Evening Star Newspaper, December 31, 1934, Page 15

BUSINESS -REVIEW. TRUCE MARKS NEW] RECOVERY PHASE Bank Peace Announcement May Go Down in History as Milestone. BY FORREST H. GRAVES. (Cambridge Associates’ Staff.) Future economists may well select October 24, 1931, as one of the sig- nificant dates in the history of the great depression. It was on this date that the truce between bankers and the administration was publicly acknowledged and what may be con- sidered recovery's third phase was officially and conspicuously launched. Still conscious that they had been called “money changers,” still rankled by an invidious and, in many ways, unfair comparison with their British brethren, disturbed by numerous ru- mors of distasteful banking and monetary legislation and, to an even greater degree, distressed by sem.- official discussions concerning the establishment of a central bank, mem- bers of the American Bankers' Asso- ciation gathered in Washington for their annual convention. Disquiet, however, was not the exclusive monop- oly of the bankers. The administra- tion had troubles, too. The drive for recovery had slowed to a halting am- ble, with the Midsummer months bringing a business recession of more than seasonal proportions; prices of United States bonds had shown a tendency to slump, expenditures for relief and other administration proj- ects were still on the ascendant and the Treasury’s recent new financing efforts had achieved a success that was little more than Withal, the chorus of criticism from business and financial sources was be- coming more vocal and increasingly acid. Scene Stage-Managered. This was the background for the burying-the-hatchet scene, but the scene itself gave unmistakable indica- tions of adroit stage-managering by the more far-sighted banking leaders some time before. The reasoning be- hind it was thus. Pre-election reports made it apparent that willy-nilly bankers, business and administration would have to get along together for some time to come. Approximately 55 per cent of out- standing Government obligations were held by the banks. Any impairment of Government credit, any failure of the recovery drive or of Govern- ment financing would eventually force the Government into more un- orthodox and inflationary methods of supporting its activities. Therefore, any serious and concerted attempts by the bankers to embarrass the ad- ministration would simply be sawing off, on the tree-side, the limb they were all sitting on. The big city bankers recognized this. That pure, unadulterated love for the administration may not ha-e motivated the rank and file may be inferred from the enthusiasm with which several speeches attacking New Deal policies were received during the opening days of the convention. Those discordant voices were hushed, however, and the spotlight was ex- pertly and dramatically focussed upon Jackson E. Reynolds, president of the First National Bank of New York, as he made the speech which introduced President Roosevelt on the final night of the convention. Bearing the olive branch, he posed three very pertinent questions regarding the need for re- lief, the feasibility of selecting a date for balancing the budget and the de- sirability, from an international view- point, of definite stabilization of the dollar at the present time. No Brow-Beating. President Roosevelt, in his talk that followed, scarcely touched on the specific points which the bankers hoped to hear discussed. On the other hand, there was no attempt at brow-beating and the majority held that his remarks were ‘‘con- ciliatory in tone.” That he yielded, 50 far as this occasion is concerned, on any important policy is impos- sible to assume, but both before and after the bankers' convention there have been increased efforts by the administrators to encourage “pri- vately owned agencies to take up the slack.” This truce, like any compromise, was hailed with hardly more than perfunctory hosannas by either side. There is a general feeling, none the less, that a new working basis be- tween Government and finance has been formulated which augurs well for the future. Such an assumption is substantiated by recent business in- dices and, more particularly, by the success of the Treasury's December financing operations, CARRIER MAY PURCHASE ELECTRIC LOCOMOTIVES By the Assoclated Press. NEW YORK, December 31.—The Elgin, Joliet & Eastern Railway Co. is contemplating the purchase of from one to five Diesel electric locomotives, according to Railway Age. The Chesa- peake & Ohio has ordered 10 light weight steel hopper cars of 50 tons capacity from the American Car & Foundry Co. indifferent. | STOCK PRIGESFAIL 10 HINT FUTURE No Clues Given This Year Whether Major Bear Move Is Ended. (Continued From Page B-1.) the regimentation—to use a term in- vented by the opposition—of industry and agriculture. It is possible, then, to interpret the indecision of the market movement of 1934 as indicative of a fairly even balancing of the favorable against the unfavorable. It is also possible to say that all that was indicated was a com- plete inability to reach a verdict one way or the other just because the issues were too poorly defined. Gold Shares in Demand. The inflation psychology was best typified by the gold mining stocks. They were the popular mediums for those who felt the urge to hedge against inflation, and this was true not only of the New York market, but in London and on the continent of Europe. . As always happens, over-speculation developed, with promoters taking ad- vantage of the situation to market stocks of doubtful value—to put it mildly. The gold shares advanced in May and June, reacted slightly in July, advanced again robustly in August and have been declining since, with a minor rally late in December. A speculation sometimes parallel and sometimes divergent developed in the silver stocks. This was partly in anticipation of general inflation, but more in expectation of an advance in the price of silver, due to Government buying. Here also overspeculation developed, with consequent abrupt re- actions. Now it is at once obvious that a rise in these metal stocks was not in- spired by any growing confidence in business revival. More often it was just the reverse. The case is different with the public utilities. The mar- ket for that group of stocks did di- rectly reflect the prospects of the in- dustry, and those prospects were and are dark. The public utilities in the Fall of this year almost duplicated their de- pression lows. For them it was still & bear market. If their prices be re- duced from a gold basis, they were lower in 1934 than they were in 1932, and comparison is only fair if such a reduction is made. The reasons for this continuous sagging of the utilities are well known. Their income at best was stationary and at worst declining, while their costs were always advancing. These costs went up with the N. R. A. codes and with rises in wages and in the prices of materials. Taxes increased enormously. Finally, and just as important was the attitude of the Government, as typified in the Tennessee Valley Authority. It is not going too far to say that the market feared Govern- ment competition with private man- agement to the extent that, under the auspices of the Government, a part of the cost of producing and dis- tributing light and power would be assessed against the taxpayer. That meant ruin for the utilities. Rail Stocks Laggards. Railroad stocks made a much bet- ter showing than the utilities, but they lagged so far behind the in- dustrials that the believers in the Dow theory could not persuade them- selves that the rise in the industrials signified a resumption of the advance which culminated in July, 1933. It is only when we come to the industrials that any large degree of confidence is warranted. At one time or another during 1934 pronounced strength was displayed by the chem- ical stocks, the merchandising and mail order shares, the building con- struction issues, the packing stocks and various specialties. In most cases, the huge Government spending pro- gram helped—an influence particu- larly in evidence in retail trade. Higher prices for agricultural prod- ucts, plus Government assistance, raised farm purchasing power with great benefit to the corporations doing business with the farmer. The reser- vation here is the uncertainty as to what will happen when Government COLUMBIA A Home for Your Money Ample funds available for prompt consideration of applications for loans to modernize homes or to refinance existing trusts on homes. “Where Savings Are Safe” Members of : Federal Home Loan Bank System—D. C. Building & Loan League Money for Your Home! No Commission—I2 Years to Pay—No Remewals BUILDING ASSOCIATION 716 Eleventh St. N.W. Established 1907 THE EVENING STAR, WASHINGTON,.D. C, MONDAY, DECEMBER 31, 1934 - aid is withdrawn, but that considera- tion was not a market factor in 1934. ‘The story would not be complete without some reference to the effect on market values of the unprecedented accumulation of money. The 1934 in- vestment market was always strong. High-grade bonds sold on an approxi- mately record low-yield basis. Despite the increase of the national debt to & total never before equaled, the Gov- ernment was able to finance its re- quirements at progressively Jower costs. For the best corporate bonds, mar- ket prices approached the level fixed by prevailing interest rates, with lit- tle or no allowance for business risk. The demand for investment bonds was greatly stimulated by the lack of new offerings, partly the result of the working of the securities act and partly the result of already over- expanded production facilities. Eventually this investment demand spread to preferred stocks, and here, too, the best issues- sold at record priecs. The record of recovery from other depressions suggests that sooner or later this search for a means of employment for idle funds will extend to common stocks and forms the best basis for optimism for the future of the market. Effects of Federal Control. There remains to be considered the effect of Government control of trad- ing—an entirely new factor, one which never before entered into stock market calculations. This control did not be- come fully effective until the last quarter of the year, and enough time has not elapsed to speak positively about its working. The only reason- ably safe conclusion is that under control the volume of business is less than it would have been under the old order, other things being equal. Quite possibly stock market trad- ing would have been on a greatly re- duced scale this year without the law, but it certainly would not have been as low as it was. On the present scale brokerage houses cannot make ends meet. The trading machinery is equipped to carry, at the very least, twice the load now put upon it. Dras- tic economies have been put into ef- fect, but they are not enough, and the first of the year is bringing a series of consolidations, with the elimination of many long established firms. Wall Street is gratified at the evi- dent disposition of the Securities and | Exchange Commission to administer the law as reasonably as possible, but it is not reconciled to the situation. Its only hope is that the New Deal will not last forever. (Copyright. 1934, by North American Newspaper Alliance. Inc.) e < PR NEW FUEL SPURS SALES OF JERSEY STANDARD Special Dispatch to The Star. NEW YORK, December 31.—The introduction of its new premium motor fuel by the Standard Oil Co. of New Jersey on December 1 has necessitated a 250 per cent increase in anticipated production, officials of the company said in announcing that sales of this fuel are now twice as great as the sales of all other premium fuels com- bined. Additional stills have been placed in operation at the company’s refineries to insure an adequate sup- ply of this aviation-type motor fuel for the company’s 30,000 service sta- tions and dealers. HUGE 1335 GAIN 1S SEEN FOR STEEL Industry Is Given Flying Start by Advances Late in 1934. BY B. E. V. LUTY, Associate Editor, American Metal Market. Steel enters the new year with a well-defined swing, and that is not usually the case. In times of ordinary activity demand for steel has slipped in the last two months of a year, on an average, while seasonal improve- ment, beginning just after the turn of the year, was always marked, and favorable predictions for a new year rested upon precedent. As 1934 was drawing to a close de- mand for steel increased, quite contra- seasonally. September was the low month of the year in steel production, although only slightly under August, and each of the last three months of the year registered a gain of about 10 per cent over predecessor in average rate of output per working day. Given Flying Start. Thus the steel industry was given a flying start for the new year instead of having a backset to make up for first. The reasons were, first, im- provement in general underlying busi- ness conditions, and, second, absence of stocks in buyers’ hands to be liqui- dated against December 31 inventories. Seasonal improvement in the first three or four months of the new year may be taken for granted. The usual manner of referring to steel activity by citing production in percentage of capacity is apt to be misleading. The capacity on which the percentage figures are based is 51 per cent more than average production in the seven years 1923-29, inclusive, constituting a remarkable period of | activity, interrupted only slightly by two of less than six months’ duration each. Even production in the record year, 1929, was only 20 per cent above that average. Steel Ingot Output Up. Production of steel ingots in 1934 was slightly more than 25,000,000 gross tons, or 10 per cent over 1933 and 90 per cent over 1932, the worst year. It was 36 to 37 per cent of “capacity,” but was 55 per cent of the seven-year average. As matters now stand, production in. 1935 promises to be 20 to 35 per cent above that in 1934. With rail- road and building activity this fore- cast could be exceeded readily. \WORLD LEAD OUTPUT DOWN IN NOVEMBER| By the Associated Press. NEW YORK, December 31.—World production of lead in November was 123,192 short tons against 130,695 tons in October and 132,830 tons in November, 1933, the American Bureau of Metals Statistics reports. United | States production in November was 29,755 tons against 31,243 in October. NEW YORK STOCK EXCHANGE NEW YORK CURB EXCHANGE (Assoc.) ‘WASHINGTON STOCK EXCHANGE Municipal Telephone NEW YORK BALTIMORE Direct Private Wires to AUCHINCLOSS, PARKER & REDPATH MEMBERS Listed and Unlisted Stocks and Bonds Bonds—Commodities Accounts carried on conservative Margin. CHICAGO BOARD OF TRADE CHICAGO MERCANTILE EXCHANGE COMMODITY EXCHANGE. INC. (N.Y.) i | WASHINGTON 719 Fifteenth Street METROPOLITAN 3116 PHILADELPHIA WILKES-BARRE New York and Chicago Happy New Year —Financially Let us help you to make 1935 a year of satisfying financial achievement. Union Trust offers: —proven safety for your money $ —interested attention to your business plans -—sinecere appreciation of your patronage. Southwest Corner Fifteenth and H- Streets Northwest | il | Capacity of Steel Rolling Mills Is Boosted Sharply By the Assoclated Press. NEW YORK, December 31.—The steel rolling capacity of the United States was increased by 1,000,000 tons during 1934, and installations under way for completion in 1935 will add an additional 2,000,000 tons to the capacity of the industry, according to a survey which will appear in this week's issue of Iron Age. Commenting on this development the survey declares that “this ap- parently large increase in rolling mills is not as alarming as it may seem to those who consider the steel industry already overcapacitated.” “Continuous sheet and strip making facilities are rapidly rendering obso- lete a large portion of the old man- ually fed sheet mills. “During 1935 eight blast furnaces were scrapped or abandoned. These furnaces had an aggregate potential capacity of 2,500 tons a day.” The survey points out that the iron and steel code prchibits the construction of new blast furnaces, open hearths and Bessemer converters. —e COLOSSAL CREDIT FOUNDATION LAID R. C. Jones Predicts Gains in 1935 Without Resort to Inflation. With the foundation laid, Robert C. Jones, head of the investment bank- ing firm by that name, looks forward to 1935 as the year which will witness the return of confidence in business and high-grade investments, inaugu- rating a long period of business recov- ery. He explained: “The credit situation is distinctly better. Money rates are low and Gov- ernment bonds are higher. Bank de- posits throughout the entire country are more than 20 per cent higher than a year ago and demand deposits of the New York banks are over six billion dollars. “The excess reserves of the Federal Reserve member banks are in excess of $1,500,000.000, which is sufficient to support a colossal credit expansion without resort to currency inflation.” Established 1861—Oldest in Washington 1934—1935 As we review the past year, we take note of our splendid progress, but also with deep satisfaction that we realize home owners of Washington. As we enter our 75th year of helpful service, we pledge anew our desire to make loans on desirable D. C. first trusts, at 6% interest, with NO Renewals, NO Bonuses, and NO Commissions. ORIE 7 EFFORTS TO CREATE HARMONY IN RECOV D. C. BANKS FINISH MOMENTOUS YEAR | Deposits Mount $40,000,- | 000—Insurance Helps to Create Confidence. (Continued From Page B-1.) taken after the Washington Clearing House Association had reviewed the situation very carefully. Paying any interest on savings accounts has also faded out of the banking picture. The year 1934 saw Clarence F. Burton elected president of the Wash- ington Mechanics Savings Bank. Later this bank consolidated with the Mount Vernon Savings Bank and the Franklin National Bank, taking the name of the City Bank of Washing- ton. Dr. Burton became head of the merged banks while several officers in the other units joined the official staff of the new institution. Uniting of | | these banks, with the resumption of 100 per cent operations, brought the city’s financial map much nearer to normalcy. Later in the year the In- dustrial Bank, the only colored bank |in the city, reopened its doors. One | branch was opened in 1934, the office of the Bank of Commerce & Savings at North Capitol and H streets. One other new bank president was elected during the year, H. Prescott Gatley being chosen to head the Na- tional Savings & Trust Co. when Wil- liam D. Hoover stepped into a new | | position as chairman of the board | | after 25 years in the presidency. Pride ir. Fleming’s Election. While not directly connected with | the local bai yet the financial | district took great pride in the elec- tion of Robert V. Fleming to the | first vice presidency of the American Bankers' Association, which means that next year he will be accorded the highest honor that can be be- | stowed by his associates on any | banker in the United States. | The Washington Stock Exchange | | has enjoyed a highly satisfactory year, | considering general conditions. The | present officers are C. J. Gockeler, president; Y. E. Booker, vice presi- | | dent; Karl W. Corby, secretary, and | James M. Johnston, treasurer. New | members elected to seats include Paul P. Rodler, Karl R. Kurtz, James J. | Lemon, John C. Leggs, jr., and Edson B. Olds, jr. The volume of trading was well | maintained, as were prices. Quota- tions in some issues scored notable advances. Capital Transit stock and Mergenthaler Linotype were especially in the limelight because of sensational upswings in earnings. Bonds de- | LOANS Applications solicited for loans on centrally located business prop- || erty. Money supplied by a Life | | Insurance Company at en attrac- tive interest rate. D. F. McConnaughey 412 Union Trust Building Tel. . 0827 it is not only with pride that the help we have been to BUSINESS REVIEW. pendent on Capital Transit earnings climbed up the quotation ladder in a manner that caused gratification to holders. Under the chairmanship of H. H. McKee, vresident of the National Cap- ital Bank, the Washington Clearing House Association has efficiently handled many perplexing problems. The association’s most vital move re- lated to the standard measured service charges. The new schedule of fees adopted by the banks was drawn up by the clearing house. The new 2 o’'clock closing schedule, which goes into effect in all the banks on January 2, was also drawn up by the Clearing House Association and recommended to the banks for adop- tion. This action brought to a climax a matter which had been under discussion for several years and is of concern to every bank de- positor in the city and vital to all bank employes. Trade Picture Bright. Bank clearings as shown in the association’s monthly report have re- flected steady business progress during the year. In the first 11 months of 1934 canceled checks totaled $668,- 350,725, against $561,177,511 in the like 1933 period. This gain of $107,- 173,214 paints a vivid picture of the way business has gone ahead. | Retail trade in Washington wound | up the year in a blaze of glory. In| November sales in eight leading de- | partment stores were 25 per cent ahead | of the same month a year ago. In/ many stores managers have reported | December trade as the best in the past five years, or since the gepression | swept down upon the just and unjust. | For the first 11 months of 1934 trade | in the Capital was 20.4 per cent better | than last year. With the remarkable December records added, it will be well above that figure for the full 12 months, when totals are available. 2% B ERY RANKS SPUR HOPES BULDINGINDUSTRY ONRECOVERY ROAD U. S. Public Works Program Likely to Make Biggest 1935 Contribution. BY THOMAS S. HOLDEN, Vice President. P W. Dodge Corp. ‘The construction industry is on the road to recovery, without being as- sured as to how much recovery it will get in 1935. As in the year just closed a Federal public works pro- gram is apt to make the largest con- | tribution to increased volume of ac- tivity. This new PFederal program is yet to be announced to the pubiic and submitted to Congress. As to private construction, which increased only slightly in 1934, there is reason to expect increased activily in modernization and rehabilitation projects of all kinds. The Nation- wide compaign of the Federal Hous- ing Administration for developing small repair and modernization projects 1s likely to be supplemented by large piant extension and plant rehabilitation projects for industrial corporations. Gradual increase of small house building is possible, since a considerable potential demand for this class of work has been dem- onstrated and the possibilities for financing such projects has been siowly improving. Federal housing, promised as a part From a mercantile standpoint, it will | be a hard year to beat. | During 1934 operating earnings of the utility companies in Washington have scored sharp improvement. Postal | receipts mounted, trade indices have climbed, bank deposits have increased as "as the amount of funds turned over in bank checks, the number of | telephones in use has steadily in- creased, together with a pick-up in the total number of calls. The de- mand for electric power has shown the same trend. What about 1935? and business leaders believe these barometric uptrends will continue. Financiers in the Capital and else- where declare that when the present vast amount of idle money begins to flow into credit channels, recovery will make surprisingly rapid strides. Washington’s huge Government pay roll makes this city one of the most fortunate in the country. It will enjoy more than its share of prosperity as conditions grow better. — Exports from British Malaya are being maintained at a high level. Many bankers -of the public works program is an indefinite factor in the situatioa. Limited-dividend housing projec:s, financed privately under the F. H. A. insured mortgage plan, may become a reality; a number of such projects, totaling more than $125,000,000, are before Administrator Moffett for con- sideration at this time. HERRING TRADE AIDED. Great Britain is making a world survey to increase its herring trade. COMPLETE INVESTMENT SERVICE U.S. Govt.—Home Loan and All Other Bonds GENERAL SECURITIES Robert C. Jones Co.= £ Shoreham Blds. ME. 2922 S T LT T SAFE IN QUR YAULTS OUR VAULTS OFFER YOU SAFEKEEPING FOR YOUR VALUABLES NTAL Building Association No. 6 600 F St. N.W. Telephone NAt. 2162-3 Under U. S. Government Supervision. Member of Federal Home Loan Bank System =\ The District of Columbia Building and Loan League Keep your jewels, important document and other treas- ures in a Safe Deposit Box. For as little as $5 a year you can buy peace of mind against theft or fire. Con- venient booths are available to all box holders, thus insur- ing strict privacy. “Keep your valuables where we keep ours.” THE MUNSEY TRUST CO. Penna. Ave. Bet. 13t h and 14th St. N.W. MUNSEY BUILDING Prospect and Retrospect Another mile-post has been reached. Another year is beckoning to us with its hopes and its opportunities of service. So we pause today to recall the pleasant relations of the year that’s passed and the good friends we have been able to serve. To every one we wish a New Year filled with happiness and success. The Washington Loan & Trust Co. Harryv G. Meem President