Friday, August 7, 1931: Dow 133.77 -0.33 (0.2%)

Germany special:

German bank reopening has proceeded very smoothly since Wednesday. "Elaborate police preparations made for the handling of large crowds were found to be unnecessary." Emergency supplies of bank notes provided to banks to enable them to meet all demands are now being returned to the Reichsbank. Bankers note encouraging rise in new deposits, while withdrawals are normal. Savings banks to reopen Saturday. Early reduction in the 15% discount rate is expected. Pres. Von Hindenburg issued decree giving govt. “closer regulatory control of financial institutions.” German security market remains closed, though some private transactions are taking place at prices 10% - 20% below those when the market closed on June 11. Main difficulty in reopening the market is likely low prices for mortgage bonds, of which savings banks have large holdings. However, a cut in the discount rate would help with this problem. Farm Board chair. Stone says has received offer from German govt. to buy surplus cotton on credit from the Board. Conditions not yet settled. Chancellor Breuning left Wednesday night for an official visit to Rome.

Editorial: On Sunday, Prussia will hold an election on whether to dissolve the Diet (state Parliament) and call new elections; only those in favor will vote, and a majority of voters is required. This election will, in effect, be a "round-up of Prussia's 'trouble makers'" together with the "normally reasonable ... driven by hard times into something approaching desperation." It will be no surprise if this adds up to a majority; the vote is being taken as Germany feels the depression in "concentrated form" and living standards have been tremendously pressured. "The political stability that the German people has shown since the election of Gen. Hindenburg as President is nothing short of remarkable"; he incarnates the "spirit of modern Germany" that can best be expressed by the single word Pflicht - duty. "That is the ruling thought in German life, and it was the one great contribution to the national spirit that was made by the German army. In these days it is yielding results that other nations may profitably observe ... There is, however, a limit to all things human, including human capacity to endure, and it is time to think of lessening the strain upon Germany's endurance - great as that endurance has been proven to be."

O. Sprague of Bank of England, now in Berlin advising the German govt., says things are proceeding well; further progress possible next week on foreign credits and reopening of savings banks. On bigger picture, “if Germany is weak financially I consider her strong economically. Costs of production are low and her plant is as good as any to be found in the world. That is a guarantee for the future.”

Assorted historical stuff:

Oklahoma Gov. Murray's carries out threat of declaring martial law and closing the oil wells of Oklahoma until purchasers pay $1/barrel. Almost all wells in the Oklahoma City field are closed; troops have moved into the Greater Seminole region to close down over 1,500 wells in that district. H. Sinclair, Sinclair Consolidated Oil chair., bitterly attacked Murray's action as absurd and unjust. Gov. Murray invited Texas Gov. Sterling to "join me by shutting down all flush wells in Texas"; Sterling declined, noting the Texas Legislature was working on a new conservation law. Editorial: While Gov. Murray does set an interesting example for the "dawdling, red tape-worshipping official" who never takes action, "admiration for him must stop there." His action is likely unconstitutional since "police power of a state extends only to protecting the health and safety of the public." It will also prove ineffective since overproduction in other areas will continue; the real solution is modification of the antitrust laws to allow cooperative production and conservation of vital resources. Gasoline in Chicago wholesale market began to reflect shortage of oil due to Oklahoma Gov. Murray's oil well shut down; price rose to 3 1/4 - 3 1/2 cents/gallon.

Pres. Hoover's Emergency Employment Committee urged young people to stay in school whenever possible and not compete for jobs with heads of families during the current depression. Chair. Croxton reported on a program designed to discourage students from giving up school.

US govt. turned over the departments of agriculture, public works, and sanitary services to the Haitian govt., "a further step in establishing a stable government in Haiti. Undersec. of State Castle could not say just when the remainder of the US Marines would be withdrawn from that country."

H. Morgenthau, former ambassador to Turkey, says world shouldn't disarm at present time "because of the menace of Russia and other backward nations which would overrun prosperous ones for natural resources and raw materials."

Increased use of pistols in robberies in England has resurrected that old British custom, the whipping post. A recent robbery of a railroad ticket office by 3 youths using empty pistols became a cause celebre in the press; in addition to imprisonment at hard labor, the court ordered "twenty lashes" for each culprit.

"Carrying coals to Newcastle" may soon be replaced by "bootlegging in Glasgow"; illegal stills have proliferated as a gallon of moonshine can be distilled for 10 cents and sold for $12.50. The practice is causing heavy losses of tax revenue; "as the product is often handled in gasoline cans, the trade is hard to check."

The old-fashioned "box car red" may soon be extinct as a color for railroad refrigeration cars; recent experiments by the Canadian Nat'l Rwys. show the temperature of a roof painted red is 10 degrees higher than one covered with aluminum paint.

Market commentary:

Market wrap: Following ominous signals given Tuesday by the rails and Wednesday by the industrials in breaking below previous resistance levels, further confirmation was given to the downtrend yesterday by widespread weak spots in many parts of the stock market. Rails continued under pressure, with NY Central hitting a new post-1921 low; Consolidated Gas led a decline in the major utilities; American Can hit a new yearly low and US Steel approached its bear market low; even GM and Johns-Manville sold off after declaring their regular dividends. While trading remained small, liquidation was reported by some brokers. Market turned somewhat firmer in afternoon. Bond trading featured rally in German issues and improvement in most of the European govt. list, while Polish issues fell sharply and S. American govts. were weak. US govts., public utility and highest-grade rail issues were steady while rest of the domestic list was generally weak; second-grade rails were under particular pressure, dropping to a new 1931 low.

Conservative observers now anticipate a technical rally may develop, but advise against trying to catch it.

Woolworth has been relatively well supported recently. Grand Union has drawn recommendations from several brokers. New Haven is one of the few rails to draw support from some interests; Bangor & Aroostook is another rail whose earnings are expected to hold relatively well.

Recent accumulation in stocks seems more selective, concentrating in lines that appear to be breaking away from the depression sooner than the usual market leaders. Groups that have been relatively steady include chain stores, beverage and drug stocks.

Once again, intensive analysis of the bear market of 1919-21, which has so far been quite similar to the current one, has “analysts ... closely watching the character of the support in the market” if the current downtrend carries stocks close to the June 2 lows (Dow industrials at 121.70 and rails 66.85). If either of the averages is able to hold above the June 2 low, “reasonable grounds would be afforded for the belief that the 1929-31” bear market was over.

Recent inability of rail shares to show "any inclination toward firmness" seen as most discouraging, considering past ability of rails to predict the general market.

Market appears to have turned its attention back to domestic developments, as successful reopening of German banks brought no positive response. Traders seem to be mostly short, and to react quickly to any piece of bad domestic news. Quite a few traders who have been picking up shares they believe sufficiently "deflated" have been selling shares of leading companies short as a hedge.

Atlas Utilities Corp., an investment trust [similar to mutual fund], has been pursuing an interesting strategy of buying control of other investment trusts and liquidating them [trusts have typically traded at large discounts to liquidating value as the public lost interest in them during the bear market]. It has absorbed 10 trusts and raised assets from $15M to over $48M.

Speculation on third-quarter earnings has already started. Some expect seasonal improvement next month due to current extreme dullness in many lines. However, the more conservative see "nothing on which to base the hope of any substantial improvement" and expect seasonal fall recovery to be later and weaker than usual.

Economic news and individual company reports:

Widespread commodity price declines continued Thursday, with wheat, corn, oats, rye, cotton and and rubber again selling down to new lows. Sept. wheat at 47 5/8 hit record low for any wheat future on the CBOT; cash wheat sold at lowest price since 1852; corn 1907; oats 1900; rye 1907; cotton 1915. Crude rubber hit record low of 5.30 cents. Wheat prices in British (Liverpool) market lowest since time of Queen Elizabeth [1592]; heavy Russian wheat shipments reported. Copper remained at record low of 7 1/2 - 7 3/4 cents/pound with buying small.

Detroit City Council approves refinancing of short-term debt into 1 to 5 year bonds as part of program worked out with NY and Detroit bankers for "effecting a permanent solution of Detroit's debt problems."

Soviet Commissariat of Finance announced successful sale of huge internal loan totalling 1.6B rubles (nominally about $800M), largely to city workers.

Pittsburgh coal operators reportedly discussed asking the Federal govt. to regulate the coal industry as a public utility. A spokesman for the operators noted that a few years ago this would have been denounced by operators as "Bolshevism. Now they are inclined to welcome it as the only way out."

Mexican Fin. Min. de Oca gave a rather obscure argument that Mexico's new monetary policy was “misunderstood” in the US; maintained that Mexico was not on the silver standard, but that silver pesos are still theoretically gold pesos; exchange rates will readjust to balance of trade and Mexico will buy gold when the time is right; at the same time, the new law has “deprived it [gold] of its monetary functions,” making it freely tradable merchandise. Withdrawals from Mexican banks almost stopped, but value of the silver peso fluctuated wildly; following a brief rise as high as 2.50 pesos/dollar on Tuesday during heavy demand for pesos, the pesos slumped to 3.50 - 4 on Wednesday; business community is waiting for a fixed rate to be set by the Bank of Mexico.

Sterling recovered part of Wednesday's losses, but Bank of England lost 2.5M sterling in gold to Holland and France. French banking houses blamed Wednesday's break in sterling on “English pride” as Bank of England failed to use US-French credit to support sterling.

Pesetas broke 1/4 cent to $.0849; international bankers “not at all satisfied with conditions in Spain”; general strikes in Seville and Algeciras threaten to spread.

Argentine pesos weak on concern over $50M loan maturing in NY Oct. 1.

Canadian weather in the Northern parts of all 3 prairie provinces changed violently, with temperatures dropping close to or below freezing (these are the provinces suffering from severe drought conditions).

Money in circulation Aug. 5 was up $68M to $4.848B, total Reserve Bank credit outstanding up $22M to $967M. Member banks in NY City report brokers' loans down $44M to $1.346B; loans on securities to non-brokers up $5M to $1.688B.

Class 1 rails in earned first-half net operating income of $238.6M, which gave an annual rate of return of 2.15% on their property investment, vs. 3.46% in 1930.

Nat'l Auto. Chamber of Commerce estimates July production in US and Canada at 221,485 cars and trucks vs. 256,297 in June and 275,721 in July 1930; first 7 months 1.856M vs. 2.585M.

Steel output averaged 33.97% in July, lowest level since Sept. 1921.

Earnings reports: Timken Roller Bearing Q2 $.48/share vs. $1.25; half $1.02 vs. $2.54. McQuay-Norris half $2.44 vs. $2.63. Safeway Stores half $2.61 vs. $2.15. National Dairy Products half $1.68 vs. $2.16.

Companies reporting decent earnings: McQuay-Norris (auto parts), Safeway Stores.

Report from Paris:

Another capsule history of black entertainers in Europe. Popularity dates from the war, when "soldiers on leave first heard these syncopated rhythms which seemed meant to make men forget." Many black musicians who had entered France during the war remained abroad, either staying in France or moving elsewhere in Europe. "Jazz and jazzy entertainment bore the label 'American,' and its popularity was immediate." Fashion for jazz in Europe waned somewhat as a more conservative style took hold and "Victorian manners ... restored a becoming femininity to an overly efficient sex." However, jazz was kept alive by the talkies and US tourists, as "night clubs of ... Montmarte ... found that the spender from across the seas was limbered both in limb and pocketbook by good old-fashioned jazz." Now, the Colonial Exposition in France has sparked a revival in popularity for black musicians, with its "flaming colors ... barbaric jewels and primitive costumes, wild savage dances, songs that rise in a crescendo of joy and end on a wailing note of despair, weird harmonies and intonations - and color, color everywhere." Even in these more conservative times, "there is still a large public ... for the strident voice of the 'blues' singer, who lifts her skirt and shuffles along - to the jazzy tunes of a jazzy band."

Joke:

Teacher - Now, ten dimes make a dollar and ten cents make a dime. How many mills make a cent? Student, from prominent textile area - Not a damned one.

Thursday, August 6, 1931: Dow 134.10 -2.40 (1.8%)

Assorted historical stuff:

The unemployment situation is "readily admitted" to be "one of the disturbing elements at present. ... A number of reliable authorities in industry" have expressed fears about conditions in the coming winter. While some expect a seasonal improvement in fall, this may only be temporary and slack conditions may "rule during the cold winter." There's increasing discussion of a Federal dole system; it's known govt. authorities are opposed to this and believe "relief should be left in the control of states and cities." However, "what will happen when Congress reconvenes ... cannot be forecast."

Editorial: AFL Pres. Green recently made some intemperate remarks threatening "a 'revolt' of unemployed labor unless the economic order is swiftly reorganized and brought into health." He shouldn't be held "too strictly to account for his words. ... There are times we are all apt to yield to excited rhetoric, especially when it is a question of food and shelter for our fellow citizens. Fortunately we are all agreed that whatever the cost and whatever the inconvenience to any or all of us no one will lack these necessaries in the coming winter. That is one of the few things on which there is no dispute" [note: strangely unfamiliar.] However, relief should be undertaken without mixing it up with the separate issue of reorganizing the economy. Unemployment is a worldwide phenomenon, caused by falling commodity prices and automation; these will take time to address, and we must avoid the temptation of quick miracle cures. In particular, gigantic schemes of public works requiring large increases in the national debt aren't advisable; "far better that the funds necessary to take care of the needy people provided in any other way - and, above all, by local civic units and not by the federal government. ... A good rule ... would be 'millions for relief - but easy on experimentation!' Otherwise, as the Germans put it, we may 'throw the baby out with the bathwater.' And, by the way, it is not a bad example that the Germans are setting us by their behavior in these days of sore trial for Germany."

Metropolitan Life Ins. Co. reports US death rate in second quarter was 8.9 per thousand, lowest for any Q2 on record.

Agriculture Dept. reports grasshoppers ravaging crops in Nebraska and South Dakota have now reached the flying stage, making control difficult.

Wrangling continues on NY City mass transit unification; series of conferences is being held and it's now hoped a plan acceptable to the Transit Commission, the Board of Transportation, and the private transit companies (IRT and BMT) can be completed by Aug. 15 and hearings can be started in late Aug.

Car designers have gone back to nature, using the raindrop as inspiration for a new streamlined design claimed to offer a minimum of resistance to air pressure. The new design promises benefits including: allowing a car to travel faster and further on a given amount of gas; lighter weight, making braking easier; and a low center of gravity, making the car hug the ground more closely and providing a smoother and safer ride.

Phrenology, in spite of having "no scientific basis," is still advocated by "charlatans" who maintain they "can read character or tell a man's future from the bumps on his head." Police departments in many cities are "driving away those 'phrenologists' who solicit fees for services."

Trouble almost everywhere but Germany special:

Reopening of German private banks “almost sensationally tranquil, in contrast to the renewal of panic which had been feared by some bankers.” Several hundred policemen stationed near Berlin banks were idle, with no crowds or disorders to control. A tour of banks showed not only absence of the anticipated run, but almost universal excess of deposits over withdrawals, even at the Darmstadter bank (closed July 13) and the Dresdner (provided with govt. aid). Savings banks are expected to reopen Monday, and an early cut in the discount rate is hoped for. “Govt. authorities and big bankers were both astonished and overjoyed”; some credited Chancellor Breuning's speech Tuesday calling for German's to help themselves. “Experts were agreed that Wednesday appeared to mark the end of the banking crisis, although fundamental economic perplexities and political uncertainty persisted.”

Germany continued to rigidly control foreign currency transactions pending agreement on extension of foreign short-term credits. Foreign currency was also “being refused generally for new imports under pressure from protectionist adherents.” A strong campaign has started to permit “the import trade to shrink naturally under economic pressure.” Recent US proposals to sell large amounts of surplus wheat and cotton to Germany on credit have drawn strong opposition both from Southern Senators and from cotton importers in Germany objecting to paying above-market price.

US banks are practically agreed on Luther plan for extending their short-term credits to Germany, though a few minor technical points remain to be ironed out; banks denied reports of trouble reaching agreement; said meetings had been in a cooperative spirit and most satisfactory. According to the plan, German firms will still have to repay credits as they mature, by paying marks into the Reichsbank, but the proceeds will not be sent abroad but be reloanable for import purposes. How long this arrangement will last is uncertain; this will depend on results of the BIS committee investigating German credit.

Sterling fell sharply, apparently due to a rumor that much of the $250M US-French credit to the Bank of England had already been used. This was followed by a partial recovery on apparent concerted action by French banks. The credit was reportedly only "used to a small extent" by the Bank of England, but much heavier use is expected today to support sterling. The break in sterling "was a shock to French bankers as it was believed that the psychological effect of the" Bank of England credit has been lost; a renewed flight of deposits from London is now feared. Sterling fell below the gold export point vs. several major currencies, but Bank of England didn't report any unusual gold losses. Bank of Switzerland figures revealed huge inflow of gold in July; total gold rose to 1.164B Swiss francs from 840M starting the month.

Spanish pesetas fell sharply to $.0877, after falling below 9 cents yesterday for the first time since the Republican govt. took power. Political future there seen "darkly clouded, with the threat of a definite break between Catalonia and the present govt." General strike planned Thursday in Seville; all unions there, "seat of recurrent labor uprisings, frequently violent," have indicated they will join in.

Premier Lang says unless New South Wales (state in Australia) is loaned $2.5M immediately, there won't be enough money to meet civil payrolls today.

Run on Banco Nacional de Mexico broken Tuesday and normal business resumed after bank paid long lines of depositors about 10M pesos in a day and a half; other banks have also resumed normal business.

24-hour Cuban general strike ends; called in sympathy with street car men's strike against wage cuts; three street cars bombed by striking motormen, causing property damage but no major injuries; union leaders indicated another general strike might be called if street car men's demands aren't met.

Unrest spread in Poland after "drastic measures" were adopted to relieve the financial crisis. Most cities suspended payments to employees and contractors. Govt. officials reportedly hope for a loan from France to tide the govt. over the increasing emergency.

Hungarian Parliament passes emergency financial powers bill. Chase Nat'l Bank representative is working on agreement with Hungarian banks to renew all short-term credits and to establish a central corporation to examine collateral; French, Swiss and NY banks are on board but some Hungarian banks are balking at supervision by the corporation.

Home Savings & Loan of Youngstown, the second-largest bank of its kind in Ohio, with total deposits of $36.3M, limited withdrawal amounts to $50 after a run; restriction due to illiquidity of real estate loans; pres. J. McKay said condition of the institution is "fundamentally sound."

NY State Supt. of Banks Broderick closed three small uptown banks with combined deposits about $15M, due to "non-liquid condition and depreciation in the value of their assets." Liquidation will start immediately, and liquidating dividends are expected in 90 days.

Market commentary:

Market wrap: Stocks "put up a good fight" considering discouraging domestic economic news including lower car loadings, steel production, and commodity prices. An initial accumulation of selling brought good-sized declines in early trading, but trading then turned dull and prices steadied; some rallying in afternoon failed to recapture the earlier declines; late trading again turned irregular with AT&T and Can under pressure. Bond trading moderately active; foreign list reactionary with German and S. American issues weak; domestic corp. list featured weakness in rails, oils and convertibles; US govts. steady.

Technical analysis indicates downtrend since June 27 is intact. Ominously, a "double top" was formed in early May and late June at about 156 on the Dow; even more ominously, a second double top was formed about 10 points lower on July 10 and July 21; even still more ominously, the rail average has confirmed the downtrend. The rails now appear headed for a test of the June 2 bear market lows, and this will provide a clue to the outlook for the whole market. If the June 2 lows fail to hold for the leading rails, "the possibility will be suggested that the market as a whole is confronted with an extension of the major decline that has been underway since Sept. 3, 1929."

Editorial by T. Woodlock: Report by W. LaRoe, prominent lawyer, that attempts to prove rails are in strong financial condition is in the final analysis irrelevant. The important verdict is that of the security market, which rails need to raise capital. This market has already spoken; bonds of many large rails are selling to yield 6% or more, and preferred stocks 10% or more; this while securities of unquestioned safety are selling at very low yields. Recently, one large rail almost went into bankruptcy over a refinancing operation involving less than $10M. "From the judgement of that market, there is no appeal - not even to the Supreme Court."

H. Rivitz, Industrial Rayon pres., says "things are definitely looking up in the rayon industry, and the demand is increasing encouragingly."

While nothing has yet been officially said about wage cuts in the steel industry, "it is the confident view in responsible quarters that some action will be taken in the not distant future." There's no doubt industry leaders would like to maintain wage rates, but recent earnings make clear the need for further major cost cuts; it's believed cost of labor must be seriously considered soon. Many believe "a steel wage cut would be viewed as optimistic by interests in the stock market."

Washington officials skeptical on Oklahoma Gov. Murray's drastic action shutting down state oil wells until buyers offer a $1/barrel price. It's pointed out this is similar to Farm Board efforts to reduce production and set prices for wheat and cotton; one difficulty is that there are other sources of supply not subject to control.

Economic news and individual company reports:

Commodities broke sharply, with several new record lows. Wheat futures in the Chicago market hit new record lows for all active months; cash wheat dropped to the lowest since May 1852; in the Liverpool market, wheat hit the lowest prices since 1592 [note: holy crap!]. Other grains and cotton also weakened; Dec. corn hit a post-1906 low while oats hit post-1900 lows and cotton sagged to post-1915 lows. Rubber hit new record lows. Hides fell sharply. Copper fell to 7 1/2 - 7 3/4 cents/pound, though little was available at the record low price of 7 1/2. Value of the last cotton crop estimated at $693M, about half the value of the previous crop and lowest in over 15 years; average price for that crop 9.57 cents/pound.

Weekly steel reports quite discouraging. Rise in output reported a week ago proved abortive. Automotive and rail demand low; construction bookings declined; scrap markets mixed; machine tool trade poorest in years. Finished prices were steady. "The industry is not only resigned to another exceedingly dull month but is even more reluctant ... to estimate the scope of seasonal improvement in Sept." Steel production for week ended Monday was below 31% vs. 33% previous week, a little over 31% two weeks ago, 58% in 1930, and 94% in 1929. Almost all of the decrease was at smaller independents.

Pres. Hoover's emergency employment committee reports slight upward trend of employment in NY City; situation in rest of the country generally unchanged.

Only 1/2% of US manufacturing plants employ over 1,000 workers. However, these plants employ almost 25% of manufacturing workers.

The US Consul General in Hankow, China reports a customs transit tax, called the "likin," is imposed on every shipment of goods as it moves through each city and province in China; the accumulation of "likin" charges frequently comes to many times the original value of the goods, and is all paid by the consumer.

Proclamation increasing duty on men's sewed straw hats, made by Pres. Coolidge in 1926, held unconstitutional by US Customs Court.

Earnings reports: United Light & Power year ended June $1.54 vs. $2.40. Amer. Water Works & Electric year ended June $2.72 vs. $3.82. Standard Oil of Calif. Q2 $.10/share vs. $.80; half $.43 vs. $1.53. Remington Rand Q2 ($.31)/share vs. $.30. Anaconda Wire & Cable Q2 $.28/share vs. $.31; half $.66 vs. $.45. Syracuse Washing Machine half $.43 vs. $.19. C.I.T. half $1.26 vs. $1.53.

Companies reporting decent earnings: Anaconda Wire & Cable. Syracuse Washing Machine, Alaska Juneau Gold Mining.

Movie:

The Public Defender - RKO-Pathe film, at the Mayfair. A "good old-fashioned movie melodrama." Richard Dix stars in the title role, turning "combination private detective and outlaw" to get the evidence to prove his sweetheart's father innocent of "the machinations leading to the failure of the trust company of which he was secretary-treasurer." Aided by two experts in crime (ably played by Paul Hurst and Boris Karloff), he "plans each action in his scheme so that it works like a clock." Gaining entry to the homes of the company directors in "strange ways," he takes the evidence he needs and "leaves a mysterious card, labelled 'The Reckoner.'" In the end, he not only manages to prove the directors' guilt, but [fortunately] manages to clear himself of a murder charge as well.

Joke:

Editor - So, what did the eminent statesman have to say? Reporter - Nothing. Editor - Well, try and keep it down to two columns.

Mrs. Murphy - It was terrible. There were 27 Swedes and an Irishman killed in the wreck. Mrs. Grogan - Terrible indeed. The poor man!

Wednesday, August 5, 1931: Dow 136.50 -1.00 (0.7%)

Assorted historical stuff:

Editorial: A reader asks whether the people of this country would vote for cancelling the interest on foreign debts. The question should be, how long must it be until the people realize foreign debts are in fact uncollectible? "At the root of the world's sickness is a combination of debt, public and private, in volume totally unprecedented, with a level of commodity prices which has undermined the foundations on which that debt was created. The whole credit system ... is functioning poorly and it is of the first importance to prevent its breakdown." The most helpful measure toward this would be removal of intergovt. debt obligations; this would help the US at least as much as other countries.

Texas House calls on Pres. Hoover to call special session of Congress to stabilize currency, charging Congress has "delegated control of monetary system to selfish interests to detriment of people."

97,139 immigrants were admitted to US in fiscal year ended June 30, vs. 241,700 for 1930; first time since Civil War that the total fell below 100,000.

Labor Sec. Doak reports to Pres. Hoover on progress of the newly reorganized Federal employment service. With 332 offices assisting in placing unemployed persons, total placements in jobs by Federal and cooperative employment offices from Apr. 1 - July 31 were 638,689.

Editorial: Independent merchants shouldn't mistake the Supreme Court decision upholding the Indiana anti-chain store tax as proof of economic soundness. If chain stores in fact provide cheaper goods of established quality, then the people will ultimately be convinced of this and have no use for the anti-chain taxes. Some are warning that in another 20 years chains will have a "virtual monopoly" of retail trade; if consumers can be convinced of this they might back anti-chain measures. "But with innumerable chains already in competition ... it will require more than mere assertion to establish a distant possibility as a compelling reason" for the public to take sides in a "struggle between ... private interests."

Navy Sec. Adams approves new policy calling for building up US fleet to be on par with navy of the British empire.

"Two stones' throws, or, say, three Elevated stations" from Wall Street is a curbside market many decades old, though content to be obscure - the secondhand clothes market of Bayard Street, around the corner from the Bowery. Here, one can find the "bid and asked on dusty derbies," or conduct "pool operations in patched shoes." Curiously, this market too is complaining of depression though it usually thrives in hard times; it may be that merchants are finding it hard to unload the goods bought in flush days at a reasonable profit margin.

All-time great real estate deals: The 160-acre Medcef Eden farm [located in Manhattan, extending from the Times Square area Northwest to the Hudson River] was bought by John Jacob Astor over 100 years ago at a foreclosure sale on a $25,000 mortgage [Note: In a remarkably modern sequel, Astor was then sued by Eden's heirs and the case dragged on in NY courts for over 20 years until Astor settled for another $9,000]. In the time since, it's estimated the Astor family has received $100M in income from the property.

Market commentary:

Market wrap: Stocks worked lower most of the session; weak spots included US Steel, American Can, and AT&T while GM was well supported; volume continued unusually small and there was little evidence of concerted bear pressure. Market was unsettled in early afternoon by decline in rails following poor loadings report. However, trading turned very dull as the afternoon continued, and a moderate recovery from the lows took place in the last hour on short-covering. Bond trading extremely dull, prices irregular; European govts. listless and little changed; S. American irregularly higher; US govts. slightly lower; domestic list mixed, with utility issues steady on reinvestment demand while weak spots included second-grade rails, convertibles, and real estate bonds. Commodities weak; grains generally fell, hitting new season lows but rallying somewhat in later trading; cotton hit new 16-year lows but rallied to close slightly higher. Some copper sold at record low of 7 1/2 cents; this price was 1 1/2 cents below the pre-1931 record; price now 7 1/2 - 7 3/4 with buying small.

Conservative observers see no new encouraging developments, continue to favor sidelines.

While German conditions appeared improved, domestic news items were discouraging, including Standard Oil of Indiana dividend cut, sharp decline in Youngstown district steel output, weakness in wheat, and unseasonal decline in rail freight loadings. Prospect of continued small rail traffic is discouraging to observers who had predicted an increase starting at the end of July.

AT&T is subject of dividend rumors, with observers pointing out it's "dominated by the same banking interests" as US Steel. However, conditions at the two are quite different, with AT&T maintaining earning reasonably well considering business conditions. "The financial district is confident" GM will maintain its $3 dividend rate (8% yield) at today's board meeting. Public interest in the stock has increased somewhat after recommendations from several brokers.

When brokers' loans were at high levels a few years ago, a decline in the total was hailed as a positive sign. Now, however, with brokers' loans regularly setting new low records, the opposite view prevails; the low total is seen reflecting public reluctance to borrow in order to carry stocks, even at a time when yields on many well-fortified dividend stocks are well above brokers' loan rates.

Discussion of recovery has become quite popular, but the most conservative observers note that while eventual recovery is certain, there's "nothing on which to base an accurate forecast as to how long the so-called bottom of the depression will continue." Various foreign and domestic factors are "checking the development of confidence among consumers"; without this, it's unlikely that even a seasonal recovery will develop.

Germany special:

German Chancellor Breuning gave an internationally broadcast speech on the eve of the reopening of Germany's private banks. Urged countrymen not to rush to the banks, and only to withdraw urgently needed cash. With no current possibility of foreign help in form of a new loan, German business must rely on own efforts to better conditions; cooperation of the people needed for resumption of trade. Dismissed danger of currency inflation due to govt. measures, saying “there are not too many but too few banknotes in Germany.” Praised Hoover one-year debt moratorium as “historic” and said it had now essentially been realized, but several weeks of delay had caused severe economic consequences for Germany. Repeated Germany's willingness to come to terms with France in an economic settlement.

“All eyes are once more turned on Germany.” Full withdrawals are likely to be allowed from banks tomorrow, other than savings banks. It will be necessary to continue strict control of foreign currency transactions. “Advices from Berlin are encouraging and bankers here believe that Germany will gradually work herself out of the difficulties although setbacks are possible from time to time.”

Removal of restrictions on German interbank transfers went smoothly. Many banks voluntarily allowed unlimited withdrawals by depositors without problems. Latest rulings of new German “Devisencentrale” appear to prohibit imports other than industrial raw materials; officials are trying to appease importers by saying the restrictions will only last a few days.

French and German bankers held long discussions on extension of short-term credits; it's believed the French bankers may agree to limited extension considering that "immediate withdrawals are for the most part impossible anyway." NY bankers have been meeting for the past few days studying proposals of Reichsbank pres. Luther for extension of credits; some difficult points have been encountered, and there's also concern about attitude of creditors from other countries. An announcement is expected before end of the week.

Germany has reduced the percentage of foreign wheat millers are allowed to use to 3% from 40% due to a good domestic crop and govt. austerity policy; this was seen as making significant German purchases of US surplus wheat unlikely. However, German govt. is reportedly receptive to plan for buying US cotton and copper on credit. Sen. Harris of Georgia protests plans to sell surplus cotton to Germany, saying this would be "taking away a market which rightfully belongs to the current crop."

London stock markets rose after the holiday, but, contrary to expectations, sterling fell against dollars and failed to rise against francs. Bank of England reported a small gain of gold for the day. National Bank of Czechoslovakia raised discount rate 1% to 5%.

BIS, in monthly meeting, noted difficult financial situations in Austria and Hungary but “decided to maintain the policy of watchful waiting until the political situation becomes clearer.”

Economic news and individual company reports:

“Mexico City's financial district was gripped with fear Monday as depositors swarmed the foreign banks and withdrew heavily.” Bank runs attributed to closure Monday of Credito Espanol de Mexico, a Spanish bank; this was first bank suspension in Mexico City in several years. Foreign banks paid out large sums, with many depositors leaving “weighted down with bags of silver pesos.” In wake of demand for pesos, the dollar fell from 4 to 3 pesos in value while prices rose and merchants refused to extend credit. Banco Nacional de Mexico denied it had closed or would close; said bank in sound position and supported by govt. and central bank; bank opened early Tuesday and announced it would stay open as long as needed to pay all waiting depositors. “Financial circles” blamed Mexican bank runs on govt. law removing gold from circulation [as currency] and moving to exclusive silver standard. Lifting of restrictions on gold exports from Mexico has already resulted in transfer of at least 10M gold pesos to US; further shipments believed likely. Mexican govt.'s drastic measures, including granting Pres. Rubio power to levy emergencytaxes, have provoked widespread protests.

Pres. Hoover announced 758 public building projects now authorized at total cost of $453M; expects $300M will be under contract by fall.

Recent weekly banking reports show a reversal of the recent encouraging uptrend in “all other” (commercial) loans; these rose $165M from June 24 - July 15 but have declined $60M since.

US Steel will reduce salaries 10%-15%; hourly wages not affected. Youngstown district steel production is down 9% since Monday, to 33%.

Tennessee Comptroller informs Gov. Horton the state's coffers are practically empty; state employees face possibility of no pay Sept. 1.

NJ decides to postpone sale of $20M highway bonds until bond market conditions improve; attempted sale of the issue has already failed twice.

Rail freight loadings for week ended July 25 were 741,752, down 15,803 from prev. week, down 19.3% from 1930 week, and down 32.7% from 1929. Boston and NY Chambers of Commerce oppose 15% rail freight rate increase.

Refineries ran at 65.1% in week ended July 25 vs. 69.0% prev. week; stocks of gasoline fell 547,000 barrels to 36.742M. Crude oil production in week was 2.501M barrels/day, up 13,700 from prev. week and 14,650 below a year ago; increase again due to East Texas area, which rose 92,650 barrels/day to a new high of 597,550 while production in Oklahoma and California fell substantially.

Efforts to rebuild nitrate cartel failed again; all agreements between producers suspended. Russia plans a large expansion of its nitrate industry, and is bidding for services of some US executives.

Australia experienced big drops in both imports and exports for year ended June 30, but showed trade surplus of $141.5M.

Chevrolet output in July was 66,307 cars and trucks vs. 84,597 in June and 58,690 in July 1930; third consecutive month of higher output than in 1930. Auburn Automobile shipments in July were 2,580 cars vs. 646 a year ago. Sales of washing machines in the first half rose to 341,025 vs. 319,229 a year ago. Kelvinator reports June shipments 40% ahead of 1930, July shipments 49% ahead; orders on hand Aug. 1 substantially ahead of 1930; production "running full force" to meet demand."

Earnings reports: Public Service of NJ half $2.02 vs. $1.92. Pacific Tel. & Tel. half $4.02 vs. $3.04. Mack Truck Q2 $.16/share vs. $1.85; half ($.07) vs. $2.49. Adams Millis half $2.49 vs. $2.15.

Companies reporting decent earnings: Public Service of NJ, Pacific Tel. & Tel., Adams Millis (hosiery).

Movies:

Politics - MGM film, at the Capitol. A "hilarious comedy vehicle" for Marie Dressler and Polly Moran that also includes some effective drama, as when Dressler, playing Hattie Burns, a modest landlady, is angered at the murder of an innocent girl during a gang war and speaks out at a political rally for the mayor's reelection. The mayor hedges when asked to close the nightclub where the murder took place, and Hattie enters the campaign herself. The city's women eventually resort to the tactics of the Greek women in Lysistrata, declaring a sex strike against the men of the city; "many comic situations are presented, showing how embarassing life is made for the men by this concerted action." Following some melodramatic complications, Hattie is elected mayor and her daughter marries the intended victim of the gangsters' bullets, who was "put on the spot" after he threatened to quit the rackets.

The Reckless Hour - First National Film, at the NY and Brooklyn Strand theatres. Dorothy Mackaill's acting is so intriguing that viewers are "likely to enjoy the film in a pleasant mood of unconsciousness of the fact that the old romantic hokum is being dispensed ... Story is the old one of the poor working girl who believes the polished words of the rich roue and lives to suffer and regret until an understanding male comes along to marry her." Plot has been somewhat modernized through addition of sophisticated sister and modifying of father's part to make him sympathize with his daughter once she's "in trouble" rather than "banishing her from his household as he would have done in the old days."

Joke:

[Note: Best. Joke. Ever.] Teacher - This system of memory training is foolproof. For example, suppose you want to remember the name of the poet Robert Burns. Simply fix in your mind's eye an image of a London policeman over a fire. See - Bobby Burns! Student - Yes, but how am I to remember that's not Robert Browning?

Tuesday, August 4, 1931: Dow 137.50 +0.85 (0.6 one %)

Assorted historical stuff:

Editorial: T. Conklin, a biologist at Princeton, argued 15 years ago that the economic civilization that "the world had ... contrived somehow to build up was beyond the mental capacity of the race to handle successfully" and, failing improvement in that mental capacity, would have to be simplified. This has, "thus far at least, received handsome confirmation" from experience. We now hear "demands for a 'plan'" from all sides, but this begs the question of who is to do the planning - "is it to be 'government in business' or 'business in government'?" While the world's economic leadership has partly failed, the failure of political leadership has been catastrophic. Economic leaders can at least lay claim to raising the world standard of living very materially in the past generation or two, while the chief political "achievement was what best can be described as a gallant attempt at suicide, which only just failed of complete success." The state of war continues, and this is the "fundamental cause" of our current problems. "'Planning,' no doubt, we must have more of, if our civilization is not to be 'simplified' to death, but the world's 'politics' need it even more than the world's 'economics,' and 'politics' is the place to begin the blueprinting. ... when the world's 'politicians' have succeeded in stopping the war it will be time enough for them to teach the world's 'economic' leaders their business."

M. Woll, AFL VP, appeals to John D. Rockefeller Jr. to intervene against wage cuts by Colorado Fuel & Iron; attacks “international bankers” as responsible for movement toward wage cuts, and praises stand of US Steel pres. Farrell against cuts.

British govt. committee proposes “rationalization” of coal industry involving combination of 1,000 individual collieries into six large units, closing of hundreds of uneconomic mines, “conversion of whole districts into derelict areas and dismissal of 100,000 workers.”

Agriculture Dept. reports Russian grain crop outlook worse due to hot, dry weather; yields per acre expected "decidedly below" last year, offset somewhat by 7% increase in acreage. Loss reported from "untimely harvesting and inefficient fieldwork." Official Russian data shows increases in grain and cotton acreage; 1931 spring sowing plan target not reached for grains, but plan exceeded for cotton.

Mexico imposes new immigration restrictions barring unskilled labor from "entering the country to compete with Mexican labor."

Census Bureau estimates 10M homes, about a third of US total, now equipped with radio sets; Dr. J. Klein says industry is now half-grown, believes further growth will substantially help business revival.

One of the methods used by the Navy to study ocean currents is the old-fashioned message in a bottle; about 5,000 ships of the international merchant marine drop bottles into the ocean from "here, there and everywhere" marked with location and time of drop; some are found months later and thousands of miles away. The US Navy's Hydrographic Office gets about 1,500 bottle reports annually.

RCA opens new direct radio circuit between San Francisco and Mukden, China, a few months after opening one between San Francisco and Shanghai.

1930 was the biggest year ever for the Patent Office, with 117,789 patents and trademarks applied for and 49,599 patents issued, or 5,982 more than 1929. In the past 10 years 424,574 patents have been issued, more than in the hundred years following Washington's inauguration in 1789.

Continental Bank building now being constructed at 30 Broad St.; will be 48 stories and 564 feet high, contain “complete pneumatic tube system designed to handle the delivery business of its broker-tenants.”

The old joke that when two Germans meet they form a society seems to be coming true in Berlin, where there are over 5,000 societies or "vereins" registered with the authorities. Most popular type of society is athletic (over 1,000); also popular are "health and uplift of the youth" (270), college student (265), and theater (70).

Offering of 5-cent sandwich by John R. Thompson (restaurant chain) has reportedly met with good reception.

Silas P. Tompkins, one of the builders of the Lackawanna Railroad, dead at 100.

Germany special:

While there's apparently no definite agreement on extending German credits, several large US and British banks have already extended their lines 6 months and others are expected to follow since new foreign currency restrictions give them no better chance of repayment if they demand it than if they agree to extension. Foreign currency payments will be unrestricted for interest and “sinking fund” payments on long-term loans, but all other payments exceeding 3,000 marks, including those for imports, must be approved by the “Devizencentrale,” as must export of mark currency and securities. Restrictions on internal banking transactions, other than at savings banks, are expected to be lifted this week, since “public sentiment is calm and weak banks are now safeguarded.” Fed. Reserve monthly review says short-term credits to Germany by US banks “substantially maintained” in June and slightly increased in first half of July.

Wholesale German price index was 110.1 on July 29 vs. 112.3 on July 15; commodity transactions have been small since the crisis, and retail prices have also barely changed. Berlin comment indicates current German grain situation precludes immediate purchase of significant amount of US surplus wheat.

Editorial commenting favorably on Bank of England's recent $250M credit. "It is no reflection on British credit that the Bank of England has to borrow at this time." This is a result of Germany's plight and the large balances of both French and German funds maintained in London; "in a measure London finds itself today the victim of her position as world banker." It's noteworthy Bank of England raised rates twice before borrowing, demonstrating a good-faith effort to help itself; this is "in striking contrast to the methods pursued by the Reichsbank." Granting of the credit is another example of improved central bank cooperation. The war is still unsettled in many political and economic ways, "but in central banking there has been developed a ... genuine desire for helpfulness that might well be an example to the governments of the respective nations."

Foreign currency market again at a standstill due to holiday in London. However, with resumption of full-scale trading today strength is expected in foreign currencies, particularly sterling, due to higher rates in London and the $250M credit granted the Bank of England. Some concern felt over the upcoming fall period when sterling usually weakens due to the cotton trade, but it's generally felt the Fed. Reserve will act to alleviate the strain by buying sterling bills as in the past, “so that undue weakness in sterling in the fall is not looked for.” Stocks rose in Paris, and German bonds rallied; “the French scare is over for the time being” but evidence of moderate inflationary policy in Britain, starting with 15M pound increase in authorized currency circulation, is looked at skeptically; it's believed the Labor govt. is not ready to initiate needed reforms including reduction of doles. “All eyes are now turned toward Germany, where the political, rather than the financial interest, is dominant.”

Market commentary:

Market wrap: Stock action rather indecisive, with no outstanding news developments to affect prices over the weekend. Prices trended higher most of the day on very slow trading, but a wave of selling broke out in the afternoon, wiping out most of the gains on heavier volume. Bond trading very dull, prices steadier; foreign list featured sharp break in Hungarian issues, but German and other European issues were firm; S. American bonds mixed; US govts. dull and firm; some parts of the domestic corp. list saw mild rallies, and rails steadied. Commodities soft; grains lower; cotton down slightly, hitting new season lows. Copper remained at 7 5/8 - 8 cents with buying small. Silver up 1/8 cent to 28.

Strong spots included automotive and accessory shares, amusements and major rails; oil shares steadier; Westinghouse and J.I. Case dropped sharply late.

Brokers believe trading "has now reached such a low ebb that it would be difficult to induce any active liquidation."

Retailing shares including Kroger, Penney, and Safeway have drawn a fair amount of buying based on good first half showings. Amusement shares viewed more positively; while film companies have had their troubles in the past few months, attendance now seems to be improving as the new season's releases start appearing.

American Chicle, at 44 5/8, is only four points below its yearly high; co. has maintained strong balance sheet; first-half earnings $2.22 vs. $2.16 in 1930; yield 4.5%. GM has drawn some "investment buying of good quality"; financial position is very strong; stock about 37; first half earnings $1.83 vs. $2.32; yield 8%. Standard Brands improvement in earnings vs. 1930 attributed to aggressive ad campaign in national magazines; sales of brands including Chase & Sanborn coffee and Royal Gelatine continue to grow. Aluminum Co. of America gained on expected increased use of the lighter metal in place of steel and copper; particular interest was drawn by announced plans of Peerless Motor Car for all-aluminum automobile. "Despite the talk of pool operations in IT&T in the last few weeks, there has been some important buying in the stock, some for the account of investment trusts."

Sept. corn drew selling by a leading professional; open interest in that contract is over 16M bushels, and some observers anticipate a short squeeze similar to the one that took place in the July contract, orchestrated by "the Thomas M. Howell interests."

Yet another rather technical editorial by T. Woodlock on the ICC and rail reproduction cost vs. book value; concludes “net book values” and “reproduction cost depreciated” are coming close together due to shifting price trends since the war.

Hayden, Stone & Co. dispute view that steel is a leading business indicator; believe industry is one of the last to reflect either uptrend or downtrend in general business, since it's used mainly in "capital goods"; that the steel industry has recently fallen to an unprofitable level shouldn't obscure the fact that "consumption goods, such as textiles, shoes and tires, are showing decided improvement. Rather the fact that the steel business has fallen to such a level would indicate that the cycle has been about completed." Consumption goods seem likely to lead the recovery as in the depression 10 years ago.

Harvard Business Society: "Were it not for the crisis in Europe, recent developments in domestic situation would definitely indicate business recovery is in progress and presently be accelerated. The unsettled foreign situation will slow down the pace of business recovery here, though it may not delay or prevent such recovery. ... In any case business conditions in US will be influenced largely by events in Central Europe, which, for the next few weeks, it will be impossible to forecast." If foreign situation reverses the recovery in domestic business, it may fall below recent levels, making the depression "of exceptional duration."

Economic news and individual company reports:

Fed. Reserve monthly review notes weakness in bonds; says this is partly due to “continued and even accentuated tendency for banks to seek to maintain the most liquid possible position.” Ordinarily, “banks seek to employ promptly any excess of reserves beyond legal requirements. During recent weeks, however, the reporting member banks in principal cities have as a whole decreased their total loans and investment despite large excess reserves.” In past 2 months, these excess reserves have been larger than at any time since the depression began. NYSE reports security loans by members as of July 31 were a new low record of $1.344B, vs. $3.689B a year earlier and peak of $8.549B in Sept. 1929.

While there were 17 US car companies that registered 1,800 or more new cars in the first half of 1931, three of those firms sold 83% of all cars: GM with 44.3%, Ford 29.9%, and Chrysler 8.7%. Auburn was the only firm to show an increase in the first half vs. 1930, rising spectacularly to 20,440 cars from 8,690, though 9 firms showed an increase in June. GM was the best performer in the top three, falling only 7.1% from 1930 vs. a 48.7% decline for Ford and 24.5% for Chrysler.

C. Churchill, general sales manager for Buick Motor Car, says based on June registrations, "retail demand for automobiles is becoming more firm" around the country; Buick registered 8,686 cars in June vs. 8,550 in June 1930; report "encouraging ... not alone for the automobile industry, but for business generally."

Fed. Reserve of NY reports improvement in June department and chain store sales in the NY district.

Assoc. of Commerce reports brisk wholesale trade in Chicago last week thanks to fall buying by retail merchants across the US; Chicago retail sales uneven.

Standard Oil of Indiana cuts annual dividend rate to $1 from $2 previously; says measure a conservative one to maintain strong position; believe cut will be temporary; some encouraging developments in their business. Curtailment of oil production appears to be making some progress. The Texas Legislature is still meeting, but may act on some major bills by end of the week. Production in California and Oklahoma is lower. East Texas production hit another record of 555,484 barrels/day last week, and may be as high as 625,000 this week, but number of drilling permits is lower and many producers seem disposed to "pinch in" their wells.

The diamond trade is suffering from an unprecedented depression. However, Sir E. Oppenheimer, chair. of De Beers, says the industry has now been organized on an economically sounder basis than ever before. All large South African producers have been gathered under De Beers, which controls production; the S. African govt. is helping by restricting exploitation of new discoveries; De Beers has also organized a geological dept. to keep track of future diamond discoveries around the world. Oppenheimer declares that “every link of the chain between mine and consumer is complete, and ... every stage ... has been placed on a sound footing.”

Assoc. of Rail Executives declines to meet with railroad union heads to discuss unemployment problem and possible solution using 6-hour day and 5-day week; say matter should be handled by discussions with individual roads due to diverse conditions across the US. Unions say in view of refusal to meet, will formulate plans to deal with the problem and "command support of public sentiment."

Canadian wheat pool report showed further deterioration in the estimated crop, though grain prices gave little response. In the Southwest US, farmers are getting little return from a bumper crop; in the Northwest and the Canadian prairies, farmers are getting record low prices for one of the smallest crops in years. With continued poor weather and low prices, many Canadian farmers may find it more practical not to harvest their damaged acreage. G. Ruggles, "Minnesota state entomologist," reports grasshopper infestation has affected 46,875 square miles of farmland in the Dakotas, Nebraska and Iowa.

Chile defaults on bond payments. City of Rio de Janeiro defaults on bond payments. Australia arranges to meet state of New South Wales interest payments due July 31; asks "New South Wales to repay the advance at the first convenience." Govt. officials will meet Wednesday to "consider the future attitude" toward New South Wales; continued assistance depends on N.S.W. Premier Lang carrying out promises to cut spending.

Detroit will probably complete within 10 days a new financing plan "designed to effect a sound and permanent solution of Detroit's financial problems." Plan was worked out between NY and Detroit bankers and city officials to meet short-term debt maturing in the next few weeks; it will involve issue of $30M in one to five-year bonds to refinance much of the debt, and compliance by the city with an austerity program; the refunded debt will be repaid over 5 years, with debt service taking priority over other city requirements. West Palm Beach reportedly without funds because only 63% of past year's taxes have been collected; city may be forced to pay salaries in scrip and declare 90 day moratorium on other expenses.

Pres. of the recently closed Banco de Cataluna of Barcelona attributed closing to open campaign against the bank; said resumption of normal operations near.

S. Rosoff, subway contractor active in attempts to reorganize Bank of US, favors a proposed law providing for state to meet cost of liquidating insolvent banks in cases where it exceeds resources and enforcible stockholder liability; law would be made retroactive to cover Bank of US.

Following the Supreme Court decision upholding the Indiana anti-chain store tax, it's expected anti-chain tax laws will be introduced in almost every state legislature that meets this fall and winter. This year, 32 legislatures considered such laws but only 2 passed them.

French govt. again gives aid to the French Line (France's leading shipper); govt. injects 160M francs and takes management role in co.

The first brokerage office aboard a Pacific Ocean liner will be opened by Wm. Cavalier & Co.

Grand Union reported a record profit margin of 3.01% in the first half vs. 2.82% in 1930.

Earnings reports: Goodyear Tire & Rubber half $1.06 vs. $2.02. Pullman Q2 $.13/share vs. $1.37; half $.28 vs. $2.54. Skelly Oil Q2 ($1.54)/share vs. $.59; half ($2.29) vs. $1.09. Grand Union half $1.00 vs. $.97. American Stores half $1.87 vs. $1.75. McCall Q2 $.88/share vs. $1.12; half $2.04 vs. $2.26. R.K.O. half $.25 vs. $.76.

Companies reporting decent earnings: Grand Union, American Stores.

Theatre:

Sunday entertainment in NY and London presents an interesting picture. In NY, plays are forbidden while movies are allowed; this has generated periodic efforts to legalize the Sunday play from Broadway producers who note that Sunday is the biggest box office day for movies and, "however unskilled in mathematics, can compute that before the legitimate theater has raised its first curtain on a blue Monday, ... picture theaters have written off half their overhead for the ensuing week." In London, both plays and movies are illegal under the Sunday Observance Acts, along with boxing. However, the House of Commons is now vigorously debating the Sunday Performances Bill to legalize Sunday movies, and British theatre producers led by Sir Arthur Butts are fighting to include plays in the law. Movie competition is already "blowing with hurricane fury" through London theatre - as United Artists announces its $5M super-cinema with 3,500 seats on the West End and Paramount negotiates to build four of the largest movie houses in Britain, "legitimate theatres are going under the hammer." There are interesting differences in how strictly NY and London enforce the Sunday theatre laws; NY allows performances that don't involve change of scenery or costume, including vaudeville ("under the more pious name of Sunday concert") and "dancers and similar entertainers"; London is much stricter, essentially limiting Sunday entertainment to golf and motoring. However, under both current and proposed laws NY and London are agreed on strictly prohibiting Sunday circus performances.

Joke:

Mahatma Gandhi recently attended a formal dinner in Bombay wearing his usual loincloth, and spoke for two hours. "This was considered remarkable in view of the fact that he had no cuffs to write notes on."

Monday, August 3, 1931: Dow 136.65 +1.26 (0.9%)

Assorted historical stuff:

Washington report: The once semi-weekly press conferences where Pres. Hoover answered written questions from reporters have become rare, even after the debt moratorium question that was supposedly occupying the President's time was settled. "There seems little point in trying to cover the fact that there is a growing coolness between the White House and some sections of the newspaper corps." While technically the Administration's policy against wage cuts is unchanged, subtle signs have appeared indicating that it now recognizes the policy may be impossible to maintain in face of economic realities. These signs include Commerce Sec. Lamont's letter declining to intervene to prevent wage cuts in Rhode Island textile mills. It's true that after this letter, the White House affirmed its previous policy, but only "in a very brief way." Officials also insist the policy was worthwhile in that it prevented a wholesale campaign of wage cuts in 1929.

Pres. Hoover has directed the Agriculture Dept. to cooperate with local authorities in dealing with the drought and grasshopper destruction in Northwest and Central states. "The President said that while suffering in the areas affected is acute, the extent and damage of the drought is comparatively minor to that which confronted the nation last year."

Editorial by T. Woodlock: A recent Alabama legislative investigation of the power situation there is of interest since Alabama, along with Tennessee, is "vitally concerned" with the Muscle Shoals situation [potential govt. power development]. The investigation found that the private Alabama Power Co. charged lower rates for service than publicly operated plants in the state, and furthermore that the company was earning less than a fair return on property and was more heavily taxed than comparable businesses. It's also noteworthy that no witnesses appeared before the committee to complain about utility service.

Soviet govt. gives instructions for large increases in livestock raising by state and collective farms over the next two years.

Peerless Motor Car is planning to introduce within a few months new 12- and 16- cylinder cars with all parts made of aluminum, including motors, pistons, connecting rods, etc.; parts will be made of a special heat treated alloy called duralumin prepared by the Aluminum Co. of America.

Prof. Bell was granted his original telephone patent in March 1876, and exhibited that summer at the Philadelphia Centennial Exposition, to little attention. The early phone consisted of a single instrument used alternately as a transmitter and receiver and a length of wire. Today there are over 20M phones in the Bell System, representing over 57% of total telephones worldwide; even in these depressed times, only 100,000 phones have been lost this year.

The Navy will advertise for bids on construction of its "immense" dirigible hangar at Sunnyvale, California.

Fares on Graf Zeppelin flights from Germany to Brazil will be reduced 25%, to $750 one way.

"Americans have long been accustomed to sending missionaries" to Asia to spread Christianity; now they will be surprised to see some missionaries returning the favor, coming to the US to spread Buddhism. At a recent religious conference in Honolulu, hope was expressed that "the morals of Confucianism, the philosophy of Buddhism, and the emotionalism of Christianity might soon be combined in one great ethical system."

Airline customer service dept.: On a recent Eastern Air Transport flight from Washington to Richmond, a passenger was allowed to carry 53 pounds of luggage without extra charge; luggage is usually carried free up to 30 pounds, and the limit allowed is 50 pounds. However, the passenger in question was a dwarf only weighing 48 pounds, so the staff didn't charge him for extra weight since total of him and his luggage was below the average weight of a passenger alone.

George Imes, trolley conductor who inspired the long-running Toonerville cartoon, died in NJ. "Mothers entrusted their children and housewives their marketing to him. He wouldn't start his car until all his regular commuters were aboard; he escorted inebriates home, and directed strangers."

Germany special:

Schedule taking shape for removal of some German banking restrictions. Today, transfers between clearing house banks are to be allowed; on Tuesday, all other interbank transfers are to be allowed, including checks; on Wednesday cash payments will be permitted, except for savings banks; removal of restrictions on savings banks "is expected to follow soon" and payout limit for savings banks has been raised to 50 marks/day. To avoid "explicit declaration of a moratorium on foreign payments," it will likely be necessary to get definite agreement on prolongation of foreign credits before Tuesday. In any case, an office will almost certainly be established to "keep a rigid control" over the foreign currency market and "safeguard the gold reserve." Germany shipped $11M in gold to NY, believed to be working capital for the office. Reichsbank rate hike to 15% seen as temporary measure to tide over transition period, prevent "sudden outpouring of capital," and maintain stability of the currency exchange rate in spite of large new issue of currency. It's estimated note circulation will increase about 1.2B marks from the 4.4B on July 31. However, note cover isn't expected to fall much below 30% since some foreign currency is expected to return to Germany thanks to the recent decree requiring this for holdings "not economically justified."

Farm Board chair. Stone seemed amenable to selling of surplus commodities to Germany on credit, though he said the Board had received no definite proposals from Germany. "The plan seems to be regarded as a good move but not of fundamental importance in the commodity situation at this time." Opinion seemed divided on whether the plan would increase world consumption of wheat or cotton.

Fed. Reserve together with Bank of France granted a $250M credit to the Bank of England; the credit will run for 3 months and be renewable at maturity. NY bankers “expressed the belief that the Bank of England had already weathered the most severe part of the current strain” and saw little chance that the credit would actually be used; the step was seen as mainly to bolster public confidence, particularly in France. It's expected the Bank of England will maintain its 4 1/2% rate to avoid use of the credit. Announcement of the credit was “something of a surprise to the financial district.” Sterling strengthened following announcement of the credit, though effect was muted due to today's holiday in London; further improvement expected this week.

Week in review:

It took the US Steel dividend cut announcement “to shake the market out of its apathy and bring about a definite price move”; unfortunately the move was lower as the cut to a $4 rate was worse than expected. Volume on Monday and Tuesday was well below a million shares, and even after the Steel announcement only rose to 1.6M on Wednesday, which would normally be classed as a very dull day. Bethlehem's dividend announcement also wasn't very positive for the general list, though Bethlehem itself rose afterwards. Speculation intensified on wage cuts after the steel leaders' reports, though no statements were made by the companies. It was also believed that the dividend cuts by such basic industrials might be followed by a faster pace of dividend cuts at other cos.; rails in particular reacted after the Nickel Plate omitted dividends on both common and preferred stock. Trends in the steel industry presented a mixed picture; canning continued its unexpected decline, but overall production rose 2% to 33% and scrap markets continued firmer; prices were more stable but remained untested.

Commodities were very weak. Grain prices worked lower in spite of reports of extensive drought damage in some sections; the US Northwest, in particular, reportedly was facing the worst crop failure in its history. The week ended with grain prices generally in new low ground and wheat hit record lows. July corn, however, saw a spectacular short squeeze develop, rising almost 25 cents/bushel to over 72. Cotton prices declined almost continuously to new season lows; spot cotton, at 8.25 cents/pound, hit lowest price since 1915.

Fed. Reserve credit rose slightly; NY member banks expanded investments but reduced loans, as brokers' loans fell to a new low record; all other loans also fell slightly, but loans to non-brokers rose for the first time in some weeks. Money markets were inactive.

Foreign currency markets featured rises in central bank rates in Britain, Sweden and German. Sterling rallied strongly against dollars after the Bank of England's rate hike to 4 1/2% in an attempt to stem gold losses, but much of the gain was lost the next day. Bankers believe higher rates in London might cause gold to move there from NY. However, sterling disappointingly failed to make much headway against francs and some gold losses continued to Holland. Reichsbank rate hike to 15% was seen as a measure to prevent inflation when emergency restrictions on cash payments by banks are ended.

Bond trading was generally lethargic, though the foreign list showed activity at times. US govts. moved slightly lower. German issues were firm early in the week but eased later. Hungarian bonds broke sharply Friday. S. American issues fluctuated widely with most ending lower. Foreign list rallied substantially in the week's last session after announcement of the $250M Bank of England credit. Rail issues generally weak, with some hitting record lows. Industrial bonds weakened after the US Steel announcement, particularly oils; convertibles lost ground. High-grade public utility bonds a notable strong spot. Municipals slightly higher.

Market commentary:

Market wrap: Stocks opened irregularly, then trended lower with J.I. Case a particular weak spot. Around 11 o'clock, a general recovery set in with major industrials including Steel and Can moving up; Woolworth and AT&T were strong spots; trading in rails was very dull, but they also participated in the rally. Market closed with fractional gains, though volume wasn't particularly heavy. Bond trading showed considerable activity; foreign list rallied on Bank of England credit and news of improvement in German credit situation; US govts. steady; domestic issues affected by poor earnings were pressured, particularly the railroad list, while Aug. 1 payments brought reinvestment demand in the highest quality bonds. Commodities mixed; grains featured sharp rally in Sept. corn with moderate rises elsewhere; cotton continued to sag, with spot cotton falling to 8.15 cents, the lowest price since 1915. Copper at 7 5/8 - 8 cents, buying quiet.

Encouraging news items from abroad included $250M French-US credit to Bank of England and further details on proposed German plan to buy surplus US wheat and cotton; reports from Berlin also considered more positive.

"Secondary stocks" have recently been more resistant on reactions than the majors; many of these shares were "thoroughly liquidated and deflated during previous declines," discounting likely unfavorable business developments; bear traders also have concentrated efforts on the majors rather than low-priced secondary stocks.

Chain stores have been relatively resilient, with many selling closer to their 1931 highs than lows. Some investors concerned about possible anti-chain store taxes have turned to Dominion Stores (Canadian), even though it only offers a yield of about 5%; sales and earnings increased in the first half vs. 1930.

Rather complex analysis of railroad figures shows that due to large increase in wages and salaries from 1916-1929, "new capital put into the railroad properties not only failed to produce returns, but, in addition, the return on old capital was partly sacrificed." [Note this was even before the downturn became serious in 1930-31.] Steel industry authorities say condition of the rails is adversely affecting steel buying. In normal times, railroads are important steel buyers. Due to small earnings, rails now aren't placing orders and, in some cases, are postponing delivery on orders placed almost a year ago. Stock market observers continue to watch the rails closely in belief their movements predict those of the general list; a number of traders are basing their operations in other groups on action of the rail averages.

Conservative observers are carefully watching developments in the Northwest; crop failure is reportedly possible; this would not only affect rails in that area but general business due to further curtailment of farm buying power.

Editorial: "Texas legislators are spending their summer vacations hard at work" on the oil problem. However, while the East Texas overproduction situation is admittedly the most serious current problem, bringing it under control would only be likely to repeat the disaster elsewhere; "other pools, no doubt, are yet to be discovered." It's time to appeal to the Supreme Court regarding whether "the antitrust laws stand in the way of a decent and orderly production of oil and coal, as the Dept. of Justice apparently feels itself compelled to hold, or whether the rule of reason has something to do with these matters. Such an appeal ought in all conscience to be made, without waiting the years that must pass before any elaborate scheme of state and federal legislation can become effective."

Wall Street now expects many further dividend cuts; a number of boards of directors will likely take their cue from the US Steel dividend action.

Economic news and individual company reports:

As features of the new Ford car continue to “filter through the veil of secrecy which has surrounded it for the past several months,” it appears the 1932 competition among car cos. will be waged “on the battleground of increased values rather than lower prices.” Another factor in favor of the new car buyer is “a rather surprising turn” in used car prices, which from reports over the past 15 months have been depreciating at a lower rate.

Total class 1 railroad net operating income in first half was about $239M, down 36.5% from 1930 and 57.5% from 1929; revenues $2.190B, down 18.6% and 28.5%. Only 3 of 52 major rails reported higher first-half income than in the previous 2 years. The two largest rails in terms of revenue, the NY Central and Pennsylvania, reported even worse declines in first-half income vs. 1930 (47.8% and 51.4%).

Fisher's wholesale commodity index fell to 69.3 vs. 69.5 prev. week, another new postwar low. Commerce Dept. reports worldwide decline in wholesale prices since 1929 has been the most drastic since the postwar deflation in 1920-21; prices in 14 countries have declined 18%-33% and are now lower than before the war in many countries.

Youngstown district steel production will start the week at 42%, about the same as last week though down from the midweek bulge to 45%; production remains higher than the industry average and sentiment on fall business is slightly better; August production will be better than expected.

Gasoline in Chicago wholesale market firmed to 3 1/8 - 3 1/4 cents/gallon; gasoline rise in face of discouraging news from East Texas attributed to continued strong gasoline consumption.

US leaf tobacco exports in first half were 271M pounds vs. 260M in 1930 and 226M in 1929; value $51.8M vs. $55.1M and $52.8M.

Uruguay says despite foreign exchange quotations that place the peso about 50% below par, the govt. will meet all debt payments promptly.

Chilean banks and stock exchanges reopened after 4-day holiday due to change in govt. Chile appoints exchange control committee with authority to restrict purchase or sale of gold coins and bars, and to prohibit foreign currency operations "not arising from regular legitimate or commercial financial transactions." Central bank of Chile given exclusive right to buy and sell foreign currency.

Argentina bondholders' corp. reports total Argentine govt. debt 4.702B pesos ($1.376B); deposed regime left budget deficit of 900M pesos.

Union Miniere de Haut Katanga [huge producer of copper and other metals in Belgian Congo; later a source of uranium ore for the first atomic bomb] says co. is still profitable with copper at 7 1/2 - 8 cents; helped by more stable prices of its secondary metals including cobalt and radium.

Florida now has the highest state tax on gasoline at 7 cents/gallon; estimated annual revenue $2.350M.

Liggett & Myers denies agreeing with other cigarette makers to increase prices, but says it reserves the right to respond to action by competitors.

Link Belt Co. cuts factory wage rates for the first time, by 10%; also puts entire co. on a 5-day week, effectively reducing pay a further 8%. Armour cuts salaries 5% - 10% but exempts employees on hourly wage basis from cuts.

Ford Motor opens $5M assembly plant at Richmond, Calif.; plant is another unit in the company's $60M worldwide expansion program announced last year.

Earnings reports: Amer. Light & Traction Q2 $.77/share vs. $.96; half $3.08 vs. $3.88. Pittsburgh Steel year ended June ($3.92) vs. $3.74. Bucyrus-Erie (steam shovels) half $.89 vs. $1.33. Formica Insulation half $.75 vs. $1.03. Melville Shoe half $1.37 vs. $2.33.

Movie:

A Jew at War - Film in Russian, produced by Ukrainfilm, at the Cameo. A young Russian Jew, David, is drafted by the Czar to fight in the World War, and forced to leave sweetheart and friends for the front. He comes to hate war and those he believes responsible for it. He deserts together with an old German friend he has saved from death in no-mans land, and the two join the Bolsheviks in Russia. His friend betrays his trust and becomes a "grafter. It becomes David's duty to have him shot for sabotage." David returns to his small frontier hometown to take charge of a state shoe factory built according to the Five Year Plan. Part of his job is dismissing drunken workers, one of whom stabs him. Film "ends with the thought that, while David is dead, what he fought for still lives in the minds of the younger generation of Jews who are now active in carrying out the plans of the govt." Story follows the "new conventionalism" of Soviet films; a hero and villain are still called for, each of which represents "new forces in the Communist State. The endings ... are all 'happy,' envisioning a new social order in which the workers will rule and in which machines will do their bidding." [Note: Exactly - I can't believe they copped out with that cheap happy ending.] Film is directed using "methods prescribed by Eisenstein, Alexandrov and Pudovkin," but not as adeptly. Acting is good, particularly Venimin Zuskin of the State Moscow Jewish Theater as David.

Joke:

Customer - I've ruined my suit with your paint. Store Owner - But didn't you see the Fresh Paint sign? Customer - Yes, but I didn't take much notice - I figured it was like your Fresh Eggs sign.