News from 1930

Friday, November 14, 1930: Dow 180.38 +3.05 (1.7%)

2009-11-14T13:27:00.000-05:00

An interesting piece of economics history:

Letter from T. Macauley, Sun Life of Canada pres., defending his proposal for Fed. Reserve to halt depression by buying $500M of bonds, increasing bank lending power by over $5B. Currently, dollar has no fixed purchasing power but varies with amount of currency credits outstanding as controlled by the Fed. “If we permit commodity price levels to go up and down with good and bad times, we are asking for trouble ... we shall automatically transform moderate depressions into severe ones and severe ... into disasters.” Suggests boom-bust cycle can be moderated by stabilizing value of dollar relative to broad price index of industrial and farm products, rents, real estate and security prices. Praises Fed actions in preventing inflation by selling bonds to absorb excessive gold imports in past years, and in already buying $450M of bonds to reduce effects of current depression; believes it may be hindered in acting more agressively by current criticism and opposition.

Assorted historical stuff:

Growing sentiment seen on both sides of the political aisle for modification of the Sherman antitrust laws, though form this would take is uncertain. Pres. Hoover is expected to mention the Sherman Law in his next message to Congress, while Dem. Nat'l Committee chair. Raskob outlined a specific proposal before the election.

Editorial: “China, with its great population and low standard of living, offers a great potential market ... so too does all Asia.” China trade already has grown dramatically; from 1900-20, imports grew from $155M to $940M and exports from $120M to $670M; since then wars and depression have somewhat reduced trade. China needs both physical infrastructure for business and political stability, but latter will follow former. Rehabilitation should be a business benefit, not burden.

British imperial conference apparently fails to reach definite solution of empire economic problems; another conference seen likely in Ottawa next spring.

Last Mountain Progressive Assoc. urges secession of Western Canada, saying Eastern financial interests working against best interests of the section.

Sir Percival Dewhurst Perry, chair. of Ford Motor Cos. in Europe, makes bold call on Russia: “The Russians have seen the writing on the wall. With the collapse of their five-year plan there is no doubt that they will revert to capitalism. It is the only way in which they can avoid a revolution.”

Use of airmail said to save costs in a number of fields, including: bankers sending checks for quicker deposit, vaccines, “style garments,” and urgent advertising.

Rate of admissions to NY State “Craig colony for epileptics” - one every 29 hours; “state hospital for criminal insane” - one every 38 hours.

One-room rural schools have been vanishing at the rate of 4,000 a year since 1920; however, 153,306 still remain.

Lunch service to New York high school students, begun by Dept. of Education on small scale 29 years ago, is now business of $2M annually.

Market commentary:

Market wrap: Rally continued for a third day in a row; considered noteworthy since this was the first three day positive streak since mid-August; seen as evidence “forced liquidation was burning out.” Sharp rebounds in majors including GM, du Pont, and Woolworth, and specialties including Fox Film and J.I. Case; coppers continued strong while major industrials including US steel and American Can pushed gradually upward, reaching best levels in the final hour; banks and trusts also strong. Some irregularity in final dealings but day's highs fairly well maintained. Bond market more active, generally higher, particularly corp. with rallies in many recently weak issues; convertibles rally; US govts. remained firm, hitting high prices for the year.

V. Lersner, Bowery Savings Bank pres. (largest US savings bank), says savings can be overdone at times like these; “one should save, but not at the expense of the other fellow.” However, emphasizes that dollars in savings banks are not hoarded but loaned out, helping to increase wealth of the nation.

Rumors that E. Meyer, Fed. Reserve Gov., would issue “constructive statement regarding credit conditions” were denied by authorities.

Steel industry update: Immediate outlook gloomy, with production expected to dip to 35%-40% or lower over rest of year. Q3 earnings showed very few companies earning dividends, and many showing losses; Q4 will undoubtedly be worse. Growing belief that improvement will set in sometime between Jan. 15 - Feb. 15. Optimism on price stabilization. Peak of 60%-70% seen for spring upturn, followed by moderate lull and possible improved summer and fall.

J. Simpson, Marshall Field chair.: “We have scraped the bottom of the slump. That means things henceforth will be on the upward trend.”

Many brokers that have kept clients have the market for several months have changed views in the past few days. While expecting renewed irregularity after current rally, believe forced liquidation has brought standard stocks down to attractive prices for long-term investment.

Economic news and individual company reports:

Fed. Reserve reports money in circulation Nov. 12 down $14M to $4.477B, total Reserve Bank credit outstanding up $25M to $1.035B. Member banks in NY City report brokers' loans down $219M to $2.235B vs. $4.172B in 1929, new record low; “all other” (commercial) up $40M to $2.644B.

Companies producing over 90% of world's copper agree to reduce production by 20,000 short tons a month.

Labor Dept. says analysis of Oct. reports it received shows little change in employment situation, though large numbers remain unemployed; considered hopeful since Oct. usually shows seasonal increase in unemployment.

Agriculture Dept. reports demand for farm labor Nov. 1 was 73.6% of normal vs. 87.5% in 1929; supply was 107.2% of normal, highest in 10 years or more.

Big corporations seem to be accumulating more cash than ever, largely due to reduced inventories; in first 9 months, GM's cash was up $44.5M to $145.6M.

Companies reporting decent earnings: National Dairy Products, White Rock.

Movies:

Paramount-Publix new releases include Harold Lloyd in Feet First, Maurice Chevalier in Playboy of Paris, and Jackie Coogan in Tom Sawyer.

Jokes:

“Ma Talltimber - I'm afraid Bud's learned to gamble at college. Pa - Well, I hope he's finally mastered the study. His expenses while he's been learning it have been too much for me.”

“'The spirit of your departed wife wishes to speak to you. Do you want to say anything to her?' 'It wouldn't do any good if I did. She always did all the talking.'”

+ The Boring Stuff:

Editorial: Protest of French metal-working industry on copper marketing policy is premature; reluctance of producers to contract for large future sales at today's prices isn't objectionable if based on individual producer's self interest rather than binding agreement. Copper buyers do have example of Stevenson crude rubber scheme which quadrupled rubber prices in a few months, but copper situation differs; producers can be expected to know by now that “any impediment to the free movement of commodities into consumers hands is evil.” Situation calls instead for production cuts, which arise naturally from low prices.

King Alfonso of Spain approves Cabinet's plans for ending dictatorship and returning to constitutional government; elections to be held March 1.

Over 31M vehicles passed through the Holland Tunnel since it was opened 3 years ago; income of over $6M this year to be divided between states of NY, NJ.

Large increase in cars seen parked along highways repairing flats probably results from decrease in tire sales in past year; older tires are much more susceptible to punctures and blowouts. Car owners should soon get tired of wasting time and effort on old tires, and at first sign of business improvement will buy new ones.

Broad Street Gossip: Market value of NYSE listed stocks Nov. 1 was $55.0B. Earning power of the country is about $70B even allowing for unemployment. “This buying power is what eventually will help stocks back to what they are worth.”

Short covering said important influence in rally; stocks that were heavily attacked recently rose sharply. Optimism on copper and steel also credited.

Demand by short sellers for stocks in the loan market lower than past several days.

Stock markets abroad generally higher following Wednesday's US rally.

Amer. Petroleum Inst. report: P. Clarke, Central Trust of Ill. pres., recommends oil companies keep cash reserves as high as possible to provide for period of lower earnings and any required expansion; says fortunate 1928-29 security inflation allowed many cos. to strengthen balance sheets. C. Ames, Texas Corp. VP, criticizes large waste of natural gas in Texas, Okla., and Calif.; says conservation of gas would relieve overproduction and insure maximum ultimate oil and gas recovery. Action on tariff postponed.

Broad Street Gossip: “The law says that there can be no concerted movement to regulate prices of any commodity, even though reckless competition forces prices down to below cost of production, thus threatening wage cuts. If the government withdrew its objection to price regulation ... permitting a reasonable return to the investor we should get our prosperity back in short order.”

W. Persons, former Prof. of Statistics at Harvard, analyzes current depression compared to previous ones and finds recovery should begin in next month or two, with normal conditions by end of next year. Similarity closest to 1884-85, though layman seems to think more of 1873, 1893 and 1907. Pattern of all seven depressions in past 55 years is much the same. Some novel factors now including international debt situation, installment buying, large bank loans on securities, and attempts at commodity price controls. However all previous depressions lasting more than 25 months were due to war or trouble involving gold standard; current sound credit conditions and financial status of most corporations could offset retarding influences.

Commodities mixed. Grains up substantially though off day's highs. Cotton down substantially on late break. Copper price has been advanced to 10 cents/pound; French and other foreign producers complaining of inability to buy large amounts far ahead into 1931; outlook for gradual advance in price seen.

Copper producers say curtailment will be done by orderly reductions across units. Believe plan is lawful since production is above requirements, curtailment is voluntary, and there is no price-fixing agreement. US copper industry hasn't yet presented plan to Justice Dept.; Att'y. Gen. Mitchell says no official or unofficial opinion will be expressed until program has been set in motion.

Chair. Wood of House Appropriation Committee predicts 1% income tax reduction started in 1929 will be continued this year, while Sen. Reed (R, Pa.) believes reduction can't be continued since budget will be in deficit; Administration believed in favor of continuing reduction.

Electric output by US light and power industry for week ended Nov. 8 was 1,731 GWHr vs. 1,748 in prev. week and down 4.4% from 1929; decline from previous week attributed to Election Day holiday.

P. Neff of Missouri Pacific Railroad reports bus companies handled about 1B passengers in 1929 vs. 800M for rails; estimates this year's passenger revenues for rails at $900M vs. $315M-$320M for bus companies.

Oct. life insurance sales were down 13.1% from 1929, bringing cumulative 1930 total below 1929 for the first time this year.

High grade municipal bonds are in strong demand around a 4% basis; those maturing in 1-5 years can be bought to yield 2.5% - 4%.

Dow average of eight finished iron and steel products was $44.56/ton, unchanged from prev. week and low for 1930; 1929 range was $49.88 - $51.25.

US Shipping Board reports 23,238 employed in 10 shipyards as of Nov. 1 vs. 22,608 on May 1; ships under construction to cost $121.5M, of which 3/4 will be advanced by the Board. Work expected to expand based on pending contracts.

Commerce Dept. review of conditions abroad finds mixed picture with some improvement in Argentina, Canada, and Japan, none seen in Brazil, Germany, and China, and some worsening in France.

France plans $80M public works construction program to start early in 1931.

Tire prices to car manufacturers to be reduced 5%-10% Dec. 1.

Sept. production of leather boots and shoes was 28.9M pairs vs. 28.4M in August and 34.8M in 1929.

Some railroads testing 3-fare plan (standard sleeper, tourist car, and coach).

Sears expects net about $3.15/share for 1930 vs. $6.62 in 1929; first decline since 1921.

White Rock stock about 35, yield almost 13%, 1929 earnings $4.42/share, 1930 expected earnings $4.75-$5.00/share.

Further weakness in scrap steel prices continues in several markets.

Thursday, November 13, 1930: Dow 177.33 +4.03 (2.3%)

2009-11-13T13:05:00.000-05:00

Assorted historical stuff:

Editorial: Pres. Hoover's Armistice Day speech makes his concept of the US role in world politics clearer; he favors building up the “moral obligation” to avoid hostilities through agreements such as the London Naval Treaty and agreements to use “arbitration and conciliation” to resolve disputes, but believes US role in promoting cooperation must stop “short of any implication of the use of force.” This is advisable; an obligation to “preserve peace by making war,” in the current state of world politics, “would merely throw the nations back upon the ancient European system of competitive alliances.”

Rep. Eaton (R, NJ), following meeting with Pres. Hoover, criticizes banks for not taking more active part in relieving depression: “Idle money is lying in the banks, piled up, yet the banks refuse to give loans to those who need them, with some exceptions.”

NY Gov. Roosevelt says public utilities supplying “daily needs of a people have long been recognized as” differing from ordinary trade; “must not be made the instrument of unreasonable profit of private individuals” who are much smaller in number than users of the service.

“Chinese flappers” said responsible for increased popularity of coffee; while girls aren't carrying coffee in hip flasks, younger generation of Chinese is reportedly taking to foreign style food and drink including coffee, in spite of immemorial reign of tea drinking there.

NY City basic tax rate for 1931 estimated at $2.69 per $100, 16 cents over 1930 rate.

A pawnshop on Second Ave specializes in war medals. It has scores on display in its show window, all left in the past 10 years by World War veterans who had to raise a little money. “The question is, to whom does this pawnshop sell these badges of bravery that others risked so much for?”

US Circuit Court of Appeals sustains Irving Langmuir's vacuum tube patent in suit by GE against De Forest Radio; if decision stands in Supreme Court will give GE exclusive control of production of vacuum tubes used in radios, etc. Litigation has lasted over 10 years in patent office and nearly 5 years in court.

Market commentary:

Market wrap: Yesterday gave “some relief from the monotonous picture of a market harassed by unremitting liquidation.” There was early pressure on US Steel on lower current and anticipated production; “widely advertised drives” were also launched on GE and AT&T, driving them to new bear market lows; however, volume dried up on the reaction. News that copper had been marked up to 10 cents sparked sharp advance in producers including Kennecott and Anaconda; this was followed by a broad rally in the general list; “market as a whole was on its best behavior in nearly two weeks”; active short covering seen, and stocks closed at day's highs. Bond market moderately active and irregular; US govts. firm; foreign issues slightly lower; corp. irregular - high-grade rails steady, others irregularly lower but closed with strong tone.

During recent market declines, reports have resurfaced that bank are liquidating security loans, partly prompted by the Fed. Reserve; these continue to be denied.

View in “speculative quarters” was very optimistic on turn in copper, seeing it possibly presaging improvement in general conditions; conservative interests maintain recovery should “prove its ability to hold.” Stocks had clearly become “heavily oversold,” and short covering was said an important influence in rally.

Economists note yield on representative dividend paying stocks now averages almost 6%, almost double commercial paper rate of 3% - widest gap since 1924. By contrast, in Aug. 1929 commercial paper rate was 47% higher. More aggressive investment buying is anticipated, particularly of stocks with safe dividends.

P. Mazur of Lehman Bros. sees business recovery by last half of 1931; blames depression on overproduction, says construction now in gradual recovery.

R. Stephenson, Amer. Bankers Assoc. pres., sees business still considerably curtailed, but confidence beginning to return, and “no one other element is so forceful to stimulating recovery”; sees current caution as presaging a more dependable advance.

Economic news and individual company reports:

Several car makers report sharp increase in dealer buying since Nov. 1; attributed to new models and low inventories.

Justice Dept. “has resisted all efforts to elicit any indication as to what its attitude might be in case the copper companies went ahead with some cooperative plan.”

Western rails face “revenue dilemma” after ICC refusal to reconsider lower grain rates; may resort to the courts, claiming failure of the ICC to provide legally guaranteed 5 3/4% return on property.

Youngstown steel producers said cooperating with Carnegie Steel in efforts to stabilize prices.

Texas Railroad Commission says will continue to enforce oil proration (production control) order in spite of 4 current Texas lawsuits against it.

Several cos. cut Pennsylvania grade crude oil 15 cents to $2.15/barrel. Gasoline in Chicago wholesale market is 4 1/2 - 5 1/4 cents vs. 4 5/8 - 5 1/4 previously.

Companies reporting decent earnings: Amer. Ice, Amer. Safety Razor, Amer. Water Works & Electric.

Jokes:

“You would not knock the jokes we use, could you but see those we refuse.”

“Angry Widow (after learning her husband left her nothing) - I want you to take 'Rest in Peace' off that tombstone I ordered yesterday. Stonecutter - I can't do that, but I can put something underneath. Widow - All right, put on 'Till I Come.'”

+ The Boring Stuff:

Editorial by T. Woodlock on Socialism: Marx's doctrine of “economic determinism” (which he of course “borrowed” from Feuerbach, much as Spengler borrowed his central idea from Goethe) has only partially come true; he was to some extent right in predicting concentration of capital and cooperative effort into large industrial units, but, “at least so far as this country is concerned,” wrong that this would condemn the workers to hopeless slavery; instead, living standards have increased, and the predicted workers' revolution doesn't seem much nearer than 60 years ago. Modern Socialists have turned to the goal of “egalitarianism,” condemning relative inequality. Their main target seems to be a group Marx didn't even consider, but which now might be more important than his Capital and Labor, to wit: Management; the Socialist objective, which also seems to be turning into the major issue separating Democrats and Republicans, is increased public control of economic power now exercised by business leaders. The merits of this objective are doubtful; the gift of excellent “management,” like “violin playing, ... mathematics, metaphysics, etc.” may be concentrated in a select few.

Youngstown district steel producers taking measures for relief of unemployed steel workers; most are using system of distributing available work to minimize number of unemployed, while some including Carnegie Steel and Youngstown Sheet & Tube provide food and necessities for employees in extreme need.

NY City Emergency Employment Committee expands campaign to include investment and commercial banks, trusts, and brokers; target is now $6M for unemployment relief. Initial efforts encouraging; committee has already assigned 3,000 men and women to work in city parks and other nonprofit institutions; and jobs pay enough to “maintain their families and to regain their independence.”

Figures from 36 of 57 New York non-municipal hospitals show 10% increase in demand for free treatment.

Rail worker unions gathering in Chicago say will ask Congress to favor six hour day as one means of relieving unemployment.

Imperial Conference in London reportedly will end without satisfactory results; however, Canada, Australia and New Zealand rumored considering formation of economic union, giving each other tariff preferences denied rest of the empire, including Britain.

Cuban Pres. appoints military supervisors for six provinces due to recent disturbances caused by “students and other elements.”

US manganese producers file another petition for embargo on Russian manganese, claim Russian dumping at 50% of cost to break down the US industry; deny testimony from steel producers that US manganese is unsuitable for use in steel industry. Sen. T. Oddie says will introduce bill completely prohibiting Soviet imports.

Sec. of Agriculture announces lifting of all restrictions on Florida fruit and veg. exports due to Mediterranean fruit fly; govt. has spent $6.4M in exterminating it.

Twenty radio stations report average cost of $12,500 a month for talent, total monthly operating costs of $22,000; income of $23,500, of which $21,000 is from advertising; 30% of programs were paid.

A well-known bear says stocks haven't been sold short in big blocks lately; while recent market has been a liquidating one, it has also been an accumulating one, with stocks passing from weak to strong hands; “At this stage of the game, the bear is more in need of caution than the bull.”

Some previous tax sellers now reportedly rebuying after 30 days at generally lower prices.

Stop-loss orders reportedly still popular among traders buying for a technical recovery.

Demand by short sellers for stocks in the loan market remains fairly high, though more stock was available, with few issues loaning at a premium.

Most brokerage houses now in very strong position, with total brokers' loans at 4.65% of total market value of NYSE-listed stocks vs. the peak of 9.82% in 1929; however, traders are timid about buying due to the continued declines, with those that have bought so far “hung up” with stocks bought much higher.

Recent gain in US Steel unfilled orders considered possible turning point. Steel operators are expecting an upturn in the first quarter of next year; scrap prices and steel operations will likely decrease seasonally for rest of the year, but this is thought to be already discounted. Inventories at year-end expected to be lowest in many years; price announcement by Carnegie seen aimed at stiffening prices for next quarter's contracts.

Statement by W. Donovan, former Asst. Att'y General, that oil industry could restrict production within antitrust laws, was considered timely for other industries.

Commodities strong. Wheat was weak most of the day but closed up sharply on a late rally; other grains closed up moderately. Cotton also closed up substantially after early weakness; heavy short covering reported. Copper up 1/2 cent to 10 cents/pound; some good buying at that price, but little more seems available from producers now.

Firms most active in bond offerings in first 9 months were National City, $1.253B; Harris, Forbes $1.214B; Halsey, Stuart $1.102B; Guaranty $1.086B.

Administration remains opposed to farm debenture plan in spite of election results. Plan would give farmers a percentage of the value of exported products as certificates usable to pay import duties; administration believes this is equivalent to dumping surplus abroad.

Revised Sept. exports $311.9M vs. $437.7M in 1929, imports $226.3M vs. $351.4M; 9 months exports $2.952B vs. $3.844B, imports $2.401B vs. $3.360B.

US electric output decline of 4% Sept. vs. 1929 was improved from 6% decline vs. 1929 in Aug.

Stocks of refined copper Nov. 1 were 364,930 tons vs. 360,650 on Oct. 1 and 88,401 in 1929; Oct. production was 118,229 vs. 116,004 and 152,840.

Farm Board reports loan repayments so far “running quite satisfactorily.”

Newsprint produced by Canadian mills in Oct. was 213,817 tons vs. 195,490 in Sept. and 251,914 in 1929; US produced 105,450 vs. 95,261 and 122,009.

Tire casing shipments in Sept. were 4.405M vs. 5.175M in Aug. and 5.623M in 1929; inventories Sept. 30 were 9.812M vs. 10.848M and 12.875M.

FTC resumes investigation into public utilities after recess of six weeks.

British trade figures for Oct.: imports 90.9M pounds vs. 78.7M in Sept. and 110.3M in 1929; exports 46.9M vs. 42.7M and 64.6M.

British registered unemployed on Nov. 3 totaled 2.263M vs. 2.238M previous week and 1.252M in 1929.

R. Benson & Co.: “So far as London is concerned, the money market situation is as bright as the industrial position is gloomy.” Bank of England's reserve position much stronger than a year ago, gold holding also considerably higher.

Private Paris bank Bernard, Freres fails, submits to judicial liquidation.

Cuban House of Representatives approves Chadbourne plan for stabilizating sugar prices.

World production of Ford cars and trucks in Oct. was 78,347 vs. 97,885 in Sept. and 177,483 in Oct. 1929.

Some stocks currently yielding 5%-6%: Eastman Kodak, Otis Elevator, Westinghouse, Union Pacific; yielding 6%-8%: Liggett & Myers, New York Central, Standard Oil NY; yielding over 8%: GM, American Ice, Allis Chalmers, Hudson & Manhattan.

Wednesday, November 12, 1930: Dow 173.30 +1.70 (1.0%)

2009-11-12T11:35:00.001-05:00

Assorted historical stuff:

Pres. Hoover says US should play a part in World Court; in Armistice Day speech, declares belief world will within a few years become firmly interlocked with arbitration and conciliation agreements, and disputes not resolvable through diplomacy will be arbitrated; sees important role for Court: “In the development of methods of pacific settlement ... a great hope lies in ever extending the body and principles of international law ... Our duty is to seek ever new and widening opportunities to insure the world against the horror and irretrievable wastages of war.”

Col. Woods of emergency unemployment committee says pleased at better cooperation from big employers than in 1921. Reports that auto and construction industries, which has sales of $4B each a year ago, have fallen off by about $1.5B each; estimates this has led to 900,000 unemployed in these industries alone.

Republican Nat'l Committee chair. Fess says Prohibition will be a chief issue in 1932 Presidential campaign, deviation from dry law enforcement will mean defeat.

Art exhibitions now at galleries include Rembrandt etchings at Knoedler's, a “Currier & Ives epidemic” at the print shops, and Lucille Douglass series of pastels and etchings, mostly of the ancient temple at Angkor. Offered at auction are the entire contents of Mrs. Charles V. Bob, wife of the promoter who recently vanished.

Medical dept. of NY Edison Co. develops treatment for pneumonia by inhaling mixture of oxygen and carbon dioxide; said to cure all but most hopeless cases.

First US-controlled aircraft factory in foreign country opened by Curtiss-Wright in Santiago, Chile.

One of world's largest rubber-covered conveyor belts manufactured in a single length: 891 feet long by 67 inches wide, one inch thick, weight 28,565 pounds.

Market commentary:

Market wrap: Stock price movements indicated relentless declines had finally produced an oversold condition. Heavy morning pressure on AT&T and Nat'l Biscuit normally “would have been extremely disturbing,” but only had a temporary unsettling effect. Strong rallying tendencies developed in the afternoon; short covering seen; specialties including Case and Auburn rose sharply, and US Steel led recovery in the major industrials, rebounding 5 points from recent low; upturn was checked in late afternoon by news of further slump in steel production, but efforts to renew decline were stubbornly opposed. Bond market moderately active, irregular; corp. up after sharp late rally, speculative and convertibles strong; foreign govts. weak, particularly South. Amer.; US govts. active, mostly higher.

Recent trend of odd-lot investing may have found its ultimate example in one broker's customer who in the last year bought 192 shares of 192 different companies.

Poor business sentiment partly attributed to market decline, since there are over 10M shareholders of record in the US; “the experience of having what they hold shrink day after day is not a stimulant to optimism by any means.”

Middle West Utilities Oct. survey of business and crops in territories they serve finds conditions still uneven but some general improvement over Sept.

Experienced observers see market approaching selling climax and turnaround; “another day or so of selling in the heavy volume seen on Monday might well bring the end of the present phase of the market, and be followed by a recovery that could run for several weeks.”

Curb Exchange report: (later the Amex; small companies) Goldman Sachs Trading Corp. [investment trust started by Goldman Sachs in Dec. 1928, peak in 1929 was over 100] hits new low ground under 8. Great Atlantic & Pacific among last chain store stocks to fall below 1929 panic low at 162, about 15 times earnings.

Economic news and individual company reports:

Rail freight loadings for week ended Nov. 1 were 934,640 cars, down 24,695 from prev. week and down 137,594 or 12.8% from 1929 week.

ICC denies petition of rails for reconsideration of lowered Western grain rates.

US Steel ingot production for week ended last Monday was at 47%-48% vs. 52% previous week and 75% in 1929; independents were at 41% vs. 44% and 72%; industry total was 43% vs. 47% and 73%.

Copper producers agree worldwide production cut of 20,000 tons/month desirable, to about 130,000 tons/month; producers seek permission from Washington to allow agreement in spite of antitrust law.

Barnett Nat'l. Bank of Jacksonville warns Florida bondholders against adjustment committees formed for profit attempting “to scare holders of Florida bonds into 'dumping' them at sacrifice prices”; urges holders to get information from dealers who sold the bonds or other reliable sources.

Suez Canal shipping traffic in first half was 12.212M net tons, down 4.642M from 1929.

Halsey, Stuart study reports newspaper circulation up 39% in past decade, advertising revenue up 60%.

Companies reporting decent earnings: Fox Film, Equitable Office Bldg., Pet Milk Co.

Joke:

“'You mean to say you were not at your own daughter's wedding? Where were you?' ... 'I was looking for a job for the groom.'”

Financial etymology:

[Note: This is the first time I've seen “blue chip” defined as a particular price. Still not sure about the origin, but would guess it might be from poker.] “The White Chip Club now has a big waiting list and has taken over most of the floor space of the Blue Chip Club.” At end of trading Monday, only one stock was traded at a “blue chip” price (over 200), though there were 8 more quoted over 200 that didn't trade. Total number of stocks that traded over 200 sometime in 1929 was 94. First stock to trade over 200 was Pennsylvania Coal, at $275, in Feb. 1876. Average price of all listed shares Nov. 1 was $42.43.

+ The Boring Stuff:

Pres. Hoover addresses Assoc. of Nat'l. Advertisers; praises advertising as having “stirred the old lethargy of supply and demand” and raised living standards; credits it with speeding up the application of new discoveries and inventions; purpose is “to create desire, and from the torments of desire there at once emerges additional demand.” At one time advertising was resented as intrusion and “clamor to the credulous. But your subtlety and beguiling methods have long since overcome this resentment.” Stresses need for probity in advertising, praises self-regulation by industry as “curing abuse without the interference of government.”

Editorial: Steel producers' decision “stoutly to resist further price demoralization” is a very important development. A year ago, during Pres. Hoover's conferences for industrial stabilization, steel men “heartily accepted” proposition that wage levels should be maintained. If prices continue declining, this would become very difficult; some smaller producers are already operating at a loss. “In the steel trade it is widely believed that a firm refusal of further price concessions will bring in a substantial amount of new business.” Outcome will prove “whether the industry's maintenance of the long existing scale is or is not sound practice.”

Congress to convene Dec. 1; this session will still have large Republican majority in House and coalition control in Senate. Glass subcommittee to inquire into banking, Fed. Reserve and its relation to stock market, and other issues. Some radical stock market proposals including banning short selling and margin buying considered very unlikely to pass. Some measures regarding power regulation and formation of Federal Communications Commission. Doubtful how much legislation can be passed, though new spirit of cooperation may allow progress on some items.

Pittman Senate subcommittee reportedly will recommend US loan of 1B ounces silver to China; Administration opposed; opinion was espressed that use of the loan for public works in China would help break up the warring forces, many of whom are said to have joined up to avoid starving.

Rio de Janeiro population has been growing steadily and is now over 2M; many large apartment buildings went up a few years ago when, like many other cities, they were experiencing severe housing shorrtages. Now, there are over 10,000 empty dwellings in the city that landlords won't rent for what tenants will pay.

Outright buying of stocks [for cash] in the past 6 weeks was estimated at $600M-$1B or more based on brokers' loans figures.

Banks apparently not forcing liquidation of security loans; reports of member banks as of Nov. 5 show no important declines in any major cities.

Recent declines attributed mostly to forced liquidation and tax selling rather than aggressive short selling; “the lower stocks have gone, the heavier has been the liquidation”; continued downtrend has impaired many margin accounts that were in strong shape two months ago. However, demand by short sellers for stocks in the loan market remains high, with several large issues including US Steel at a premium.

P.F. Cusick, Kent, & Co.: “It is our opinion that we are rapidly approaching, if we have not yet reached, the actual bottom of the bear market.” Point out that every bear market since 1897 has hit bottom above the preceding bear market low, but below the second-preceding bull market high; Dow is now between these two points (162.31 and 173.90).

The Chronic Optimist notes stocks are less risky to own now: “Many stocks ... could drop to zero now and the loss per share held would not be as great as the same stocks suffered in the October-November breaks of last year.”

Bond dealers less optimistic on outlook for bond market, a marked contrast with Sept. when most saw a good market imminent; increasing opinion that market won't show sustained improvement until business conditions do.

Many utility companies now selling below 15 times earnings, lowest ratio for past few years.

A. Sloan, Jr., GM pres., says GM able to stay profitable by starting adjustment a year ago when co. realized conditions were changing; sacrificing some current profits to keep production and inventories low; hasn't reduced wages, believing “prosperity of the US is founded on a high wage scale.”

Commodities dull. Grain markets closed in observance of Armistice Day. Cotton up moderately. Copper situation unchanged; good foreign buying, domestic producers reluctant to sell at 9 1/2 cents, awaiting rumored curtailment agreement among world copper producers.

Volume of bond trading on NYSE in Oct. was $272.1M vs. $231.0M in Sept. and $353.2M in 1929; heavy activity in foreign loans due to political unrest.

Gasoline stocks at refineries Nov. 8 were 37.012M barrels, down 203,000 in week; refineries operated at 63.8% vs. 64% prev. week; oil production was 2.297M barrels/day, down 65,800 from prev. week and down 333,950 from 1929.

W. Donovan, former Asst. US Attorney General, says oil industry should try to regulate itself to solve overproduction, warns that public wouldn't consent to modification of antitrust law without a price that “may well be the surrender to government of a greater participation and control than now exists.” E. Reeser, Amer. Petroleum Inst. pres., calls for permanent solution to overproduction, says immediate outlook depends on business improvement, but increased demand certain in long term due to fundamental role of petroleum in present-day industrial life.

Interior Dept. says prospects good for adoption of unit (cooperative) development for oil and gas at Kettleman Hills; called test case in oil and gas conservation.

Most rail equipment companies will cover dividends in spite of almost negligible buying since early in 1930, due to good buying in late 1929 and early 1930. Prospects for early 1931 look unfavorable, though strong financial positions should protect dividends unless slump is prolonged.

Editorial: Anticipated short corn crop suggests price will rise enough to result in other grains being substituted.

Assoc. of Cotton Textile Merchants reports Oct. sales were 335.8M yards, 146.7% of production; shipments were 118.1% of production; stocks on hand declined over 41M yards or 10.6% to lowest level in 12 months, while unfilled orders increased 22.9%.

Public is reportedly so eager in its search for exceptional values that stores offering genuine bargains sell out without advertising. One large drug store chain has sent buyers across the country looking for “job lots” of bargain merchandise; efforts have been successful beyond expectations.

Amer. Machinist reports machine tool demand slightly improved, but industry sees no tangible improvement until start of 1931.

Directors of European Ford subsidiaries report business ahead of 1929 everywhere but Italy; attributed to Ford offering best value.

Beneficial Industrial Loan Corp., largest firm specializing in small loans, reports new loans in first 9 month were $46.0M, up 14.7% from 1929. Reports only 68 “surrenders” in first 9 months out of 400,000 non-selected accounts vs. 146 in last year.

Tuesday, November 11, 1930: Dow 171.60 -1.54 (0.9%)

2009-11-11T13:28:00.002-05:00

Assorted historical stuff:

Editorial: Offer by 7 Democratic leaders of cooperation for the common good and positive response by the Administration are hopeful signs. While some partisanship could be detected even in this exchange, there are still real reasons for hope. Newly elected Dem. Sen. Bankhead has rejected idea of allying his party with insurgent Republicans to organize the Congress “on the basis of a division of the spoils.” Likewise, Sen. Walsh of Montana has called for end to partisan attacks. Public has right to insist both Republicans and Democrats stick to the agreement in good faith.

Pres. Hoover to ask Congress for special emergency appropriation to expedite public works for unemployment relief.

Chair. Woods of Emergency Committee on Employment says will attempt to get more accurate figures on number and distribution of unemployed in US; charts prepared by the Committee based on Labor Dept. statistics show uniform decrease in unemployment in recent months, with increasing part time work.

Movie industry execs move to throw power of “talkies” behind “buy now” campaign using nationwide showing of trailers, newsreels, and other advertising.

F Sargent, Chicago & North Western Rwy. pres., attacks Agricultural Marketing Act as unconstitutional; “I strongly criticize the establishment of government agencies to compete with private business as constituting unlawful confiscation of property.”

British Conservative leader S. Baldwin predicts even with tariffs, England will have “thundering hard job” over next decade to return prosperity.

A banker returning from New Mexico, Arizona, and Mexico reports that messengers there carry bags of gold and silver without gun or bodyguard, whereas here in New York, transfer of a bag of coins requires armed escort.

Anne Nichols, author of “Abie's Irish Rose,” loses appeal in lawsuit for plagiarism against producers of “The Cohens and the Kellys.”

C. Fritsche, Detroit Aircraft pres., asks Pres. Hoover for help in getting $4.5M authorization to construct all-metal airship 550 feet long, 120 feet in diameter, with 100 gross ton lift capacity and 100 mph speed. Ship would use oil-burning engines and helium for lift.

Market commentary:

Market wrap: Stocks briefly rallied during first hour (attributed to pledges of Democratic-Republican cooperation on economy), but a flood of selling quickly reappeared, spreading throughout the list. Several stocks which had previously resisted the selloff dropped sharply, including Amer. Tobacco, Nat'l Biscuit, and United Drug. US Steel hit new low since 1928; new bear market lows in Amer. Can, GE, Westinghouse, GM. Utilities, oils, and investment trusts also weak. Commodities also broke sharply. Bond market continued active; corp. generally lower, especially convertibles and rails; US govts. firm, foreign down mildly.

Many stocks are depression-proof based on increasing earnings, but in the recent decline no stocks have been bear-proof.

Broad Street Gossip: Many traders believe the recent fast and severe decline in stocks will be balanced by a sharp rally when the bottom is hit. However, picking the bottom of this downtrend can be tricky - one trader reports he's picked 6 bottoms and counting.

Experienced observers believe recent increase in short-selling by small traders is hopeful: “Just as a rapid expansion in brokers' loans heralds the culmination of a bull swing, general switching from long to short positions by inexperienced speculators is a familiar feature of the final stages of a prolonged decline.

Dow made new post-panic low. There was one new yearly high and 376 new lows.

Economic news and individual company reports:

Total value of all NYSE listed stocks Nov. 1 was $55.026B vs. $60.143B on Oct. 1; borrowings by NYSE members were down $925.3M in the month to $2.556B, declining from 5.79% of total value to 4.65%, vs. 8.51% on Nov. 1, 1929.

Fed. Reserve member banks weekly report for Nov. 5: loans on securities up $24M to $8.081B, “all other” loans up $8M to $8.715B.

Some encouraging steel news seen in increase of 57,425 tons in US Steel unfilled orders during Oct. to 3.482M, and in announcement by Carnegie Steel (US Steel subsidiary) that they would maintain a $1.60/hundred pound minimum price on steel bars, shapes, and plates - seen as first step toward stabilizing steel prices.

Sentiment in France said better, but “still nervous despite reassuring statements by the Premier, the Finance Minister, and the Governor of the Bank of France to which wide publicity was given.” Rumors persist about some banks, may result in mergers.

NY State Industrial Commissioner F. Perkins reports NY index of factory employment down 2% in Oct. vs. 84.6 in Sept; first Oct. decline since 1920.

Companies reporting decent earnings: Amer. Gas & Elec., Charles E. Hires (drinks, syrup, extracts).

Stock market joke:

The Room Wit speculates that if this decline keeps up, we may start quoting earnings-price multiples instead of price-earnings.

Jokes:

“'There is nothing so satisfactory as a clear conscience.' 'No,' answered Senator Sorghum; 'and the next best thing is a good lawyer.'”

“'I went West in '89,' said the New Yorker. 'How fur did ye git?' queried the miner. 'Buffalo,' said the New Yorker. 'I went East the same year,' replied the miner. 'Went as fur's Butte, Montana. Nearly ran into each other, didn't we?'”

“'Now that I'm going to marry Mary, there's one thing I'd like to get off my chest.' 'What?' 'A tattooed heart with Jessie's name in it.'”

Financial etymology:

Modern banks date back to Italy in 808; word comes from “banco,” or bench, which was set up in a market for sale and exchange of money. British merchants originally deposited funds in Royal Mint, until Charles I seized it and gave them IOU's, after which they started depositing at goldsmiths in Lombard St. Oldest bank now in existence is Bank of Barcelona, founded 1401; one of earliest banks in London was founded by Francis Child, a goldsmith, in 1663.

Origin of the term bear dates back at least to Exchange Alley in London as early as 1719, when phrase “sell the bearskin” was used, from proverb “to sell the bear's skin before one has caught the bear.”

+ The Boring Stuff:

Post-election comments: Washington officials now free to be more realistic on economic picture: “It is to be hoped that 'Washington optimism' is a thing of the past, and there are indications that this is the case”; current best Washington opinion, contrary to popular impression, “not one of wild optimism”; however, some signs noted of more solid foundation for stock market. World conditions aren't good, but US believed able to lead recovery; more emphasis on domestic market likely; spread in prices between manufacturer and consumer must be reduced. Less “friendly intervention” by govt. in business likely; “advice to let business alone is becoming louder.” Govt. not disposed to join in any of ideas for economic “panacea,” most of which boil down to currency inflation to stop falling prices and stimulate spending; while “perfectly possible,” after-effects likely worse than the disease; memory of wartime inflation still fresh and little desire to repeat it.

S. Insull, Commonwealth Edison chair., says depression has caused a lack of perspective. “I know of no way to judge the future except by experience of the past. ... In the thirty-seven years since 1893, we have had more than one business depression; we have had some that I thought were worse than the one we are passing through. These depressions have not stopped the growth of our city or our country. ... On the contrary, business depressions have induced economies in many directions. ... In 1893, some people were fearful that we would never get over the effects of the panic of that time. Yet, investors have put 48 times as much money into the electricity business as was invested in it in 1893, and we have 214 times as many customers as we had then.”

Editorial by T. Woodlock: Rails face difficult future traffic trends; traffic in raw materials best handled on rails is flattening out, with pressure on rates, while for manufactured items, other tranport is more competitive. Situation calls for “thorough overhauling of rate structures, together with a tightening up of executive control over traffic policies.” Preferably, in each region one “group-rate-commissioner” should be empowered to control rates, acting for all rails in the region.

Both miners and operators blamed for chaotic conditions in coal industry; ACLU dir. R. Baldwin urges unionizing as remedy for mining trouble.

“Deadlock” reported on NY City negotiations for unification of rapid transit lines (including BMT and IRT); related stocks decline, though there's still hope of a change in the situation.

Many NYSE brokers continue to report large increase in odd-lot buying by investors across US either having stock transferred to their name or delivered to their banks; the buying has been selective, favoring well-established cos. with long earnings records, and showing a “bargaining tendency”, picking up on market dips.

Short interest said to have increased substantially since election; much of it in small (100-1000 share) and odd lots.

President of a large industrial co. says main worry isn't production levels but prices: “If we can maintain even 65% operations we can make a little money and hold wages ... But when prices go down with production, it is difficult to keep wages at peak ...”; notes difficulty maintaining prices due to antitrust laws.

Royal Dutch Shell board of directors says sees continued difficult conditions in oil industry, with only largest and most conservative firms producing profitably.

H. Thornton, Canadian Nat'l. Rwys. pres., returns from talks with Michigan auto execs, sees definite signs of moderate improvement in auto trade.

Commodities very weak. Wheat plunged to new lows on bearish crop news, with Dec. futures at 69 3/8, off 4 1/8 and low for Dec. future since 1902; other grains also weak, with corn showing best resistance. Cotton down sharply, reversing Saturday gains. Copper still at 9 1/2 cents, producers awaiting results of negotiations for curtailment.

Total financing (bonds, notes, and stocks) by domestic and foreign corporations in Oct. was $208.0M, vs. $328.2M in Sept. and second-all-time high of $1.357B in Oct. 1929; lowest monthly total since Sept. 1923. First 10 months total was $5.6B vs. record high of $10.3B in 1929 and $6.6B in 1928.

Agriculture Dept. Nov. 1 corn crop estimate was 2.094B bushels, up 2.3% from Oct. 1 est. but down 20% vs. 1929 crop and 22.4% vs. 5 yr. average crop.

Standard Oil NJ reduces tank car price of gasoline 3/4 cent to 7 cents/gallon at the refinery.

Fed. Reserve reports Sept. department store sales up 34% over Aug., somewhat less than the usual seasonal gain; Sept. sales were about 12% under 1929.

British budget running into deficit; planned expenditures were 787.2M pounds, and deficit of up to 20M pounds is now expected.

Canadian stats: index of employment in Oct. was 116.2 vs. 116.6 in Sept. and 125.6 in 1929; Sept. car loadings 302,890 vs. 281,150 in Aug. and 335,340 in 1929; Sept. imports $87.9M vs. $77.9M in Aug. and $99.3M in 1929; exports $82.1M vs. $70.6M and $89.4M.

Chrysler increases prices of three high-end “imperial eight” models $250 each to $2745 - $2945.

Fire at Crown, Cork, and Seal plant in Baltimore; over 3,000 tons of raw cork lost, valued at about $300,000.

Monday, November 10, 1930: Dow 173.14 -1.24 (0.7%)

2009-11-10T11:53:00.001-05:00

Assorted historical stuff:

Seven Democratic leaders make conciliatory statements; pledge cooperation with administration in promoting business revival; promise to abstain from “rash policies” and say business “should not be frightened”; say will limit tariff changes to those recommended by economic experts; praise Fed. Reserve Board.

Editorial: Gesture by Dems. is sincere, but may be passing: “Before an election politics is at its height. The men in the heat of the fight honestly regard the opposition as either fools, criminals, or both ... Once the ballots are counted ... the pendulum swings to the other extreme ... even the politicians are eager for a rest from politics for a time.” Statement is still encouraging since it suggests Dem. leaders will curb the wilder schemes and more radical proposals of some of their party members.

Col. A. Woods summarizes reports on unemployment from governors: main problem is in Great Lakes and US industrial centers; almost all states reported they're “stimulating public works and pushing ahead work which had been planned for a later date”; general feeling is to provide work for unemployed rather than relief.

W. Melville, Pres. of Melville Shoe, sends telegrams to 508 store managers saying positions are secure, urging them to buy for future needs.

Editorial: People may disagree on the meaning of Tuesday's elections, but one result is absolutely clear: public sentiment against Prohibition is rapidly increasing. People are starting to understand “morality can never be accomplished by law.” Instead, the effects of the “noble experiment” have been seen in “an increase in crime, the placing of almost unlimited wealth in a criminal class, and the spread of drinking among young men and women. ... People have been revolting against our prohibition laws; the elections show the revolt is changing to revolution before which this legislative tyranny must fall.”

Dr. L. Wilson, Mayo Foundation dir., calls for establishment of $200M endowment for cancer research, diagnosis, and treatment in 20 large US universities.

Law against importing rabbits into Australia has been revoked, and fancy fur-bearing varieties of the Angora and Chinchilla type are being imported in great numbers in hope of establishing a new industry; “some of the bucks are valued at $1,000 each.” It's hoped the common rabbit can be exterminated or “crossed with his aristocratic fur bearing relative and thus changed from a pest to an asset.”

New Brunswick provincial officials warn motorists to drive more carefully after several accidents involving moose fatalities.

Gov. H. Caulfield of Miss. orders investigation of lengths of trucks and trailers after his car is forced off highway; rigs said to often reach 60 feet in length.

Market commentary:

Market wrap: Rails came under continued selling pressure; leading industrials were firmer in early trading but selling became general in second hour; Southern Pacific, New York Central, and US Steel hit multiyear lows while GM, Radio, du Pont and Bethlehem hit new bear market lows on heavy volume; utilities also came under continued pressure. Bond market active and irregular; US govts. firm, foreign generally steady, corp. of all grades continue downtrend.

Week in review: Further drastic declines following Election Day holiday; all Dow averages well below fall panic levels; active banks stocks generally at lowest levels since 1928; considerable investment buying seen but overwhelmed by large scale forced selling in impaired margin accounts. Bonds generally down on moderate volume; only govts. and highest grade rails resisted pressure, and many corps. were down sharply. Money slightly tighter but rates little changed. Grains break to new season lows; wheat only 1 1/4 cent above record 1906 low. Cotton sagged in midweek but recovered later and stayed above season lows. Steel output continued lower; prices slightly weaker. Oil production down, price cutting continues. Rail traffic seasonally higher.

The past two months' bear market has been one “of the most severe, as well as one of the most aggravating, declines in the history of the Exchange.” The Dow has declined from 245.09 to 174.38, with almost no interim rallies in which traders who bought on breaks could sell at a profit. Causes seem to have been tax selling and liquidation due to poor earnings and dividend cuts; however, if trade reviews are accurate business is not much worse than is was on Sept. 10. Some investment buying is seen, but selling has outweighed it; consensus is the decline can't last much longer, “but the Street has been thinking that way for the last several weeks.”

Broad Street Gossip: Patient investors will, in the long run, make a lot of money buying good stocks at current prices. Some people are in fact doing this, as seen in record numbers of shareholders in US Steel, AT&T, GM, and others; “The little fellow has been getting in on the ground floor while the big fellow with the big income has been busy seeking ways and means to cut down his 1930 tax payments.”

Executives in wide variety of industries agree future earnings will depend mostly on sales volume, since costs have been cut as far as possible.

Dow made new post-panic low. There were no new yearly highs and 261 new lows.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Nov. 7 was 82.2 vs. 82.4 in previous week and 93.3 a year ago.

Report of Committee on Petroleum Economics to the Fed. Oil Conservation Board recommends additional 7% cut in oil industry operations; also suggests industry measures beyond production curtailment, including restriction of drilling and plant expansions, and unit (cooperative) operation in new development areas.

Reports from Paris state Oustric banking crisis has passed and the banks and brokers involved are of minor significance. However, heavy withdrawal of balances from New York and London to France has continued for the past few days as French banks attempt to increase confidence and prepare for any emergency.

Rail freight cars ordered in Oct. were 3,291 vs. 565 in Sept. and 17,207 in Oct. 1929; first 10 months were 36,428 vs. 83,397.

Joke:

“A teacher in a Lagrande (Oregon) school asked for pupils to tell who the world's smartest man is, and give the reasons. One urchin suggested Thomas Edison, 'because he invented the phonograph and the radio so people could stay up all night and use his electric light bulbs.'”

+ The Boring Stuff:

Editorial: All three Dow averages are now below last fall's panic lows; the rails were first, followed by the industrials during the violent selloff since Sept. 10, and finally the utilities. The six bear markets this century (aside from the 1912-14 one caused by war) averaged about 12 months; this one is now 14 months old; prices will be closely watched over the next few weeks to see if the “business situation as a whole has completed its liquidation. ... Though it has not yet been indicated in prices, all reasoning from experience tells us that the completion of the market decline cannot be far away in time, whatever prices may do in the short interval.”

Editorial by T. Woodlock: The late J.P. Morgan on two occasions turned grave US economic crises around through bold action- in 1896 when the Treasury was being drained of gold, and on Oct. 24, 1907 when Exchange brokers desparately needed money for deliveries (on this occasion, “Mr. Morgan is said to have asked whether the banks had not still 'reserves' and what bank reserves were for”). Similar bold action is called for now; “a riot of unreason ... is loose in men's minds” but fundamental such as inventories and production/consumption balance are improving; “all that the stock market needs now to produce a swift change of mood is evidence that somebody has some reason and some 'confidence' left - and it need not be a great deal.”

Closely divided Congress seen making it difficult to pass many bills.

Dr. C. Warburton, Fed. Drought Relief Committee chair., reports many firms buying a year's supply of lumber ahead to help drought areas; warns farmers in distress that they would probably be worse off if they moved to cities this winter.

US recognizes new Brazil govt. headed by Getulio Vargas.

J. Scullin, Australia PM, says country suffering from decline in commodity prices, sudden cutoff of loan availability; has had to take drastic measures to correct exchange position by reducing imports and stimulating exports; however, says nation is solvent, denies “irresponsible talk” that country may repudiate debts. Australian bonds decline several points after govt. fails to adopt Niemeyer [austerity] recommendations.

J. Baum of Amer. Bankers' Assoc. reports US bank theft losses have exceeded $12M/year in past 5 years and are steadily increasing.

Broker R.H. Gibson to open South Bend office Nov. 10; Knute Rockne will be in charge, assisted by former Notre Dame teammate Al Feeney.

Hardest subject in New York high schools last year was mathematics, with 26.9% failing; only 13% failed English and 5% failed music and “domestic science.”

Record-setting phone call recently made between Sedalia, Mo. and Sydney, Australia; total transmission distance was 15,000 miles. Call started at a Sydney telephone, went to local radio station, was amplified and sent to London, received there and switched to regular transatlantic circuit to AT&T's receiving station at Houlton Me., forwarded to New York, and then over regular land lines to Sedalia.

Market ups and downs in 1930 have tended to parallel those of the steel industry; the Street is therefore looking closely at future steel prospects. Sentiment in the trade is hopeful “the bottom is being scraped,” and steel operations generally rise significantly in Jan. and Feb.; this “might mark a turn for the better in general business,” and, after the recent extensive liquidation in stocks, “furnish the groundwork for a sustained rally.”

Broad Street Gossip: Dominant issue in the 1930 elections will probably be people's desire to see business back to normal. “Therefore, the opinion of old and experienced traders is that no party will attempt to enact legislation detrimental to business.”

Brokers continue to report increasing buying on market declines by odd-lot (small) investors “who have taken the shares out of the Street. ... Eventually, the accumulation of stocks for the accounts of the smaller investors must have a beneficial effect on the market structure.”

Heavy selling throughout the list was seen as indicating large scale forced liquidation of impaired margin accounts; this was expected to strengthen market internal conditions, and “shrewd interests” were picking shares up on expectation of a sharp technical rally.

There's still some surplus money left for investment, as seen in bond offerings for the first 10 months of $4.842B vs. $2.852B in 1929.

Curb Exchange report: (later the Amex; small companies) One of the largest Curb stocks, Cities Services (oils and utilities) plunged about 3 points to 17 1/4; with almost 30M shares outstanding, the decline from the 1929 peak of 65 has reduced the market cap by $1.440B. Lily Tulip Cup is now yielding about 8%, and earned its dividend for the first 9 months twice over.

F.J. Lisman says coal burned with up-to-date equipment remains cheapest fuel, calls heating with oil and gas a luxury; notes coal trade in very bad shape.

Commodities mixed. Wheat closed down moderately after failing to hold early gains; corn also down moderately. Cotton up sharply after slightly lowered USDA crop forecast (to 14.438M bushels from 14.486M Oct. 1 estimate).

Electric output by public utilities in Sept. was 7,763 GWHr vs. 7,878 in Aug. and down 4% from 1929; of Sept. production, 5,506 GWHr was generated by fuels and 2,257 by water power.

F.W. Dodge reports construction started in 37 states east of Rockies in Oct. was $337.3 M vs. $331.9M in Sept. and $445.6M in 1929; first 10 months $4.022B vs. $5.047B.

Railroad labor leaders to meet next Wednesday in Chicago to consider problem of railroad employment.

Rail executives announce emergency freight rate reductions in drought areas won't be further extended beyond Nov. 30.

Youngstown District steel operations at 50% this week, down 2% from last week.

Dealer stocks of new cars Oct. 1 were down for seventh month in a row, and are now 37% under 1929 level.

Survey of Chicago chain and independent groceries finds chains offer prices about 10% lower on average.

Reports from Paris that Russia plans to dump 400,000 tons of sugar on European market; French beet sugar growers ask govt. protection.

Final argument in Bethlehem-Youngstown merger trial presented by plaintiff representing Eaton-Otis interests trying to block the merger. A decision from Judge D. Jenkins isn't expected for 6 - 10 weeks, since the Court must examine extensive arguments, testimony, and briefs, as well as over 900 exhibits.

Companies reporting decent earnings: Diamond Match, Pennsylvania Water Co.

Patent and proprietary medicine shipments by mfrs. engaged primarily in that line were $263.0M in 1929, up 12.4% from 1927.

Civil aircraft on scheduled air transport in first half flew 16.903M miles with 6 fatal accidents; on other flights 51.767M miles with 144 fatal accidents.

Favorites of the week Nov. 3-Nov. 8, 1930

2009-11-09T14:39:00.001-05:00

No Journal was published Sunday, Nov. 9, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

Nov. 8:

[Note: Strangely reversed Dept.] Heard in the customers' rooms of brokerage houses: “The way stocks decline without any substantial support is beyond belief.” “Is there something we know nothing about overhanging the market?” “Why don't the 'big interests' do something to end the decline?” “Stocks are cheap, many selling far below respective book values. Why don't people buy?” “Will they ever stop going down?”

[Note: Strangely familiar Dept., except for the delinquency part.] Consumer finance companies are reportedly reducing their bank credit lines due to materially lower business this year, attributed to drop in radio and auto sales. Delinquencies said to be “far below expectations” and customers have paid down much of their debt, but renewed buying is not yet evident.

[Note: They'll get to that one of these days Dept.] Johns Hopkins researchers establish fact that common cold is infection transmitted by “non-filterable viruses, minute disease producing agents so small as to defy most powerful microscope; if virus can be made to grow in laboratory tube, vaccine may be developed.”

[Note: Sheer Genius Dept.] French Nat'l Economic Council adopts resolution for calendar reform, with majority preferring the 13 month plan.

Nov. 7:

[Note: Ay Chihuahua! Dept.] A number of market observers who have advised waiting to buy stocks until a definite turn for the better, are now saying current opportunities are too attractive to be overlooked; It's argued that with patience and good judgment there is little chance of suffering losses on standard stocks. “It is evident that liquidation has been extensive enough to suggest that it is fairly well completed”; the Dow has declined over 200 points from its peak, while brokers' loans are at a record low.

[Note: Ay Chihuahua! Dept.] B. Anderson, Chase Nat'l. Bank economist, sees fundamentals much better than in 1921, including both “general world picture” and domestic commercial credit situation (particularly corporate inventory and debt levels). Points out that in 1921, unlike today, “many businesses could not do even the business that was in sight” because of urgent demands from creditors. Estimates consumption and retail buying has for about 4 months outrun wholesale buying and factory production. Sees “makings of an upturn in business” that can become “long period of prosperity” if fundamentals are right, but should in any case be “good while it lasts.”

[Note: Edgar Allan Poe Dept.] Dr. Dervieux of the Medico-Legal Institute of Paris asserts that in most advanced countries in Europe, 2 per 1,000 are buried alive, with percentage probably much higher in certain other countries. Group of 35 deputies, mostly physicians, proposes law requiring verification of death by physician before burial.

[Note: In an ironic twist, I understand Jackie Chan is going to play Edward G. Robinson next year.] East is West - Melodramatic Chinese-American love story starring Lewis Ayres as Billy Benson, Lupe Velez as Ming Toy, and Edward G. Robinson as Charlie Yong. Cast is generally mediocre with outstanding exception of Mr. Robinson. Following much discussion “to the effect that the souls of all people are the same no matter what color their skin,” story ends with discovery that girl was the daughter of white missionaries who died in China when she was a child.

Nov. 6:

[Note: Strangely reversed Dept.] Editorial: This year's swing away from the Presidential party is apparently “more pronounced than the traditional mid-term reaction,” but to call all of Tuesday's results a repudiation of Hoover's leadership, “as the Times does,” is exaggeration; there are many other issues involved. Most importantly there's the depression; rightly or wrongly, “voters who have half a job or none visit their resentment upon the party in office.” Tariffs always cause a reaction at the polls, and Prohibition influenced many votes. We must wait for completed Congressional returns to see how much of a “national overturn” has taken place. A Democratic Congress, by historical precedent, might foreshadow a Democratic President in 1932, “but much water is to go over the dam in the intervening two years.”

[Note: Stimulus Dept.] Bulk of the local public works bond issues on the ballot were approved, for total of about $300M.

[Note: Would be an interesting investing case history - of course, color films did work out eventually but it took quite a while.] Technicolor hit new low under 11 but found support; traders said attracted by long-range possibilities of color films.

[Note: Sheer Genius Dept.] Westinghouse creates automatic fire extinguisher able to operate without human attention. An electric eye is rotated by a motor. When it detects a fire, it stops the motor and directs a stream of water toward the source of the flame; After extinguishing the fire, it begins to rotate again. In a recent demonstration, the eye found and extinguished 5 separate fires in various parts of a room in that many minutes.

[Note: Historical Joke Dept. ] “'What are you standing over there throwing rocks at that little boy for?' 'I dasn't go closer, ma'am. He's got the whooping cough.'”

No Journal published Nov. 5:

Nov. 4:

[Note: Strangely familiar Dept.] Dr. D. Friday, economist, predicts recovery this winter but warns that “fat days coming will be far leaner than those of preceding cycle.”

[Note: Strangely reversed Dept.] Main cause of Republican trouble seen as depression; absent this, even with issue of Prohibition and troublesome claims of ineptness, only normal off year election losses would be expected. Results of the election will probably be used to forecast Democratic presidential victory in 1932; if it really “ain't goin' rain no mo,” this may be the case, but things may change if economic conditions improve “as they almost surely will”; Democrats must also tend to “lack of any one outstanding candidate on whom various factions of the party can agree” and to lack of other issues or constructive program to campaign on. Republicans have been in power so long they have grown “careless and fat”; also, “without desiring to pun, it may be said that too many nuts are loose within it.” Results of election may in fact put “a good fright” into the Republican party and make it “train down and do a little fighting with its broad back to the well-known wall.”

[Note: Stimulus Dept.] J. Raskob advocates construction of “coast-to-coast super highways” and reduction of 5 1/2 day workweek to 5 days at same wages to restore prosperity. Various US communities will aid unemployment situation by immediately starting public works that normally wouldn't be undertaken for 2 to 3 years; many related bond issues will be voted on today. E.I. du Pont de Nemours announces will advance work on plant repairs and replacements. Hudson Motor adopts 5-day week.

[Note: Strangely familiar Dept.] Glass Senate subcommittee won't begin meeting until Dec. 1; will inquire into activities of Federal Reserve system and banking and finance generally; believed changed economic conditions necessitate study of banking laws to determine what modifications necessary.

[Note: Ay Chihuahua! Dept.] Editorial by T. Woodlock: Vast majority of investment trust funds (similar to mutual funds) were invested after start of 1928, at “final stage in the greatest speculative orgy that this country - or any country ever experienced.” Ironically, conditions today are now ideal for starting an investment trust; we're in a period of “maximum depression” with many bargains to be had, but past mistakes seem to prevent grasping the opportunity.

[Note: Strangely unfamiliar Dept.] C. Hanch, Nat'l Assoc. of Finance Cos. GM, reports average car loan in 1929 was paid off in a little over 9 months (standard terms are 1/3 down, a year to pay the balance). Urges more installment buying as stimulus to business today.

Nov. 3:

[Note: Ay Chihuahua! Dept.] National City Bank Nov. circular says there's little doubt depression is now scraping bottom; sees several signs of improvement; while timing of general recovery is impossible to predict, believes “next important movement will be upward.” Positive factors include impressive gains in industrial efficiency, recent stability in commodity prices, and improvement in textile and lumber industries.

[Note: Rather amazing increase.] BLS reports cigarette production in year ended June 30 was 119.9B, up 150% from 1920 and 3,600% from 1900. Avg. hourly earnings for workers in the industry were 37.8 cents for males and 26.8 cents for females.

[Note: Sheer Genius Dept.] An interesting new use for old rail cars and locomotives has been discovered by an enterprising Midwestern showman: taking the old equipment and staging sensational train wrecks, to which he charges $1 a head admission. The first show netted over $16,000.

Saturday, November 8, 1930: Dow 174.38 -6.34 (3.5%)

2009-11-08T00:32:00.001-05:00

Assorted historical stuff:

A. Smith, Union Trust of Cleveland Exec. VP, addresses Nat'l. Battery Mfr. Assoc. convention; says present price levels and improving business outlook justify public buying for normal needs; predicts national efforts to relieve unemployment would put at least 300,000 to work in final quarter; “as to the immediate outlook for business, we have passed the worst of the depression ... The element of unreasonable fear and caution in business today is going quite beyond the realities ... we are working our way out of business depression because price declines are effective, like wage increases, in encouraging public buying ... I expect 1931 to be a period of unmistakable recovery, leading to a return of prosperity.”

Chicago Assoc. of Commerce launches “steady buying” campaign urging all those not affected by unemployment to buy “all normal wants.”

Johns Hopkins researchers establish fact that common cold is infection transmitted by “non-filterable viruses, minute disease producing agents so small as to defy most powerful microscope; if virus can be made to grow in laboratory tube, vaccine may be developed.”

French Nat'l Economic Council adopts resolution for calendar reform, with majority preferring the 13 month plan.

Mr. and Mrs. James A. Smith of Deposit, NY, have indulged their wanderlust spirit by traveling in 42 states over the past eight years. They live in “a regular cottage on wheels” measuring 11 3/4 feet long by 8 feet wide by 6 feet high. “It is equipped with electric lamps, running water, refrigerator, cooking equipment, wardrobe space, a six tube radio, comfortable chairs and a double bed.”

Port Norris Oyster Co. formed in Bivalve, New Jersey.

Market commentary:

Market wrap: Heavy liquidation resumed, “some of it appearing to be necessitous in character.” Selling began in rails, including leaders such as New York Central, Union Pacific, Pennsylvania, and others; many sold at lowest prices in several years. Liquidation then spread in all directions; industrials were weak with US Steel hitting a new low since 1928 and other majors down sharply; utilities also severely pressured, including AT&T and Consolidated Gas. Liquidation continued heavy into the last hour, and market closed at the day's lows. Bond market more active, with liquidation in many parts of the list and many bonds hitting new lows for the year; corp. generally down, particularly convertibles; foreign irregular; US govts. active, firm.

Heard in the customers' rooms of brokerage houses: “The way stocks decline without any substantial support is beyond belief.” “Is there something we know nothing about overhanging the market?” “Why don't the 'big interests' do something to end the decline?” “Stocks are cheap, many selling far below respective book values. Why don't people buy?” “Will they ever stop going down?”

D. Haddock, Arkansas Chamber of Commerce: “The economic situation is 'buyological' rather than psychological. A new 'buyology' will solve it - buy something.”

Consumer finance companies are reportedly reducing their bank credit lines due to materially lower business this year, attributed to drop in radio and auto sales. Delinquencies said to be “far below expectations” and customers have paid down much of their debt, but renewed buying is not yet evident.

Dow made new post-panic low, closing at lowest price since July 1927. The Dow utility average broke below the fall panic low for the first time. There was one new yearly high and 270 new lows.

Economic news and individual company reports:

Bradstreet's and Dun's weekly reviews report trade and industry somewhat quieter, possibly due to Election Day holiday and end of peak fall wholesale season. some isolated bright spots due to holiday buying and cooler weather stimulating retail sales, but no broad trade revival seen.

Total loans on securities at end of Oct. were $8.814B, down $721M in Oct. and $4.391B off the Sept. 30, 1929 peak. The decline in loans has been entirely in loans by non-banks (corps. and individuals) - loans by Fed. Reserve member banks were $8.057B, up slightly from Sept. 30, 1929; these are now 91% of the total vs. 59% at the peak. Security loans to non-brokers have been gradually increasing since May; seen as indicating stronger or “better quality” buying.

The stronger 5-and-10-cent stores have generally had earnings only slightly below 1929; the two largest chains are Woolworth and S.S. Kresge.

Amer. Iron & Steel Inst. reports steel ingot production in Oct. averaged 50.32% vs. 55.10% in Sept. and 85.64% in 1929; first 10 months 68.01% vs. 93.92%.

French market calmer after Oustric Bank requests “judicial liquidation.” However, French banks still appears to be withdrawing gold from London, causing Bank of England to advance short term rates slightly. The French banking troubles also apparently caused some nervousness in German bank stocks.

Company reports since Oct. 1: 155 companies reported higher earnings vs. 1929 and 337 lower; 355 dividends unchanged, 35 increased, 53 cut.

Stock market joke:

“Applications for membership in the Half Century Club are coming in so thick and fast that enlarged quarters are being talked of. Practically the entire floor space of the Double Century Club is for rent and a great part of the space of the Century Club.” [Note: I believe this is a reference to stock prices.]

Joke:

“'Are you going abroad next summer?' 'No,' answered Senator Sorghum. 'What's the use of traveling around among people who don't speak my language, and who couldn't vote for me even if they did.'”

+ The Boring Stuff:

Gains by wets in Tuesday's elections considerable, but probably not enough to change law in next two years; strength of outright repeal advocates in House roughly doubled from 75 to 150. Election results may also act to change some of the less committed Congressmen currently counted as dry. Wets apparently now have strength to at least force an up or down vote in 1932 or 1933. It's unclear if wets will go for outright repeal, modification to allow beer and light wine, or “nullification” in which federal govt. will withdraw from enforcement in states.

Young Plan for German reparations, planned to last for 60 years, is now subject of widely discussed campaign for revision “before the ink has dried.” Campaign attributed to German economic troubles and recent election results; current German govt. still trying to carry Plan out. There is provision for postponing some payments in case of economic difficulty, but this in itself would probably be so damaging to general German credit that permanent revision would be needed. Plan will certainly need to be modified if price deflation continues; ironically, previous Dawes Plan replaced by Young Plan did contain such a provision.

Editorial: Report of the Farmers National Grain Corp. (established by the Farm Board as a cooperative marketing organization) is strangely uninformative on vital financial details including how much money has been paid in and by whom, marketing costs compared to private grain houses, etc.

New revolutionary govt. in Brazil says will revise terms of Henry Ford concession involving “immense tract of land in the interior.”

Capt. F. Hawks flies from Havana to New York in nine hours 21 minutes, breaking previous record of 14 hours; average speed was 182 mph.

Trading has been growing steadily more professional; activity by outsiders is largely selling for tax purposes or to get out of stocks.

Stop loss orders again prominent, attributed to traders who had bought during recent weakness expecting a technical rally.

Broad Street Gossip: One reason trading may have fallen off is that many traders have exhausted their cash resources trying to catch the bottom.

Some scale buying for long-pull investment has been seen, but not “any concentrated effort on the part of the former bullish leaders to move the market forward.”

Some speculation US Steel report of unfilled orders as of Oct. 31, to be released Monday, will show a surprise increase due to heavier buying on low prices.

J.S. Bache say tangible factors such as production, carloadings, and electric output were more favorable before the fall panic; however, “other considerations” influencing prices, including price/earnings multiples, dividend yields, money rates, and brokers' loans, are more favorable now; “as other considerations in the summer of 1929 warned of the approaching peak of the bull market, so do these considerations today hint of the early termination of the bear market.”

Many veteran traders expect a definite market upturn before end of the year, but with a period of irregularity first. They note that all stocks have joined in the downtrend, even those with 1930 earnings close to or exceeding 1929; this is unnatural and can't last. The downtrend is partly blamed on tax selling, but this should reverse in Dec.; this will also mark 18 months of business recession, and sentiment is now at a low extreme; the time to buy stocks is when no one wants them.

Some observers attributed part of recent stock selloff to insurgent Republican Sen. Brookhart's statement favoring Sen. Glass' bill for tax on speculation. Glass hearings will convene in Dec., but “well informed Washington authorities” now expect them to be “extremely conservative” since Democrats, anxious to maintain their recent advantage, won't want to do anything that might interfere with business recovery.

Number of stockholders in 38 motor cos. Mar. 31 was 431,398 vs. 191,914 in 1929 and 111,018 in 1925. GM holders were 218,392 vs. 82,415 and 39,799. Currently, only 12 of 50 representative motor cos. have any funded debt, and total debt is only $67.4M.

Most popular stocks held in fixed investment trusts (similar to ETF's): AT&T, Nat'l Biscuit, NY Central, US Steel, GE, Consolidated Gas, du Pont, Std. Oil NJ, Westinghouse, Atchison, Pennsylvania, Woolworth, Int'l Harvester, Amer Tobacco B, Eastman Kodak, Otis Elevator, Union Pacific.

Commodities strong in spite of break in stocks. Wheat up slightly but receded from early highs; other grains little changed. Cotton up substantially. Copper buying continues good abroad; domestic producers unwilling to sell, awaiting developments on curtailment.

Fed. Reserve entered open market last week for first time in a month, buying $20M of bankers' acceptances to keep rates from rising; seen as demonstrating continued willingness to maintain easy money conditions.

Sears sales Oct. 9 - Nov. 5 were $34.6M, down 17.8% from 1929; Jan. 2 - Nov. 5 were $319.1M, down 8.7%. Kroger sales for 5 weeks ended Nov. 1 were $25.2M, down 10.1%; for 43 weeks $221.6M, down 6.7%. S.H. Kress Oct. sales were $5.716M, down 1.9%; for 10 months $51.7M, down 2.6%.

Region where rails performed relatively best in first 9 months was Southwest, with operating income down 19.0% from 1929; worst was South, down 36.4%.

Rails extend test of reduced fares between Midwest and Pacific coast through Dec.; one-way coach fare from Chicago to Calif. is $47.50.

Detroit industrial employment index Oct. 31 was 79 vs. 74.8 on Sept. 30 and 98.5 on Oct. 31, 1929. Cleveland employment index was 91.6 vs. 92.0 and 119.2.

US soft (bituminous) coal production in Oct. was 44.3M net tons vs. 38.6M in Sept. and 52.2M in 1929.

A number of NYSE seats sold for $226,000-$240,000; previous sale was at $240,000.

Chevrolet prices for 1931 range from $475-$650 vs. $495-$685 for 1930.

GE reports sales of electric refrigerators in first 9 months up 30% over 1929.

Assabet Mills in Maynard, Mass., for years the largest woolen mill in the world, to suspend operations.

Some valuation extremes of companies in difficulty: four automotive companies (Mack Truck, White Motor, Reo, and Hupp) carry no long-term debt and are selling below net quick assets, i.e. below probable liquidation value, not counting plants or other fixed assets. Goodyear stock is about 41, or less than 4 1/2 times 1929 earnings of $9.34; annual dividend is $5 for a yield over 12%; company thought likely to continue dividend this quarter although it's not being earned.

Friday, November 7, 1930: Dow 180.72 +0.91 (0.5%)

2009-11-07T14:44:00.002-05:00

Election Special:

Final outcome of Tuesday's Congressional elections won't be known for days or weeks, since a number of recounts will be demanded for close contests. It appears the two parties will differ by only 1-2 votes in the House, so vacancies, which average about 10 a year, may change the situation; decision which party organizes the House may be postponed until new Congress meets in Dec. 1931. Senate situation appears similar, with 48 Republicans, 47 Democrats, and 1 Farmer-Laborite. Regardless of exact outcome, Republican strength has been cut so neither party can have effective control in either chamber.

Only once in history has an “unfavorable verdict” for the President's party in an off-year election not been followed by a defeat in the next Presidential elections.

While Republicans shouldn't in fairness be held responsible for the depression, they may be suffering for campaigning as party of prosperity in 1928. Another cause of trouble is widespread feeling against “Washington optimism” expressed too often since last spring. The situation is still salvageable for the Republicans; the US is still “overwhelmingly Republican in a national sense,” and a more favorable business climate seems likely to develop. However, Republicans still have work to do - the party needs to select candidates and leadership of better character, and Hoover needs to recapture the confidence and imagination of the country.

Republican “insurgency” in Senate may be toned down as “some of the insurgents had unpleasantly close calls as results of the Democratic tide they helped to create.” Election results may “bring home the value of some semblance of party solidarity” and bring more cooperation between Senate Republicans and President.

Assorted historical stuff:

A survey of the 500 female students at Stanford got 225 responses. Summary: About 90% expect to marry, with 40% currently in love. College men and fraternity members preferred. 70% “do not enjoy kissing for its own sake”; 20% believe in “companionate marriage”; 80% believe in divorce; 30% “consider themselves experienced in love”; 20% “approve of the double standard of morals”; most important qualities in husband: personality, appearance, and wealth. Favorite cities: San Francisco, New York, Washington, Los Angeles; most admired women: Mrs. Hoover, Helen Wills, mother, Amelia Earhart; most admired men: Lindbergh, Hoover, Edison, David Starr Jordan, Admiral Byrd. Religion: almost half Christian, 15% no religious faith, 7% “exotic Oriental creeds”, 1% spiritualism.

British Labor govt. plan to revive farming and decrease unemployment calls for initial spending of $125M, large-scale establishment of experimental farming “along Socialist lines”; to be conducted through Agricultural Land Corp. “empowered to acquire land by agreement or by compulsory methods” or by reclamation; would grant jobless men and women small farms and cottages at nominal rent and provide loans as working capital.

Prominent German business leaders recommend wage cuts of 20%, reparations relief, and strict control of public spending to meet present crisis.

Number of movie theaters in China has more than doubled in the past few years; there are now 233 theaters with a total capacity of 137,000.

Dr. Dervieux of the Medico-Legal Institute of Paris asserts that in most advanced countries in Europe, 2 per 1,000 are buried alive, with percentage probably much higher in certain other countries. Group of 35 deputies, mostly physicians, proposes law requiring verification of death by physician before burial.

New York Railways plans to ask Board of Estimate to substitute buses for trolleys on all its Manhattan lines.

Market commentary:

Market wrap: General market remained unsettled; majors including US Steel and American Can showed gains over Wednesday but broader recovery “held in check by sporadic outbursts of selling in various departments”; utilities particularly weak on election results, with new yearly lows for AT&T and Consolidated Gas. Bears continued attacking weak spots, particularly stocks selling at high earnings multiples; targets included Eastman, Nat'l. Cash Register, GM, du Pont. However, leading issues showed increasing resistance as the session wore on, and pressure lifted from the general list; US Steel and Loews showed particular strength; some short covering and moderate rallying in last hour. Bond market more active; corp. generally lower; US govts. firm; foreign govts. irregular.

A number of market observers who have advised waiting to buy stocks until a definite turn for the better, are now saying current opportunities are too attractive to be overlooked; It's argued that with patience and good judgment there is little chance of suffering losses on standard stocks. “It is evident that liquidation has been extensive enough to suggest that it is fairly well completed”; the Dow has declined over 200 points from its peak, while brokers' loans are at a record low.

H. Firestone predicts largest tire business in history in 1931 due to sharp decline in 1930 tire sales even as total car mileage increased.

Broad Street Gossip: A Chicago banker reports “talking with some of my friends, I have reached the conclusion that while stocks may be off 50% to 75% from peak prices, sentiment is off 99% from its 1929 peak.”

B. Anderson, Chase Nat'l. Bank economist, sees fundamentals much better than in 1921, including both “general world picture” and domestic commercial credit situation (particularly corporate inventory and debt levels). Points out that in 1921, unlike today, “many businesses could not do even the business that was in sight” because of urgent demands from creditors. Estimates consumption and retail buying has for about 4 months outrun wholesale buying and factory production. Sees “makings of an upturn in business” that can become “long period of prosperity” if fundamentals are right, but should in any case be “good while it lasts.”

Economic news and individual company reports:

Revised Sept. exports $307.6M vs. $437.7M in 1929, imports $226.3M vs. $351.4M; 9 months exports $2.903B vs. $3.844B, imports $2.401B vs. $3.360B.

US and Canada auto production in Oct. was 156,743 vs. 230,888 in Sept. and 394,510 in Oct. 1929. first 10 months 3.223M vs. 5.269M.

Electric output by US light and power industry for week ended Nov. 1 was 1,748 GWHr vs. 1,725 in prev. week and 1,830 in 1929.

Total class 1 rail operating income in Sept. was $104.078M, down 22.5% from 1929; revenues were $467.469M, down 17.6%; 9 months operating income was $659.4M, down 31.5% from 1929, while 9 months gross was $4.083B, down 14.6%.

French market continues nervous on Oustric bank failure; several small brokers and banks fail. French banks said withdrawing gold from foreign accounts.

Companies reporting decent earnings: So. Calif. Edison, International Cement, Bulova Watch, George W. Helme (snuff and ground tobacco).

Movies:

East is West - Melodramatic Chinese-American love story starring Lewis Ayres as Billy Benson, Lupe Velez as Ming Toy, and Edward G. Robinson as Charlie Yong. Cast is generally mediocre with outstanding exception of Mr. Robinson. Following much discussion “to the effect that the souls of all people are the same no matter what color their skin,” story ends with discovery that girl was the daughter of white missionaries who died in China when she was a child.

Jokes:

“'How did you head off your son's marriage? Did you tell them you'd disinherit him?' 'No; I told the girl.'”

“'Do you mean to say,' asked the magistrate, 'that such a physical wreck as your husband gave you that black eye?' The woman smiled proudly. 'He wasn't a physical wreck your worship,' she said, 'till 'e gave me that black eye.'”

+ The Boring Stuff:

Editorial: Gov. Roosevelt has asked the Public Service Commission for “searching inquiry” on New York's Central's proposal to increase commuter fares, adding “you of course realize that this hardly seems to be the appropriate time to increase rates ...” While we questioned New York's Central's wisdom in asking for an increase, we do feel compelled to ask Gov. Roosevelt the question: When is an appropriate time for increasing rates?

Editorial by T. Woodlock: Public anger tends to focus on packers and railroads as source of high meat prices, but they do their work very efficiently; back of the envelope calculation indicates they make a profit of about 1/2 cent per pound of meat, with distribution accounting for much more of the cost.

Govt. officials call for Congress to raise limit on spending for federal construction; current plan is for about $80M this year but could be doubled if limit is removed.

Luigi Facta, Italian Premier before Mussolini's march on Rome, dies at 69.

Republic Steel and other independents were weak on worse than expected earnings; these have been hurt by dependence on automotive industry.

Leading steel companies anticipated to show Q4 earnings considerably below Q3; some hope January will bring improved orders. US Steel ability to earn dividend requirements in Q3 considered indication of strong and diversified position.

A good percentage of Q3 earnings declines for many corporations may be due to inventory markdowns due to commodity price declines; many carry inventory at the lower of cost or market.

Stocks have again become more difficult for short-sellers to borrow, with premiums charged on some leading issues; attributed to reluctance of holders to loan shares. Short interest is still believed to be large, but increasingly done by outsiders.

Market observers have noted recent declines on unusually low volume; stop loss orders are believed to have played an important part.

Bond market as a whole rallied sharply last Nov. and Dec. following the fall panic, but has been relatively dormant since; however, highest-grade bonds have continued to advance gradually since Jan.

Renewed instability in commodities drawing attention; many operators trade both stocks and commodities, causing markets to move “sympathetically.”

Many investment trust (similar to mutual funds) companies are now liquidating holdings of other investment trusts. This may be due to public suspicion of these cross holdings caused by two failed NYSE firms that sponsored investment trusts bearing the firm's names (including Prince & Whitely); companies may also feel that “as matters have worked out in the past year ... they could have accomplished as much, if not more, by directing the investment of all their own funds.”

Stock dividend yields present a mixed picture now, with some of the “standard” investment stocks still having yields well below those reached in previous bear markets, while others are substantially higher, particularly among high-grade rails. One of the “new era” bull arguments in 1929 was that the tremendous increase in US wealth over the past decade had created a much higher volume of capital looking for investment. While new era conceptions have “lost their savor,” this increase in capital was a fact; “capital as well as labor is unemployed just now and the former ... must expect to work for a smaller compensation.” This means that when dividends are comparatively safe, yields must remain relatively low; these stocks even take on something of the nature of a bond.

Number of stockholders in 35 steel cos. Mar. 31 was 175,355, up 31% from Mar. 31, 1925; US Steel holders were 128,594, up 37.6%; others were up 19%. This contrasts with a gain of 114.5% in holders of a group of 469 industrial companies of all types.

While some oil fundamentals are favorable, including reduced production and increased gasoline consumption, gasoline and oil price cutting remains widespread and gasoline in storage of 37.215M barrels is still 3.5M above last year.

Commodities mixed. Grains up substantially. Cotton continued down. Copper unchanged at 9 1/2 cents.

During the postwar deflation, total loans and discounts at national banks declined 11.6% from 1920 high to 1921 low; current decline from 1929 peak is 9.6%.

Fed. Reserve reports money in circulation Nov. 5 up $65M to $4.491B, total Reserve Bank credit outstanding up $25M to $1.010B. Member banks in NY City report brokers' loans down $58M to $2.454B vs. $4.882B in 1929, “all other” (commercial) loans down $12M to $2.604B.

New bond offerings in Oct. were $416.6M vs. $424.0M in Sept. and $363.9M in Oct. 1929; first 10 months were $4.842B vs. $2.852B.

US Shipping Board has warned intercoastal shippers that if destructive rate cutting continues to endanger their industry they may recommend that Congress put the industry under the Interstate Commerce Act; calls for self-regulation of rates. Traffic reportedly about 25% below normal.

F.W. Dodge reports construction started in 37 states east of Rockies in week ended Oct. 31 was $57.3 M vs. $59.7M prev. week and $90.6M in 1929.

Dow average of eight finished iron and steel products was $44.56/ton, unchanged from prev. week and low for 1930; 1929 range was $49.88 - $51.25.

Commerce Dept. reports Sept. iron and steel exports were 131,211 gross tons vs. 151,235 in August and 221,415 in Sept. 1929.

General Mills reports US flour production in Q3 was 29.289M barrels vs. 29.250M in 1929.

F.W. Woolworth Oct. sales were $26.422M, up 18% over Sept. but down 4.5% from 1929; first 10 months were $222.9M, down 4.2%.

George W. Helme (snuff and ground tobacco) stock about 84, yield 8.2%, 1929 earnings $8.52/share, 1930 earnings expected about the same.

Thursday, November 6, 1930: Dow 179.81 -5.58 (3.0%)

2009-11-06T10:32:00.001-05:00

[Note: Unfortunately the blather on contemporary events I tried to write yesterday kept expanding so I didn't get it done - will try and finish it soon!]

Election Special:

Congressional returns incomplete; Democrats appeared to gain control of the House and make inroads into Republican Senate majority. Regardless of exact outcome, neither party expected to have any effective control in Congress; administration expected to be “greatly embarrassed in pursuing its policies over the next two years”; Washington center stage to be occupied by “political jockeying and maneuvering for the preferred position in 1932.”

Editorial: This year's swing away from the Presidential party is apparently “more pronounced than the traditional mid-term reaction,” but to call all of Tuesday's results a repudiation of Hoover's leadership, “as the Times does,” is exaggeration; there are many other issues involved. Most importantly there's the depression; rightly or wrongly, “voters who have half a job or none visit their resentment upon the party in office.” Tariffs always cause a reaction at the polls, and Prohibition influenced many votes. We must wait for completed Congressional returns to see how much of a “national overturn” has taken place. A Democratic Congress, by historical precedent, might foreshadow a Democratic President in 1932, “but much water is to go over the dam in the intervening two years.”

NY Gov. Roosevelt reelected by record 3/4 million margin; “more than ever stands out as the likely presidential selection of his party two years hence.” While greatly strengthened, his candidacy still might be resisted because of anti-Prohibition stand and New York political affiliations. Also gaining as a possible presidential candidate was Robert Bulkley, elected senator from Ohio on a wet platform.

Editorial: Gov. Roosevelt's victory in New York, while impressive, may not have been a referendum on Hoover but largely driven by local issues. Roosevelt's program of social relief naturally had special appeal in a year of depression. His opponent was little known, had an incompetent party organization, and his only noteworthy issue was the Tammany Hall scandals. “Thus the unprecedented Roosevelt majority in this state was primarily a personal and local affair.”

Prohibition expected to become outstanding issue in 1932 Presidential and Congressional elections. Wets in House increased from about 75 to 125-150; gains in Senate were small but considered influential. Wets expected to move aggressively toward showdown, though change considered unlikely by this Congress.

Bulk of the local public works bond issues on the ballot were approved, for total of about $300M.

Assorted historical stuff:

Report to White House child conference estimates annual crime bill at $16B and annual child welfare cost at $5B.

Alien immigration to the US was 17,792 in Sept. vs. 28,020 in Sept. 1929.

Officers and workers of Chicago area railways join to aid rail workers in need; cash funds for aid gathered from voluntary contributions; commissaries at important points will provide necessities including coal, food, and medical care.

Speech from British throne censures government for having no constructive program to cure depression and unemployment. Liberal party presents plan to reduce unemployment by one million by reducing production costs, govt. stimulation of new enterprise, encouragement of agriculture, and public works.

Prohibition movement advancing slowly but surely in Europe: following “ten years propaganda in favor of total abstinence,” village of Mengsdorf, Czecho-Slovakia unanimously adopts resolution to refrain from drinks and revoked liquor license of town's only inn.

Gov. Dern of Utah says will remain neutral in lawsuit filed by Arizona to stop construction of Hoover Dam.

Gallery exhibitions include a show of 50-odd Degas pastels and drawings at the Seligmann Galleries, and paintings by Max Backmann, the leading modern artist in Germany, at the New Art Circle. The Museum of Modern Art regrets to report that one of Daumier's finest small works, “The Print Collectors,” valued at $35,000, was stolen from its exhibition walls last week. “A detective is now constantly on guard at the museum to prevent any further thefts.”

Westinghouse creates automatic fire extinguisher able to operate without human attention. An electric eye is rotated by a motor. When it detects a fire, it stops the motor and directs a stream of water toward the source of the flame; After extinguishing the fire, it begins to rotate again. In a recent demonstration, the eye found and extinguished 5 separate fires in various parts of a room in that many minutes.

Dr. H. Eckener says all future German Zeppelins to use helium gas due to danger of hydrogen shown in R-101 disaster.

Market commentary:

Market wrap: Whole market under pressure most of the session; “results of the election were undoubtedly the principal factor”; as additional results became known and it became clear Democratic gains were larger than expected, liquidation increased; commodities also came under severe pressure. Leaders including AT&T, Westinghouse and Standard Gas hit new 1930 lows; selling spread to rails; US Steel broke to lowest point since 1928 on further decline in production. Volume was not heavy and decline orderly but steady; activity increased in final hour when new lows were established. Bond market more active; high grade corp. generally higher; US govts. firm; foreign govts. steady, Brazil higher.

Utility shares were heavily sold; apparently due to Roosevelt and Pinchot victories in NY and Pennsylvania; “ideas of neither man are in harmony with normal private operations of utilities”; Gov. Roosevelt's prominence as 1932 Presidential candidate seen as “unpleasant cloud on the horizon.”

Eastman Kodak hit new 1930 low on reports holiday outlook not promising; however, company reportedly has attractive Christmas line including “Kodatoy”, a $12 movie projector for children projecting the 16mm film used for home movies, as well as the “Beau Brownie” and “Kodak Coquette.”

Technicolor hit new low under 11 but found support; traders said attracted by long-range possibilities of color films.

R. Budd, Great Northern Rwy. pres., sees business starting to definitely improve next summer and back to normal by end of year; points to depleted inventories as providing stimulant when consumption returns.

Dow made new post-panic low. There was one new yearly high and 127 new lows.

Economic news and individual company reports:

American Bankers Assoc. reports savings deposits at US banks and trusts June 30 were a new record of $28.485B, up $267.2M vs. 1929. Number of depositors was 52.769M, up 5,048.

Rail freight loadings for week ended Oct. 25 were 959,335 cars, up 28,250 from prev. week and down 175,025 or 15.4% from 1929 week.

Class 1 rail employees in Aug. totaled 1.514M and were paid $215.8M vs. 1.532M paid $217.9M in July and 1.760M paid $260.0M in Aug. 1929.

French banking difficulties continue; stocks declining, “advices from Paris hint of possibility of further difficulties before liquidation has run its course.”

Companies reporting decent earnings: United Light & Power, Federal Water Service, Loews.

Jokes:

“Dr. John B. Watson was recently quoted as follows: 'In fifty years there will be no such thing as marriage.' Consulting 'Who's Who,' I find that I am able to write with a degree of confidence that in fifty years there will certainly be no further prophecies from Dr. Watson. - Rev. David A. Poling.”

“'What are you standing over there throwing rocks at that little boy for?' 'I dasn't go closer, ma'am. He's got the whooping cough.'”

+ The Boring Stuff:

Strange editorial by T. Woodlock where he points out that stock market fluctuations don't result in overall total money gain or loss across society since the buys and sells all balance out. Doesn't seem to acknowledge potential of bubbles to increase borrowing, resulting in over-consumption, over-expansion by business, etc.

Survey by authorities in Kiangsi Province of China finds “so-called 'Communist' bandits” blamed for killing 81,300, destroying $214M worth of property, and burning down 37,700 houses in the province in first 9 months of 1930.

Aviation Corp. of Canada to be formed with Canadian Railway participation; to control several existing Canadian airway cos. and provide coast to coast service.

Many industrials have greatly increased cash holdings as a result of lower inventories and smaller accounts payable.

Up to Sept. 10, the day the last rally ended, 75% of traders believed the market had definitely turned; now, 75% are bearish.

Thus far in the bear market it's been the long-term bear that made money, while those traders who try to switch between long and short have had difficulty.

Steel trade interests see further declines in production before change for the better due to seasonal factors.

D. Willard, B. & O. Rail. Pres., attacks government subsidized inland waterways and free use of highways by trucking companies.

Increase in freight loadings considered encouraging, since at this time in 1929 loadings were trending down; comparison vs. 1929 was since Aug. 30; however, market interests inclined to wait for next few week's results before placing too much importance on the increase.

Commodities weak. Wheat down sharply to new season lows, corn little changed, other grains also down sharply; several month contracts down to lowest levels in 20 years or more. Cotton down sharply on late weakness. Copper buying continues active abroad; domestic producers not anxious to sell, seen buying time and hoping for production curtailment.

Currency Comptroller reports resources of 7,197 national banks Sept. 24 were $28.379B, down $737.9M from June 30 but up $454.4M from Oct. 4, 1929.

US Steel ingot production for week ended last Monday was at 52% vs. 55% previous week and 80% in 1929; independents were at 44% vs. 47% and 75%; industry total was 47% vs. 50% and 77 1/2%. Scrap steel and iron prices reported sharply lower. Iron Age reports “steel trade still clings to the opinion that production is close to bottom,” counting on rail and structural steel buying; machine tool orders reported down in Oct.

Gasoline stocks at refineries Nov. 1 were 37.215M barrels, up 560,000 in week; refineries operated at 64% vs. 65.7% prev. week; oil production was 2.363M barrels/day, down 15,150 from prev. week and down 456,400 from 1929.

State and municipal borrowing in Oct. was $157.1M vs. $72.6M in Sept. and $122.3M in Oct. 1929; first 10 months $1.202B vs. $1.090B.

Bradstreet's reports Oct. business failures were 1,943, up 10.2% from Sept. and 17% from Oct. 1929; liabilities totalled $74.2M, up 31.1% and 146%; first 10 months were 19,818, up 21.2% from 1929; liabilities totalled $744.0M, up 49% and a new record high.

World copper production in Sept. was 302.0M pounds, down 23.3% from peak in April 1929 when copper was 24 cents; US prod. was 137.0M, down 37.9%.

Japanese business activity reported about 27% below 1929 level, and foreign trade about 30%. Stocks have steadily declined since July, 1929; total value of shares listed on Tokyo Stock Exchange Sept. 1 was 1.671B yen, down 989.2M since Sept. 1, 1929. Business uncertain on govt. policy; many who favored “deflation and rationalization” when current govt. took power in July 1929 are now in favor of inflation, with govt. providing emergency aid for all classes of business by giving funds to the Industrial Bank of Japan and having it “endorse any commercial bill or note of which there was even a remote chance of repayment.”

Industrial machinery exports in first 9 months were down 5% from 1929 but up 19% from 1928.

Q3 production of fats and oils was 1.087B pounds, of which 482.6M were vegetable oils and 339.4M were lard.

NYSE seat sold for $240,000, up $8,000 from most recent sale.

Assorted Q3 earnings: Mack Trucks $0.62/share vs. $1.85 in Q2 and $2.67 in Q3 1929; Standard Oil of Calif. $0.83 vs. $0.80 and $1.13.

The last survivor of the original 54 subscribers to stock of the old American Electric Co. is A. Sloper. This company was a predecessor to GE formed 50 years ago to market an electrical arc-light. The stock issue was 3,500 shares at $25 par, of which Mr. Sloper took 20 shares for $500; had he held on to the stock he would today have GE stock worth a total of $35,669.

No Journal published Nov. 5, 1930

2009-11-05T14:00:00.004-05:00

No Journal was published Wednesday, Nov. 5, 1930 following the Election Day holiday. I know you're all in suspense, but you'll have to wait until tomorrow for the results!
I'll try and blather on about some contemporary topics later in the day.

Tuesday, November 4, 1930: Dow 185.39 +0.50 (0.3%)

2009-11-04T14:26:00.001-05:00

Election special:

Republican control of Congress now expected to be “pared to a shadow if not obliterated” in today's election. Democrats claim majority in House but don't expect to win control of Senate; Republicans anticipate “victory” but expect to lose some strength and fear loss of effective control in House as has occurred in Senate; independent observers don't expect Democrats to gain control.

Main cause of Republican trouble seen as depression; absent this, even with issue of Prohibition and troublesome claims of ineptness, only normal off year election losses would be expected. Results of the election will probably be used to forecast Democratic presidential victory in 1932; if it really “ain't goin' rain no mo,” this may be the case, but things may change if economic conditions improve “as they almost surely will”; Democrats must also tend to “lack of any one outstanding candidate on whom various factions of the party can agree” and to lack of other issues or constructive program to campaign on. Republicans have been in power so long they have grown “careless and fat”; also, “without desiring to pun, it may be said that too many nuts are loose within it.” Results of election may in fact put “a good fright” into the Republican party and make it “train down and do a little fighting with its broad back to the well-known wall.”

Editorial: An increasing number of votes for third-party candidates seems driven by protest. Those who vote this way should consider if they're doing more harm than good; “the decline of parliamentarism which has driven more than one of the nations of Europe to dictatorship was caused in the main by too-fine division of the electorate into many warring factions ... ”

Business fears as to election results seem exaggerated; the new Congress won't meet until Dec. 31, 1931 and will probably be too closely divided to do anything controversial; In fact, since the new Congress will meet shortly before a presidential election, it's an almost unbroken rule that it won't do much of anything.

Anti-Prohibition forces expected to gain from election, but drys expected to retain control; repeal or modification not expected for at least two years.

Assorted historical stuff:

J. Raskob advocates construction of “coast-to-coast super highways” and reduction of 5 1/2 day workweek to 5 days at same wages to restore prosperity. Various US communities will aid unemployment situation by immediately starting public works that normally wouldn't be undertaken for 2 to 3 years; many related bond issues will be voted on today. E.I. du Pont de Nemours announces will advance work on plant repairs and replacements. Hudson Motor adopts 5-day week.

Glass Senate subcommittee won't begin meeting until Dec. 1; will inquire into activities of Federal Reserve system and banking and finance generally; believed changed economic conditions necessitate study of banking laws to determine what modifications necessary.

W.R. Hearst calls for substitution of Canadian or Swedish system for national Prohibition in US.

The position of railways on smoking in dining cars has become complicated due to the recent increase in smoking by women; “It is more difficult for the head steward to say 'No smoking, please,' to a charming lady ... If she declines to listen to his objurgations, the head steward's position is practically untenable.” The Boston & Maine Railroad has now resolved to settle the question by a customer ballot.

Notable new developments in business machines: IBM - automatic billing machine, new time clock equipment, “safe electric” food slicer; N.C.R. - check writing and signing machine; Burroughs - cash registers in colors, savings bank entry machines; Royal - pastel and duo-tone typewriters, 44 inch carriage for statistical work; Addressograph - bill printing and addressing machine. Earnings generally down moderately from 1929 except for IBM.

Market commentary:

Market wrap: Trading extremely light due to tomorrow's election day holiday; many traders “seizing the opportunity for a three-day vacation,” and others were reluctant to commit before election results were known. Leading shares opened slightly lower and staged a moderate recovery about 11 o'clock, then traded in a narrow range the rest of the session. Amid general dullness, some individual weak spots stood out including Simmons, Coca Cola, International Nickel, Chrysler, and Westinghouse late; however, attempts to spread weakness to the general list made no headway. Bond market also dull, little changed; foreign and US govts. and high grade rails showed firm tone.

Editorial by T. Woodlock: Vast majority of investment trust funds (similar to mutual funds) were invested after start of 1928, at “final stage in the greatest speculative orgy that this country - or any country ever experienced.” Ironically, conditions today are now ideal for starting an investment trust; we're in a period of “maximum depression” with many bargains to be had, but past mistakes seem to prevent grasping the opportunity.

T. Girdler, Republic Steel Pres.: “Operations for the industry are around 50% of capacity and there are many signs that this will be maintained or improved upon during the last two months of the year. I expect a national and sound recovery in prices and operations to get under way in the steel industry early next year.”

Neisner Bros. Pres. A. Neisner sees noticeable improvement in fall buying, expects co. business for Q4 as good or better than 1929.

Movie companies adjusting to novelty of sound films wearing off; box office again dependent on film quality; some companies now offering widescreen as new novelty; stage shows at high-end theaters being restored; more children's films planned.

Dr. D. Friday, economist, predicts recovery this winter but warns that “fat days coming will be far leaner than those of preceding cycle.”

Economic news and individual company reports:

Longest US dividend records: Penn. Railroad 75 years; New York Central 61 yrs; Western Union 57 yrs; AT&T 48 yrs; United Gas Improvement 45 years.

NYSE reports brokers' loans at end of Oct. were $2.556B, down $925.3M in month and lowest total ever recorded (figures have been recorded since Jan. 1926; value of NYSE-listed shares has since increased from $34.5B to $60.1B as of Oct. 1).

Standard Oil of NJ cuts retail gasoline 1 cent/gallon throughout its territory. Std. Oil of Indiana lowers prices on midcontinent crude oil by 12 cents/barrel.

US gasoline consumption in first half was 6.810B gallons vs. 6.292B in 1929; taxes collected $230.6M vs. $175.1M; avg. tax per gallon 3.39 cents vs. 3.07 cents.

C. Hanch, Nat'l Assoc. of Finance Cos. GM, reports average car loan in 1929 was paid off in a little over 9 months (standard terms are 1/3 down, a year to pay the balance). Urges more installment buying as stimulus to business today.

Companies reporting decent earnings: Pullman (passenger rail cars), Canadian Wire & Cable (benefited from power development), Distillers Corp. - Seagrams (Canadian whiskey, able to increase sales in spite of Canadian govt. efforts to end exports to US).

Joke:

“'So you took that pippin home from the movie last night.' 'Yeh.' 'How far does she live from the theatre?' 'Oh, three soda fountains and a candy store.'”

+ The Boring Stuff:

Editorial: Rails are suffering because of scheduled freight trains that must be run with whatever loads are available. They should consider cutting back; “Is the element of time so supremely important in the case of most of this ... freight?”

K. Druisberg, Nat'l. Assoc. of German Industries Pres., says Young (reparations) Plan “cannot be carried out,” leads to “the severest damage, not only to German economy, but also to the economic life of the creditor states.”

Dr. G. Vargas, Brazil provisional Pres., promises to dissolve Congress, reorganize courts, and investigate Banco de Brasil for criminal misuse of public funds; says will not take vengeance on members of deposed govt.

Yonkers Mayor Fogarty joins Gov. Roosevelt and Westchester officials in denouncing New York Central's proposed 40% commuter fare hike.

German air officials plan to use helium in new Zeppelin if negotiations with US succesful. R-100 airship plant at Yorkshire, England shut due to lack of orders [the R-101 recently crashed and burned, as reported on Oct. 7].

While Eskimos have previously been considered uninterested in the outside world or worldly riches, some families are now earning up to $40,000 a year in the fur trade “with a resultant disregard for expense that is startling.” Extravagances include chartering airplanes for travel, paying $300/ton for coal, and radios that “bring American jazz to the igloo.”

Major US govt. research labs include the 4,600 acre Wright Field site outside Dayton Ohio where main aeronautic research is carried out; 7 types of aircraft are now being developed including “attack, bombardment, ... transport, and photographic”; work now being done on engine design, high altitude flying, fog penetration by light rays, etc. Also important is Nat'l Bureau of Standards on 43 acres Northwest of White House, with 70 specialized groups in 11 major buildings.

F.J. Lisman & Co. lists 10 cash-rich industry leaders that may become blue chips of the next bull market: American Radiator, Commonwealth & Southern, Commercial Solvents, Chrysler, Phillips Petroleum, Remington-Rand, Standard Brands, Kroger Grocery, Lorillard, International Nickel. 100 shares of each can be bought for a total of $18,000.

O. Kahn tells Suffolk County Republican Committee that US financial and economic foundations are perfectly sound, no cause for alarm in present depression.

R. Pressprich suggests banks employ excess funds to buy NY City bonds, pointing out they are most liquid next to US govts. and, at about 4%, yield 3/4% more than highest-yielding US govts.

Recent market has moved down on low volume, indicating discouraging lack of support; this “has smashed the theory of 'don't sell a dull market.'”

The new Bank for International Settlements is off to a slow start in fulfilling its founders' ambitions, particularly that of equalizing credit conditions among member countries; rates can be 1% in one country and 15% in another though both are on the gold standard; while currencies are stabilized, “there is no atmosphere of mutual confidence permitting capital to circulate freely from one currency to another in the certainty of being able to make the reverse journey without injury.”

Commodities mixed. Grains down sharply, with wheat at season's lows. Cotton up moderately after easing off earlier gains. Copper buying continues active at 9 1/2 cents, with producers unwilling to fill all orders; prospects for curtailment still uncertain.

US Post Office to employ 228,490 for Christmas mail rush; will as far as possible give preference to “competent men with families to support.”

Transit Commission announces employment for 10,000 in 1931 will be provided by crossing and other transit improvements involving cost of $173M.

Commerce Dept. reports public works construction costs down 9%-20% below 1929; avg. municipal bond rates were 3.97% vs. 4.38%.

Fed. Reserve member banks weekly report for Oct. 29: loans on securities down $85M to $8.057B, “all other” loans up $134M to $8.707B.

New NYSE listings in Sept. were $346.3M ($79.6M stocks and $266.7M bonds) vs. $2.089B in 1929; may account for gains in shareholders of existing cos.

Pennsylvania crude oil, after recent 15 cent cut to $2/barrel, is at lowest price since 1915.

US coal output for week ended Oct. 25 was 10.438M tons, up a more than seasonal 13.1% from prev. week but down 10% from 1929.

More efficient rail transport has stimulated large increases in fruit and vegetable production; domestic fruits and vegetables unloaded in 66 markets in 1929 were 615,387 carloads, up 3.2% over 1928 and 5.3% over 1927. Largest market was New York with 21% of total, second was Chicago with 10%.

USDA estimates 1930 wheat production in 32 countries at 3.231B bushels, up 4.5% from 1929.

Average corn crop forecast by 5 experts was 2.040B bushels, up slightly from last month's 2.003B; final crop in 1929 was 2.614B, and this would be smallest crop since 1901.

Cudahy Packing Pres. E. Cudahy testifies in court hearing on allowing meat packers to sell at retail: depression has had serious effect, with people demanding cheaper cuts of meat and refusing to buy better grades; says monopoly impossible in packing industry due to perishability and widespread production of livestock.

French tax receipts in Sept. were 3.414B francs, up 45M from Sept. 1929; 6 months ended Sept. 30 were 22.007B francs vs. 23.606B in 1929.

French Banque Adam fails as result of Oustric troubles; govt. recruits 5 largest French banks to liquidate 200M francs in assets; stock market remains nervous.

Canadian employment at 7,384 firms Oct.1 was 1.021M vs. 1.025M Sept. 1, usual seasonal decline; index was 116.2 vs. 116.6 Sept. 1 and 125.6 in 1929.

F.W. Dodge reports NY metro. area new construction contracts in Oct. were $80.0M vs. $81.6M in Sept. and $80.4M in Oct. 1929.

Montgomery Ward Oct. sales were $30.1M, down 6.4% from 1929 and improved from Sept. decline of 18.3%; first 10 months were down 2.0%.

Assorted Q3 earnings: Coca Cola $4.899M vs. $4.333M in Q2 and $4.661M in Q3 1929; Timken Roller Bearing $.48/share vs. $1.25 and $1.55; Pullman $1.75/share vs. $1.37 and $1.87.

International Nickel has production capacity of 180M pounds/year, roughly 1/3 more than world consumption in 1929, and probably enough ore for 75 years.

Monday, November 3, 1930: Dow 184.89 +1.54 (0.8%)

2009-11-03T12:18:00.001-05:00

Assorted historical stuff:

Editorial: Recent events in Europe suggest “political skies there may soon be perceptibly brighter,” particularly Chancellor Bruening's success in persuading the Reichstag to reject all motions by extremist parties to modify reparations. Even Mussolini's recent speech celebrating the eighth anniversary of the march on Rome “seemed to reveal some appreciation of the risks inherent in unrelieved swashbuckling.” A less pleasing aspect of Mussolini's speech was his bid for German and Austrian support in undoing the Versailles Treaty; however, German reaction indicates they're increasingly recognizing “that their relations with France ... are the key to both political and economic improvement on the continent.” Much depends on Berlin continuing to resist “temptation to play upon the relations between France and Italy”; if the current govt. stays the course, “little need be feared from either the periodic fireworks from Rome or the obviously unsettled reparations settlement.”

Colombia reportedly has suffered less political unrest due to Colombian coffee prices not declining as much general coffee prices.

Average height in Japan has been increasing; doctors attribute this to “athletics, more open air living, and better diet and sanitary conditions.” As one result, the Tokyo police force has increased the minimum height one inch to 5 feet, 2 inches.

An interesting new use for old rail cars and locomotives has been discovered by an enterprising Midwestern showman: taking the old equipment and staging sensational train wrecks, to which he charges $1 a head admission. The first show netted over $16,000.

Town of Hickman, Ill., consisting of store, post office, house, and two smaller buildings, auctioned off for $1,053; buyer will move buildings and use as corn land.

Market commentary:

Market wrap: Market unsettled in short Saturday session. Some stocks heavily pressured, including AT&T and specialties such as Gillette, Fox Film A, Warner Bros., and Auburn Auto; some weakness in other leaders including Allied Chemical and American Can. Bulls cautious on signs “liquidation had not been fully completed,” and main body of stocks was under pressure most of the session, though trading was light. Moderate improvement developed throughout the list toward the close, with particularly brisk recoveries in Bethlehem and US Steel. Bond market more active on reinvestment demand, prices generally steady; US govts. firm.

Week in review: Stocks declined extensively on weak business news and election jitters; a particular low point was Bethlehem Pres. Grace's pessimistic statements; many leading stocks hit new bear market lows. Money remains extremely easy, and brokers' loans continued sharp decline; banks continued heavy purchases of securities, with investments now at record levels. Grain prices eased off, while cotton lost part of an early week rally. Oil and steel prices declined. Main feature in bond market was strength of foreign govts., particularly Brazil on reassuring statements by revolutionary govt., and Germany; US govts. lightly traded, strong; domestic corp. irregular: highest grade rails firm, utilities steady, industrials and lower-grade weaker.

K. Hogate, Dow Jones & Co. GM, reports recently improved sentiment in East although as yet no signs of generally improved business. “The feeling exists in important places that the depression has gone far enough, and it has been decided that no more important houses are to be allowed to fail, provided they are meritorious, so that several sore spots have been healed. ... The one thing that is necessary to revive business is shortage. That is the one 'panacea' that has always worked us out of depressions in the past. We now have actually reached a point of shortage ...”; this should be felt in retail business first, as is apparently happening. Revival of business has so far been postponed because “most individuals went into the current depression better supplied than in any previous depression. ... There may be nothing sensational in immediate prospect, but ... we are, I believe, definitely beyond the really disheartening phase.”

National City Bank Nov. circular says there's little doubt depression is now scraping bottom; sees several signs of improvement; while timing of general recovery is impossible to predict, believes “next important movement will be upward.” Positive factors include impressive gains in industrial efficiency, recent stability in commodity prices, and improvement in textile and lumber industries.

GM earnings considered encouraging; Q3 net of $0.53/share was slightly above most optimistic estimates, and company now expected to comfortably cover year's $3 dividend requirement in spite of “great business unsettlement.”

Economic news and individual company reports:

Bureau of Securities charges Prince & Whitely with taking $2M-$3M from Prince & Whitely Trading Corp. and falsifying books to show loan had been repaid, and with using stock supposedly bought for the Trading Corp. for its own brokerage business.

Fed. Reserve Oct. review notes usual peak period for credit demands passed with only slight, temporary tightening in money market; banks continue to increase holdings of investments; bank positions considered strong, with little Fed borrowings and many having surplus funds seeking profitable employment. Savings banks showed unusually large increases vs. 1929; Oct 10 deposits were up 6.4% year over year vs. a 2.7% increase in 1929 and an avg 5.5% increase in prev. 4 years.

BLS reports cigarette production in year ended June 30 was 119.9B, up 150% from 1920 and 3,600% from 1900. Avg. hourly earnings for workers in the industry were 37.8 cents for males and 26.8 cents for females.

Ford Motor Co. says saves $4M - $5M annually by salvaging old materials including used lumber, waste paper, glass, rubber, etc.

Technicolor operations reportedly down to about 50% due to lower motion picture business; 1930 earnings will be about $2/share, well below earlier estimates.

Jokes:

“'Your silver wedding anniversary, is it? Congratulations, old boy.' 'Yes, that's the first twenty-five years of it over.'”

“Foreman - Well, everything is all right? Night Watchman - Yes, I haven't done so bad for the first night. I've checked off everything, and there's only one thing missing - the steam roller.”

+ The Boring Stuff:

Editorial from Boston: The Justice Department recently asked us “in confidence” whether we favored prohibition. Since we have at least as much confidence in our readers as in the Bureau of Prohibition, we will share the questions and answers with you. “Question 1. Is your paper in favor of prohibition? Answer: No. Question 2. Is your paper against prohibition? Answer: Yes. Question 3. Is your paper neutral on the subject of prohibition? Answer: No. Question 4. Will you state briefly your reasons for adopting the policy you are advocating? Answer: 'Prohibition' inevitably promotes intemperance and has already undone a generation's progress toward temperance.” Prohibition is based on “the mistaken assumption that law and legislation are identical, and on a misunderstanding of human nature.” Its continuation “constitutes a demoralizing menace to constitutional and representative government.”

Editorial: New York's Central's attempt to raise commuter fares is bound to turn over a hornet's nest. “To raise these fares means to start a small riot in each of literally scores of communities, in each of which is then presented a glorious opportunity for 'defenders of the public interest' to distinguish themselves.” Without prejudging the merits of the business case, the rails might be better off keeping the current fares to avoid losing more business to buses.

NY Gov. Roosevelt asks thorough investigation of NY Central rate hike request, states “this seems hardly the appropriate time to ... make living expenses of suburban dwellers higher.”

Five Southwestern rails join Northern and Western carriers in petitioning ICC on recently ordered reductions in grain rates, climbing rates are already too low to provide a fair return as mandated by law.

Work on Boulder [later Hoover] Dam to start in about two weeks; Interior Dept. to put $60M - $70M of contracts up for bid by about Dec. 1.

Western states to undertake enormous engineering projects in next few years, including Colorado River - LA aqueduct estimated to cost over $225M, and two other projects on the same scale: Columbia River development in Washington and water conservation program for Northern and Central Calif.

Bulls discouraged by Friday's new bear market low and “dissipation of hopes” for immediate recovery in business. This was said to explain reduction in buying and market decline on low volume; also cited was increasing short selling by small traders. However, looking slightly further ahead, the next few weeks may “mark the transition from the prolonged downward movement ... [of stocks] since September 1929.” The market seems close to completing its adjustment to current business conditions, and fundamentals should start being more favorable soon. Usual holiday improvement in merchandising, and Jan. and Feb. improvement in steel trade will now be accompanied by vastly improved margin situation, very easy credit, and attractively valued stocks.

French stock market nervous over troubles of Oustric Bank.

Increasing hopes for copper curtailment; some observers point to succesful effort in 1921 when a similar surplus was built up.

Short covering said to be relatively small recently, with short interest down considerably. Stop-loss orders said increasingly popular, and a factor in recent declines.

Commodities mixed. Wheat up slightly, other grains down. Cotton down slightly.

Bureau of Securities reports Oct. security fraud losses of $11.765M, bringing total to $51.015 for first 10 months; Oct. said most active month in Bureau history.

Dun's reports 2,124 business failures in Oct. with total liabilities of $56.297M, vs. 1,963 with $46.947M in Sept. and 1,822 in Oct. 1929.

Agriculture Dept. reports agricultural exports in Q3 were $286.3M vs. $336.7M in 1929.

Irving Fisher's index of 200 commodities for week ended Oct. 31 was 82.4 vs. 82.7 in previous week and 93.7 a year ago.

South Penn Oil Co. cuts Pennsylvania crude oil prices $.15 a barrel. Texas Railroad Commission approves cut in allowable oil production in Panhandle from 80,000 barrels/day to 70,000.

Ford Motor Co. owns or controls Ford companies in Great Britain, Irish Free State, almost all European countries and others. Some manufacture their own parts, while others just assemble cars, or distribute cars built elsewhere.

German shipyards inactive, with only 200,000 tons of 1M capacity commissioned vs. 270,000 at end of 1929 and 500,000 at end of 1928.

German coal production in Q3 was 34.4M metric tons vs. 34.2M in Q2 and 42.3M in Q3 1929.

Chinese Fin. Min. Soong denies China seeking loans abroad at this time.

877 lumber mills reported orders for the week ended Oct. 25 were 4% under production of 260.2M feet; first time in 6 weeks orders fell below production.

Youngstown District steel operations expected to decline 2% to 52% this week. Auto business down; further slow decline expected until Jan., followed by slow advance on automotive demand.

Gasoline in Chicago wholesale market is 4 5/8 - 5 1/4 cents vs. 4 3/4 - 5 3/8 previously.

Detroit factories and shops reportedly called 3,446 men back to work in past week and 5,727 in past 2 weeks.

Metro. Los Angeles district had 194 new industrial plants and expansions for $24.4M announced in first 9 months vs. 196 for $22.6M in 1929.

Three NYSE seats sold for $232,000 - $235,000, up $12,000 - $15,000 from previous sale.

Melville Shoe reduces retail shoe prices 10%.

Companies reporting decent earnings: Ulen & Co. (engineering and construction), Melville Shoe.

Canada Dry Pres. P. Saylor says co. is unlikely to be hurt by repeal of Prohibition, pointing to Canadian subsidiary's tremendously increased profits since 1924 even though every Canadian province with the exception of Prince Edward Island was dry in 1924 and is wet now. Also expressed his belief that more beer is made and consumed today under Prohibition than was ever made or consumed prior to Prohibition.

Favorites of the week Oct. 27-Nov. 1, 1930

2009-11-02T13:55:00.000-05:00

No Journal was published Sunday, Nov. 2, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

[Note: Sheer Genius Dept. - this one is from after the crash in 1929, of course.]
The Trader's Lament:
“They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”

[Note: And another item from 1929 - I feel the need to honor the one guy I found quoted in the Journal who got things right.] P. Mazur of Lehman Bros. took a contrarian view: “Yesterday's crash on the stock market is likely to have an immediate and probably lasting effect on retail buying. Not only will those who have lost money in the collapse cease to purchase luxuries for a time, but will withhold commitments upon necessities.”

Nov. 1:

[Note: How could anyone put their money into fly-by-night outfits like those? Dept.] Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.

[Note: Behavioral Finance before its time Dept.] Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”

[Note: Stimulus Dept. ] Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.

[Note: Stimulus Dept. Interesting - an indication stimulus in 1930 may be undercounted, since much of it came through “volunteering” of industry by govt., and so wasn't counted in govt. budgets.] Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.

[Note: Words to live by Dept.] Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”

Oct. 31:

[Note: Ay Chihuahua! Dept.] H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.

[Note: A depression is a depression, but a good cigarette is a smoke.] Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.

[Note: Huh??] Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.

Oct. 30:

[Note: Interesting claim Dept.] British PM MacDonald states if US used same system as English in figuring unemployment, they would show unemployed of 10M-12M.

[Note: Ay Chihuahua! Dept.] Editorial: An analysis by Banker's Monthly finds that of the many small bank failures in the past 9 years, a large portion happened due to the communities themselves “melting away” rather than bad banking. Nonetheless, speculation in real estate and other unsound practices were also large factors. It's a good thing this dead wood was cleared away before the current depression; “one of the reassuring aspects of the situation today is the stable banking position.”

[Note: Sheer Genius Dept.] Calif. State Dept. of Public Works announces will use no mechanical devices at four construction camps in order to provide work for more men.

[Note: Best final words Dept.] Theater: The Noble Experiment - “Almost the entire array of racketeers is present, including bootleggers, gamblers, gangsters, dope-peddlers, hijackers, prostitutes, and corrupt sheriffs and judges, yet they are all unbelievable and at best only laughable caricatures.” Protagonists final words: “When you see my people in Europe, tell them I died in a country where the people have bathtubs for their bodies but none for their souls!”

Oct. 29:

[Note: Strangely familiar Dept.] Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”

[Note: Stimulus Dept. ] Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.

[Note: Strangely familiar Dept.] Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.

[Note: Yeah, but what have you done for me lately? Dept.] GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.

Oct. 28:

[Note: Ay Chihuahua! Dept.] J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”

[Note: Doesn't exactly look overvalued ... but there was almost an 80% downside from here in about a year and a half.] Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.

[Note: Speculators affecting prices - that's crazy talk!] G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.

Oct. 27:

[Note: Strangely familiar Dept.] Union Trust of Cleveland says fresh wave of business pessimism in Oct. was unwarranted; notes definite evidence of improvement in merchandising and residential building, and very low inventories. Says business may be disappointed at slow pace of improvement, but believes fourth quarter will be looked back on at start of business recovery. Criticizes attempts at the “false stimulation” of trade.

[Note: Strangely familiar Dept.] Sept. rail earnings have so far been much better than expected, with first 12 rails reporting a 13.8% decline vs. 1929, compared to a 32.5% decline for all rails in Aug.; improvement is attributed to expense cuts in response to lower revenues.

[Note: Rate in 2006 and 2007 was 14.3, in 2008 was 13.9.]US birthrate in 1929 is lowest since 1915, at 18.9 per 1,000 population.

Saturday, November 1, 1930: Dow 183.35 -4.72 (2.5%)

2009-11-01T15:13:00.001-05:00

Election editorial and endorsement:

Treasury Sec. Mellon in his radio address disputed those blaming the administration for the depression and said it was due mainly to worldwide conditions over which they had no control. This is valid, “but is there much ... sound thinking to be found in the heat of a political campaign?” The administration should fairly be judged on the measures taken since the economic storm broke. On this they have a strong record; Pres. Hoover, as Mellon points out, has great experience and expertise in reconstruction work, large public works are being undertaken to increase employment, and Treasury's house is in order. To quote Mellon, “It is not time for divided authority. It is rather a time for strong and united action ... in this way we shall attain most quickly that full measure of economic recovery which is inevitable in a nation so self-reliant.” As Coolidge said this week, “this is no time for rash experiments in men or measures.” Also, consider Lincoln's advice on changing horses in midstream. This administration knows “the needs of industry and trade,” and is headed by men of recognized business judgment and ability; they should be entrusted with the task of putting business on its feet again. To hamper them now wouldn't be good business, to say the least.

Assorted historical stuff:

Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.

Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”

Bank of Manhattan Trust Co. sponsors series of lecture on finance for women at the NY Junior League; several prominent financial figures to lecture.

One New York suburb contains a family that has lived on the same piece of land for almost 200 years, originally farm land purchased by the first settlers from the Indians. Europe has some examples of families that have lived in the same place over 1,000 years, but 200 years is a rarity in greater New York.

Treasury officials say over half of imported antique furniture is fake.

Market commentary:

Market wrap: Further substantial selling in main body of stocks brought Dow to a new bear market low, though rails and utilities held slightly above previous lows. Bethlehem's poor earnings report had been expected, but Pres. Grace's statement that no improvement was in sight “attracted widespread attention.” With both traders and investment buyers increasingly reluctant, selling took place “on a descending price scale.” Slight improvement at mid-day, but selling resumed broadly in the afternoon; general list came under severe pressure; leaders including US Steel, Westinghouse, and AT&T hit new lows on the decline; sharp breaks in Auburn, Sears, and J.I. Case. Bond market active, mostly firm; notable strength in South American govts., rails; utilities firm; industrials weaker.

Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.

Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”

“One banker says the cry of too much oil, too much copper, ... too much this and that is founded on facts, but temporary facts ... in later years, the cry may be not enough oil, copper, coal and so on if producers do not strive to conserve.”

C. Denney, Erie Rail. Pres., sees constructive elements now at work leading to gradual and well sustained recovery before many months; says the Erie is maintaining spending on improvements and maintenance to aid unemployment.

Total NYSE volume in Oct. was 64.497M vs. 141.667M in 1929; largest day was 6.297M vs. 16.410M; Dow range was 183.35 - 214.18 vs. 230.07 - 352.86.

Dow made new post-panic low. There were no new yearly highs and 94 new lows.

Economic news and individual company reports:

Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.

Interesting items in recent reports by Fed. Reserve member banks in NY: brokers' loans down sharply while loans on securities to non-brokers are increasing; seen as stronger buyers (those borrowing from banks instead of brokers) absorbing selling from weaker ones. Banks have been left with such high surplus funds that “they were forced to invest heavily in securities and bankers' acceptances”; last week's increase in “all other” loans was due to heavy buying of acceptances.

Bradstreet's and Dun's weekly reviews continue to see uneven picture, with some encouraging spots but no sign of marked improvement in near term.

Bank of England reportedly considering cutting discount rate, possibly in preparation for 5% war loan conversion.

Index of farm prices Oct. 15 was 106% of prewar level, down 5% from Sept. 15 and down 34% from Sept. 15, 1929, and lowest Oct. level since 1915.

Rates on 150 and 180 day banker's acceptances down 1/8% to 2 1/8% - 2 1/4%, indicating “reign of extremely easy money in NY is by no means near an end.”

Gasoline in storage Sept. 30 was 38.254M barrels vs. 33.181M in 1929, but down 3.370M in month; consumption was up 6.9% over 1929.

Companies reporting decent earnings: Canada Dry Ginger Ale, United Gas Improvement, Lincoln Printing.

Assorted Q3 earnings: GM $0.53/share vs. $1.17 in Q2 and $1.58 in Q3 1929; Auburn Auto $0.97 vs. $4.25 and $6.72; Nat'l Tea $0.30 vs. $0.21 and $0.53.

Company reports since Oct. 1: 116 companies reported higher earnings vs. 1929 and 256 lower; 297 dividends unchanged, 32 increased, 44 cut.

Joke:

“The witness was certainly no chicken, and the young barrister thought it would be to his advantage to get her rattled. ' And now, madam,' he said, 'I must ask a personal question. How old are you?' 'Young man,' she replied, 'it isn't more than an hour since the judge there objected to hearsay evidence. And I don't remember being born; all I know of it is hearsay.'”

“Teacher (to new scholar) - How does it happen that your name is Allen and your mother's name is Brown? Little Lad (after a moment's thought) - Well, you see, it's this way; she married again and I didn't.”

+ The Boring Stuff:

Editorial: One of the chief causes of wasteful and inefficient overproduction is nationalism in commodity production, or the objective of national self-sufficiency in commodities; “the idea itself is a survival of war-time modes of thought. ... An economically self-contained nation, be it a Balkan monarchy or a far-flung empire, is today an impossibility.” If any country could achieve it it would be the US, “but it cannot hope to do so for all its wealth and area, unless it wishes its civilization to recede to that of the Civil War period.” The first remedial measure against the depression should be to turn our back on this idea.

Editorial: Pres. Hoover's denunciation of the Kelley oil charges as political was strong, but may have been justified. Many public servants make financial sacrifices with the only possible reward aside from service being in reputation. “After all, not everything 'goes' in politics!”

Washington authorities dismiss rumors of early action on Prohibition by Pres. Hoover or Congress; dry majority in Congress is expected to last until 1932 election, when cities gain larger representation; however, that Congress won't meet until Dec. 1933.

US Gypsum Pres. S. Avery selected as industry liaison to Col. Woods' emergency employment committee.

Australia total imports for year ended June 30 were $655.7M vs. $718.2M in 1929; imports from US were $149.5M vs. $176.5M.

China to seek 1B ounce silver loan worth about $360M from US for rebuilding; US govt. expected to be skeptical.

New York World reports revolution breaks out in Greece.

Unification of many leading NY City private charities planned to facilitate aid to unemployed, Emergency Employment Committee reaches agreement with Catholic and Jewish charities and Salvation Army; $150,000 weekly goal to be raised.

“Hawaiians, proud of the fact that their islands are an integral part of the United States,” are always annoyed when tourists ask what kind of stamps to use on postcards. However, Hawaiian stamps of the past are highly collectible and prized in many collections around the world.

Trans-Arctic Submarine Expedition Co. formed to take over U.S. Navy submarine in which Captain H. Wilkins intends to explore Arctic.

Charles F. Brush [developed arc light, first wind turbine generator] estate valued at $5.2M.

Stop loss orders reportedly hit in large numbers, while short covering was much smaller (attributed to efforts to minimize short selling).

Some are paying more attention to action of preferred stocks and bonds, believing these are less affected by technical market conditions and therefore indicate company prospects more accurately than common shares.

The more optimistic are encouraged by lower volume in recent sessions during reactions, indicating a lack of urgent liquidation or concentrated bear pressure.

“Some market letters continue to urge caution to prospective buyers. With the market as low as it is, a few words of caution to short sellers also might be helpful.”

Dr. P. Atkins, economist for Ames, Emerich & Co.,: “low point in business activity has been touched if it has not already been passed, and there are good prospects that the start of a slow but certain upward trend in business activity is at hand”; sees resulting upward trend in lower-grade bonds.

Commodities weak. Wheat off moderately, other grains down substantially. Cotton down moderately, recovering somewhat from early lows. Copper buying continued in good volume, with some producers refusing to fill all orders; however, curtailment prospects seen doubtful.

For a group of 530 industrial stocks continuously listed from Mar. 31, 1925 to Mar. 31, 1930, the number of common stock holders increased from 961,027 to 2.062M, while preferred shareholders increased from 447,583 to 498,097; number of shares outstanding increased from 272.6M to 527.0M.

Panama Canal toll traffic for first four weeks of Oct. was 10% above Sept. but 8% below Oct. 1929.

Cotton cloth buying has shown a notably improved sales and price trend in the past few weeks; considered interesting since in 1921 the cotton market turned up in January, followed in June by general business improvement.

German cabinet approves increase in import duty on raw tobacco from $19 to $95 per 100 kg; total tobacco revenue from taxes and duties estimated at $303M.

O. and M. Van Sweringen provide $15M of US Treasury certificates to the Van Sweringen Corp. to maintain the required 50% in liquid securities against $30M corporate notes outstanding; these replace Alleghany Corp. common shares formerly used.

Warner Bros. (movies) reports business has improved from slump that started last May, thanks to release of new productions and return of normal fall attendance.

International Nickel reports improved sales trend since July, though Q3 earnings will be well under dividend requirements.

Rudolf Wurlitzer Mfg. (radios) reports operations at 100%, production greater than a year ago; F. Wurlitzer, Pres.: improvement “clearly indicates that a genuine upturn in business is under way.”

Gillette shareholders lawsuit said not seeking to block Autostrop merger but aimed at some directors alleged to have profited from stock dealings with the co.

IRT and NY City reach cost sharing agreement on purchase of 289 new subway cars.

Friday, October 31, 1930: Dow 188.07 -2.66 (1.4%)

2009-10-31T14:49:00.001-04:00

Assorted historical stuff:

W. Green, AFL Pres., says 20M will be “threatened with acute need” this winter, and number of unemployed will rise from 3.5M to well over 5M.

Many industries have adopted “staggered” plan to distribute available work while avoiding layoffs as in past recessions; this reduces weekly income of workers but helps greatest number of people and “alleviates suffering and need”

Dr. R. Senese, pres. of Sene, Inc. of NY (cosmetics), visits White House, proposes $5B loan to mature in 5 years, to be used in national construction program to restore prosperity; to be funded by 1% income tax surcharge on those earning over $25/week.

Germany reportedly feeling out US govt. on reparations and Allied war debts, but hasn't yet declared a moratorium on reparations payments due to US attitude and need to reconstruct economy. Allied nations said to want renegotiation of war debts in case of German moratorium; US reportedly believes war debts and reparations are independent, and there's no need at present to adjust debt payments; points out that annual payments are only a few percent of total budgets.

Australian govt. expected to present balanced budget to House of Representatives at end of Oct.; will include spending cuts, tax increases; “The old alternative of borrowing with the accompaniment of lavish spending of public funds is no longer open.”

10 years ago, 5 farms remained on Manhattan Island. Now only one does, occupying a block at Broadway and 213th St., growing vegetables and some chickens.

American Rolling Mill Co. research developed continuous steel rolling process over 15 years, by which a hot steel ingot weighing 12,000 pounds moves 800 feet in a straight line through a series of mills and furnaces, being converted to sheets at the end of the line.

Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.

Market commentary:

Market wrap: Market less active; substantial liquidation was attributed to tax loss selling, particularly in AT&T, Consolidated Gas, and Radio; US Steel was also weak. There were also bad breaks in specialties including Eastman Kodak and Air Reduction, and heavy selling in soft drink companies including Coca-Cola, Canada Dry, and White Rock on fears of beer legalization. Bulls, however, were encouraged by general market resistance to these unfavorable factors and to recent bad business news; bears did not make much headway and volume dried up on declines. Market tone improved in afternoon. Bond market mixed; foreign govts. rallied; US govts. moderately active, firm; corp. mixed on weaker stock market, but rails steady and investment-grade little changed.

While some stocks have higher earnings in 1930 vs. 1929, there have been few new stock price highs. Stocks that have acted relatively well this year include Amer. Chicle, Amer. Tobacco B, Coca-Cola, Cream of Wheat, Cudahy Packing, General Foods, National Biscuit, Reo Motor, White Rock, Woolworth.

Many still talk about last November's panic, but the current market “has been what some might term a creeping panic, with the prices of many stocks edging off week after week until they now make the Nov. 1929 lows look high in comparison.”

H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.

Investment authorities point out that many stocks are selling below value of net current assets, ignoring value of plants and earning power.

Amusement shares (movies) have been working lower recently, possibly due to disappointment they haven't been as depression-proof as previously thought.

Economic news and individual company reports:

Bethlehem Steel Q3 net was $.63 a share vs. $1.86 in Q2 and $4.01 in Q3 1929. E. Grace, pres., says prices are more stable than a few weeks ago and inventories low, but “business is not picking up a bit” and “there is nothing in sight to indicate improvement in Nov.”

Fed. Reserve reports money in circulation Oct. 29 down $24M to $4.426B, total Reserve Bank credit outstanding down $5M to $985M. Member banks in NY City report brokers' loans down $101M to $2.512B vs. $5.538B in 1929 and lowest since June 1926, “all other” (commercial) loans up $120M to $2.616B.

Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.

Amer. Bureau of Metal Statistics estimates Q3 consumption of copper for electrical manufacture was 53,000 short tons vs. 68,000 in 1929; by auto industry was 18,000 vs. 35,000, for building was 11,000 vs. 16,500, and for use in exports was 18,600 vs. 17,800.

Companies reporting decent earnings: Autostrop Safety Razor, Grand Union (9 month net up 29.6%, did not increase store count).

Joke:

“Mrs. Gee - William, how do you suppose those dozens and dozens of empty bottles got into our cellar? Mr. Gee - I'm sure I don't know, love. I never bought an empty bottle in my life.”

“'Is this beef or is it mutton, waiter?' 'Can't you tell by the taste?' 'No.' 'Then what difference does it make?'”

+ The Boring Stuff:

France allocates $480M for national defense in 1931 budget.

I. Laughlin, US Ambassador to Spain, tells Pres. Hoover conditions in Spain don't warrant recent fall in currency; says unemployment low, economic conditions relatively good, some disturbances but not of serious nature.

Situation in Brazil uncertain; banks in Rio reported closed; Dr. G. Vargas, head of revolution, reported en route to Rio to take control of govt.

Canadian fur farming industry was founded 52 years ago when three farmers near Prince Edward Island captured 15 wild silver foxes. There were 100,000 silver fox cubs born this year on Canadian fox farms, all descended from the original wild stock. Prices for this type of fur have held up better than any other kind.

Western Electric says has shortened hours at some plants to keep maximum number of trained workers employed; at end of Sept., 1/4 of workforce was working 40 hour weeks, 1/4 working 44 1/4 hours, and 1/2 working full-time 48 hour weeks.

Editorial: Fundamentals for cotton prices are improving; mills are holding production down to work off excess inventories. While futures were down Tuesday following a sharp rally since Oct. 18, those who wait to buy “may find that procrastination is the thief of profits.”

Short interest reportedly has been decreasing recently. Wall Street still discussing the recent steps to discourage short selling. Advocates say steps were not directed against short selling in general but against “concerted action on the part of the bears.” Jackson Bros., Boesel & Co. say “obstacles in the way of extensive short selling have not been removed ... We are seeing less and less of the old tactics whereby resistance points on the downside were riddled with heavy concentrated offerings”; the more prominent bear crowd “is disintegrating. Vicious bear tactics, it is assumed, would meet with criticism.”

Some market observers are wary, noting recent renewed selling and expected bad earnings news. Investment buying is favoring stocks selling at low earnings multiples, that cover dividends comfortably, are in a strong financial position, and that should participate in general business recovery.

Broad Street Gossip: “The safest kind of an asset in these days of deflation is a good gold mine.” Newmont Mining has succesfully developed one out West.

Canadian trade circles estimate govt. wheat pool liability may be 50 to 80% greater than official $10M estimate.

Commodities weak. Grains down moderately. Cotton down. Copper buying still heavy, some producers refusing to fill all orders; talks on curtailment continue.

Dow average of eight finished iron and steel products was $44.56/ton vs $44.70 prev. week, new low for 1930. Scrap prices generally lower. Youngstown district steel operations likely to be reduced next week from current 54%.

US Steel's success in earning Q3 dividend in spite of low prices and production at 60%-65% attributed to production modernized by $1.6B spent on improvements since 1901, and to diversification into rail, steamship and other lines of business.

J. Farrell, US Steel pres., optimistic on future of structural steel industry; points out shipments in first 8 months were ahead of 1929's record pace; says use of steel in construction expanding, including “residences of all steel frame, with steel floor construction.” Criticizes unfair and irrational competition, including quoting of unprofitable prices; “no satisfactory substitute has been found for the Golden Rule, whether in the field of economics or any other phase of existence.”

NYSE expels G. Forman and M. Orr, directors of Prince & Whitely Trading Corp., charging them with failure to properly segregate assets of the Trading Corp. from the sponsoring Prince & Whitely brokerage house, which recently failed; also charged improper inflation of Prince & Whitely's financial condition.

Two Toronto brokers fined total of $250,000 for “gaming in stocks.”

Tariff Commission to hold hearings concerning pig iron and crude oil.

Champlin Refining files another suit against Oklahoma oil proration in Federal District Court, charging antitrust violation and favoring of major operators.

Middle West Utilities reports first 8 months residential sales of electricity were 294.6 GWHr, up 22.5% from 1929; rural sales were 41.9 GWHr, up 46.6%; large power sales were up 6.2%.

Some Gillette stockholders sue company and directors regarding some terms of the proposed Autostrop merger.

Chesapeake & Ohio Rwy. stock about 43, year's range 40 - 51 3/8, yield 5.8%, first 9 months earnings $3.27/share vs. $3.46 in 1929.

New York Central railroad asks 40% increase in commuter fares into and out of Grand Central; points out fares have only had one 10% increase since 1910.

Thursday, October 30, 1930: Dow 190.73 -4.22 (2.2%)

2009-10-30T14:32:00.001-04:00

Assorted historical stuff:

Treasury Sec. Mellon gives first radio address of election campaign. Says current depression mainly caused not by stock speculation but by worldwide overproduction of commodities. Uncertain how long readjustment will take, but can be certain US will be among the first to recover. Govt. has kept its house in order and held itself ready for unexpected emergencies, including the depression; “The scope of governmental activities was necessarily limited, but within those limits the President acted with decision and courage.”

British PM MacDonald states if US used same system as English in figuring unemployment, they would show unemployed of 10M-12M.

Editorial: An analysis by Banker's Monthly finds that of the many small bank failures in the past 9 years, a large portion happened due to the communities themselves “melting away” rather than bad banking. Nonetheless, speculation in real estate and other unsound practices were also large factors. It's a good thing this dead wood was cleared away before the current depression; “one of the reassuring aspects of the situation today is the stable banking position.”

R. Kelley attempts to resign from Interior Dept., but is instead fired by Interior Sec. Wilbur.

Western rail execs submit statement to ICC saying revenue situation is now “sufficiently serious to menace the maintenance of adequate transportation facilities.”

Calif. State Dept. of Public Works announces will use no mechanical devices at four construction camps in order to provide work for more men.

Federal Tariff Commission begins new streamlined process of tariff review set up by Smoot-Hawley law by considering protest of high duty on straw hats.

Russians are exhibiting weapons captured from the Chinese in fighting on the Manchuria-Siberia border last fall; these include many weapons of medieval type including “arquebuses, culverines, lances, falchions, and missile throwers.”

Inventor has created fireproof paper money that will not tear or wear out; produced by spraying paper pulp with minute particles of tin, copper, and aluminum.

Tonawanda, NY merchants agree to sell their goods at costs from Nov. 6 - Nov. 8 as their contribution to drive against business depression.

Market commentary:

Market wrap: Market showed some steadiness in the face of multiple pieces of bad business news, including declines in steel operations and rail freight, and failure of US Steel to declare rumored extra dividend. US Steel opened sharply lower and continued to decline, while substantial liquidation came into rest of the market. However, volume declined as prices were lower and trading settled into a very narrow range in midday. Volume continued low in afternoon, but tone improved. Some further weakness in the final hour as Bethlehem Steel broke on prospect of poor earnings report after the close. Bond market moderately active; investment grade corp. firm, rails strong; South American govts. rally, other foreign govts. firm; US govts. dull, up slightly and near year's highs.

In spite of recently declining operating income, US Steel is still expected to earn about $10/share in 1930 (first 9 months was $8.44), comfortably above dividend.

Some rumors of recent market support by “interests that desire to see the market display a firm tone” until after the election Tuesday.

As in the past, some tax-loss selling in the year's final two months is expected.

Continued sizeable short covering reported during the session.

Economic news and individual company reports:

Car makers seen likely to lower prices for 1931 models, with one of the largest low-price manufacturers already having decided on a lower price list. In the past year, lower-priced manufacturers including Ford and Chevrolet have done better.

US Steel ingot production for week ended last Monday was at 55% vs. 58% previous week and 82% in 1929; independents were at 47% vs. 49% and 77%.

Weekly reviews for iron and steel industry find unpromising picture: cautious sentiment, slight drops in finished steel prices, and significant weakness in scrap prices. There was some hope ingot production was at the low point for the year.

Electric output by US light and power industry for week ended Oct. 25 was 1,725 GWHr vs. 1,710 in prev. week and 1,799 in 1929.

US new car registrations in Sept. were 175,286 vs. 203,737 in Aug. and 304,452 in Sept. 1929; first 9 months were 2.287M vs. 3.269M.

Previously reported drop of 21.4% in freight loadings for week ended Oct. 18 was largest percentage drop this year, contrary to expected improved trend.

Bethlehem - Youngstown merger trial continues; F. Wood, attorney for Bethlehem, currently in fifth day of his closing argument. Since several other attorneys for either side have yet to present arguments it's considered unlikely arguments will conclude before Nov. 6.

Eastman Kodak was weak on reports of wage cuts and layoffs; co. stated that while hours had been cut back for some workers due to curtailed output in some lines, co. was carrying out an extensive construction program and employing 25,000 workers, 1,000 more than last year.

Joke:

“Dr. Bottle - How is your patient doing since his operation? Dr. Knife - Fine; I think he can afford another before the year is out.”

“'Why is he so sad?' 'Didn't you know he had gone bankrupt?' 'Yes, but I didn't know he had lost money over it.'”

Theater:

The Noble Experiment - “Almost the entire array of racketeers is present, including bootleggers, gamblers, gangsters, dope-peddlers, hijackers, prostitutes, and corrupt sheriffs and judges, yet they are all unbelievable and at best only laughable caricatures.” Protagonists final words: “When you see my people in Europe, tell them I died in a country where the people have bathtubs for their bodies but none for their souls!”

+ The Boring Stuff:

Editorial: British Empire conference fortunately appears to be failing at creating a new tariff system for the Empire. Last spring, the Smoot-Hawley tariff advocated as improving US business instead coincided with a worsening of depression; while the tariff “could not fairly be called more than a minor factor in causing the present situation,” it does show “economic restoration does not lie in that direction.”

L. Horowitz, Thompson Starrett (builder) chair., invited by Pres. Hoover to review govt. building program, says doing everything reasonably possible to advance work while properly safeguarding public funds. Commerce Sec. Lamont says Boulder [later Hoover] Dam construction accelerated 6 months to aid unemployment.

Bond issues to be decided in Tuesday's election include $100M each in Louisiana and New Jersey, $75M in California (including $35M for proposed Golden Gate Bridge), $50M in New York, and $25M in Illinois.

Brazil revolutionary govt. says will pay all national debts except those incurred after outbreak of the revolution on Oct. 3.

NY City Emergency Employment Committee will take 43rd floor of 40 Wall St.; Space donated by Col. W. Starrett.

New Orleans and Chicago announce plans to register unemployed as first step toward relief.

L. Rogers of Columbia Univ. reports to Mayor Walker's committee on taxation; says city can't finance cost of new subways using short-term (4 year) bonds while maintaining the 5 cent fare; says depressed conditions in real state market will reduce taxes collected below early estimates.

Largest poultry plant in the world is at Reseda, Calif.; sells over 150,000 hens a year, maintaining a flock of at least 500,000.

GM main research lab located in Detroit; budget $1.5M/year; highlights of research include developments in fields of engine design, metal alloys, chromium plating, and lacquer finishes.

J. Gerard, former ambassador to Germany, proposes Stock Exchange rule preventing broker from lending the stock on margin without written consent of the owner for each particular loan. Recommends corporations issue more understandable reports to investors, citing US Steel as model.

Some technical market watchers expect a rally recapturing at least 25% of the ground lost since Sept. 10 before any further liquidation.

“Experienced observers” now watching for ability to hold recent support levels, including 148 3/8 for US Steel, 51 1/2 for GE, and 35 1/4 for GM; if these levels are effectively supported, “chances of early resumption of the recovery would be materially strengthened.” Recent market performance has aroused hope the market is preparing for a more sustained rally than seen since early Sept.

Bulls encouraged by appearance of strength in some specialties in the midst of market irregularity, particularly in coppers on curtailment prospects.

The frequent remark that Wall Street business is now carried on by a “new generation” of traders is verified by the fact that 934 of the current 1,346 NYSE memberships were acquired after Jan. 1, 1920.

More conservative market students have recently been recommending stocks with well-maintained earnings this year rather than those that will only make high returns when business has recovered.

Commodities weak. Grain markets mostly quiet; corn down substantially, other grains down moderately. Cotton down substantially. Copper buying continues good at 9 1/2 cents, but long-range situation remains doubtful as production still exceeds consumption.

W. Wood, Amer. Inst. of Meat Packers pres., says total production of meat for the year will be about equal to 1929; prices have strengthened somewhat since the summer but are off substantially (13%-35%) from a year ago; stocks of meat in cold storage relatively low.

Lloyd's Register of Shipping notes drop of over 50% in orders for new ships over past 3 months, increase in number of idle ships. Number of ships approved in year ended June 30 was 601 for 2.082M tons, largest since record year of 1920.

Strike of Berlin metal workers ends; seen as initial success in campaign to cut wages; dispute will be settled by arbitration, expected to lower cut to 3%-5%.

Italian unemployed were 394,630 at end of Sept., up slightly over Aug. but less than last Jan.

Registered British unemployment Oct. 20 was 2.199M vs. 2.189M on Oct. 13 and about 1.225M on Oct. 21, 1929.

Recent persistent decline in Spanish currency (peseta) reportedly increasing public support for stabilization, possible shipment of gold from Spain.

Manitoba Premier J. Bracken says unless price of wheat improves Canadian govts. may lose $10M on wheat pool.

Rail freight shipments from Chicago had a 95% on-time delivery rate for the 6th month in a row; 95.39% were on time, 3.74% one day late, and 0.86% more than 24 hours late.

Tire makers to advance prices 2.5% - 5% Nov. 1, with all of the increase going to dealers.

Over 2,000 new businesses opened in Chicago in the first half, almost 10% higher than 1929.

Delaware Gov. Buck requests indictments against all oil companies selling gasoline in state, charging price-fixing.

NY State reportedly set to relax requirement on interest rate coverage for rail bonds that savings banks may invest in.

PG&E conducting large, long term, and complex campaign to expand use of natural gas in its territory (Northern California) in competition with fuel oil.

Four-bank merger reportedly under discussion between Manufacturers Trust, Bank of United States, Public National, and International Trust.

Companies reporting decent earnings: Arundel Corp. (sand and gravel), Interlake Iron (lower profit margin but expanded production).

Wednesday, October 30, 1929: Dow 230.07 -30.57 (11.7%)

2009-10-30T01:09:00.000-04:00

One year ago today:

[Note: Ending the recap of the 1929 Great Crash - the summary below describes Oct. 29, subsequently known as Black Tuesday.
Epilog: The market fluctuated violently for the next two weeks. For example, on Wednesday John D. Rockefeller, Sr. announced he was actively buying stocks; the Dow on Wed. and Thurs. was up 28.40 and up 15.04. After this the market was closed for two days to allow the overwhelmed Exchange facilities to catch up. When it reopened Monday, the plunge resumed with drops of 15.83 and 25.55 in the next two sessions. The 1929 low was hit on Nov. 13, at 198.69 on the Dow; this held almost a year until October, 1930, as covered in the blog. The fall panic was followed by a very strong rally into the following spring, now known as the sucker's rally - the high for the rally was reached on April 17, at 294.07, and the blog starts as this rally is wearing off in June.
The Sept. 3, 1929 Dow peak of 381.17 wasn't passed until Nov. 1954.
Black Tuesday's record volume of 16.410M shares traded stood until 1968.]

Market wrap: “Necessitous liquidation” resulted in further bad breaks in “the main body of stocks.” Wholesale margin calls were sent out overnight due to the extraordinary decline in Monday's session; this caused heavy early liquidation for those accounts “unable or unwilling” to add funds. The market ignored positive morning announcements on lower call rates and margin requirements. An avalanche of selling proceeded through the morning, leaving no stocks untouched, though the decline was again orderly; bankers were said placing bids to prevent “demoralization from overwhelming the market.” Ticker quotations again fell far behind. Bankers were reportedly urging affliliated interests to buy stocks at current levels. In addition to banking support, substantial buying was reported from investment trusts, utility operators, large individual investors, and odd-lot (small) investors. This support finally checked the urgent selling in early afternoon, and some good recoveries from the day's lows were scored by leading issues.

Volume Tuesday was 16.410M shares, breaking the record just set Thursday of 12.895M. Largest individual stock volume was GM at 971,300 shares. There were no new yearly highs and 551 new lows.

The bankers' group met early in the day and after the close. After the second meeting a spokesman announced the group had been and would continue to support the market; however, the group would not bid stocks up but step in to prevent “hysteria.” The spokesman also expressed optimism, saying public seemed to be coming back to its senses, and a considerable amount of “first class investment buying” was in the market Tuesday. R. Whitney, NYSE VP, said the Exchanges board of governors had met but decided no action was necessary.

Broad Street Gossip: Many stocks are down 50% or more. “All of which means that bargain days are near ... look over the list and you will find many good common stocks that are yielding 6% to 8% or more. ... And some of these stocks are earning 50% to 100% or more above dividend requirements.”

Baar, Cohen & Co.: “There is no question but that a preponderance of stocks are now quoted many, many points below even a conservative market valuation. We believe the time is not far distant when we will look back upon these prices as a golden opportunity to buy something for less than its true worth.”

A. Conway, State Superintendent of Insurance, recommended leading insurance cos. put a substantial amount of assets into leading stocks at current levels.

Many brokers report a good increase in odd-lot (small) buying for cash; seen as “bargain hunters” taking “long pull” positions.

The break in stocks over the past two months will probably go down as the “shortest and most drastic major bear movement on record.” Decline was 39%, about the same as in 1920 and 1907, but those took about a year. This slump differs from past ones in that many more individuals were ruined, though there “has been no institutional difficulty as yet.” There's no inflation in commodities or inventories, and industry is on a “sound basis with no real indications of a depression in prospect.” Slump was apparently caused by over-issuance of stocks, a moderate letdown in business starting several weeks ago, and bear operations; these caused a panic among the speculative public; no one can now guess if “liquidation will be completed in a matter of hours or days.” While industry is sound, the market slump may worsen the letdown. However, in the long run the decline should be beneficial by releasing funds from speculation to industry and foreign borrowers.

Heard on the street: “It was blue Monday with a vengeance. And then some.” “We are now convinced that some things were selling too high.”

“It is impossible to get a prediction on the market. All observers admit that one guess is as good as another under the prevailing circumstances.”

Economic news:

The Stock Exchange announced before the open that call rates had been cut from 6% to 5%.

The bankers' group issued a statement in the morning reassuring the financial community that “There is plenty of money and it will be loaned freely.” They also announced that leading New York banks would reduce margin requirements on loans to customers to 25% of closing quotations from the previous practice of 40%, and would only enforce the margin at the close, not during a session.

Rail freight loadings for the week ended Oct. 19 were 1.186M cars, up 6,503 from last week and up 22,375 from 1928.

US Steel and American Can each declared an extra $1 dividend, with American Can also raising the regular rate from $3 annually to $4.

US Steel Q3 earnings were $5.57 vs. $6.68 in Q2 and $3.31 in Q3 1928; first 9 months were $15.82 vs. $8.17 in 1928.

Allis-Chalmers expects 1929 earnings substantially ahead of 1928, though recent business is slightly behind that in the first half.

E. Reeser, Amer. Petroleum Inst. Pres., says believes Calif. producers who slashed crude prices 40%-50% two weeks ago will restore old schedule at once, and other producers won't cut prices to avoid disrupting the general industry price structure.

K. Kingsbury, Standard Oil of Calif. Pres., says knows nothing to account for extraordinary break in oil stock prices; on contrary, believes prospects for effective conservation (cutting production to match demand) are better now than ever.

Cotton exports for first 9 months were $546.3M vs $619.8M in 1928.

Other stuff:

Editorial: Recent news from Russia is disturbing. Until recently it was barely possible to excuse use of “officially organized terrorism for political reform” due to dire necessity, and as characteristic of major revolutions. But the revolution is now 10 years old and almost as bloody as ever. Opposition is coming largely from peasants previously successful at providing for themselves. Summary trials and executions on a large scale, as many as 50 a day, are being used to impose political and economic ideas that millions of Russians abhor; these actions are “almost cheerfully” reported by official communique. This kind of government offers nothing on which friendly relations with Washington can be built.

NY Gov. Roosevelt says next great political issue will be regulation of public utilities; says Democrats would have been blamed for stock market panic if in power, but Republicans have received little blame.

Movie: Harold Lloyd in his first talking film, Welcome Danger, plays the son of a famous detective investing an opium den in San Francisco's Chinatown.

Amusing observations:
“'Never sell America short,' remarked one trader. 'All of which is true and a good thing to remember,' remarked another trader. 'But some traders are now so bearish they would sell America, the Treasury, Bank of England, Europe, Brooklyn Bridge, and the Federal Reserve Board short if they could borrow them.'”
Comment from London, Berlin, and Paris called the market break “inevitable” or “as expected”; based on this, “great fortunes must have been made by foreigners on the short side.”
Tobacco companies considered promising - it was noted that many Wall Streeters who prefer not to smoke during business hours “have abandoned their policy and are consuming cigarettes rapidly.”

The Trader's Lament:
[Note: This actually appeared a couple of days later, but what the heck ...]
“They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”

Wednesday, October 29, 1930: Dow 194.95 -0.14 (0.1%)

2009-10-29T13:28:00.001-04:00

Assorted historical stuff:

Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”

Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.

NY Gov. Roosevelt addresses Advertising Club: “We have had our financial fun following false prophets. We know once and for all that prosperity is not the handmaid or creature of any political party ... Continued optimistic statements by individuals ... or by politicians do little real good.” Says necessary to find the cause of depression, whether foreign markets or overproduction, and then to employ every means to restore business to a stable basis.

GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.

Art collecting news: Knoedler Galleries exhibiting a collection of French masterpieces from 19th Cent. - present, including paintings by Corot, Degas, Cezanne, Gauguin, Van Gogh, de Chavannes, Seurat, and Delacroix. John Ringling [circus impresario] has purchased an important picture by Peter Paul Rubens.

College football games, though the main season is only 7 weeks long, attract a total attendance of 7M, with a total gate of $20M and total spending at least $50M.

Market commentary:

Market wrap: Recent rally was “maintained in good style,” with leaders again showing “recently acquired resistance” to isolated weak spots; only a brief reaction followed poor Bethlehem earnings announcement. Leaders including US Steel, American Can, and Union Carbide hit new rally highs in the morning and were well supported in the afternoon. “Rallying tendencies” then spread through the list, with some trading favorites including J.I. Case, United Aircraft, and Vanadium up briskly. High grade rails strong on expected better traffic comparisons vs. 1929. Coppers strong on prospects for curtailment. Some late weakness, particularly in US Steel and Eastman Kodak. Bond market irregular but mostly trending up; convertibles, rails, and Peru govts. strong; US govts. dull, firm.

One of the largest industrials reports a recent revival of construction in New England; “it is an absolute fact that the ending of all past depressions has always begun with an improvement in New England” construction; attributed to New Englander's shrewdness, “saving his money until he can buy a lot for it."

Many large industries are now operating at 50% of capacity; in past depressions, things have been much worse, with steel at times down to 30%. However, these depressed levels don't remain very long; “The United States is not a 50% country.”

“Several quarters” report a more confident feeling based on improvement in commodities, lower brokers' loans, thorough deflation of many security prices, and recently expressed confidence by economists and business leaders.

Central Trust of Ill. says current pessimism unjustified based on actual reduction in total incomes of only 5%. Sees hopeful sign in inventory declines, indicating consumption has exceeded production for some time; buying has decreased more than buying power; readjustment of retail prices will restore sales.

Economic news and individual company reports:

US income tax collections for first 9 months were $1.779B, down $148.3M from 1929; individual collections were down $133.0M and corporate $15.3M.

Rail freight loadings for week ended Oct. 18 were 931,085 cars, down 23,789 from prev. week and down 254,479 or 21.4% from 1929 week.

Dominick & Dominick point out greatly improved labor relations vs. previous depressions; in first half, there were no major strikes and 399 “minor disagreements” vs. 2,385 disputes in 1921. Wage scale has been maintained in “unprecedented manner,” though hours worked have been shortened.

Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.

First 70 rails report Sept. operating income $91.6M, up 10.1% from Aug. but down 21.2% from 1929.

US Steel Q3 net was $2.06/share vs. $5.57 in 1929; first 9 months was $8.44 vs. $15.82; regular quarterly $1.75 dividend was declared, but no extra.

Assorted Q3 earnings: IBM $2.85/share vs. $2.91 in Q2 and $2.80 in Q3 1929; Studebaker $0.20 vs. $0.41 and $1.24; Conde Nast $0.73 vs. $1.04 and $1.11.

Movie:

The Virtuous Sin - Walter Huston plays a ruthless Russian general, Kay Francis a woman interceding on behalf of her husband, a scientist who was drafted just as he was on the verge of a scientific discovery that would save thousands of lives, and has been sentenced to die for attacking the military system. She is forced to use her feminine wiles to persuade the general; in the end, her husband's life is spared but she falls in love with the general.

Stock market joke:

A strong man, as part of his show, held a lemon up and crushed it in his enormous hand. He then pinned a $100 bill to the backdrop. “Whoever can extract another single drop from that lemon is entitled to the $100,” he announced. A wizened old man made his way to the stage. The strongman roared with laughter and handed him the lemon. The old man squeezed the lemon firmly, and three drops fell into the cup. “Who are you?” gasped the strongman. “I'm a margin clerk in a brokerage house,” replied the old man mildly.

+ The Boring Stuff:

NY City police census shows 15,164 heads of families jobless in city; Commissioner expects figure to go higher. Police to donate $35,176/month from salaries.

Essex County movie theater employees join strike by Newark musicians against cut in size of orchestras.

Market over the past week has been allowing bull traders to do some “profitable in-and-out trading” since it's rallied more following breaks.

One broker reports most short selling is now by small traders.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Some of buying attributed to short “squeezing”; a large short interest remains, and some have had trouble borrowing shares; frequent calls have been made for return of shares, “necessitating strenuous efforts to replace them” or in some cases forcing shorts to cover.

Bond men report expected yield on high-grade municipals is about 4%, 2nd grade 4.20%, 3rd grade 4.50%, slow-moving issues 5%.

Curb Exchange report: (later the Amex; small companies) Auto shares selling at “nominal prices” discounting no improvement in the industry (Stutz at 1, American Austin at 2). Very thin market in many specialties. Wide differences in valuation; highest grade oils yielding over 6% while some utilities at 20 or more times earnings.

R. Hose, Anglo South Amer. Bank chair., says South and Central American countries in active stage of development, large producers of commodities. Encouraged by recent stabilization in commodities; expects quicker economic recovery than in “older countries already having fully exploited resources.”

H. MacLean, US rep. to Int'l. Chamber of Commerce, notes European companies face difficulties including heavy short term debts, large inventories, and lower sales; sees severe trouble for the “less efficient and less fortunate” but notes heroic efforts to reduce costs, says readjustment period will be shortened by speed at which “hitherto unreachable cost levels have been arrived at.”

Increasing rumors Spain will attempt to stabilize currency on gold standard.

Editorial: Conditions in the wheat market favor a higher price before end of season, “providing business conditions will permit.”

Commodities strong. Wheat up strongly; other grains somewhat higher. Cotton up sharply on govt. stabilization efforts. Copper buying improved at 9 1/2 cents.

Total cars financed by 485 cos. in Aug. were 246,539 for $102.9M vs. 285,234 for $118.4M in July and 347,565 for $163.8M in Aug. 1929.

Gasoline stocks at refineries Oct. 18 were 36.655M barrels, up 379,000 in week; refineries operated at 65.7% vs. 66.2% prev. week; oil production was 2.378M barrels/day, up 7,450 from prev. week and down 491,500 from 1929.

Several companies cut crude oil prices in various sections of the US other than Calif.; typical cuts were $0.25/barrel.

Auto parts and equipment manufacturers report improved shipments to wholesalers in Sept. and Oct.; wholesalers also report improved business. Mfr. shipments of service parts in Sept. were 139% of Jan. 1925 level. vs. 132% in Aug. and 173% in Sept. 1929; accessory shipments were 76% vs. 60% and 84%.

Aug. operating income for 103 telephone companies was $21.536M vs. $22.545M in 1929.

American Machinist reports machine tool market remains static, no major improvement expected until start of next year.

Fed. Reserve Midwest (7th) District reports Sept. 15 industrial payrolls down 1.6% from Aug. 15, total earnings down 1.3%.

Canadian construction permits in 61 cities in Sept. were $11.1M, down 19.8% from Aug. and 35.3% from Sept. 1929.

European steel cartel prolonged until Dec. 31 with 12% reduction in output.

Bethlehem Steel Q3 net expected about $0.60 vs. $4.01 in 1929; first 9 months about $5.05 vs. $13.30; will maintain $1.50 quarterly dividend.

Edsel Ford, Ford Motor pres., says will keep making Model A indefinitely without major change; company “in the midst of the greatest expansion program in our history,” building plants throughout world; these will produce model A cars and AA trucks.

National Biscuit record earnings attributed to lower commodity prices and less spending on plant expansion; successful acquisition strategy focuses on buying cos. with products popular in local markets, then selling them through National's countrywide merchandising system; rumors it may acquire Wheatsworth.

Companies reporting decent earnings: American Ice, Davison Chemical (began selling fertilizer direct to farmers), Continental Can, Texas Pacific Land Trust.

New book:

They Told Barron, an edited collection of the recently deceased C.W. Barron's “Conversations and Revelations.” Considered “the father of modern financial journalism,” he assumed management of the Wall St. Journal around 1900 and developed it to its current position. People talked to him not only because of his powerful position, but his appearance and personality: “Short of stature but impressive in breadth and girth, his sparkling blue eyes, ruddy cheeks, and whitening beard completed a Santa Claus picture which did not belie its owner, for his heart was as benevolent as his appearance.” Covers development of industries including rails, steel, autos, oil, chain stores, etc.; with conversations and comments on many pioneers and contemporary leaders in those fields.

Tuesday, October 29, 1929: Dow 260.64 -38.33 (12.8%)

2009-10-29T00:47:00.000-04:00

One year ago today:

[Note: Continuing the recap of the 1929 Great Crash - the following describes Oct. 28, subsequently known as Black Monday.]

Market wrap: Monday's session repeated Thursday's drastic declines “on a slightly more orderly scale.” Selling orders had flooded in from every section of the country over the weekend; large blocks of the leading stocks were thrown on the market early and liquidation proceeded steadily through the morning, with the whole market severely pressured. Traders were rattled when one after another of the leaders broke through Thursday's resistance levels. A major battle was waged around US Steel's Thursday low of 193 1/2, with the bears finally forcing it through; this was followed by further sharp declines across the list. Some hope came from another conference of bankers at the Morgan offices around midday; no statement was made but some rallying developed and it appeared support might have been decided on. However, the rally quickly disappeared in a flood of afternoon selling, and the market was “acutely weak during the last hour.”

While declines were generally larger than Thursday's break, trading was less panicky; a continuous market was available in major stocks, there were few 5-10 point drops between sales as happened Thursday, and volume was 9.213M shares compared to Thursday's record 12.895M. There was one new yearly high and 286 new lows.

Some buying came into the market “on a scale” down, but was much smaller than the offerings and had no appreciable effect.

Some dispute over whether banks were supporting the market. Some couldn't discern any support, and one wit suggested “the bankers' pool forgot to put in its buying orders.” On the other hand, a spokesman for the bankers' group talked to reporters late Monday and implied the bankers' pool continued to operate. It was emphasized that the bankers' intervention on Thursday was to stabilize a market that had gotten out of hand; Monday's market, by contrast, was “far more orderly.” It was also clearly indicated that bankers had heard from numerous sources that the market had reached a point where investment trusts (similar to mutual funds) and others with large resources were ready to buy stocks on a sizeable scale.

“Sentiment is highly unsettled again. ... In fact, quite a few market interests favor disposing of all stocks at the moment, and then remaining on the side lines until there has been material improvement in the whole situation.”

Some liquidation remains to be done judging by the nervousness demonstrated yesterday; after this, “it will be essential for the market to have a period of quiet.”

Public expected to be more wary of stocks for some time after many were badly hurt recently; when they do return, more consideration will be given to fundamentals such as earnings and future prospects, and less to “the so-called 'information' which caused over-buying in the past.”

Investment trusts have gone from the height of popularity a short time ago to being avoided entirely by the public now.

A. Sloan, GM pres., says stock market break was healthy, although a little drastic.

S. Strawn, Montgomery Ward chair.: “I believe the severe check (in the stock market) will have good results for the whole country”; expects funds to be turned from speculation into trade and industry.

Editorial: While “speculators whose margins have been devastated” may be hard to console, there are some comforting aspects to the current situation. “Business in general shows no signs of disintegration”; it has slowed somewhat from a midsummer peak, but this preceded the market break. With a few exceptions such as the car industry, we don't have the high inventories that have caused previous recessions; together with lower prices, this indicates part of the needed readjustment has already been accomplished. Finally, a pause in the recent flood of security issues should be beneficial.

Economic news:

US Steel directors meet this afternoon; rumor mill active on what might be announced, especially in light of official promise last week that “something encouraging” would be released.

American Railway Assoc. reports railroads on Oct. 1 had 29,481 freight cars on order, up 21,959 over 1928 and up 14,648 over 1927.

Recent lower money rates are expected to stimulate construction.

Federal Farm Board puts $100M at disposal of Farmer's Nat'l. Grain Corp. for stabilizing wheat prices, which the Board considers unjustifiably low and “chiefly due to the rapid or disorderly movement which is putting a large part of the year's supply of wheat on the market within a short time.”

Merchants Assoc. denies AFL charge that 233 US firms are manufacturing abroad under US trademark to use cheap labor.

Other stuff:

Amusing anecdote: A New York businessman hadn't been feeling well for some time and finally went for a physical. After a thorough exam, his doctor told him he had diabetes. 'What!' he exclaimed. 'Diabetes at 37?' 'Yes, you have it,' declared the doctor. Very upset, he went to his office. 'Hello, Jim,' said a friend. 'Your face is longer than a board. What's eating you?' 'I have diabetes at 37,' was the sad reply. 'That's nothing!' said the friend. 'I have Chrysler at 135.'

New York Edison installs world's largest single-unit electric generator - at 161.2 MWatt, this brings total system capacity to 1.643 GWatt.

American Red Cross, in fiscal year ending June 30, donated $8.096M for relief work in 117 catastrophes in US, 11 in foreign countries.

Movie: Showing at the Roxy theater is Frozen Justice, the talking film debut of Lenore Ulric, in which she “enacts the part of a halfbreed who is torn emotionally between her love for her Eskimo husband [played by Robert Frazer] and her desire to get away from the dullness of igloo life to the land of her white father.” Also on the bill at the Roxy are a condensed version of Faust in eight scenes, a violin solo by F. Fradkin playing Sarasate's Gypsy Airs, and a delightful ballet representation of Hallowe'en by the Roxyettes.

Tuesday, October 28, 1930: Dow 195.09 +1.75 (0.9%)

2009-10-28T10:21:00.001-04:00

Assorted historical stuff:

J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”

Civil Service Clerical Assoc. of London votes overwhelmingly in favor of compulsory resignation for women after marriage.

G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.

Illinois Supreme Court finds margin trading in grains to be gambling and debts not legally enforceable.

Rumors persist that Congress will legalize beer, and possibly light wines.

Mustaches have come back into fashion in London so suddenly that wig makers are supplying artificial ones in all styles for men who can't wait to grow one.

NY City papers (Times, World, and Herald Tribune) raise Sunday edition from 5 cents to 10 cents.

Market commentary:

Market wrap: Substantial selling came into the market early, with bears interpreting Saturday's late decline as indicating market was in a vulnerable position. Majors including US Steel, GM, and Westinghouse were forced to substantial setbacks from Saturday's highs, and J.I. Case had a further bad break to a yearly low. However, the decline steadily lost momentum as volume dried up, the general list showed resistance to isolated weak spots, and leading stocks traded in a narrow range at midday. “Bears obviously were intimidated” by this steadiness, and a rally starting in the afternoon brought urgent short covering; rally was attributed to possible declaration of extra dividend by US Steel today. Bond market dull, generally steady; rallies in Brazil govts. and some convertibles. And if

F. Patterson, Nat'l. Cash Register pres., meets with Pres. Hoover, says sees nothing discouraging ahead, believes we've hit bottom; points out cash register business a good barometer of general business conditions.

J. Rosenwald, Sears Roebuck chair., says recovery from current depression will be slower than 1920-21 postwar slump due to currently restricted immigration, lower auto production and roadbuilding.

The weekend brought no news of business improvement in steel or autos, and continued uncertainty in the general price structure was indicated by in crude oil price. However, recent stock price action has created growing opinion that unsatisfactory business conditions have largely been discounted.

Some more assorted 1929 high stock prices compared to now: US Steel 261 3/4 to 146 3/4; Beth. Steel 112 3/4 to 73; Radio 114 3/4 to 22; Westinghouse 292 5/8 to 103 3/4; Montgomery Ward 137 7/8 to 23 7/8; Sears 181 to 51 5/8; Glidden 64 1/8 to 10 3/8; GM 91 3/4 to 34 3/4; Hupp Motor 82 to 8.

Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.

Economic news and individual company reports:

Prince & Whitely, the NYSE broker that recently failed, ran a [theoretically separate] investment trust (Prince & Whitely Trading Corp). The value of this trust is now hard to determine because of its tangled finances, including claims by the trust against the broker, and holdings of unlisted securities.

First 51 rails report Sept. net operating income of $77.5M, up 10.2% from Aug. but down 17.8% from 1929 and down 19.4% from 1928. Sept. gross revenue was $335.6M, up 0.1% from Aug. but down 17.1% from 1929 and down 15.3% from 1928.

Fed. Reserve member banks weekly report for Oct. 22: loans on securities down $116M to $8.142B, “all other” (commercial) loans down $33M to $8.573B.

L. Crandall of US Realty & Improvement Co. reports heaviest volume of construction projects since the spring of 1929 has come to eastern office of large builders for estimates in past three weeks; seen as sign “business is emerging from the doldrums.”

US Steel to report earnings at directors' meeting after the close of business today.

Companies reporting decent earnings: Beech-Nut Packing, Mead Johnson (baby food), Standard Cap & Seal, McCall Corp (magazines), Telautograph (machines transmitting diagrams by wire).

Joke:

“Judge - You admit you drove over this man with a loaded truck? Driver - Yes, Your Honor. Judge - And what have you to say in your defense? Driver - I didn't know it was loaded.”

Movie:

The Big Trail - romantic US pioneer drama, “handsomely photographed on Grandeur Film, which is distinctly superior to the screen of ordinary dimensions for a spectacular picture of this character. ... John Wayne, who has the principal role in the story in this, his first film, acts rather amateurishly.” On the other hand, “Marguerite Churchill makes a charming heroine” and “Tyrone Power is a capital chief-villain.”

+ The Boring Stuff:

Editorial: Kelley's sensational charges that the Interior Dept. was handing oil shale lands over to big oil companies appear to have broken down under closer examination. Of the estimated 8.258M acres of Western oil shale lands, the claims in dispute cover only 7,278, indicating the land grab in fact hasn't gotten very far yet. The dispute over rights seems like a doubtful technical one, and charges that Asst. Sec. Finney wanted to destroy evidence are very doubtful. “Does this mean that the 'Forty-billion-dollar-grab' is dead? Perish the thought! A slogan like that can never die!”

Col. Woods, chair of the President's Emergency Committee for Unemployment reports 15 large cities have started projects for dealing with unemployment; looks to public works that can be carried on in the winter as best solution to provide needed work for the unemployed. Says “staggering” method of distributing available work evenly among existing workers has accomplished much but doesn't believe using a 5-day week with 5-hour days would help this winter. Calls on property owners to have repair work done now.

Editorial by T. Woodlock: We now face a question “whether or not this country will ... 'industrialize' a large part of its food production so that it will look to large corporate units operating with a minimum of men-hours and a maximum of machinery for the greater part ... of its necessary food supplies ... From time immemorial, the land-folk have been regarded as the mainstay of the nation, and rightly so.” Two generations ago, most of the US lived by farming and no significant change in methods had occured in the previous 2,000 years; since then, “a complete revolution” has become possible, ultimately replacing man by machine. “It is at bottom a sound instinct that causes us to listen with concern to cries of distress from our land-folk;” to recall Oswald Spengler's warning, when a civilization reaches the point where the cities have swallowed up the land-folk, the end of that civilization is near.

F. Blair, United Guardian Trust chair., joins the consensus disagreeing with T. Macaulay's plan for the Fed to buy bonds to reverse deflation: “It is specious to argue that additional credit would immediately relieve the present situation. Relief from this source can come only after such credit found its way in in the hands of ultimate purchasers of goods. ... We believe that a normal working out of fundamental laws will be more helpful than attempts to apply artificial stimuli, which might cause a relapse at a later date.”

US branch factories operating in Canada estimated about 1,500, making up a large part of the $3.5B total US investment in Canada; US manufacturers have shown increasing interest in manufacturing in Canada, partly due to tariff changes.

Forestry efforts in Hawaii include Army plane dropping 1,689 pounds of tree seeds, foresters planting 298,650 trees in the territory's forest reserves, and 623,800 trees distributed for planting on private land.

Stock in California's San Francisco Bank is selling at about $13,500 a share; has assets over $125M and deposits over $120M.

Short covering has reportedly been heavy in recent sessions, and is responsible for some of the advances.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Support that ended the recent severe declines in the general list seen as “mostly outright purchases by interests taking long-pull positions.” While there was some disappointment among traders that Saturday's session didn't continue the recent rally, “the check on Saturday appeared due mostly to temporary impairment of technical conditions. ... the market seemed to be consolidating itself in preparation for more sustained improvement.”

Present business conditions are not encouraging particularly in steel, copper, and oil. However, past turns in the market have usually come when the outlook was dark, since stocks have tended to discount a change before it happened.

Average duration of past bear markets has been about 13 months; present decline is in its 13th month, since it began in Sept. of last year.

Many investment trusts (similar mutual funds) continue to sell at big discounts from liquidating value; this is opposite of the situation a year ago when many sold at substantial premiums “because of the presumed miracle-working possibilities of their management.” One example: United Securities Trust Associates - selling at $29/share, has $15/share cash, management fee capped at 1/4% per quarter, and remaining securities valued at $27.50, largely made up of leading stocks.

Savings banks call for revising law to allow holding bonds falling below legal requirements because of “temporary conditions.”

Commodities mixed. Wheat down moderately after early rally; other grains mixed. Cotton up moderately after early setback. Copper domestic buying small at 9.5 cents; future price trend seen based on how quickly and drastically production cuts are made.

Agriculture Dept. reports world production of feed grains is 156.2M short tons, down 11% from last year, and also down from 1927 and 1928. US imports of agricultural products, including forest products, for fiscal year ended June 30, were valued at $2.101B, down 11% from prev. year and down 15% from the 5-year average 1925-29. Most of the decline was due to deflation rather than decline in volume.

T. O'Connor, US Shipping Bd. chair., says US shipyards will do $75M of work annually for next 5 years; dismisses foreign criticism of US for enlarging merchant marine when world shipping is slumping; believes depression temporary, shouldn't derail long-awaited project important to national welfare.

FTC continues investigation of pricing in chain and independent stores, comparing pricing on several hundred commodities.

Gasoline in Chicago wholesale market is 4 3/4 - 5 1/2 cents vs. 4 7/8 - 5 1/2 previously.

Soft coal production for weekend ended Oct. 18 was 9.232M net tons, down 263,000 from prev. week and down 2.122M from 1929; Production so far this year totals 364.9M vs. 419.8M in 1929 and 388.6M in 1928.

US tire shipments in 1929 were $682.8M, down 12.4% from 1927.

Magnolia Petroleum cuts Oklahoma and Kansas crude oil prices 17-38 cents/barrel to match Standard Oil of Indiana cuts.

US cigarette production in first 9 months was 92.0B, up 1.5B from 1929.

US exports of leaf tobacco in first 9 months were 381.3M pounds, up 33.6M from 1929; value was $96M vs. $100M in 1929.

Bangor & Aroostook is a rare exception among the rails, earning double its annual dividend requirements in the first nine months, with $7.27/share, equal to 1929 earnings. Stock is about 61, dividend $3.50 for a yield of 5.74%.

Monday, October 28, 1929: Dow 298.97 -2.25 (0.7%)

2009-10-28T00:57:00.000-04:00

One year ago today:

[Note: Continuing the recap of the 1929 Great Crash - the following describes the Saturday Oct. 26 short session, two days after Black Thursday.]

Market wrap: Friday's session considered very reassuring, as a large volume of distressed sales were absorbed with impressively steady prices (total volume was almost 6M shares). Floor reports Friday indicated brokers were steady sellers due to margin calls. Some buying was by “powerful banking interests,” while there was heavy buying by “moneyed people” picking up stocks they considered undervalued; some buying of this type also came from investment trusts (similar to mutual funds).Volume was much lower in Saturday's short session; price moves were typical of “cleaning up processes” after a drastic market break; these caused weak tendencies in many sections of the list. However, leading shares retained “powerful support,” and attempts to force a renewed downward movement were checked.

“It was natural that traces of nervousness should linger in trading circles, but the best opinion was that the worst of the selling had been seen, and that the market would settle down into a narrow range, allowing time for recuperation from the recent demoralized breaks.”

Bears seen as not inclined to try for a new reaction, fearing banking support for key stocks.

Public morale seen as damaged; many outside longs were forced to sell out [by margin calls] and in some cases are indebted to their brokers due to low sale prices realized during the sharp declines; “it will be some time before outsiders again enter the market with any degree of confidence.”

Broad Street Gossip: This panic, unlike those of the past, was brought about not by “something fundamentally wrong with finance or business,” - inventories are low, corporations flush with cash, etc. Instead, it was caused by “the position of the market itself.” Because of this, “the storm has left no wreckage except marginal traders forced to sell at a loss ... Mr. Mellon, Mr. Rockefeller and others who hold stocks outright stand just where they were ... They have lost a few tail feathers, but in time they will grow in again, longer and more luxurious than the old ones that were lost in what financial writers like to call the debacle.”

E.F. Hutton: Many leading stocks including US Steel, AT&T, National Biscuit, GE, etc. are now “cheap by any statistical measurement ... It should have been very obvious that many stocks sold at entirely ridiculous levels on Thursday's break.”

Editorial: Everyone in a responsible position is now saying conditions are sound. “From the President on down, what else could he or would he say?” Conditions are sound, but showing some weakness: stocks have been declining for almost 7 weeks, commodity prices are sagging, and rail traffic, while large, is declining when it should be reaching a peak. In this situation, the Senate, whose basis is “not infrequently sound and fury, signifying nothing,” shows signs of doing some mischief: it has kept the import trade “uncertain and exasperated” by lengthy consideration of an “indefensible” tariff increase, and it looks set to launch another of those Wall Street investigations that “return their findings first and hear the evidence afterwards. ... If conditions are 'sound' the US Senate can cooperate in so preserving them by keeping its hands off.”

Economic news:

Leaders of both parties now predict Senate passage of Smoot-Hawley tariff by Thanksgiving. However, chances of agreement any time soon between House and Senate to pass the tariff into law have become slim; House majority leader J. Tilson said possibility of tariff passage “completely vanished” when the Senate adopted the export debenture provision (designed to benefit farmers). It's already been demonstrated twice that the House will adhere to Pres. Hoover's wishes in rejecting the debenture.

Irving Fisher's index of 200 commodities for last week was at 94.6% of the 1926 level, a new low for 1929; the high was 99.2 on July 2.

First 27 rails report Sept. net operating income $53.9M, down 2.8% from 1928.

US Steel earnings for first 9 months est. $15-$16/share; earnings for all of 1928 were $12.50. Q3 estimated at $5-$5.50 vs. $6.68 in Q2 and $3.31 in Q3 1928.

Crude oil in storage in Texas, Louisiana, and Arkansas on Oct. 1 was 133.3M barrels, up 1.040M from Sept. 1 and up 8.274M from Oct. 1, 1929.

US exports of agricultural products (excluding forest products) in the year ended June 30 were $1.848B, up 2% from previous year.

Other stuff:

Amusing anecdote: A customer at one broker entered an order Thursday to sell 105 shares of a certain stock. The 5 shares were sold immediately at an odd-lot house for $108, but the 100-share lot was sent to the specialist and had to take its place in line with the many other sales; these shares were sold at $87. The customer complained bitterly, but was told this was the best execution available. “Execution,” he replied, “why I call that both execution and crucifixion.”

Amusing anecdote: Charles M. Schwab began his speech at the banquet of the Amer. Iron & Steel Institute: “After what has happened in Wall Street, it would probably be quite correct for me to start my remarks to you with the words: 'Friends and former millionaires ...'”

NY City long-term traffic plan recommends decking over of Park Ave. above 96th St. to create new highway at maximum height of 4 stories over street level.

The Irish Theatre, Inc. (formerly Greenwich Village Theatre) presents The Silver Tassie, Sean O'Casey's play about a champion Irish football player paralyzed by an injury in the war.

Lobsters have crossed the Suez Canal; an investigation finds a species previously confined to the Red Sea is now abundant near the Syrian coast. It's estimated it took 30 years for the lobsters to make their way through the Canal.

Monday, October 27, 1930: Dow 193.34 -1.75 (0.9%)

2009-10-27T11:29:00.002-04:00

[Note: The recap of the 1929 Great Crash will be back tomorrow - Oct. 27, 1929 was a Sunday with no Journal published.]

Assorted historical stuff:

Col. A. Woods, emergency unemployment committee chair., says time is right for construction, with rates and material costs low; to visit NY City today. Williamsburg Chamber of Commerce announces probable $5M project to “start the rehabilitation of Williamsburg.”

Dept. of Justice exonerates Interior Dept. on R. Kelley's charges of handing over rights to Western oil shale lands to large oil companies.

Historical oil stats: World production has increased from about 800,000 barrels/day in 1910 to over 4M currently, of which 64.5% is US. Currently shut-in production estimated at 2.383M barrels/day, of which 1.310M is in the US.

Dr. C. Warburton, Fed. drought relief sec., praises continuation of reduced rail rates on feed and livestock, says food situation may become serious in some states.

US birthrate in 1929 is lowest since 1915, at 18.9 per 1,000 population.

NY Gov. Roosevelt offers state armories as quarters for homeless during winter; Mayor Walker forms committee of 37 to aid jobless.

John David, NY clothing merchant, emphasizes importance of keeping well dressed as an aid to morale.

California has both highest and lowest points of dry land in the US, separated by only 86 miles: Mt Whitney, elevation 14,496 feet, and Death Valley, 276 below sea level. Until 25 years ago, the Salton Basin, near the Mexican border, was the lowest US point, but a 1905 flood turned it into the Salton Sea.

Curtiss Wright Corp. bans use of commercial planes for races due to fatal accident to airport operations manager.

Russian scientists announce methods of making leather from fish, govt. plans to open tanneries. Skin of white grampus said to make excellent shoe leather.

Market commentary:

Market wrap: Market action seen as generally positive, with profit-taking on Friday's extensive gains absorbed in good style; volume lower. Early dealings showed substantial gains in major industrials and rails; while the rally wore off as the session progressed and the final direction was down, the market as a whole impressively resisted isolated weak spots including Montgomery Ward and J.I. Case. Bond market rallied sharply on heavy trading; South American strong, particularly Brazil; European and US govts. firm; investment-grade corp. strong, convertibles sharply higher.

Week in review: Stocks showed some rallying tendencies to end the week after the Dow slumped to close at 184.98 on Wed.; at least a technical recovery is now expected. Most commodities were firmer, even early in the week when stocks were down. Bonds were down sharply most of the week, with many hitting new yearly lows; a sharp recovery toward end of the week made up some ground. Money market continued dull and easy; brokers loans continued to plunge, while commercial loans and money in circulation were down; NY City bank investments were up $84M to a new yearly high of $2.227B. German and Spanish situations considered improved; Brazil rebels victorious. Steel production down, as were steel and gasoline prices.

Stocks showing good resistance to recent selling include AT&T, American Radiator, American Tobacco, Woolworth, and dairy shares.

Recent confident statements by several business leaders including J. Raskob “carried greater weight than similar expressions in recent months,” with the market rallying vigorously in response. With commodities showing signs of stability, merchandising stimulated by cooler weather, and generally low production, chances of further declines in business were seen as lessening.

Union Trust of Cleveland says fresh wave of business pessimism in Oct. was unwarranted; notes definite evidence of improvement in merchandising and residential building, and very low inventories. Says business may be disappointed at slow pace of improvement, but believes fourth quarter will be looked back on at start of business recovery. Criticizes attempts at the “false stimulation” of trade.

Conf. of Statisticians in Industry says Sept. and first half of Oct. show a few encouraging details but no positive indication that a general upturn in business is here.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Oct. 25 was 82.7, unchanged from previous week and vs. 94.1 in Oct. 1929.

Recent demand for municipal bond offerings is down, particularly from banks, which “appear desirous of keeping their funds in liquid condition.”

Sept. rail earnings have so far been much better than expected, with first 12 rails reporting a 13.8% decline vs. 1929, compared to a 32.5% decline for all rails in Aug.; improvement is attributed to expense cuts in response to lower revenues.

Standard Oil of Indiana reduces crude oil prices in Oklahoma and Kansas by $0.07 to $.38 a barrel.

W. O'Neil, Gen. Tire & Rubber Pres.: tire inventories down 2M from this time last year; only 1 1/2 tires per car in use sold this year, drivers wearing tires out; expects higher demand, tire shortage in spring.

Companies reporting decent earnings: Lambert (Pro-Phy-Lac-Tic toothbrush, toiletries and medicinals), Diamond Match, Anchor Cap (glass, food containers).

Theater:

Ambassador Theatre presents play loosely based on the Marcus Garvey movement, starring Frank Wilson as Marius Harvey. Play begins with fraudulent stock promotion enterprise, resulting in a sincere back-to-Africa movement that ends bitterly in abandonment by the colonists.

Stock market joke:

“Broker: 'There are some very cheap stocks on the list ... that you might buy.' Trader: 'But I think something is overhanging the market.' Broker: 'You're right. The market keeps going lower because it has overhanging it thousands of traders who think something is overhanging it.'”

Jokes:

“'Mary has just married Bill Hendricks.' 'Bill Hendricks? Impossible! Why, he's the man she was engaged to.”

“Satan (to new arrival) - Hey, you act as though you owned this place. Newcomer - I do. My wife gave it to me.”

+ The Boring Stuff:

Editorial: Now that business has “sunk to levels unthought of” last fall or spring, there's a clamor of advice on how to restore prosperity. In particular, many say a simple increase in spending of 5 cents a day, a dollar a week, or some other per-capita amount, would do the trick. This is too simplistic, and reflects our weakness “for economic salvation by formula.” However, it might stand a chance of working if retailers reduced their prices to reflect lower costs and disposable income; there are some signs they're now overcoming their initial reluctance and doing this.

Col. A. Woods points to figures indicating strong financial position of most state governments. For 1928, $584.5M was spent on permanent improvements while net debt only increased $76M, indicating 87% of outlays were met from current revenues.

Editorial: Pres. Hoover, speaking at a recent AFL convention, suggested reconsidering the antitrust laws in light of modern conditions. There are two industries particularly in need of this: coal and oil. The coal industry, with twice as much capacity as needed, is “a running sore” in need of surgery, but the law won't permit the use of the knife. The oil industry is only slightly better off. The world has fundamentally changed in the 40 years since the Sherman antitrust act; the US alone “worships a fetish” in seeing things the same way; “inflexible prohibitions” should be modified to relieve an impossible situation.

Present wealth of former German Kaiser estimated at $103M, about half consisting of landed property.

Breuning cabinet approves balanced budget for fiscal year starting April 1, 1931 with spending of $2.481B, $270M under budget previously decreed in July.

Prussian govt. proposes combating unemployment by adding a year to compulsory schooling, and prohibiting layoffs in factories not adopting a 40-hour week.

Editorial by T. Woodlock: While rails have been affected by some factors out of their control, including lower rates, higher taxes, and competition from other transport, they also have their own destructive competition to blame; they should act together, intelligently and aggressively, to end this problem.

Farm Board says can't loan to Kansas Livestock Assoc. because it won't join the national livestock setup and eliminate commission men from its organization.

Westinghouse X-Ray Co. receives order from Bronx Hospital for equipment for the hospital's new x-ray department.

Foreign markets: London and Paris stronger through the week; German market up sharply on govt. parliamentary victory but lost gains toward end of week.

M. Taylor, US Steel finance committee chair, see steel industry near bottom, improvement very soon. Says US must adjust to new inventions and systems of production that increased output above consumption by equal redivision of labor.

Guaranty Trust of NY sees mixed picture; definite recovery not evident, but pronounced recession of spring and summer has given way to “irregularity, with positive improvement in some branches of trade and industry.” A full recovery probably will have to wait until spring due to the holiday lull.

Market seen as technically stronger after resisting recent isolated bad news on Montgomery Ward and the Van Sweringen rails. Since the market has declined about 25% in the past 6 weeks with no significant rallies, a more sustained improvement is expected, though possibly “accompanied by considerable irregularity.”
Demand by short-sellers borrowing stocks in the loan market was still fair, but lighter than earlier in the week.

Conservative observers inclined to wait for the market to encounter another test from liquidation, and demonstrate whether support levels can be held.

Commodities mixed. Grains weak; wheat and corn down substantially. Cotton continues rally, up substantially.

Mexican tariffs seen as emergency measure to correct trade deficit and declining peso; object will be to reduce imports by $25M; about 2/3 of Mexico's imports are currently from the US; in first 8 months, they totalled $82.7M vs. $83.8M in 1929, while US imports from Mexico were $61.5M vs. $84.1M.

Foreign financing by public US offering of securities in Q3 was about $153M vs. $466.3M in Q2 and $338.4M in Q1.

Standard Oil of NJ says has kept number of employees almost the same since start of year. Lily-Tulip cup says will start building inventory Nov. 1 instead of next year to help unemployment situation.

Youngstown District steel operations expected to advance 1% to 54% this week. Buyers said still minimizing orders and keeping supplies on hand down. Most producers in the district reportedly close to unprofitability.

Census Bureau reports cotton harvest running somewhat better than expected and slightly ahead of 1929; weather fair over the entire cotton belt.

US exports of wheat July 1 - Oct. 18 were 68.2M bushels vs. 58.6M in 1929. Exports of cotton Aug. 1 - Oct. 24 were 2.002M bales vs. 1.856M.

Cuban legislature delays action on Chadbourne sugar plan until after Nov. 1 election.

870 lumber mills reported orders for the week ended Oct. 18 were 2% above production of 265.0M feet; production is over a third below 1929 levels.

Montgomery Ward difficulties attributed to large number of new stores opened in the past two years.

Sinclair Oil has $7.86 a share in cash, $6.97 a share in crude oil and inventories, and plants valued at $32.21 a share; the stock is about 14.

Assorted Q3 earnings: Union Carbide $0.80/share vs. $0.70 in Q2 and $1.14 in Q3 1929; Maytag $0.08 vs. $0.40 in Q2 and $0.80 in Q3 1929; New Haven Rwy. $1.83 vs. $3.46 in Q3 1929, first 9 months $4.89 vs. $7.24.

Favorites of the week Oct. 20-Oct. 25, 1930

2009-10-26T12:41:00.000-04:00

No Journal was published Sunday, Oct. 26, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

Oct. 25:

[Note: Federal Reserve funds used for speculation – that's crazy talk!] Glass Senate subcommittee to meet about Nov. 15 to investigate financial matters, particularly use of Federal Reserve funds to help finance speculative operations.

[Note: Tell-tale sign? dept.] London insurers raise rates to insure property in US against civil disturbances.

[Note: I love the smell of metaphor in the morning.] Amer. Iron and Steel Institute meets at the Commodore Hotel; prominent steel executives speak, including C. Schwab, E. Grace, etc. Price cutting seen as main problem facing the industry; over-expansion also cited. Industry praised for maintaining salaries and staff as far as possible. Long-term optimism expressed; C. Schwab calls for looking beyond “immediate but transient gloom,” says business in general has weathered the recession in a most assuring way. “Apply the heat treatment of an intelligent glowing optimism to the current warped point of view and most of the stresses and strains will disappear.”

[Note: Ay Chihuahua! Dept.] J. Raskob, GM finance committee dir. and Democratic Nat'l. Committee Chair., optimistic on auto industry: “There have been indications during the past six to eight weeks showing that the depressed conditions in the automobile industry have reached bottom and are slowly turning into more normal channels. ... Sharp revival in the motor industry may be expected to begin with the automobile shows in early January. It will stimulate all other lines of business activity. ... There can be no doubt that the motor industry will show substantial improvement in 1931. ... Optimism should now be the order of the day.”

[Note: Ay Chihuahua! Dept.] Recent increase in bank loans on securities to non-brokers seen as indicating buying by stronger and more experienced investors.

[Note: Never trust a guy with two first names dept.] Federal investigation started into Charles V. Bob, promoter of a long string of mining stocks who recently went missing; two of his firms put into receivership.

Oct. 24:

[Note: Fundamentals, earnings, and dividends – that's crazy talk!] Several brokers report clients buying stocks for cash are now paying careful attention to fundamentals such as position of the company in its industry, prospects of the industry, management, earnings, and dividends. This contrasts with “fancies which appeared to rule when stocks were being carried to abnormally high levels.”

[Note: Ay Chihuahua! Dept.] Broad Street Gossip: “If history repeats itself, you can expect to see the following ... Oct. 24, 1930: 'If I had only sold out in Sept. 1930! Just see where they are now.' Oct. 22, 1931: ' If I had only bought some stocks in Oct. 1930! Look where they are now.'”

Oct. 23:

[Note: Strangely familiar dept.] A. Reynolds, Continental Ill. Bank & Trust Chair., sees “signs in a good many different directions that business is picking up somewhat”; gains are uneven, not general; “improvement ... will probably come in this spotted way and gradually work into a more general betterment,” probably starting with small businesses and moving to large. Commodity prices relatively stable since July, seem to have bottomed.

[Note: Interesting.] W. Edge, US Ambassador, says France “like an oasis surrounded by depression on all sides,” with unemployment practically nil; acknowledges differences with US on tariff, but “is this not always the case when two nations maintaining high protection barriers try to agree?”; says gold accumulation by France an internal matter.

[Note: Sheer Genius dept.] “New type airplane, claimed to be safest yet constructed, tested in Berlin. Plane resembles duck in appearance and seems to be flying backwards when in motion.”

Oct. 22:

[Note: Sheer Geometric Logic dept.] Editorial: Senator Glass apparently means to start another “money trust” investigation like the one in 1913 [investigating control of bankers and the NYSE over the economy; followed by Federal Reserve Act and 16th Amendment]. The NYSE can be expected to mount a better defense this time. One item requires clarification: the subject of “gambling in stocks” is likely to come up now as it did in 1913, but it was never defined. The main distinction is in the person, not the act: if reasonable judgement is used, then it's not gambling. Therefore, since reasonable judgement is always possible when trading stocks, the act per se is not gambling; Q.E.D.

[Note: Danger of using historical precedents dept.] Hayden, Stone & Co. point out that in the 33 year history of the Dow Jones average there have been 5 major bear markets, with 4 severe enough to be called panics; in none of these cases did the market break substantially below the panic low in the following year. This is no guarantee, but there's a logical reason for it: in the throes of panic, prices tend to be driven lower then they'll be when investors are calmer and more rational.

[Note: Strangely familiar dept.] Many of the Q3 earnings reports so far have been “fair reading,” especially in light of the pessimism going into earnings season.

[Note: Always keep your eye on the freight loadings dept.] Rail freight loadings for week ended Oct. 11 were 954,874 cars, down 17,618 from prev. week and down 224,666 or 19% from 1929 week.

[Note: Sheer Genius dept.] “Buy-a-bale” movement proposed by Texas Gov. Moody to remove 5M bales of cotton from the market draws many responses. A couple of the more interesting ones: One Arkansas enthusiast proposed “burn a bale” movement, himself buying a bale and setting fire to it on a main street; movement ran out of steam when he was summarily thrown in jail for arson. W. Parker, economist for Fenner & Beane, has started using cotton cloth for everything possible, including writing paper.

[Note: Attention Jay Leno - feel free to use this joke - you can make it about the Smart car.] Eddie Cantor joke about midget cars: “A chap riding in one said to the driver, 'It's dark; we must be going through a tunnel.' 'Tunnel hell,' replied the other, 'we're under a truck.'”

Oct. 21.

[Note: Strangely familiar dept.] NY City businessmen's committee to relieve unemployment will make special appeal to Wall Street, since many currently unemployed were laid off from there.

[Note: Danger of contrarianism dept.] Broad Street Gossip: “The other extreme from last year's peak prices has been reached ... many stocks ... in October, last year, may have been entirely too high. Many stocks are now entirely too low. Some are selling ex-bad earnings, ex- ... passed dividends, and everything else.”

[Note: Sheer Genius dept.] New German railroad car driven by 400 hp airplane engine attains speed over 100 mph.

[Note: Things got ugly when flight attendants ran out of liquor at 5 days, 7 hours.] New record for flight between England and Australia set by C. Kingsford-Smith - time of 9 days, 23 1/2 hours beats old record by 5 days, 2 1/2 hours.

[Note: Whatever happened to those suitcase labels?] “'Has Harry traveled much?' 'Has he! He's been to half the places on his suitcase labels.'”

Oct. 20:

[Note: Danger of contrarianism dept.] Experienced market observers see the current universal bearishness as very favorable; market psychology is exactly the opposite from that a year ago when bullish enthusiasm obscured unmistakable signs of a rapid decline in business. Many who were observant enough to sell in the final stages of the bull market are now taking advantage of deflated values and good yields to replace their holdings.

[Note: I can't believe that didn't happen dept.] R. Updegraff, writing in the current issue of Tomorrow's Business, sees bright future for gas stations: “May it not be that new villages and towns and, ultimately, cities, will grow up around some of the best located of our roadside filling stations?”

Saturday, October 26, 1929: Dow 301.22 +1.75 (0.6%)

2009-10-26T01:32:00.002-04:00

One year ago today:

[Note: Once again, your regularly scheduled 1930 news will be along later in the day. Continuing the recap of the 1929 Great Crash - the following describes Friday, Oct. 25, the day following Black Thursday.]

Market wrap: “Yesterday's market was notably orderly, presenting a striking contrast” to Thursday's session. Opening was strong on optimistic statements from govt., banking, and industrial officials, and decline of $167M in brokers' loans; active issues showed good gains on very heavy volume. Following the opening rally, stocks retreated to some extent; this was attributed to traders who had survived Thursday taking advantage of the rally to strengthen their accounts. However, support remained strong and leading shares were steady for the rest of the day. Volume slackened toward the close; final volume for the day was 5.923M shares, a very heavy day by normal standards though less than half Thursday's volume.

Technical note: “The second secondary reaction was more severe than the first, and the third secondary reaction more severe than the second.”

Opinion on Thursday's crash:

Pres. Hoover, at regular Fri. news conference, points to positive fundamentals for US economy: wages and productivity are tending upward; production and consumption of commodities are at high levels but prices haven't gone up; no significant increase in inventories of manufactured goods. Some scattered weak spots including construction due to high interest rates caused by stock speculation, and seasonal declines in a few industries, but these are relatively small compared to the whole picture.

More details on bankers' group that came in to support the market Thursday: Consensus among the group is that trouble is due to excessive speculation; business conditions considered sound, credit ample, and banks have abundant liquidity. First time “it can be authoritatively said” banks have stepped in to buy stocks directly. Object of support is not to advance the market or turn a profit, but to insure orderly trading so security prices can find their proper level. Only a small part of the resources available were used Thursday; “We have by no means used our big ammunition yet”; one member of the pool predicted a drive against the market would be met with powerful resistance.

Another reassuring factor was the Stock Exchange's fine performance. Before trading resumed Friday, all of Thursday's record-shattering trading of almost 13M shares had been cleared; confirming no Exchange houses were in any difficulty from Thursday's violent declines.

Editorial: Stocks had become over-inflated and vulnerable due to speculation. It's been clear since last Wednesday that the market trend had turned down. “The market will find itself, for Wall Street does its own liquidation and always with a remarkable absence of anything like financial catastrophe. ... Suggestions that the wiping out of paper profits will reduce the country's real purchasing power seem rather far-fetched.”

P. Mazur of Lehman Bros. took a contrarian view: “Yesterday's crash on the stock market is likely to have an immediate and probably lasting effect on retail buying. Not only will those who have lost money in the collapse cease to purchase luxuries for a time, but will withhold commitments upon necessities.”

Economic news:

Some 9-month earnings reports: Erie Rail. $4.08/share vs. $2.64 in 1928; Allis-Chalmers $11.92 vs. $8.55; Corn Products $3.78 vs. $3.

Bradstreet's reports retail and wholesale trade off slightly this week vs. 1928, while industrial activity was slightly higher. Dun's Review sees nothing in commercial situation to cause further drastic stock declines; some lines of business moderately down, but overall results this year should be unusually favorable, and credit appears to be easing.

Other stuff:

Amusing anecdote: “An immense throng milled about Broad and Wall Streets Thursday afternoon and a tone of great excitement was in the air. 'What's it all about?' an uninformed passerby wanted to know. 'The market has crashed,' someone told him. 'What market?' 'The stock market. Many people have lost money.' The uninformed one shrugged his shoulders. 'I've lost no money,' he said, as he pushed his way toward Beaver Street.”

G. Clemenceau, former French premier, says despite so-called “peace parliaments,” peace based on military strength will long be imposed on the world.

Theater: Button, Button - “major theme is a satirical treatment of current standards of sanity in the business and social world”; also makes fun of “modern poetry, golf enthusiasts, psychoanalysis, collectors of antique furniture, birth control, and the Little Theatre movement.”

Advertisement: On Thursday, Dow Jones Electric Page News Tickers (normally used to distribute financial news) flashed up-to-the-minute prices for about 20 leading stocks every 10 minutes [this was when the stock ticker was hopelessly behind]. “There is no substitute for Dow Jones News.”

Saturday, October 25, 1930: Dow 195.09 +6.99 (3.7%)

2009-10-25T14:50:00.001-04:00

Assorted historical stuff:

Glass Senate subcommittee to meet about Nov. 15 to investigate financial matters, particularly use of Federal Reserve funds to help finance speculative operations.

Marine Midland group of NY State banks will start “buy now” advertising campaign; G. Rand, Pres., says recovery being retarded by “false economy.”

London insurers raise rates to insure property in US against civil disturbances.

Brazilian rebels score unexpectedly quick victory with little bloodshed when federal troops in Rio de Janeiro join revolt; Pres. Luis resigns; provisional govt. expected until new elections; revolutionary leader A. Amaral says will honor foreign obligations; bonds strong, coffee down.

Chinese Pres. Chiang-Kai-Shek unexpectedly baptized as Methodist; seen as blow at Communists.

Standard Oil of NJ points out foreign oil areas are becoming more important; while US is still the premier oil producer, it is not completely dominant as before (foreign producers accounted for 36% of oil in 1910, 28% in 1923, 32.5% in 1929, and 35.5% in first half 1930). Calls for world cooperation in crude oil development, says “the country should draw judiciously upon its remaining reserves if the American oil man expects to stay in front of his fellows in the future.”

AT&T to begin phone service to Australia Oct. 27; calls from New York will be $45 for first 3 minutes and $15 each additional minute.

George Washington bicentennial commission plans for 1932 include having “every man, woman and child in this nation sing 'America' over a nationwide radio hookup,” with accompaniment by the combined US Army, Navy and Marine bands.

The Hellabrun Zoo in Munich now has two hybrids born of a lion and tiger; very few successful lion-tiger crosses are known to zoologists.

Market commentary:

Market wrap: Bulls encouraged by further $139M decrease in brokers' loans, seen as evidence of stocks passing from weak to strong hands. Also encouraging was Thursday's session, when Van-Sweringen-connected rails plunged but industrials were up strongly; seen as indication “market as a whole was breaking away from the influence of specific weak spots” and had “largely corrected its position.” Market rallied across the list; rails staged a brisk rebound, while GM was up sharply on positive statements by J. Raskob; other major industrials also showed extensive gains; active short covering. Bond market active, rallies in many sections; Brazil and other South American issues higher; US govts. firm, close to yearly high; corp. generally higher; speculative and convertibles up moderately.

J. Raskob, GM finance committee dir. and Democratic Nat'l. Committee Chair., optimistic on auto industry: “There have been indications during the past six to eight weeks showing that the depressed conditions in the automobile industry have reached bottom and are slowly turning into more normal channels. ... Sharp revival in the motor industry may be expected to begin with the automobile shows in early January. It will stimulate all other lines of business activity. ... There can be no doubt that the motor industry will show substantial improvement in 1931. ... Optimism should now be the order of the day.”

B. Block of Benjamin Block & Co.: “On Thursday, for the first time in many months, I advised without reservation the purchase of sound stocks. ... A little over 14 months ago people looked at me in amazement when I advised the liquidation of all stocks. ... Since then the greatest deflation movement the stock market has ever witnessed has carried stocks to levels where unfavorable developments for many years to come have been more than discounted. It has been another case of sentiment running to extremes, with underlying fundamentals ignored.”

Amer. Iron and Steel Institute meets at the Commodore Hotel; prominent steel executives speak, including C. Schwab, E. Grace, etc. Price cutting seen as main problem facing the industry; over-expansion also cited. Industry praised for maintaining salaries and staff as far as possible. Long-term optimism expressed; C. Schwab calls for looking beyond “immediate but transient gloom,” says business in general has weathered the recession in a most assuring way. “Apply the heat treatment of an intelligent glowing optimism to the current warped point of view and most of the stresses and strains will disappear.”

One large broker says it's unusually difficult to make forecasts, with the market apparently ruled by technical factors and psychology.

Recent increase in bank loans on securities to non-brokers seen as indicating buying by stronger and more experienced investors.

Economic news and individual company reports:

Fed. Reserve Sept. report: factory output and employment increased, but by less than the usual seasonal amount; construction little changed; average wholesale prices little changed from Aug. but trending downward; commercial loans up; bank holdings of investments up but loans on securities declined rapidly in early Oct.

BLS reports new construction permits in Sept. in 291 cities were $147.7M, up 6.4% over August and reverse of usual seasonal decline.

Several companies report earnings down but sufficient to cover dividends, including Sears, Safeway, Youngstown Sheet & Tube, Kansas City Southern.

Federal investigation started into Charles V. Bob, promoter of a long string of mining stocks who recently went missing; two of his firms put into receivership.

Company reports since Oct. 1: 86 companies reported higher earnings vs. 1929 and 152 lower; 238 dividends unchanged, 26 increased, 35 cut.

Stock market joke:

“So far, shorts haven't had an opportunity to establish market losses against 1930 tax payments.”

Joke:

“Artist - Do you think I have depicted the horrors of war strongly enough in my new picture? Critic - Yes, I have never seen such a horrible picture.”`

+ The Boring Stuff:

Pres. Hoover says no need for special session of Congress on unemployment. Col. Woods says unemployment relief organization getting splendid cooperation; will spend next week gathering information; plans to continue policies set up a year ago to cooperate with states and industries; aim is employment first, then relief.

Employees and execs of Insull group of utilities to contribute one day's pay a month to aid unemployed; will raise over $100,000/month.

Editorial: The current “Buy Now” campaign to relieve the depression is too simplistic; people in financial trouble aren't going to be “stampeded into purchasing things they can do without.” The irresistible force that will start the buying movement is the “bargain allurement”; when prices are low enough “the desire of possession may be relied upon to overcome economy tendencies.” W. Wollman of the NYSE correctly points out that retail prices haven't yet come down as much as wholesale and commodity prices; when this happens consumption will increase and unemployment will go down.

Several more US bankers disagree with Macauley proposal for Fed to buy govt. bonds in order to stabilize prices; say some stabilization in commodity prices already seen; would prefer natural recovery, even if slower, to artificially stimulated one, since business would be more confident in permanency.

M Traylor, First Nat'l. Bank of Chicago Pres., says current depression is a repeat of previous ones, and recovery will come; calls for normal conduct by business leaders; says artificial methods will not help, particularly “unreasonable anticipation of future needs”; says 1928-29 boom was of unprecedented size due to a number of factors; deflation has not yet been sufficient but need not present unsolvable problems due to efficient production.

Editorial: Two Southwestern railroads have now cut rates for transporting gasoline by 40% to meet pipeline competition. The situation now developing in rail gasoline traffic is extremely unfortunate; these price cuts may be “in the nature of a rearguard action by a retreating army.”

Market Data Handbook of the US reports over half of manufacturing activity is in 37 of the 2,073 counties in the US.

Metropolitan Opera seeing record demand demand for tickets and subscriptions.

Market resisted afternoon break in Montgomery Ward on passing of dividend.

Experienced market observers believe further substantial declines are unlikely without a substantial intervening rally; stocks have declined for a 43 days without a significant recovery; technically, this suggests a reversal of trend and recapture of at least a third of the decline.

Conservative observers still advise waiting for market to prove itself.

Substantial selling of rail shares in past few weeks has led some market students to conclude “a profound revaluation” of rails is in progress.

Initial opinion on Q4 earnings is that they will fall below Q3 in many industries.

Possible origin of a common market expression: “Baron Rothschild, during the Commune following the Franco-Prussian war [the Paris Commune of 1871] suggested French rentes [bonds] were cheap to a brother banker; the latter remarked: 'Why, the streets of Paris are flowing with blood.' ' That is why you can buy rentes cheaply,' replied Rothschild.”

Commodities mixed. Grains down moderately. Cotton continued rally with moderate gains. Copper now offered at 9 1/2 cents/pound by all producers (after having broken below 18 cents about 6 months ago), but buying remains light.

Bank and insurance stocks have become much more widely held over the past few years; 81 banks and trusts reported 354,024 individual shareholders as of Mar. 31, up 412% from 69,139 for 57 banks in 1925; for insurance companies, 91 reported 121,391 shareholders, up 114% from 57,686 for 70 cos. in 1925.

First 12 rails report Sept. operating income $22.3M, up 10.2% from Aug. but down 13.8% from 1929 and down 19.0% from 1928.

Gasoline in Chicago wholesale market is 4 7/8 - 5 1/2 cents vs. 5 - 5 1/2 previously.

Several refiners increase price of refined sugar 1/10 cent for the second time in two days, to 4.75 cents/pound.

Manchester cotton market reports improved tone; business in most markets improving, including India, China, Egypt, South America, and Europe.

German imports from the US in first half were 729.2M marks vs. 948.6M in 1929; exports to the US were 378.8M vs. 497.0M in 1929.

German unemployed were 3.116M, up 112,000 in the first half of Oct.

F.W. Dodge reports new construction contracts in New York State in Sept. were $83.6M vs. $82.5M in August and $62.0M in Sept. 1929.

A&P has grown from 4,638 stores in 1921 to 15,418 in 1930.

Companies reporting decent earnings: New England Power Assoc., Briggs Mfg.