up very sharply on late rally attributed to short-covering. Foreign buying of copper was heavier, with a total of 5M pounds sold Monday at equivalent of 8 cents; Germany was largest buyer. Silver up 1/8 cent to 28 1/8.

Total NYSE volume for Monday was about 700,000 shares, lowest since May 1926. This was about equal to the trading done in 13 minutes of the biggest day in Exchange history, Oct. 29, 1929, when 16.410M shares turned over; Monday's volume was 271,300 shares less than the trading in GM alone on that day.

Traders took to the sidelines pending European news, particularly after "indications that the London parley was likely to drag out to some length." "Most of the traders went about their social life earlier than usual."

Incoming earnings reports for the second quarter have in many cases been much better than anticipated earlier in the period; Westinghouse is an outstanding example, swinging to a profit after showing a substantial loss in the first quarter on mch higher refrigerator sales.

Buying in oil shares attributed to expectations of substantially lower production due to widespread well shutdowns in the Southwest. This has led to higher prices in some areas, and a general advance could follow if restriction continues and the "East Texas difficulty" is solved. Major oil cos. will have dividend meetings in August; none are currently covering dividends from earnings, but all have strong cash positions, and prospects of higher prices before year-end may influence directors to maintain dividends. Leading sugar stocks have been more active than in several years; prices for raw and refined sugar have been steadily advancing in recent weeks, with raw sugar up about 40% from the end of May. Rise attributed to Chadbourne plan and hot weather, which has stimulated demand for ice cream and soft drinks. At current price of 1.53 cents/pound for raw sugar, Cuban producers are still unprofitable after interest and depreciation, but Puerto Rican producers are profitable thanks to 2 cent duty on Cuban sugar; South Porto Rico Sugar has doubled from the year's low. Copper shares developed strength in response to higher foreign copper demand. Movie shares showed strength. Large public interest always drawn by Radio Corp. in the past has apparently died down pending decision in some important lawsuits, particularly the important govt. suit on patent pooling.

Tobacco shares remain popular with the bulls, with most trading close to the year's highs. One commentator looks for a dividend hike from American Tobacco.

Fertilizer shares are at a low ebb thanks to unstable income over the past decade; some now sell well below net quick assets and several industry leaders still have strong balance sheets. However, upcoming earnings reports "will not make pleasant reading" and "outlook for next season is far from encouraging."

Reports from Rochester of improvement in men's clothing business and higher wool prices drew some interest; the clothing business, "like the shoe industry, must enjoy certain replacements irrespective of depression" and "probably 95% of the clothing worn by men in this country is partly made of wool."

E. Rybicki of NY City Dept. of Public Welfare predicts "vigorous spurt of business next spring," believes unemployment "nearing its lowest mark."

Harvard Economic Society says “present indications are that the long decline in business” ended in Q1 and that Q2 “saw an approach to recovery.” While revival in building is not in evidence as in past recoveries, “business volumes in general have improved.” Partial setbacks in May and June attributed to stock decline and foreign conditions, and will “probably prove temporary.” Note “acute crisis” in Germany but believe suspension of debt payments will lessen strain.

Economic news and individual company reports:

Nat'l Industrial Conf. Board reports June business declined more than seasonally, continuing contraction that started in May and reaching roughly the low at start of the year; unless reversal takes place in July, low point of the depression reached several months ago may be overtaken.

Fed. Reserve July bulletin gives different reason for open-market purchases of govt. securities than the optimistic interpretation that it was done in belief business and banks were ready to use additional credit; says move was made necessary by withdrawals of currency by depositors due to bank suspensions, together with excess cash in bank vaults. Fed. Reserve figures show 166 bank failures in June, 80 in the Chicago Reserve district. For the two months ended June 24, US gold holdings gained $200M, much of it from Germany; $90M was added in one week, most for any week in US history.

Deterioration in California irrigation district finances is "now engaging the attention of some of the state's most able economic, financial and political minds." A few years ago development of the districts was thriving; now, 22 of 74 active districts are unable to make bond payments and, of total bonded debt of $96.0M, $41.4M is in default. "At the moment no handy remedy to return affairs to their former state has appeared." Coral Gables, Florida officials agree with bondholders' protective committee on plan for refinancing all bonded and floating debt. New bonds will total $4M, paying 6% and maturing in 40 years. City will cut operating budget $51,000 to $220,000. NY legislative banking committee ignores Republican demands for investigation of State Banking Dept.; votes instead to examine testimony in Bank of US trial in order to improve State banking law.

Commerce Dept. reports most European countries show budget deficits for the most recent fiscal year, including Germany ($297M), Britain ($113M), France ($86M) and Austria ($38M); countries with surpluses include Greece, Spain, Netherlands, Switzerland and Yugoslavia.

Wages of Mexican Federal employees cut up to 25% to save $7.5M. Mexican Congress expected to debate agreement with T. Lamont for renewal of payment on foreign debts in Sept.

BLS reports index of retail food prices June 15 was 118.3 vs. 121.0 on May 15 and 147.9 on June 15, 1930.

Steel buying so far in July has continued the slow pace seen in June; improvement isn't expected until about the end of August at the earliest; some authorities believe fall buying may be delayed beyond the usual seasonal time since customers are still cautious and the price situation hasn't yet fully stabilized.

ICC hearings continue. ICC Commissioner Eastman questions claims that increased rates and higher rail revenues would lead to prosperity through higher rail spending; points out that in 1930, despite rails' voluntary maintenance of capital spending though most of the year and veterans' bonus payments of $800M, there was no improvement in the economy. Questions advisability of raising railroad rates 72% over the 1916 level when commodity prices are 13% lower. Attributes better prices on utility bonds to more conservative capitalization. Rails serving drought areas in Montana and N. Dakota ask ICC permission to provide lower emergency rates on hay and other feeds to aid farmers. Examiners submit tentative report to the ICC revising freight rates on hay throughout the West.

Sinclair Oil & Gas wins temporary injunction barring Texas Railroad Commission from enforcing production curtailment in East Texas. Texas House, as part of legislative investigation of the oil industry, heard testimony from Commission officials on efforts to enforce curtailment.

Indications are that farmers in Kansas and other Southwestern states will make little reduction in wheat seeding this fall for the 1932 crop. Other crops are also low, and no employment is available in the cities; apparently "farmers prefer to go on producing wheat rather than join the army of unemployed"; they hope for revised tariff policies and improved markets. Agriculture Dept. reports Australian wheat acreage for 1931-32 about 13.6M acres, down 25% from last year. Canadian Nat'l Rwys. estimates Canadian wheat acreage this year at 23.0M acres, down 8% from 1930.

Canadian report: Canadian wheat pool further threatened by court case against the Saskatchewan pool charging law forcing producers to market through the pool is unconstitutional. Senator W. McDougald agreed to testify on charges the Beauharnois Power Corp. contributed almost $1M to the Liberal Party before getting a concession for the St. Lawrence River. Agreement to testify came after govt. threat "to send him to 'the tower,' an unprecedented action in Canadian history"; McDougald had previously claimed Parliamentary immunity. Building permits in 61 Canadian cities in first half totalled $57.5M, down 33% from 1930, partly due to lower costs.

Pacific Northwest reports record Alaskan salmon sales for year ending June 30 and good outlook for 1931.

NYSE seat sold for $235,000, down $15,000 from last sale.

Sears-Roebuck sales, after running well behind 1930 for the first four months of the year (5.8% - 14.8%), have been much closer since (0.9% - 5.3%). Sales in the four weeks ended July 16 were down only 1.0% from 1930, and mail order sales showed an encouraging increase for the first time this year.

Earnings reports: Chesapeake & Ohio RR half $1.55 vs. $1.96. General Foods Q2 $.87/share vs. $.88; half $1.93 vs. $2.01. National Biscuit Q2 $.66/share vs. $.80; half $1.36 vs. $1.48. Beech-Nut Packing Q2 $1.43/share vs. $1.72; half $2.63 vs. $2.96. Maytag Q2 $.52/share vs. $.40; half $.88 vs. $.44. Pierce-Arrow Q2 $.04/share vs. $1.87; half $1.00 vs. $1.57. General Railway Signal Q2 $1.64/share vs. $1.72; half $2.10 vs. $3.03. Congoleum-Nairn half $.42 vs. $.40. A. Hollander & Son half $2.15 vs. $.96. Madison Square Garden year ended May $1.08 vs. $1.30. Trunz Pork Stores half $.98 vs. $1.11.

Companies reporting decent earnings: General Foods, Maytag, Congoleum-Nairn (floor coverings), A. Hollander & Son (furs), Trunz Pork Stores.

Movie:

Murder by the Clock - Paramount film, at the NY and Brooklyn Paramount theatres. "A skillfully constructed ... cinematic tale of a selfish woman who inspires men to kill." Laura Endicott is married to the drunken nephew of a wealthy old woman who chooses to bequeath her fortune to him in preference to her "idiot son." Choice proves unfortunate as nephew kills the old woman to inherit the fortune immediately. Nephew is next to be killed so Laura "may be free to marry her lover, a sculptor. Then it becomes the lover's lot to die at the hands of the idiot, who wants Laura for himself." Lacking somewhat in credibility; taken at "face value, however, it provides a mildly thrilling hour's entertainment."

Racist joke:

"We consider tipping a degrading custom, and have formed a society to put a stop to it." "Aye, I'll gladly join it!" said the Scotsman. "Good; the membership fee is only 50 cents a year." "Hmm. I'm thinkin' it'll be cheaper for me to tip."