Thursday, January 15, 1931: Dow 167.46 +1.51 (0.9%)

Assorted historical stuff:

Editorial: Both labor and politicians are rejecting increasing suggestions that the theory of high wages may need modification; this theory seems to be one of the few holdovers from the "new era" that ended in 1929. Chair. Wiggin of Chase Nat'l. recently suggested some industries "may reasonably ask labor to accept a moderate reduction of wages"; the NY Commissioner of Labor dismissed this as a "dangerous fallacy ... the great market is the internal market" while the AFL answered that "if there were any economic advantage in low wages China would be leading the world." While these arguments may apply to long-term trends, there may now need to be some temporary adjustments. There is a single test of whether wage cuts are justified which must be applied on a case by case basis: they are justified if "high labor cost makes high selling price a bar to marketing." If wage cuts aren't immediately reflected in lower prices, and so made to increase production and employment, "the demand for wage reduction has no solid basis in the mere desire of employers for a more satisfactory margin of profit."

Fed. Reserve Gov. Meyer to appear before the Glass committee on Monday, when it begins its general financial investigation. Sen. Glass has introduced bill restricting security loans by Fed member banks; inquiry is expected to investigate extent to which Reserve and member banks supported loans for speculation.

Washington report: House of Representatives making good progress on needed legislation. Senate, on the other hand, has contributed little action but much in the way of headlines. Senate Minority Leader Robinson asks $25M appropriation for Red Cross to be used for supplying human food in drought areas and other parts of the country where there is suffering. Former Gov. Alfred E. Smith's plans in 1932 subject of some discussion; most Washington Democrats believe Smith would be very difficult to nominate again, and unlikely to be elected. Many see the same drawbacks regarding Gov. Roosevelt; conservative wing of the party is talking more and more of Owen Young.

Sir Josiah Stamp, British economist, disagrees with Pres. Hoover's assertion that US can recover independently from rest of world; says retreat behind an economic wall creates instability which invites disaster.

St. Lawrence Power Commission appointed by NY Gov. Roosevelt recommends immediate creation of Power Authority to develop hydroelectric sources and contract with existing utilities for distribution. Believes project entirely practical; cost estimated at $171.5M; recommends household consumers be given preference in rates. Editorial by T. Woodlock: Lessons of St. Lawrence Commission report on using existing utilities for distribution should be applied to Muscle Shoals to avoid uneconomic public development of power, repeating our inland waterway experience where huge sums of public money were spent to provide benefits to a small group enjoying transportation services at rates far below their true cost.

C. Schwab, Bethlehem Steel chair., takes full responsibility for Bethlehem bonus system; taken from system he saw introduced by Mr. Carnegie in all his cos.; believes contributed to company success; has never participated personally in distributions to avoid possible prejudice in allocating bonuses.

US passports issued in 1930 were 209,211, up over 15,000 from 1929.

Sears-Roebuck announces new spring/summer catalog - 1,000 pages, 48,000 items, 7M copies to be distributed. Prices cut, many to all-time lows.

Polo championships to be decided over 16 weekends starting Saturday, divided between Northern and Southern Calif.

Commerce Dept. is running experiments at Wenatchee, Wash. aimed at killing tree pests using radio waves. Two wires are strung over each row of fruit trees, and hooked up with a "spark sending station which sends out powerful signals." These form a field between wires and ground that kills pests and eggs. Current is only needed an hour or two per day, and method is reported more effective and less costly than spraying.

General Foods licenses “selective irradiation” [by light rays] process of Prof. G. Sperti from Univ. of Cincinnati; allows addition of Vitamin D in controllable quantities to many foods; also able to kill wide variety of germs and stimulate plant growth.

Dr. C. Mills of Cincinnati Gen. Hospital is experimenting with a climatic lab; believes in future we will treat fever patients in cold rooms and high blood pressure patients in hot, moist rooms.

Market commentary:

Market wrap: Stock trading volume much lower; prices generally weak for first few hours; moderate rally developed at midday under leadership of rails; trading remained dull but improvement was sustained in afternoon. Bonds moderately active, irregular; US govts. firm near highs; foreign irregular; corp. mixed with high-grade steadier. Commodities firm; sharp rise in July wheat, a month not supported by the Farm Board.

Conservative observers remain cautious, advise buying in small lots during reactions; most observers expect range-bound trading for some time.

Vanadium again subject of a struggle, with new bear attacks breaking out. Disappointing earnings expected, may barely cover $3 dividend; board action uncertain. American Can has also recently become a bear target on theory it hasn't been deflated as thoroughly as most leading industrials. Aluminum Co. of America [Alcoa] displayed interesting gyrations in trading on the Curb Exchange; it dropped to a 12 month low of 140 1/2, rallied sharply to 148 at midday, then sold off again late to 146 - all on total volume of 850 shares. Some food cos. may be helped by recent USDA decision allowing use of corn sugar in packaged products without making special mention on the label.

Yesterday's rail freight loadings report considered unfavorable; year-over-year drop of 20.6% was worse than all but two weeks in 1930.

New bond issues this past week have been unusually large; bankers have been planning to bring out more issues when conditions are good. Reception of the new bond issues will be watched closely as indicator of investor sentiment.

Bears have ammunition in expected poor earnings reports, but industrial interests argue future outlook is more important, point to improvement since first of year.

Broad Street Gossip: Brokers report "amateur short selling" has been abundant in past few days; large bear operators also "have seemed eager to advertise that they again are very bearish."

A. Wiggin's recent statement seen typifying current conservative attitude of financial community: not encouraging unreasonable hopes or concealing unfavorable factors; not attempting to set date for recovery; current quarter's earnings may compare unfavorably with 1930 - "Business then was only in a minor depression. Now it is in the trough of a major depression."

A. Mount, Bank of America Nat'l Trust pres.: “We entertain no illusions as to a rapid change in conditions during 1931, but do feel reasonbly sure that the bottom of the depression has been about reached ... ”; expect gradual improvement soon.

Col. L. Ayres of Cleveland Trust says dividend paying stocks are at lowest level compared to high grade bonds in past 31 years; historical normal ratio of stock yields to bond yields is 6 to 5; prior to 1928, ratio was never 20% above normal but in the 1929 bull it went to 70% above; it's now at 21% below normal. Notes numerous unfavorable surprises for business in 1930, including drops in commodity, stock and bond prices, drought, and bank failures. However, while it's possible bottom of depression hasn't been reached, “weight of probability is distinctly in favor of durable improvement beginning in 1931.” Calls on other industries to follow auto makers in lowering retail prices; this would hasten business improvement.

Economic news and individual company reports:

Steel industry weekly reviews report some increase in production, now about 44%, but attributed largely to rebound from holiday period; improvement expected to be gradual. Price structure holding satisfactorily.

Tentative agreement for unit (cooperative) operation of Kettleman Hills oil and gas field praised by Interior Sec. Wilbur as possibly marking a turning point toward stabilized economic conditions in the oil industry, says will greatly reduce waste of natural gas.

Humble Oil & Refining cuts prices paid for oil in several Texas fields; average cut 24 cents/barrel, bringing 36 gravity crude to 71 cents. Similar reductions anticipated by other purchasing cos. in Oklahoma and Kansas. Plan awaits approval by operators.

S. W. Straus reports Dec. building permits in 573 cities were $131.5M, up 1% from Nov. but down 14% from Dec. 1929.

US investments abroad in 1930 estimated at $15B, up about $1B from 1929.

Foreign bond offerings in the US fell off sharply in the second half; only 20% of the $600M total for the year was offered in that period.

German Fin. Min. Dietrich announces 1930 budget deficit 400M marks greater than expected; receipts 100M lower than expected, while unemployment expenditures were 300M over expectations. German stocks sharply lower.

French stock prices followed the German downtrend. Worldwide depression reportedly has started to take hold in France for the first time; unemployment is rising while increasing gold reserves are driving up retail prices contrary to the wholesale trend; trade and tourism are down sharply.

Six-month time money rate declines to 2 1/2% - 2 3/4%, lowest in 52 years.

Agriculture Sec. Hyde sets interest rates for drought relief loans at 5%; will work out rules for granting of loans.

US gold production in 1930 was 2.233M ounces, down 500,400 from 1929; Silver production was 48.638M ounces, down 12.690M.

GM Dec. retail sales in US 57,989 cars and trucks vs. 41,757 in Nov. and 44,216 in Dec. 1929; full year 1.058M vs. 1.499M. Dec. sales attributed to new model introduction in Nov. instead of Jan. as in previous years.

AT&T expects 1930 earnings of $10.40/share vs. $12.67 in 1929; net gain of 125,000 phones in Bell system vs. 900,000 in 1929.

R.J. Reynold's 1930 earnings of $33.257M was a record for any US tobacco co., though below early 1930 estimates. Earnings increase attributed to price hike; advertising campaign for Camel cigarettes apparently not successful in increasing sales.

Companies reporting decent earnings: White Rock Mineral Springs, Wil-Low Cafeterias.

Theater:

Sita - classic drama of India. "It is difficult to see how theatre-goers who have no intense preoccupation with India can get their money's worth out of witnessing Sisir Kumar Bhaduri and his company of Hindu players present Sita, an ancient classic of the country, in Bengali at the Vanderbilt Theatre."

Joke:

Tommy's father - What's the matter, son? Tommy - I can't get a certain sum right. I wish you'd help me with it, dad. Tommy's father - Can't, my boy. It wouldn't be right. Tommy - I don't suppose it would, but you might have a try.

Wednesday, January 14, 1931: Dow 165.95 -2.04 (1.2%)

Assorted historical stuff:

Due to Russia's repudiation of war debts, almost all transactions with US are on a 50% cash-in-advance basis, while European countries have guaranteed Russia credit. In spite of this, the US is now the leading exporter to Russia. About 2000 firms are carrying on business with Russia, including GE, Ford, Du Pont, etc. The Soviet government apparently has undersold world prices in some cases to meet foreign currency requirements.

Editorial quoting P. Warburg's description of "ostrich politicians." US built its mass production industries behind "our wall of high protection"; then, not content with huge domestic markets, began to conquer foreign ones on which Europe depended and further increased domestic tariffs. Combined with debt payments, this has broken down Europe's purchasing power. "Our international policies seem ... to be fashioned by Senators of state-wide views" who believe the US can exist in "privileged isolation" considering only its domestic interests; the current depression offers an "overwhelming answer" to this view.

Administration reportedly opposed to reduction of Allied war depts in spite of advocacy by some financial leaders; Congress considered unlikely to approve, and debate likely to be “opposite of constructive”; opponents also argue debt payments are small percentage of national budgets. Administration opinion on Fed. Reserve doubts its power to effectively modulate major trends of over-optimism or pessimism, even if completely freed from politics and given best equipment and personnel. Major job seen as keeping its house in order and member banks in shape to meet emergencies.

Conventions signed by Sir J. Chancellor, High Commissioner under British mandate, for construction of pipeline to carry oil from Mosul, Iraq, to port of Haifa, Palestine, on the Mediterranean. Vast oil project will be one of most difficult ever attempted; obstacles include hostility of desert tribes along the route, cholera, typhus, and disagreements between French and British interests. "The oil lands are in the territory of King Feisal of Iraq, over which nation British holds a mandate under the league of Nations. An agreement was reached with France, however, to share the rich oil land with other powers"; branch of the pipeline may go to "Tripolis, the French port."

J. Simpson, Farmers Union pres., repeats charge that Farm Board is speculating in wheat and cotton; further charges Board purposely brought down prices and advised bankers to demand payment of farm mortgages to ruin individual farmers and force consolidation into 50,000 acre units; says proposed government drought relief would not be worth a dime to farmers by the time it reaches them. Farm Board chair. Legge says not finding it necessary to buy much wheat currently; total cash and futures holdings now exceed 130M bushels; may control the entire wheat carryover next spring. Editorial: US wheat exports were 149M bushels in the second half of 1927; 100M in 1928, when farmers were advised to hold their wheat for higher prices; 89.0M in 1929, and 86.6M in 1930. The Farm Board has failed at its stated objective of effective commodity merchandising; world prices are now far below the US price, making the surplus impossible to sell normally.

Southern Assoc. of Commissioners of Agriculture discusses state regulation of cotton planting, with fines and imprisonment for farmers exceeding allotted acreage; C. Williams of the Farm Board says 1931 cotton crop of more than 12M bales would be disastrous for South.

Editorial by T. Woodlock: Important cause of the depression is serious dislocation of the price relation between commodities and services. This has severely lowered buying power of farmers while raising that of wage earners and the "rentier" class; natural result is unemployment for workers and reduced income for "rentiers." Prosperity must come by restoration of balance; underlying reasons are hard to fathom, but history shows many precedents for mankind's ability to pull itself out of almost any difficulty. "If one wanted to cultivate a cheerful view of the future, a good way to do it would be to read the annals of the past ..."

House Appropriations Committee recommends $11.370M for Prohibition Bureau, $2.370M over current appropriation, but $161,180 under budget estimate due to committee's refusal to grant salary increases and small sum for furniture and fixtures.

Pres. Hoover issues proclamation asking country to donate $10M to Red Cross for drought relief. Rep. Ackerman (R, NJ) proposes issuing a billion special 2-cent stamps to be sold for 3 cents, with proceeds to go to Red Cross to aid destitute in drought areas.

NY Gov. Roosevelt asks Legislature to act on $48M for public works before taking up annual budget.

Market commentary:

Market wrap: Stocks continued weak early, leaders declined while oils, Westinghouse and Vanadium were particularly pressured. Trading settled into a narrow range at midday; some tentative rallying developed in afternoon trading. Bonds generally weak; US govts. firm; foreign lower; corp. lower across most of the list. Commodities narrowly higher; wheat firm on reports renewed Farm Board operations.

Conservative observers more cautious; some now believe the recent market rally may have moved ahead faster than warranted by business fundamentals. Some observers are watching action of leading stocks, believing when they break out of the recent range this may signal which direction the next move will go.

Over the past few weeks, ease in money rates has started spreading from short term rates in NY City to longer term rates. Banks have reduced rates on deposits, while the bond market has staged a spirited rally. Corporations have revived some planned bond financing and projects abandoned last fall.

Demand for new bond flotations was reportedly below expectations, though some attributed this to a temporary oversupply; call money remained very easy and rates on bankers' acceptances (30 - 180 days) were lowered to 1 5/8% - 2%.

Banks over the past 2 weeks have reported increased government security holdings and reduced other securities, but this is attributed to year end operations; the trend is anticipated to reverse in the next several weeks.

Rail stock that has increased the most in the recent rally was Chicago & Alton, up over 200%. The road was purchased by the B. & O. out of bankruptcy; the B. & O. bankers have stated the stock has no value.

Some negative surprises similar to Texaco's announcement yesterday may be upcoming from other companies, particularly from those that only report annually.

Broad Street Gossip: Short selling by big operators has recently increased; "considerable selling has come from Florida winter resorts, now the headquarters for several of the largest bears." US Steel backlog of 3.943M tons compares favorably to the past four years; backlog was lower than this at some times when mills were at 80%-90%. Editor: Wage earners who have kept their jobs with no cut in pay have the best of it; their cost of living should easily be 20% less than a year ago. One NYSE broker has advised clients optimistic on 1931 to establish tax losses now rather than waiting until conditions may not be favorable.

Economic news and individual company reports:

Bethlehem Steel directors sued by four stockholders asking return of bonuses paid them since 1911, totaling $36.5M.

Nat'l Conf. of Insurance Commissioners investigate recent disclosures that investment banks having no interest in life insurance policyholders can get control of companies and substitute paper of doubtful value for insurance reserves.

Rail freight loadings for holiday week ended Jan. 3 were 615,382 cars, up 76,963 from prev. week, but down 160,373 or 20.6% from 1930 week, and down 183,300, or 22.9% from 1929.

Corporate financing remained very low in Dec.; total corp. sales of bonds, notes, and stocks were $159.9M vs. $156.4M in Nov. and $311.7M in Dec. 1929. Full year total was $5.920B vs. record high of $11.007B in 1929 and $8.474B in 1928.

Steel production was at 40% in week ended Mon. vs. 36% prev. week and 24% in holiday week; production a year ago was 65%. American Machinist reports improved machine tool orders and inquiries since start of new year.

Sales of 24 chain store and mail order cos. in Dec. were $351.3M, down 9.2% from 1929; full year was $3.341B, down 1.6%.

Total US electric output in 1930 was about 95,300 GWHr, down 2% from 1929 but up 8.5% from 1928. Comparison with 1929 has worsened through the year; Nov. production was down 6.7% from 1929.

Indications seen of imminent cuts in crude oil prices; Texas independents are already buying at lower prices. Potential supply remains excessive; future prices depend on further curtailment and timing of general economic recovery. Typical grade of midcontinent crude will be cut 25 cents, to 70 cents/barrel. Price cuts and lower volume will adversely affect earnings; several companies seen likely to cut dividends.

National City Bank [predecessor to Citigroup] reports current operations profitable with net of $21.4M for 1930, but decided to mark securities held down to market at year-end, resulting in drop of about $40M to surplus and reserves. In response to question whether they contemplate expansion to regain position as largest bank [now Chase National], chair. Mitchell replies: "We do not have our mind on size as much as quality."

Lloyd's reports world shipbuilding in fourth quarter was lowest since 1926; sharp decline in Britain and Ireland, US gains to almost 10% of world total.

Agriculture Dept. reports farm prices firmed in the first 10 days of Jan.

Some New England textile mills have reduced wages by 10%, though other manufacturers strongly oppose any reductions; for example, the large mill town of New Bedford has not instituted any cuts [in the 19th Century, New Bedford was a large whaling city; Herman Melville was a whaler there before writing Moby Dick].

Tire shipments in Nov. were 2.834M vs. 3.499M in Oct. and 3.339M in Nov. 1929.

Companies reporting decent earnings: Procter & Gamble, R.J. Reynolds Tobacco, Sweets Co. of America, National Licorice.

Movie:

Almost a Honeymoon - Light British farce about young love. A penniless young Englishman must marry in 24 hours to get a job in the foreign service; failing, he gets drunk and returns to his old apartment, forgetting he moved that day, and awakens to find a girl in the adjoining bed. Not hard to guess ahead from complication to complication, except where the man's butler is concerned. [I love that even penniless Englishmen get to have butlers.]

At the galleries:

Exhibit of twenty-odd abstract paintings by Picasso at the Valentine Gallery "will serve to edify and instruct those unfamiliar with abstractions, as well as confound those whose tastes do not concur with them. One can no longer igore the genius of the artist ... an explorer with unsurpassed intrepidness." Henri Matisse, the co-leader with Picasso of the School of Paris, exhibits some forty-five sculptures at the Brummer Gallery; seem more experimental than his paintings. A very original exhibition by Hilda Rebay at the Wildenstein; her best work is "in the manipulation of scraps of colored paper ... to say the least, a vivid talent." Erlich Galleries are showing fifteen master paintings, including portraits by Rembrandt, Titian, Van Dyck, and Rubens.

Jokes:

"Two pickpockets had been following an old man whom they had seen display a fat wallet. Suddenly he turned off and went into a lawyer's office. 'Good lord,' said one; 'a fine mess. Wot'll we do now?' 'Easy,' said his mate, lighting a cigarette. 'Wait for the lawyer.'"

"Mrs. Newly Rich - Yes, all real antiques. Some of our chairs go back to Louis the Fourteenth. Mrs. Not So Rich - Same with us. Our dining room set goes back to Hartman's on the fifteenth."

Tuesday, January 13, 1931: Dow 167.99 -3.72 (2.2%)

Assorted historical stuff:

Editorial by T. Woodlock: A first look at the 1930 Census figures shows a steady growth in US population of about 1.6% annually; present enthusiasm for birth control may be partly due to this trend. However, a closer look by Dr. Dublin of Met. Life Ins. shows that the past trend reflects two conditions that don't exist anymore - a past large influx of immigrant children who are now of childbearing age, and the relatively higher fertility of US natives a generation ago. Were it not for these conditions, our population might be roughly stable. This would cause profound changes in national life, some of them hard to foresee; in particular, our business psychology has been "created in an atmosphere of great expansion."

Undersec. of Treasury Mills says outstanding govt. achievement of past 10 years is management of public finances: when Republican administration took office, it faced a war debt of $24B with early maturities of $7.5B and high interest rates; debt has been reduced $8B, annual interest $430M, and annual taxes $1.8B.

Editorial: An increasing number of American business leaders is calling for revision of Allied war debts. Notably, Pres. Wiggin of the Chase National Bank recently joined the movement, advocating it without reference to fairness, as an expedient business decision. Matter is likely to become urgent when Germany decides to delay the postponable part of itsYoung Plan payments; Allies are likely to insist on similar forgiveness.

Editorial: After failing to do its constitutional duty in 1920, Congress has made a reapportionment under the 1930 census. The National Civic League [a dry organization], concerned this will increase representation of "large wet cities" by about 30 congressmen, is attempting a desperate end run in the form of a new constitutional amendment to undo the reapportionment. "Apparently hope springs eternal in the Prohibition breast."

The Senate will never learn; “Periodically it has to go barging up Pennsylvania Ave. ... until it reaches the White House. After calling numerous political epithets at the occupant thereof, it sticks out an uncovered jaw at an angle so inviting that even the most docile could hardly resist putting a haymaker in the vital spot. Very frequently the Senate has been so dazed by the result ... that it did turn to the prosaic business of legislating for several days. Perhaps Pres. Hoover's power commission statement [refusing to resubmit the nominations] will have that result.”

Sen. Couzens (R, Mich.) disagrees with Chase pres. Wiggin's advocacy of cuts in Allied war debts and US wages.

Chinese Fin. Min.. Soong says China doesn't favor proposed loan of silver, would not help trade situation; Shanghai bankers say difficulties not due to lack of metal but to its deflated value.

Total US fire losses in 1930 about $465M, up 10% from 1929.

Port of NY Authority recommends construction of new Midtown Hudson Tunnel at 38th St and 9th Ave.

Average NY City temperature in Dec. was almost exactly normal, a little below 40 degrees; there were two days of 20-degree cold.

Nathan Straus, Jewish-American leader, dead at 83; successful in department store business, pioneered use of pasteurized milk in large cities, Zionist.

A Cleburne, Tex. man has concluded there is no future in the snake oil business, after two years of experiments with rattlesnakes. Thirty years ago, snake oil was commonly listed on patent medicine labels, but the food and drugs act changed all that; now the product is a genuine white elephant.

Sydney, Australia is making beach swimmers safer from shark attacks by flying an airplane patrol that drops a red flag upon spotting sharks.

New York electrical experts are reportedly working on an apparatus to electrocute flies. Plan is similar to Edison's cockroach eradicator, one of his first inventions. Plagued by roaches in his room over a Boston restaurant, Edison hooked two strips of tin foil on a wall to a battery; the device killed so many roaches that he decided to leave the idea unpatented for the benefit of humanity.

Market commentary:

Market wrap: Stocks opened weak on accumulated sell orders, and worked lower for most of the session; rails declined, with weakness then spreading to industrials and the general list. Bond market quieter; US and foreign govts. firm; corp. generally lower, rails weak. Commodities mixed; grains mostly higher; cotton lower; copper unchanged at 10 cents with moderate buying.

Conservative observers more cautious; while still advising accumulation of standard stocks on reactions, advise stop-loss orders to protect against sharp decline.

Industrial authorities expect seasonal improvement in Jan. and Feb., but are unwilling to predict results after the spring bulge; results depend considerably on world conditions in coming months.

Long operators reportedly have been supporting their favorites on a scale during recent reactions; a contest is in progress between bulls and bears, and market observers are watching developments closely to anticipate the near future.

Broad Street Gossip: Part of recent stock rally attributed to hasty rebuying of tax-loss selling. Nov. rail earnings show rails getting better control of expenses; for the first 6 months, gross was down 12.27% while net operating income declined 33.11%; for Nov., gross declined 20.21% while net only declined 28.36%. Some bulls are disappointed in the slowness of the recent market rise, but conservatives would prefer a moderate rally as we've had so far; from Dec. 30 to Saturday, the Dow industrials have recovered 11.55 while the rails were up 11.98. This compares with a decline from high to low of 1930 of 136.56 in the industrials and 66.29 in the rails.

Harvard University disclaimed any responsibility for forecasts made by the Harvard Economic Society.

J. Barringer, Nat'l. Cash Register GM: “In the not distant future, we will be enjoying an era of prosperity equal to that of 1929.

R. Dunlap, Asst. Agriculture Sec.: “The outlook for agriculture in 1931 is certainly brighter than it has been in the year just passed.”; demand should improve in second half; “probability is good for more favorable climactic conditions - certainly there will be no such drought as was experienced in 1930.”

Col. A. Woods, chair. of President's Emergency Employment Committee, says depression has reached its worst point and next move will be upward; employment conditions aided by public works totaling $2.5B in process.

Economic news and individual company reports:

Dr. M Winkler recommends changes in banking practice and supervision for greater depositor protection, most importantly that all banks be required to pay a percentage of earnings annually to the state to be held as a "Depositors Guarantee Fund."

Bank of US bankruptcy hearing continues, delving into complex transactions between the bank, its officers, and various affiliates. D.A. Crain offers to appoint Max Steuer as Special Assistant D.A. to investigate the Bank.

Dominick & Dominick note unexpected success of oil curtailment efforts in 1930: world production was about 1.404B barrels, down 6%; US production 900M vs. 1.004B; only country to substantially increase production was Russia, up 23M. Prosperity of oil industry in coming year to depend on curtailment by refiners; with a 7% cut by refiners, it's believed gasoline could be stabilized at a profitable level for the summer.

About 1,549 chain store units opened in the US in 1930, about 50% fewer than in 1929.

Record high of $347.6M in corp. industrial bonds to mature in 1931 vs. $338.8M in 1930 and $242.2M in 1929.

Canadian Bank of Commerce Jan. letter reports business in Canada in past 2 months followed smoother course than world business; activity relatively stable at levels somewhat below Nov., some irregularity in industrial operations. Canadian industrial production lower in 1930 than in 1929 or 1928, but compares favorably with any previous year; in first 11 months steel production down 27%, construction contract awards down 20.6%, commodity index Nov. was 79.8, down 16.6% from 1929.

British Dec. imports were 89.6M pounds vs. 79.4M in Nov. and 106.6M in Dec. 1929; exports were 38.5M vs. 44.1M and 58.4M. Sweden has moved from trade surplus of 42M kr. in 1929 to deficit of about 130M in 1930.

F. Perkins reports NY State index of factory employment declined 4% from Nov. to Dec., reaching new low of 77.5 (average of 1925-27 = 100).

Virginia leaf tobacco sold at new low record of 9.48 cents/pound for season through Dec. 31, vs. $18.03 in 1929.

American Furniture Mart at Chicago had record opening-week attendance of 3,370 buyers.

American Stores Dec. sales were $13.3M, up 1.1% from 1929; full year $142.8M, down 0.4%. Kroger Grocery sales for 5 weeks ended Jan. 3 were $25.4M, down 5.4%; full year $267.1M, down 6.8%.

Texas Corp. (oil) expects 1930 net under $1.52/share vs. $5.12/share in 1929; current annual dividend is $3. Western Union expects 1930 net about $9.30/share vs. $15.11 in 1929; lowest since at least 1921. Curtis Publishing (Sat. Evening Post) reports advertising is now running behing 1930 pace; earnings in first half 1930 were above 1929.

Companies reporting decent earnings: Continental Can, A.G. McKee (engineers/contractors).

Joke:

"Movie Director - Now, here is where you jump off the cliff. Nervous Actor - Yeah, but suppose I get injured or killed. Movie Director - Oh, that's all right. It's the last scene in the picture."

Waiter - You sometimes find a pearl in an oyster stew. Customer - I'm looking for oysters.

Monday, January 12, 1931: Dow 171.71 +1.53 (0.9%)

Assorted historical stuff:

Washington report: House Banking and Currency Committee to consider proposal to suspend foreclosures by Federal Land Banks in drought stricken areas for 12 months; considered very unlikely to pass. Wickersham Commission seen less likely than ever to advocate modification of Prohibition. Philippine independence likely to come before Congress in the foreseeable future, though possibly not this session.

Sen LaFollette (R, Wis.) reports results of questionnaire distributed to 303 cities with total population of 16M shows 15.8% of workers unemployed.

Editorial: The Senate's 44-37 vote to call upon the President to resubmit his nominations to the Federal Power Board indicates they are willing to "wrench the machinery of government out of its constitutional shape to gain a single immediate end." It will necessarily provoke a fight to the finish over the constitutional powers of the President and Senate. There's no real issue of public interest here, since the Senate can regulate the power industry in any way it sees fit; as Sen. Dill tacitly admits, the purpose of the motion is to raise the power issue for the 1932 election and inflict an early and conspicuous defeat on Pres. Hoover.

Senate passes Jones bill providing $1M annually for maternity and infancy welfare work by Federal Govt. in cooperation with states.

AP Moscow reports G. Grinko, Soviet Commissar of Finance, presents plans for 1931 budget of 31.750B rubles, or more than $15B, largest national revenue that a government has ever known.

St. Lawrence Water Power Board appointed by Gov. Roosevelt recommends distributing power generated by public plants there through existing private utilities.

The Confederacy of the Iroquois, formed in the 16th century, "is said to be perhaps the best example of a representative form of government ever evolved by uncivilized man." Confederacy was made up of five nations - the Mohawks, Oneidas, Onondagas, Cayugas, and Senacas; it was formed for defense against the Algonquin Indians, who at the time surrounded the Iroquois on all sides.

A popular form of summer vacation in Central Europe is the cross-country tramp; rich and poor alike put on heavy walking shoes and carry knapsacks containing a toothbrush and other toilet articles; moderately priced hotels cater to this trade across the rural regions of Germany.

Much trouble is caused at the start of every year by legal documents inadvertently dated with the old year. Even wills are sometimes wrongly dated, causing endless trouble at the maker's decease.

US air travel fatalities decline; only two people were killed in scheduled airplane flights in the second half of 1930, vs. 22 in the first half; the number of passenger miles flown is estimated to have gone up slightly. US had 1,782 airports and landing fields on Dec. 31 vs. 1,657 on last July 15.

Market commentary:

Market wrap: Stocks opened with heavy selling on accumulated orders; volume then dried up but a rally began under leadership of US Steel; improvement continued almost to the close, when some irregularity came in. Bond market active but irregular on profit-taking; US govts. quiet, narrowly mixed; foreign irregular; corp. mixed with speculative relatively better. Commodities narrowly mixed; corn weak.

Week in review: Unlike a year ago, businessmen are being notably conservative in their forecasts; examples included recent statements by W. Atterbury and P. Warburg. Stocks over the past week likewise improved but in cautious fashion; notable weak spots in industries facing uncertainty, including chemicals, rubber, and copper. Money continue to ease following year-end irregularity. Bonds advance sharply in unusually active market. British gold drain appears to be slowing. Plunge in silver concerns market, is reflected in Chinese currencies. Steel operations rise; grain prices firmed through most of the week; cotton in narrow range.

Market observers concerned about increased volume on breaks, believe is warning a technical reaction might develop. Also concerning some observers is the persistent upside resistance encountered by industrials in the past few sessions as rails have rallied into fresh high ground. Yet another concern is recent price declines in silver and in some industries including copper, chemicals, and tires.

Decline in silver attributed mainly to Chinese situation, though general commodity weakness, overproduction, demonetization, and sales by other countries are also contributing. Large silver loan to China being considered by Senate Foreign Relations Committee for stabilization is seen having dim prospects.

After a recent lull, bear traders reportedly consider time right for resumption of aggressive selling; expected poor earnings reports should create opportunities to subject leading stocks to tests of Dec. lows.

Some bull traders are now favoring issues that have been thoroughly liquidated, including fertilizers, sugars, and textiles.

Among specific industries, steel is expected to have poor Q4 earnings, while amusements are expected to hold up relatively well; some observers expect rails to give a relatively good showing in the first half due to expense cuts. Long-range forecasters now see continued unfavorable earnings in Q1, look for a moderate increase in Q2 and a good gain in Q3 that could carry through the final quarter.

Steel observers are encouraged by stronger scrap prices in some districts, although several false starts were made in scrap markets last year.

Broad Street Gossip: Brokers' loans have declined from $6.804B on Oct. 2, 1929 to a recent total of $1.879B. Bankers see this as indicating the strongest brokerage position in Wall Street history. Many houses report more credit balances than in 25 years; while most traders are bullish, they are cautious and either own stocks outright or on small margin. Many lines of industry have had to go on a diet thanks to overproduction, but should now be in a fair way for recovery. One banker's opinion: "Industry has learned its lesson, and I feel that hereafter there will be greater stabilization in production. Overproduction is our greatest economic evil, bad for the manufacturer, the wage earner, and everyone else."

W. Head, former Amer. Bankers Assoc. pres., sees "strong reason for believing that business will be on the upgrade throughout most of 1931," although earnings reports to be received in the next month or two will be poor.

W. Everts, Boston lawyer and Harvard graduate, sharply criticizes "ill-timed optimism" of Harvard Economic Society, questions whether Harvard might be wiser "to discontinue its role as prophet and stick to education."

A. Wiggin, Chase National Bank chair., recommends reduction of capital gains tax rate to 7.5% to help market; unsure of recovery timing, but believes we're near bottom, next important move will be upward; policy of maintaining wages and prices together with easy money has failed, markets and prices should be freed.

T. Watson, IBM pres., optimistic on 1931: "the new year cannot fail to be better generally ... if we will all have optimism, tempered with sound business judgment, we shall be moving forward at a satisfactory rate within a reasonable time."

Economic news and individual company reports:

Leading sales executives generally satisfied with results of NY Auto Show as reflected in actual orders booked and in dealer interest; attendance was somewhat below a year ago, but floor salesmen described visitors as a “buying crowd” rather than a “curiosity crowd.”

934 banks failed in 1930 involving $908.2M in liabilities vs. 437 for $218.8M in 1929. General business failures totaled 26,355 with liabilities of $668.3M vs. 22,109 for $483.3M.

J. Fairchild, Kings County Trust pres., gives principles that have guided the bank through 41 stable years: no overexpansion, no buyouts or mergers, money invested for clients impartially, with no securities of their own to sell.

Fisher's wholesale commodity index declines for 5th week in a row, to 78.3 for week of Jan. 9, vs. 80.7 for week of Dec. 5.

Fed. Reserve reports department store sales increased 50% from Nov. to Dec., but decreased 12% from Dec. 1929, adjusting for number of sales days. Sales for the full year 1930 were down 8%.

US Steel unfilled orders as of Dec. 31 were 3.944M tons, up 303,960 in the month, more than expected. Buying since Dec. has been higher than expected; while US Steel officials would be satisfied with a 50% production rate by end of Feb., some observers believe 55%-60% could be reached by end of Jan.

$2B steel merger rumored among Bethlehem, Republic, Youngstown Sheet & Tube, Jones & Laughlin, Corrigan-McKinley, and Otis; company interests deny rumor as "a figment of the imagination."

Large chemical companies have stopped price cutting by withdrawing from the market and announcing new price levels above the lows reached; however, the new price level is 15%-20% below former prices, and a large volume of business was booked at lower prices.

Editorial: A tentative sugar stabilization plan involving export quotas has been arrived at by the world's producers. In view of the importance of the industry and its current precarious position, with a huge surplus inventory being added to each year, this attempt will be watched "with anxious and sympathetic interest." If the plan doesn't work, "there is an economic law, cruel as it is inexorable, known as survival of the fittest, that must come into action ..."

Cuban govt. revokes 30% salary cuts to avoid severe drop in national income.

British govt. expected to borrow further $200M to maintain dole.

NY Real Estate Securities Exchange completes first year of operation; year's total trading volume $3.887M.

Two large meat packers, Armour and Swift, had a total 1930 gross of $1.8B; net was about $17M, or less than 1% of gross.

Total construction permits in 22 West Coast cities in Dec. were $18.6M vs. $13.0M in Nov. and $12.3M in Dec. 1929.

Nebraska is one of five states with no bonded debt.

Price of NYSE seat has rallied from low of $186,000 on Dec. 31 to $290,000 on Saturday, one of the sharpest changes ever.

Firestone announces cuts in tire prices of 6.5%-12%.

Paris report:

The holiday spirit lingers on after the New Year in Paris; visitors en route to the Riviera or Egypt pause to enjoy it. Streetcorner stalls are piled high with purple violets from Northern Africa; chestnut vendors have this year modernized by adding American peanuts. Street singers are in fashion, mixing the latest American musical hits with songs from Brittany and Provence. Theaters mostly feature revivals of French plays, including Topaze and Apres l'Amour. Although the tourist season hasn't started yet, US entertainers are well represented; Josephine Baker is the star at Casino de Paris, playing to packed houses in spite of controversy; the Marx Brothers are appearing at the Pantheon, together with their film Cocoanuts; No No Nanette is playing at the Mogador.

Joke:

"Sergeant - Did you give the man the third degree? Constable - We browbeat him, badgered him, threw him down the stairs, and asked him any question we could think of. Sergeant - What did he do? Constable - He dozed off, and merely said, now and then: 'Yes dear, you are perfectly right.'"

Weekly Blather Jan. 11, 1931

No Journal was published Sunday, Jan. 11, 1931. I was going to finish up the year-in-review stuff but didn't have time since I'm preparing for a talk Wednesday - will have to catch up later. For those of you who missed the videos this week, they're worth a look, but not if you're susceptible to nightmares - for some reason they were all disturbing this week.

Paid - excellent melodrama; Joan Crawford gives her finest dramatic performance yet in the lead. Story is "the familiar one of the poorly paid department store girl who is sent to jail for three years for a crime she did not commit." Upon release, she comes up with a scheme to take revenge on the department store owner using methods just within the law. A short clip containing a rather disturbing prison shower scene from the movie:

Play "Joan crawford in Jail!" on Youtube

Mary Wigman, "foremost exponent of the modern dance in Germany," appearing at Jolson's Theatre and Carnegie Hall. Appearance here has aroused more interest in dance as art form than anyone since Isadora Duncan. Dancing characterized by robust force and genuine independence; "vigorous technique is founded on long years of work in the gymnasium ... varied bodily movements which have been partly acquired from the Orient ... attaches great importance to the hands." A short clip containing a rather disturbing “Witch Dance” by Wigman:

Play "Mary Wigman's Witch Dance" on Youtube

The Criminal Code, a prison film. Although Walter Huston is distinguished as the warden, best performance is by Phillips Holmes as young man imprisoned for an unpremeditated crime who falls in love with the warden's daughter. Also excellent in minor roles are Boris Karloff as a murderer and Clark Marshall in a hysterical performance as Runch, the "squealer." A short and disturbing clip - by some accounts, this performance led to Karloff being cast in Frankenstein later in the year:

Play "Boris Karloff: The Criminal Code" on Youtube

OK, I guess I have to include at least one non-disturbing clip - here's a 1929 fashion show, in Technicolor and with sound! I believe skirts were quite a bit longer by the time 1930 and 1931 rolled in, but it was fun while it lasted:

Play "Color Fashion Show From 1929" on Youtube

Saturday, January 10, 1931: Dow 170.18 -2.86 (1.7%)

Assorted historical stuff:

Editorial: Pres. Hoover, recently said that the livelihood of 10% of the population was directly or indirectly dependent on the auto industry. In fact, if one follows up all the products the industry uses this may turn out to be a minimum figure; for example, the auto industry uses 85% of all rubber produced, 67% of plate glass, 19% of iron and steel, 18% of lumber, 15% of copper, etc.; it's also a huge railway customer. This shows the large influence of the industry on general business conditions, for better or worse. It's therefore heartening to note that the industry appears to be improving.

Washington report: Continuing controversy flares in Senate over Power Commission members appointed by Pres. Hoover. The three commissioners, immediately after confirmation, ordered dismissal of three old commission members; insurgents claim the old commission was dismissed for "protecting the public interest," and the new commission members are too friendly to the power companies. The Senate is now considering unprecedented action to reconsider confirmations. Prospects considered dim for large loan to China being discussed in Senate; necessary international and Chinese cooperation doubtful. Oil tariff and Mexican land purchase also considered unlikely.

Leading industrialists are discouraging statements of exaggerated optimism, pointing to the over-enthusiasm a year ago when business improved somewhat.

Soviet govt. official radio laboratory at Leningrad announces plan for chain of high-power radio broadcast stations to be used as powerful tool for dissemination of propaganda for home and foreign consumption.

General strike voted by 34,000 workers in Swedish textile mills following failure of govt. efforts at arbitration. Talks to settle South Wales coal miners strike break off. British Cotton Manufacturers Assoc. votes to close all mills starting Jan. 17; this will affect 1,500 firms and 250,000 operators.

Race between "the stork and the reaper" is subject of perennial interest in France. In 1929, French deaths exceeded births by 12,564; the newly published Census reveals that France is suffering falling birthrate, decreasing number of marriages, and increasing death rate, while neighboring countries Germany Italy and Spain all registered large increases in population in the past year.

Transit Unification Bill seen likely to be approved in NY State Legislature with few changes; contains several measures to aid unification under Untermyer plan, expressly specifies maintenance of five-cent fare.

NY Superintendent of Banks J. Broderick's proposal for additional regulatory powers over banks expected to meet opposition from legislators, upstate banks; Gov. Roosevelt's attitude uncertain.

H. Riegelman, counsel for NY Multiple Dwelling Law Committee, proposes cooperation between city, State Housing Board, and private capital to eliminate slums and construct in their place model tenements, parks, and thoroughfares over a ten-year program.

Market commentary:

Market wrap: Stocks were higher for the first few hours with rails particularly strong; trend reversed in afternoon on profit-taking and renewed short selling; however, scale support was evident in most leading shares. Bond market mostly firm on less active trading; US govts. steady around year's highs; foreign govts. firm; corp. mostly higher, speculative issues strong. Commodities irregular, with mostly narrow changes; copper down to 10 cents with little buying, major producers out of market; silver down 1/4 cent to new record low of 28 1/2 cents.

Stock weakness attributed to Pennsylvania RR pres. W. Atterbury's statement that it would take four or five years to realize benefits from Eastern rail consolidation, and to sudden sharp plunge in Allied Chemical attributed to weakness in soda ash prices.

Conservative observers more cautious; continue to recommend accumulating good stocks on reactions, but advise using stop-loss orders for protection.

Asian currencies very weak on decline in silver; South American also weak. British gold drain appears to be slowing. Some export of funds from Germany, but this appears due to year-end factors.

Decline in both brokers' loans and security loans to non-brokers was a surprise to obervers, who had looked for gains based on the advancing market; the declines may be due to year-end influences.

Short covering in the past two weeks has reportedly reduced the outstanding short interest.

Cuba has suffered most from sugar price weakness, but as low-cost producer is best positioned to benefit from stabilization.

Alaska Juneau Gold Mining is first active stock to cross its 1930 high.

Broad Street Gossip: A trader in a certain Wall Street house has taken some large profits since the New Year, but now is concerned that he won't be able to establish any offsetting tax losses this year. Copper shares have been stronger on reports that important developments are likely to take place this year. One big financier believes bankers are now supporting the market naturally, not as part of a pool: "It is the opinion of bankers that things have been thoroughly liquidated, and they are ready to put in supporting orders for stocks in which they are interested. ... I don't say that the market will not have reactions, but it is my honest opinion that the trend this year will be upward in sort of a see-saw fashion."

Comptroller of the Currency Pole says US banks less affected by 1930 depression than by any previous one; 95% of bank failures due to fundamental defects in rural bank organization; only a negligible number of larger banks have experienced any difficulty. Thanks to Fed. Reserve system, there has been no tightness in currency or credit, and business will have the ability to recover at the earliest possible economically favorable time.

C. Neill, Royal Bank of Canada VP, says depression not due to overproduction, stock market collapse, political unrest, or lack of confidence; these are effects, not causes. Root cause is central bank policies; high rates in 1928-29 cut off credit to borrowing countries. Calls for cooperation of central banks in stabilizing prices and assisting creditor countries - it's precisely these countries that could use investment; US must play the major role. Calls for reform of central bank system; “privileges and restrictions under which such banks now operate are based mainly on tradition”; notes countries with fiat currencies, including Argentina, Uruguay and Spain, aren't suffering nearly as badly as gold-standard countries.

Editorial: P. Warburg's fine analysis of the world depression and its causes yesterday contains this heartening statement: "I do not hesitate to say that I believe that a few years hence the level at which some of our security sell today will look as incomprehensibly low as the prices paid for the same securities seemed unreasonably high long before the crash occurred in Oct. 1929." While this opinion is common now, it has additional force coming from a man who publicly criticized stock prices months before the 1929 panic. It's also notable that Mr. Warburg sees no obstacle to recovery in low commodity prices; rather, they are the logical result of automation and the counterpart of high wages in increasing buying power.

Economic news and individual company reports:

F.W. Dodge reports new construction contracts in 37 states east of the Rockies in Dec. was $249.9M vs. $253.6M in Nov. and $316.4M in Dec. 1929. Total for the year was $4.524B vs. $5.751B.

Operating income in Nov. for all class 1 rails was $62.1M, down 28.3% from 1929; this was a return on property investment of 2.55%; revenues were $398.8M, down 20.2%. First 11 months operating income was $834.5M, down 30.6% and a return of 3.41%; revenues were $4.965B, down 15.7%.

Dun's weekly review notes some seasonal trade improvement following holiday dullness, though less marked than usual; Bradstreet's notes encouraging reports of increased industrial employment since the New Year.

NY Auto Show is wrapping up. Main topic of industry discussion was consensus that new models henceforth be introduced in Nov.-Dec.; "leaders in the industry hailed this move as one of the most forward-looking steps taken in many years." Executives reported generally satisfied with public reception and interest; larger amount of actual business developed in many lines than expected. Dec. increase in auto output is unusual, since Dec. is usually the poorest month in the fourth quarter. While partly due to change in new model timing by some producers, observers are encouraged by the upturn and believe it may mark the final 1930 quarter as the bottom in auto production; further improvement is expected in the first quarter, though output should fall well below the 1.070M in first quarter of 1930.

German unemployed Dec. 31 were 4.357M vs. 2.851M a year ago; Dec. increase was not large.

Oklahoma state legislator D. Logan asks Congress for immediate embargo on imported oil followed by a protective tariff; believes unrestrained and excessive import of foreign oil is principal cause of the industry's present plight, and has contributed to general depression.

Ford Motor to resume general operations in Detroit plants Jan. 12, returning over 60,000 to work.

Great Northern and Northern Pacific Rwys. abandon merger attempt after failing to arrive at plan to satisfy ICC requirement to separate the Burlington.

A. & P. sales for 4 weeks ended Dec. 27 were $81.3M, down 6.7% from 1929; however, sales by weight were 417,163 tons, up 2.4%. Sales for 12 months ended Dec. 27 were $1.062B, up 3.3%; sales by weight were 5.173M tons, up 9.8%.

Group of Bethlehem Steel stockholders forms protective committee to modify the corporation's executive bonus system, and to seek restitution.

Aviation Corp. of the Americas, holding corp. for Pan American Airways, has shown losses in 1929 and 1930. However, sponsors believe that with pioneering work of establishing South American routes complete, company is now in a position to show return on investment.

Company reports since Jan. 1: 14 companies reported higher earnings vs. 1930 and 44 lower; 92 dividends unchanged, 2 increased, 12 cut.

Companies reporting decent earnings: Equitable Office Bldg., Universal Leaf Tobacco.

Movie:

Paid - excellent melodrama; Joan Crawford gives her finest dramatic performance yet in the lead. Story is "the familiar one of the poorly paid department store girl who is sent to jail for three years for a crime she did not commit." Upon release, she comes up with a scheme to take revenge on the department store owner using methods just within the law. [A short clip containing a rather disturbing prison shower scene from the movie.]

Dance:

Mary Wigman, "foremost exponent of the modern dance in Germany," appearing at Jolson's Theatre and Carnegie Hall. Appearance here has aroused more interest in dance as art form than anyone since Isadora Duncan. Dancing characterized by robust force and genuine independence; "vigorous technique is founded on long years of work in the gymnasium ... varied bodily movements which have been partly acquired from the Orient ... attaches great importance to the hands." [And a short clip containing a rather disturbing witch dance by Wigman.]