September 14, 2009

Monday, September 15, 1930: Dow 240.34 -0.83 (0.3%)

Assorted historical stuff:

A small group of industrial leaders met secretly with high US officials including Commerce Sec. Lamont; the meeting was probably initiated by Pres. Hoover. Agreement was reached on the wisdom of making long-term commitments to buy raw materials at current prices. Objective is to stabilize wholesale commodity prices and help revive business. Govt. sources say the industries concerned have already begun to act.

Standard Oil of California calls for cooperation of industry and public in conservation of oil resources aiming at “a stabilized ... price over a long period of years rather than low prices during the periods of excessive production with high prices when the time of shortage arrives.” Cites President Coolidge letter from 1924 to Oil Conservation Board: “overproduction in itself encourages cheapness ... wastefulness and disregard of essential values.”

American Bankers Assoc. to meet in Cleveland Sept. 29. Topics of first three general sessions are “Problems We Bankers Must Meet” (expected to cover branch and group banking developments), controversial topics in bank taxation, and “The World Today.” President Hoover to address fourth session.

New uses for agricultural waste under development, converting corn stalks into “maizewood” insulating board or textiles, and cotton bran into plastic resins.

A piece of a 12-million year old sequoia tree was found embedded in basalt 150 feet below the Yakima river in Washington.

Market commentary:

In spite of favorable week-end trade reviews, bears renewed operations early Saturday. Past month's rally has had strong Friday action; bears may therefore have been encouraged by the late weakness on Friday. Leaders were down early in the short session, including US Steel, American Can, GE, Radio. Further disturbance caused by rumor of Baltimore & Ohio Railway suspending dividend. Market steadied in second hour with some recovery in individual stocks. American Cyanamid down to new lows on surprise dividend cut. Bond market quiet, irregular; govts. and investment grade firm, convertibles down.

The great debate: Bears argue that past month's rally has already discounted the mild improvement in business, and that decline in steel production in past week indicates weakness. Bulls counter that steel decline was due to Labor Day, that August steel and car loading figures show more than seasonal improvement, and that recent retail figures and company outlooks have been improved. On the technical side, bulls believe the recent rally has “definitely broken” the downtrend since last Sept., indicating future support should come in well above the June bottom of 212.

While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.”

T. Watson, Pres. IBM, returns from 3-month trip abroad, says IBM's European business doing well, sees European economy improving. Regarding tariffs, sees all countries considering protecting industries where necessary and on products that can be manufactured to “better advantage” than buying abroad.

Economic news and individual company reports:

Low money rates seen continuing for some time; call money seems headed back down, and govt. financing has been at lower rates. Expected seasonal rise in business demand for funds hasn't materialized, while supply of loanable funds remains high (total net deposits at member banks on Sept. 3 were $21.1B vs year's peak of $21.3B). Demand for currency is also moderate.

Employment Service of Labor Dept. reports employment situation throughout US little improved in August; textiles and automotive remained unsatisfactory; slight improvement in shipbuilding, shoes, and, towards end of Aug., in steel and iron.

Illinois Mfgr. Assoc. reports confident consensus on future industrial situation, distinct signs of improvement in many lines of business; sees gradual and steady improvement from now on. Several prominent Chicago executives issue optimistic statements, including M. Cresap (Hart, Schaffner & Marx Chair.), F. Sargent (Chicago & North Western Rwy. Pres.), W. Abbott (Illinois Bell Telephone Chair.).

Reports of 9 drug companies shows first half earnings 10.4% over 1929; this contrasts with 550 industrials showing earnings down 30.4%.

Companies reporting decent earnings: Middle West Utilities, Drug Inc.


“'Do you prefer beer or wine?' 'Well, that depends.' 'On what?' 'On who's paying.'”

+ The Boring Stuff:

European rubber producers adopt new rescue plan for industry to replace ill-fated previous schemes that tried to support prices by restricting production or exports. Rubber market will now be free, but major European planters will aim for getting their production efficient enough to make a profit at price under 17 cents/pound; this should discourage Asian production that has so far been uncontrollable. It may be problematical how long this discouragement will take to work, considering that price of rubber has already declined from 22 cents to 8 cents/pound this year and there is still excess production.

Paris and Berlin stock markets generally higher in past week, though volume was low.

There's “considerable speculation” about how far the current rally will go. It's believed that the past month's rally “has been handled in intelligent fashion, reflecting the guiding hand of interests determined not to allow ... speculative excesses.” Basic strength of market is seen in pattern of rising volume on rallies and dullness on breaks, indicating absense of weak hands. Authorities who called the rally correctly predict the upswing will continue until early November before any major setbacks. “Speculative theory” predicts gradually rising prices, next serious resistance level at 255-258; hopes for “determined assault” in coming weeks.

Conservative observers continue to advise buying only gradually when sharp reactions are in progress, and taking profits on recoveries.

An active pool is operating in Vanadium. The group has been working its favorite higher at every opportunity.”

Municipal bond prices remain firm, with highest-rates bonds yielding 4% or less.

Commodities continued weak. Grains generally down sharply; some alarm over reported large scale dumping of Russian wheat in European markets. Cotton off slightly. Rubber and cocoa both traded down to record lows in past week before recovering slightly (cocoa futures hit 5.84 cents vs. 10-11 cents a year ago).

Irving Fisher's index of 200 commodities for week ended Sept. 12 was 83.4 vs. 83.5 in previous week and 96.3 in 1929.

Recent rise in steel scrap may be due to speculative buying by dealers. Steel interests say there has been no increase in buying by steel companies.

USDA's agricultural export index for July was 57, a record low for July but up slightly from May and June.

US trade with Canada and Britain down sharply in July vs. 1929. US exports to Canada were $55.1M vs. $79.6M in 1929 and imports $30.9M vs. $44.1M; first 7 months exports were $426.8M vs. $582.2M and imports $249.9M vs. $292.1M. US exports to Britain were $40.6M vs. $56.9M and imports $13.9M vs. $28.0M; first 7 months exports were $379.2M vs. $459.1M and imports $134.6M vs. $197.6M.

European nitrate cartel formed after long negotiations; 98% of European synthetic producers included. Together with agreement of Chilean producers, 88% of world's total nitrate production is cooperating, with only US outside the cartel. Also formed was European cartel for producers of rail passenger and freight cars.

Standard Oil of California will raise price of gasoline 1 cent/gallon and reduce price of refinable oil 8-12 cents/barrel following complaints by independent refiners of impossibility of profitable operations.

US cotton consumption in Aug. was 352,335 bales vs 378,385 in July and 558,754 in Aug. 1929.

July tire casing shipments were 5.810M, up 2.9% over June but down 26% from 1929. Production was 4.257M, down 22% from June and 34% from 1929.

Anthracite shipments in Aug. were 4.822M tons, up 475,949 from July and up 257,364 from 1929.

New York State mortgages recorded in fiscal year ended June 30 were 164,341, down 69,861 from 1929 and down 113,790 from 1928.

Los Angeles Chamber of Commerce reports Aug. business activity in Southwest showed steady increase. Employment was steady to up slightly; construction strengthened; movie companies were busy; apparel and furniture production was up; oil and agriculture were steady; wholesale sales were steady but retail down.

Long running lawsuit by Eaton-Otis interests to block Bethlehem Steel - Youngstown Sheet & Tube merger seen ending in a few weeks.

A dozen leading shoe companies report “some improvement, and more expected.” Stores are stocking up for fall, but cautiously and with price pressure.

Employment in Camden, NJ radio industry expected to increase from 18,000 to 25,000 by Sept. 19.

Sears-Roebuck marks 44'th anniversary of founding by Richard W. Sears.

Bangor & Aroostook Railroad stock about 75, yield about 4.7%, expects 1930 net about $10.60/share.

1 comment:

  1. “While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.”

    Oh noooooo! Too bad! You don't win the new, fully equipped freezer, offered to us by General Electric, because, in fact the Dow raced downwards like a crazy mountain goat fleeing for the Yeti

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