Saturday, September 19, 1931: Dow 115.08 -6.68 (5.5%)

Administrative note: I had intended to maintain the day-by-day summary here until July of 1932 when (spoiler alert) the Dow industrials finally bottomed out at 41 and change. I still intend to continue the summaries until then, but due to heavy workload, I'm going to have to cut back to a more leisurely pace for a while - I'll only be able to post a summary every two or three days. I also hope to get to some other little projects that I've been meaning to tackle for a while - stay tuned ...

Assorted historical stuff:

Interesting editorial criticizing "rag money" proposal by one Dr. J. Commons, Univ. of Wisconsin economist. Commons proposes the Fed. Reserve issue "greenback, or fiat money" in order to restore the 1926 commodity price level. By his laughable reasoning, this would be sound since the Fed. Reserve would only inflate moderately and would have the power to deflate when things go too far. "In brief, we can take it and we can leave it alone. We can use it without abusing it. ... We have abundant strength of character (i.e., the Fed. Reserve system) to tell us when we have had enough ... When the right time comes we shall firmly refuse 'just one more drink' and go home in good order. ... Dr. Commons, of all men, should know his economic history; when was there ever an experiment in currency inflation that did not end with the patient in the gutter? When was there a case where the 'just one more' was refused? ... How 'old times' do come back, if one only lives long enough!"

Owen D. Young and W. Gifford, leaders of Pres. Hoover's unemployment relief organization, expressed confidence that local public and private funds would be adequate to combat distress of unemployment this winter. However, Young refused to rule out Federal funds and said the country could be assured that no one would suffer for want of food; this was interpreted to mean the Federal govt. would step in if necessary.

Rep. J. Byrnes (D, Tenn.), ranking Democratic member of the House Appropriations Committee, suggests increase in surtaxes and rigid govt. economy to balance the budget.

NY State Republicans pass own unemployment relief bill despite threat by Gov. Roosevelt to veto and call another extraordinary session of the Legislature.

Amer. Bar Assoc. annual convention officially opposes Prohibition by vote of 13,779 to 6,340. Finnish Interior Min. predicts early end to Prohibition in Finland; admits impossibility of preventing smuggling. Fleischmann Yeast pleaded no contest to conspiracy to violate Prohibition laws, in govt.'s first test of responsibility of large corps. for providing supplies to makers of illegal alcohol; was fined $3,000. W. Newton, Pres. Hoover's secretary, admits asking Census Bureau for number of people employed in manufacture of beer in 1914, 1919, and 1929, but denies he sought the figures for Hoover.

"Air pilots on scheduled transport duty must always be in perfect physical condition. Their health is taken care of as carefully as that of the most valued racehorse. Few jobs are so confining and permit so little exercise," which is considered one of the essentials to keeping a pilot fit for emergencies. The Boeing flight surgeon believes golf is the best exercise for pilots' particular needs; pilots on the Boeing system almost inevitably stow a set of clubs before takeoff.

W. Fullen, Transit Commission chair., says hopeful a plan for NY City transit unification will be ready for promulgation by the Commission before end of month. N. Amster says city has not abandoned unification plan, but, on contrary, is closer than ever to agreement with transit cos.

The Smiths now lead the Cohens in NY City's latest telephone directory, 1,916 to 1,636. However, if the Cohns, Smyths and Smythes are included, the Cohens retake first place as NY's leading family.

European special:

"Banking support" entered the Paris stock exchange Friday for the second day in a row, producing a strong rally after new lows were hit in the first hour of trading. Brussels suspended put and call operations to "curb speculation."

Stock market collapse in Amsterdam has accelerated gold movement there. US exported $550,000 in gold to Holland; first gold exported to Europe since Aug. 1930. Banking situation in Holland and Switzerland being watched.

British situation causing some concern. Bank of England lost about 1.750M sterling in gold to Holland; sterling weakened, while futures fell to a wide discount. Bank of England took steps to restrict withdrawal of small amounts of gold for “hoarding” by refusing to pay out sovereigns and restricting gold payment to bars (worth $8,000 each). British general election talk circulating; some fear Labor will make large gains among voters angered by govt. spending cuts. British politicians are demanding restrictive measures to prevent capital flight from London.

J.H. Oliphant & Co. attributes recent selling in "worldwide investment stocks" in the past two days to London; "minds of British investors are confused by their own specific troubles as well as by the American corporate situation." Many disturbing rumors circulating about measures British govt. might take on sterling, including borrowing private holdings of foreign securities, deflation of the pound, and adoption of monetary silver.

Possibility of abandoning the gold standard has now become a topic of conversation in the London financial district, though it is “minimized in responsible quarters who realize that such a course of action would be a catastrophe.” However, a tariff on imports to restore trade balance is now seen as inevitable, since balancing the budget alone won't be enough to safeguard sterling.

Considerable agitation in French commercial circles over possible British tariff on luxury items; England took half France's luxury exports in 1930, amounting to 3B francs. Lille district makes formal protest claiming possible ruin. Newspapers voice reprisal threats.

Agreement for extension of short-term German credits finally signed between German bankers, Reichsbank, and bankers' committees from numerous other countries.

Apparent failure of League of Nations to secure financial aid for Austria and Hungary has clouded outlook there.

Market commentary:

Market wrap: Stocks had one of the weakest sessions in months; "frightened and necessitous liquidation" combined with renewed short-selling and uncovered stop-loss orders, sending shares progressively lower through the day; selling continued right up to the close. US govts. the sole firm spot in the bond market, as all other classes declined; heavy selling developed in late trading, and "prices fairly crumbled away". Foreign list unsettled by sharp break in German govts.; S. Americans again suffered heavy liquidation. Dow average of 40 domestic corp. bonds reached new yearly low at 90.51, down 0.44; lowest since Sept. 1924. Cotton prices again hit new season lows. However, grain prices were relatively steady, showing a mix of small gains and moderate losses. Copper buying practically nil in spite of record-low price of 7 cents/pound, at which hardly any mines are profitable.

Dow industrial average closed at a new bear market low; there were 2 new yearly highs and 232 new lows [note: as usual, the yearly highs were in preferreds].

Conservative observers continued to recommend the sidelines. "Pessimistic views were heard on all sides after the close" due to the new lows hit in leading shares.

Considerable disappointment seen as various rumors of "some favorable development late Thursday" failed to be confirmed. Market also unsettled by foreign developments including break in sterling and in German bonds. Leading insurance stocks broke sharply, with volume much higher than in the past few months; Sun Life dropped 250 points to 650 bid, while most other leaders fell 5%-10%.

Over the past 3 months, investment trusts [similar to mutual funds] “have experienced one of the dullest periods in their existence”; changes in portfolios limited.

Q3 earnings estimates are generally being revised downward due to slow business in July and Aug., and little seasonal improvement so far in Sept. Uncertainty over earnings seen keeping many investors on sidelines until reports come out in several weeks.

R. Masson, Credit Lyonnais general dir., says US conditions depressed chiefly in comparison with abnormal 1929 boom; praises avoidance of starvation, disorders and public dole in spite of 6M unemployed.

A. Coleman, Asst. Postmaster Gen., says 15% increase in first and third class mail handled in larger cities forecasts return of prosperity. However, other postal officials disagree with Coleman and "this upturn has not yet appeared in postal figures."

Economic news and individual company reports:

August a disappointing month for chain stores and mail order houses; sales of 39 representative cos. down 6.15% in Aug. from a year earlier, vs. a 2.6% decline in July and a 2.2% decline in June. Business affected by banking troubles in certain sections, as well as prevalence of infantile paralysis. It's estimated the paralysis epidemic cost Woolworth $500,000 in August sales.

Texas Railroad Commission has drafted order reducing allowed oil production per well in order to bring total output back below 400,000 barrels/day. However, order is being held up by protests from oil operators.

Weekly trade reviews again divided. Bradstreet's reports unseasonably warm weather retarded trade throughout the country in past week. However, Dun's reports retail trade at current lower level of prices continues to enlarge as fall season advances; also reports adoption of five-day week in a number of large industries has substantially added to the number employed in various lines.

W. Atterbury, Pennsylvania RR pres., called upon company employees to join management in evolving plan for stabilization of rail employment and business.

Weekly banking reports gave first indication that perhaps the worst of the recent "currency hoarding" has passed, as currency in circulation declined seasonally by $5M. However, best estimates are that about $1B more currency is now outstanding than warranted by the current volume of business. Increase in security loans to non-brokers would normally be encouraging (indicating buying by "strong hands") but may be due to banks demanding security collateral on what are really commercial loans.

US cigarette output showed marked decline in Aug., with total of 9.521B produced vs. 10.578B in Aug. 1930. However, loose tobacco and cigarette papers showed increases.

Sales of electric washing machines in Aug. were up 8.5% over July and 6.5% over Aug. 1930.

New bond offerings continued more active; total for week ended Sept. 18 was $67.5M vs. $75.4M prev. week, $7.5M two weeks ago, and $80.9M a year ago.

French Treasury revenues in Aug. were 44M francs above estimates; first 5 months 200M above.

Company reports since July 1: 217 companies reported higher earnings vs. 1930 and 676 lower; 1,060 dividends unchanged, 24 increased, 196 cut.

Companies reporting decent earnings: British Columbia Power, Arundel (sand and gravel).

Theatre:

Singin' the Blues - black melodrama by John McGowan, at the Liberty Theatre. Police are closing in on Jim Williams, who has killed a policeman in a Chicago gambling raid and fled to Harlem with his pockets full of winnings. But Jim falls in love with night club prima donna Susan Blake and "tarries when it is in his interest to slip away to the South," spending much of the play a step and a half ahead of the police. Simple but entertaining; McGowan takes shortcuts in storytelling but actors are "more than competent and the staging is often picturesque."

Movie:

Alexander Hamilton - Warner film, at the Hollywood. Starring George Arliss in the title role, adapted from his play; least effective of his talking films since he's a much better actor than playwright. "Today, when history is being pretty thoroughly de-bunked by most writers," the film seems even weaker than the play did in 1917. Not that Mr. Arliss has made Hamilton a saint, for he treats "frankly, although rather unconvincingly Hamilton's affair with Mrs. Reynolds." However, film provides a "sketch portrait which lays too great emphasis upon the sentimental and grandiose side of the first Secretary of the Treasury."

Joke:

Timid Traveler - Has anyone ever been lost crossing the river here? Ferryman - No, sir. My brother drowned here last week, but we found him next day.

Friday, September 18, 1931: Dow 121.76 +2.50 (2.1%)

Administrative note: I had intended to maintain the day-by-day summary here until July of 1932 when (spoiler alert) the Dow industrials finally bottomed out at 41 and change. I still intend to continue the summaries until then, but due to heavy workload, I'm going to have to cut back to a more leisurely pace for a while - I'll only be able to post a summary every two or three days. I also hope to get to some other little projects that I've been meaning to tackle for a while - stay tuned ...

Assorted historical stuff:

Col. Ayres of the Cleveland Trust Co. presents very interesting chart of US business activity since 1790; there have been 20 well-defined periods of serious depression in that time, of which the current one is the most severe. Business activity in July 1931 dropped to 28% below normal, next lowest records are 27% below normal in 1921 and 22% in 1808. Each of the country's three great wars has been followed by a “primary post-war depression, and then, after a prosperous period, by a secondary post-war depression.”

Editorial by T. Woodlock attributing failure of abundant and cheap credit to help business as it normally would to lack of confidence; “it is not potential supply of credit that is lacking ... but the will to use it. ... Doubt paralyzes the will, and the more people know of the facts, the more doubtful they become of the outlook. It is a vicious circle. ... And so long as this condition lasts, the mere addition of cash to the money supplies will not help much.”

Mahatma M.K. Gandhi says US “great hoard of gold a curse and a primary cause of the depression”; “must be dissipated, distributed, and put into circulation.” Says US has “not learned the lesson of equitable distribution of wealth ... still, your poorest are more prosperous than the Indian poor.”

Pres. Hoover appoints 18 more to Advisory Committee of Unemployment Relief Organization headed by W. Gifford, increasing membership to 99. Labor Sec. Doak says US Employment Service receiving encouraging reports from almost all parts of the country on progress of the work of connecting the jobless with jobs.

Former US Ambassador to Germany J. Gerard charges Germany “making money out of bankruptcy”; calls for bankers to “aid our own countrymen.”

Editorial: Germany's record August trade surplus of $77M, far from being favorable, is an ominous sign, since it was accomplished by reduction of German imports to their level in 1898, when Germany was just starting its industrial development. The August surplus seems to have been due to a sort of “clearance sale” in which it exported manufactured goods without replenishing raw materials. Repeats yet again warning that Germany will be unable to resume reparations payments next July.

Neville Chamberlain has, according to London reports, won over the entire Conservative party to idea of general election, with 33 1/3% tariff as chief plank.

J. S. Baker, NY State Bankers' Assoc. pres., hits indiscriminate proposals for changes in state banking law after closing of the Bank of US and other institutions; says regulations can't replace “honesty, sound judgement and conservative policies in the conduct of a bank's affairs.” J. Broderick, NY State Supt. of Banks, calls for cooperation between savings banks to analyze securities before buying; says bonds too often bought from salesmen just because they are on the legal list.

Editorial: We've arrived at the stage where wage cuts are imperative to prevent continued and increased unemployment; “it is, in fact, a choice between reduced money wages and no wages at all.”

World's greatest skyscraper builders are the three Starrett brothers - Paul, William and Ralph. Since arriving in NY in 1900, they have built the Pennsylvania Station, the Plaza, Commodore and Biltmore hotels, the NY Life Building, and, most recently, the Chrysler and Empire State Buildings.

Market commentary:

Market wrap: Stocks opened under a heavy accumulation of sell orders and showed “pronounced irregularity” in the first 3 hours, with declines in active stocks across the list; bear market lows were hit in Steel, Can, and AT&T. However, news of abrupt rallies in Paris and Amsterdam was followed by a general recovery, with sharp runups in some shares; rally picked up momentum and market closed at the day's highs. US govts. a firm spot in an irregular bond market; European issues fairly steady but S. American broke sharply. Domestic corp. issues generally weak, though a sharp late rally left the Dow 40-bond average slightly higher. Cotton futures dipped to new season lows; Oct. cotton hit 27-year low of 6.45 cents/pound. Corn also fell but wheat was strong in spite of heavy Russian shipments. Copper held at 7 cents/pound, 2 cents lower than any price previous to this year, but buying remains small.

Berlin market sharply lower on foreign selling; London stocks down on Wall Street reports and general election talk. Stocks in Paris and Amsterdam also fell sharply but rallied in late trading.

Public utilities have come under pressure recently, partly attributed to fears of legislation and agitation for lower rates. General Foods is the only member of the Dow industrial average to have held above its 1929-30 bottom.

NYSE observers say that while recent declines are mostly due to domestic liquidation, they've also been given impetus by selling from abroad, representing both liquidation and short-selling; “cable advices reflect rampant bearishness in financial sentiment abroad.”

Spencer Trask & Co.: “For the first time it may be said that security prices are in many cases as excessively low as they were excessively high during the boom year. The extent of pessimism has gone beyond all reason and has now carried to a point from which a sharp turn-about could develop.”

J.C. Penney says that though evidence of sharp business improvement is lacking, there's been some noticeable return of confidence by the consuming public over the past 90 days.

NYSE pres. R. Whitney scores attempts to help one industry or section of the country at the expense of others; calls for “free and open expression of the forces of supply and demand”; traces current problems to past interference with these forces. “There has been much criticism of the seeming inertness with which American business has faced this depression. I am not sure that in reality this passive attitude may not, in the main, have been rather wise.”

The steel trade now expects US Steel to announce wage cuts at the monthly directors' meeting Sept. 29; cut of 10% would save over $7.5M in 1931.

Col. Ayres of the Cleveland Trust Co. says much hoped-for fall upturn in business doesn't appear to be developing. Fundamental cause of problems is decline in commodity prices, but there are three more immediate problems related to that one which are “key logs in the economic jam”: fiscal troubles abroad caused by unbalanced budgets; continued decline in credit by banks seeking to protect themselves; and plight of the railroads.

Economic news and individual company reports:

Commerce Dept. reports Aug. US merchandise exports $165M vs. $298.1M in 1930; imports $166M vs. $218.4M; trade deficit of $1M was first in 25 months; both import and export totals were lowest since Sept. 1914.

Six officials of the Amer. Bond & Mortgage Co., which recently filed for bankruptcy with liabilities of $60M, were indicted by a special Federal grand jury on charges of “using the mails to defraud and obtaining money under false pretense.”

Chain store and mail order houses generally are reporting lower dollar sales and profits this year, but higher sales by volume or tonnage.

Current Reichsbank statement reveals substantial loss of foreign currency reserves as result of supporting the mark in foreign markets and liquidation of German securities by foreigners after reopening of the stock exchange.

Money in circulation Sept. 16 was down $5M to $5.087B, total Reserve Bank credit outstanding up $63M to $1.279B. Member banks in NY City report brokers' loans down $54M to new low of $1.271B; loans on securities to non-brokers up $34M to $1.728B.

Plan proposed by Rep. White of Ohio by which Fed. Reserve would make quick survey of failed banks and “make such loans as were justified,” allowing immediate partial liquidating dividends to be paid and providing some relief for depositors and communities. Fed. Reserve quarters believe this course is already effectively being followed; they point out numerous cases of member banks aiding banks about to fail; this is attributed in many cases to Fed. Reserve support, though “these instances do not become matters for publication.”

Officials from Kansas, Oklahoma and Texas, together with the Oil States Advisory Committee, will present a plan for allocation of world oil production among major producing countries over 1931-34 to Commerce Sec. Lamont on Sept. 21. Retail gasoline prices cut in Ohio and Minneapolis. Cut in allowed East Texas output, with Gov. Sterling's approval, seen likely.

NYSE seat sold for $185,000, down $10,000 from previous sale.

Companies reporting decent earnings: General Foods, Connecticut Electric Service.

Report from Paris:

The Opera Comique, one of France's foremost national theatres, is being “redecorated and rejuvenated”; when it opens Oct. 1, “our own perennially young Mary Garden” will be a leading singer. This theatre has been one of the most hospitable to US vocalists; “each year shows a lengthening list of young and not so young singers who have come from Hollywood ... Chicago, NY and New Orleans”; Miss Garden herself “became a prima donna overnight on this stage. It is not important how many years ago this was ...” [Note: Garden was born Feb. 20, 1874, so was 57; she died in 1967.]