September 12, 2009

Saturday, September 13, 1930: Dow 241.17 -1.71 (0.7%)

Assorted historical stuff:

Editorial: Many large US companies are now developing foreign markets by establishing foreign branches, including GM, Ford, GE, and American Can. This month's Atlantic magazine has an analysis of this trend; companies typically set up foreign plants to reduce transport costs, take advantage of cheaper labor, and get goodwill for reducing local unemployment. Germany now has 64 manufacturing or assembly subsidiaries of US companies, and England 73. This trend may affect foreign trade in interesting ways; visible US exports would be replaced by “invisible balance” of profits, royalties, etc. Tariff wall that we have gone to so much trouble to raise may prove anachronistic.

Prisons are finding radio helpful as a diversion for inmates. Radios have been installed at Ohio and Iowa State Penitentiaries.

Per capita ice cream consumption was 2.9 gallons/year in 1928, with over 4,000 factories operating in US. Industry began around time of American Revolution, with first newspaper ad offering ice cream for sale appearing in New York Gazette, May 19, 1777.

South African ostrich farmers have raised over 100,000 birds this year, hoping for a return to the pre-World War plume wearing fashion.

W. Groat, Assistant Atty. Gen., brings suit to dissolve Manhattan & Bronx Smoked Fish Dealers Association due to alleged food racketeering.

Market commentary:

Lower volume continued Thursday until late afternoon. Bears made determined attempt early to continue previous day's decline, without success; moderate rallies came in by noon but weren't followed up. Traders may have been disappointed by failure of market to repeat Friday rally of past several weeks; there was a late pickup in volume on the downside, and market was unsettled at the close; leaders including US Steel declined. Coppers weak on bearish Aug. statistics. Bond market dull with investment-grade steady and speculative issues irregular. Foreign govts. firm with South American holding gains; US govts. strong.

Current consensus is that “there will be a good advance shortly followed by a set-back before the end of the year”, when disappointing Q3 reports appear. However, when “predictions ... are so nearly unanimous,” market action may be contrary to the general opinion.

IT&T says July was low point for their business, has been improving since; expect better showing for rest of year.

Bradstreet's and Dun's weekly reviews report moderate upturn in business, increases in wholesale and retail distribution, though volume still below 1929.

Continued commodity price declines are disturbing; many professionals are involved in both commodities and stock markets, leading to “sympathetic liquidation.”

Commerce Sec. Lamont urges increased public and private construction of needed projects as one of best means for restoring more active business.

Car production for 1930 now seems likely to be about 3.75M, well short of the expected 4M. This will mean lower earnings for auto companies and for the industries supplying them. On the bright side, this should cause large deferred demand when economic conditions return to normal; there is “little question but that the automobile market normally will absorb upwards of 4.5M units a year.” In the meantime, the industry continues to operate profitably as a whole, and is increasing efficiency and cutting costs, which should further improve profitability when normal conditions do return.

Economic news and individual company reports:

Seasonal demands for credit and currency have so far been mild. Money in circulation was down $47M last week and only up $17M since Labor Day vs. $43M in 1929; “all other” (commercial) loans were up $4M to $2.409B, around the same level it's been since mid-June. This light demand together with Fed policy are likely to keep rates low indefinitely; anticipated seasonal rise in rates is likely to be nominal if it happens at all.

Offering of $334.2M in 2 3/8% one-year Treasury certificates is oversubscribed by almost 4:1.

Production of electricity in week ended Sept. 6 was 1.624 GWHr, down 2.5% from 1929, but up 9% from 1928 and lowest percentage decline in past month.

Some retailers reportedly caught unawares by improved public demand since Labor Day; more retail buyers are now in New York than at this time in Sept. for many years, after number sent in Aug. was fewer than usual. Some reports of difficulty finding goods.

H. Smith, Pres. Natl. Council of Amer. Shipbuilders, says US shipbuilding has doubled in past year; 275,000 tons of high-grade ships now under construction.

Company reports since July 1: 208 companies reported higher earnings vs. 1929 and 469 lower; 1018 dividends unchanged, 48 increased, 83 cut.


“Friend - Do you think the great outstanding poem of the century has yet been written?
Poet - It has not only been written, but it has been rejected.”

+ The Boring Stuff:

Editorial: Chief Justice Taft, since 1921, has greatly improved Supreme Court efficiency by “bringing modernistic efficiency to bear on an apparently bottomless cistern of legalistic conundrums.” In 1923, Court was hearing 854 cases yearly and was 558 cases in arrears; Taft induced Congress to pass laws giving the Court more discretion on what cases to hear, and changed rules on deciding minor issues. By Oct. 1929, number of pending cases had been reduced to 143. New Chief Justice Hughes expected to accelerate the pace.

Agriculture Sec. Hyde calls for collective action to solve cotton growers' problems, including high costs, overproduction, and wrong mix of cotton types.

Oil industry and Wall Street relieved by court decision upholding curtailment in Oklahoma; decision the other way would have made oil outlook “extremely dubious.” Oil stocks have so far not responded dramatically.

Professional traders seen still in control of market movements; moderate amount of outside trading is not enough to influence the market. This has been disappointing to bulls hoping that public interest might increase to the point where it took control of market direction. However, $33M increase in brokers' loans last week may indicate some increased public interest; this typically develops after a depression only when tangible evidence of business improvement comes.

American Bankers' Assoc. Journal reports slight improvement last month in trade and industry.

R. Proctor, Pres. New England Council, says “general opinion is we have passed the low point of the depression.” Rate of decline in commodity prices has slowed; production is under consumption; industrial activity “is now moving with normal trend, rather than against it.”

Senator P. Norbeck and Cincinnati banker F. Schwenck return from European trip, report conditions much worse than US, especially in Britain. Mr. Schwenck reports high unemployment in Britain and Germany; didn't hear much talk about increased tariffs except on cars to protect local industries.

Conservative observers remain cautious; recommend against buying, suggest taking profits on upturns.

Investment-grade corp. bonds have reacted slightly in past few days, possibly due to increased offerings in the past two weeks.

Commodities down. Wheat futures hit new season low at 80 3/4 cents, lowest since 1914; corn down sharply, other grains also down. Cotton down. Copper was offered at 10 3/4 cents with no takers.

New securities (stocks and bonds) listed on NYSE in Aug. were $357.9M vs. $1.113B in July and $1.618B in Aug. 1929. First 8 months were $6.902B vs. $10.619B. However, new bond offerings in week ended Sept. 10 were $134.3M vs $67.2M previous week and $131.7M in 1929.

Stocks of refined copper Sept. 1 were 347,688 tons vs. 322,039 on Aug. 1 and 104,372 in 1929; Aug. production was 120,788 vs. 123,179 and 148,648.

Retail price of gasoline cut 2 to 3 cents/gallon in some Midwest cities; attributed to price wars among independent companies.

Exports of tires in first half by 8 countries were 4.459M, down 12% from 1929; US exports were down 14%.

Canadian production of newsprint in Aug. was 202,043 tons vs. 216,978 in July and 225,873 in 1929; US production was 101,601 vs. 102,840 and 120,868.

Production of Portland cement in Aug. was 17.821M barrels vs. 17.078M in July and 18.585M in 1929.

A&P sales for Aug. were $78.4M, up 4.2% from 1929, and improved from July; Sears-Roebuck sales Aug. 14-Sept. 10 were $28.0M, down 14.1% vs. 1929.

Chicago & North Western Railway expects net about $4 for 1930, below $5 dividend, but sees better second half due to cost savings and higher revenue.

American Cyanamid stops dividend payments; following expansion last year, mining and fertilizer divisions now suffering due to depression.

Autostrop Razor stock price 72, yield 4.2%; net for 1930 about $7.50/share, up almost 100% vs. 1929; suing Gillette for patent infringement, rumors of merger.

Companies reporting decent earnings: Scott Paper.


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