September 4, 2009

Friday, September 5, 1930: Dow 236.04 -1.50 (0.6%)

Assorted historical stuff:

Editorial: A Senate committee has been investigating campaign expenses of Mrs. Ruth McCormick, a Senatorial candidate. Mrs. McCormick retaliated by herself investigating one of the Senators, hiring a detective agency for that purpose. The Senator described McCormick's investigation as “shoddy, scabby, unprincipled, unconscionable, contemptible”; this may indicate he has lost “the fine judicial poise that befits the toga.” Public sympathy is mostly with McCormick, thanks to the Senate's tactics in previous investigations, including treating witnesses arrogantly, taking private papers unconstitutionally, and making their contents public.

Editorial: Real estate owners are organizing to reduce local tax burden. Real estate taxes have always been major part of local taxes, but some states including New York and Massachusets have now adopted an income tax as well; curiously, the new tax, “though it has raised much money, has not materially reduced the tax on real property.” New York state is now organizing a bipartisan commission to study whether a sales tax can be applied to relieve the real estate tax.

International Law Assoc. recommends to world govts. that contracts between residents of countries at war should be dissolved at outbreak of hostilities.

New York's tiny housekeeping apartments of today are nothing new under the sun. In London, following the Great Fire of 1666, vast numbers of families were obliged to live in one room and two room apartments.”

New York city has 20,000 postal employees handling daily 300,000 sacks of mail totalling 17M individual pieces.

Construction of 30 “baby” blimps 100 feet long by 25 feed wide with capacity of up to 8 people started at US Navy hangar in Cape May, NJ.

Audo-Cinema contracts to help wire 1,000 Soviet movie theaters for sound films; currently only one theater in Moscow is wired.

Market commentary:

Generally dull session; volume down, little public participation, leading stocks traded in narrow range. Bears attempted to extend late market break Wednesday into yesterday's session, but no liquidation was forthcoming and buying support came in on setbacks. Some declining tendency in final hour. Banks and trusts weak. Bond market more active; utilities higher, Dow bond average at new 2-year high of 97.27; govts. mostly firm except South American.

Market technicals seen favoring higher prices; most recent rally recaptured all of ground lost in break from July 28-Aug. 12, first time that happened since current bear market started last Sept. However, period of consolidation is logical considering swiftness of the advance since mid-August.

Conservative observers more cautious, noting failure to break through July resistance level about 241. C.O.'s also inclined to wait for actual business improvement before taking long positions.

Positive sign seen in increasing savings deposits and increasing number of shareholders in large corporations; this indicates continued “prosperity for many in a period of depression,” since they mean a surplus left after expenses.

Goodbody & Co. expresses some conservativism about business recovery; says will be gradual, may only be seasonal. However, because of amount of liquidation already and professional nature of market, “we doubt whether much of a decline will take place from the present level.”

J. Mills, Pres. Natl. Purchasing Agent's Assoc., advises Pres. Hoover he believes business will be slow during winter but turn up in late winter and spring.

Economic news and individual company reports:

Census finds most of unemployed concentrated in big cities; those with population over 100,000 had proportion of unemployed about 50% over US as a whole.

June gasoline consumption in 44 states was 33.331M gallons/day, up 2.418M from May and up 2.005M from June 1929.

US and Canada Aug. car production hits new 1930 low of 240,100 vs. 272,551 in July and 512,842 in Aug. 1929; first 8 months was 2.843M vs. 4.445M in 1929. Little prospect seen of upturn for next few months; car industry seems determined to hold output down to finish clearing out old inventory this year, then make “new start on its next era of prosperity,” though inventory is quite low already; upturn expected in 1931. Normal market demand seen as about 4.6M cars/year.

Many large companies seen able to maintain dividends due to huge surplus accounts built up in past.

August customs collections were $32.1M vs. $56.4M in 1929, but increased from July.

Companies reporting decent earnings: Canada Dry Ginger Ale.


“'I want a very careful chauffeur - one who doesn't take the slightest risks,' warned the would-be employer.
'I'm your man, sir,' answered the applicant. 'Can I have my salary in advance?'”

+ The Boring Stuff:

J. Dunn of Dunn, Fisher & Co. (London investment house) says British opinion moving toward policy of free trade within empire and high tariffs for outside trade; cites recent statements from both bankers and trade unions; says US “has become the most progressive and richest of all nations” through system of high tariffs. Britain said to be slowly “emerging from the Cobdenite miasma of more than 80 years” during which British prosperity was attributed to free trade rather than its 100-year lead in manufacturing and commercial development. Current crisis has made clear that high tariff countries are using Britain as dumping ground for their products while shutting British products out of their markets. Ever-increasing unemployment, depression, and drain of gold to France are working to cause change .

In 15 years ended 1928, coal consumption went up 5% while other energy sources including crude oil, natural gas, and hydro power, increased 133%-243%.

Pres. Hoover nominates Eugene Meyer, Jr. to succeed R. Young as Fed. Reserve Board Gov.; former chair of Fed. Farm Loan Bd., said favored by Mellon.

NY City independent subway lines (the BMT and IRT) seen moving to unification with the new city system that will start operating late in 1931, though IRT has been resistant. Some dispute over valuation of both companies; values assigned to BMT vary from below $200M up to $273M.

Steel industry has passed through difficult period, though observers are now hopeful for gradual improvement in rest of year. Hopeful signs include low stocks on hand, good demand from some sectors such as tin plate, and improving scrap prices. Most authorities don't expect dramatic improvement until next spring; declining steel prices have caused extreme caution in ordering.

Commodities mixed. Cotton up slightly. Grains generally down, wheat again hits new season lows. Copper remains at 10 3/4-11 cents with little buying.

Lack of anticipated public participation in market following Labor Day seen as discouraging to bulls.

Public interest in investment trusts (similar to mutual funds) currently at a low ebb; “while waiting for improved conditions, considerable thought is being given to various phases of investment trust operation.” United Founders favors active management and continuous supervision; likens other approaches to pilotless ships.

American mining interests pleased with new Mexican mining law offering better terms to foreign investors.

Brokers' loans reported by Fed. Reserve member banks up $8M in past week to $3.110B. Call money continued at 2.5% but expected to return to 2% shortly.

New bond offerings in Aug. were $202.8M vs. $508.8M for July and $129.7M in Aug. 1929; new low for 1930. First 8 months $4.002B vs. $2.279B in 1929.

R.G. Dun & Co. report Aug. business failures were 1,913, down 5.7% from July but up 8.6% from Aug. 1929; first month this year below 2,000. Total liabilities were $49.2M, up 23.5% from July and up 45% from 1929.

Construction costs for industrial buildings are lowest in past 8 years; decline is due to efficiency and lower material costs, not lower wages.

Activity in steel scrap metal markets down in past week although recent firmer prices have held. Finished steel prices also steady at 1930 lows.

Gasoline in Chicago wholesale market was up 1/4 cent.

Total dividends paid by 18 copper companies now down to 48% of peak dividend rate.

July sales by meatpacking companies were 6% below June and 20% below July 1929, largest decrease this year.

Ericsson Telephone Co. meets, confirms takeover by Kreuger & Toll, who is now seen backing Siemens-Ericsson combination in telephone field.

Company reports since July 1: 185 companies reported increased earnings vs. 1929 and 440 decreased; 898 dividends unchanged, 16 new, 8 increased, 70 cut.

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