Thursday, September 11, 1930: Dow 245.09 +0.80 (0.3%)

Assorted historical stuff:

Franklin Trust of Philadelphia takes a stand in favor of spending: “Every dollar you spend today stimulates employment, encourages industry - and buys more than at any time since 1913. Now is the time to spend wisely as well as save regularly.

Henry Ford denies making prediction that normal business will resume in October; says only way to resume good times is by higher-quality production at lower cost; this will create demand, and companies following this principle need not be concerned if times are good or bad. This certainly can't be accomplished in a month, and maybe not in years.

Editorial: Difficulty the cotton industry is currently in is due less to decreased consumption than to increasing use of foreign cotton. This can't be solved by cooperative marketing or holding surpluses but by taking on foreign competition and “producing a better quality at a less price than our competitors.”

Canadian Premier Bennett addresses Parliament; to propose raising tariffs up to 10% on 25 articles (mainly textiles), ask $20M for unemployment relief.

AFL to consider motion to modify Prohibition, legalizing 2.75% beer.

Powerful X-ray machine installed by Babcock & Wilcox Co. to examine pressure vessels and other equipment.

Market commentary:

Stocks showed broad strength again. US Steel rallied in spite of August decline in unfilled orders; decline was interpreted as result of increased operations; bears forced to urgently cover. Strength spread to stocks under recent pressure including Sears, Montgomery-Ward, and Anaconda. Retail and utilities strong; “bullish demonstrations” in trading favorites including Radio, United Aircraft. Some profit taking in late afternoon was absorbed without much disruption. Bond market quieter but prices generally firm; convertibles and South American govts. higher.

Market considered stronger technically from recent period of consolidation, move upward on higher volume; declines of June and early August are seen as having shaken out weak hands, as indicated by shrinkage in brokers' loans. Recent economic news has also been encouraging, including steel production, retail and mail order sales. Roger Babson's switch to bullish stance has also attracted attention. All indications point to good sized gains in stocks in the near future, though third-quarter earnings reports in a few weeks may change the trend.

Recent trading has been concentrated in a few issues; 42% of the 8.2M shares traded last week was in 16 stocks including Radio, US Steel, Warner Bros.

Banker J. Speyer returns from European trip, says depression is worldwide and no improvement is anticipated for the next year by bankers he visited.

D. Sarnoff, Pres. Radio Corp. of America, returns from two-month trip abroad; says after difficult first half company business is “on the upward trend”; says economic conditions in France surprisingly good but England and Germany suffering; “No matter how bad off we may think we are here ... Europe's economic and financial condition is much worse, and their improvement appears to be dependent upon our own recovery.”

Canadian Bank of Commerce sees signs of recent improvement but says they must be tested for some time to verify whether they are lasting. Canadian business doing relatively well compared to other countries; “volume of Canadian manufactures” in first half about 16% below 1929 level but only 5% below 1928.

Economic news and individual company reports:

US July electricity output was 7,870 GWHr vs. 8,114 GWHr in 1929, 3% decline was largest this year. Decline worsened by industrial shutdowns. However, revenues were up about 1%. About 36% of power was hydroelectric.

US Steel unfilled orders Aug. 31 were 3.580M tons vs. 4.022M on July 31 and 3.658M on Aug. 31, 1929; smallest total since July 31, 1928.

Farm labor situation is badly affected by lower farm income and industrial unemployment: demand for farm labor is 71.8% of normal, down 2.5% from Aug. 1 and 14.6% from 1929; supply of farm labor is 147.1% of normal, up 3.7% from Aug. 1 and 41.1% from 1929.

August sales for 530 department stores were down 8% from 1929 level; first 8 months sales were down 6%.

Movie officials estimate Hollywood studios will spend over $250M on next year's productions.

Companies reporting decent earnings: American Water Works & Elec., Texas Pacific Land Trust, Lily Tulip Cup, Claude Neon Lights, Sears Point Toll Road.

Stock market joke:

An out-of-work broker asked a friend who owned a circus for work. His friend said the circus gorilla had recently died, and if the broker wanted to get into the gorilla's skin, swing around, growl, and amuse the children, he could have the job. Things went well until one day the rope the “gorilla” was swinging on snapped and catapulted him into the lions cage. The lion let out a roar, which the “gorilla” answered with a timid yelp. The lion roared louder, and the “gorilla” lost his nerve and started screaming for help. The lion came closer and whispered “Shut up, you damned fool, you're not the only broker out of a job.”

+ The Boring Stuff:

Editorial: More bridges are needed in New York state to cross 150-mile course of Hudson river. Some time ago, most horse-drawn travel used toll roads and bridges. This became a nuisance, and roads eventually were made free. With arrival of cars, bridges became more desirable to avoid long detours for ferries; tolls again became acceptable. Building of bridges has become major industry. Successful approach has been to use authorities that can build bridges and charge tolls, making construction self-supporting and without use of taxes; ultimately structures are to revert to the state and become free.

Three directors of BMT named to IRT board, including G. Dahl; thought to improve position of BMT in unification talks with New York city transit system.

E. Seubert, Pres. Standard Oil of Indiana, returns from six-week European trip, says depression slightly worse there. France, Hungary doing relatively well; England, Germany, Austria doing poorly. Predicts US will recover before Europe due to greater resources; sees signs of gradual improvement currently and expects better conditions by next spring; recovery may be speedy when it arrives.

Conservative observers increasingly cautious, advise remaining on sidelines and taking profits in rallies, and waiting for setbacks to buy.

Brokers report a moderate increase in public participation in trading. Short interest is reported still large but decreasing on recent covering.

Commodities generally firm. Cotton up strongly. Grains mostly up slightly on professional trading. Copper unchanged at 10 3/4-11 cents, buying very light. Cocoa touched new record low below 6 cents/pound, closed down.

NYSE members loans against stock Sept. 2 were 5.31% of total market value of $67.7B vs. 5.49% of $67.2B Aug. 1 and 8.79% in 1929.

Money in circulation Aug. 31 was $4.534B vs. $4.426B July 31 and $4.840B in 1929; per capita circulation was $36.72 vs. $35.90 and $40.32.

Steel industry outlook is unclear; Iron Age reports seasonal recovery is expected but slow in materializing; demand is slightly higher this month but “nothing like a broad buying movement has set in”; real test of recovery still to come. Prospects should be clearer by Oct. 1; general view is that volume will recover from current levels but be smaller than previous years.

Steel ingot production industry-wide in week ended Monday was at 56% due to holiday curtailment, vs. 57.5% previous week and 86% in 1929; US Steel was at 63% vs. 65% previous week and 91% in 1929. Some improvement is expected this week following the Labor Day holiday.

Iron Age reports “encouraging signs” in machine tool markets, but “mostly in the form of inquiries rather than orders.” Sept. sales expected slightly up from Aug.

Gasoline in storage at refineries on Sept. 6 was 38.573M barrels, down 242,000 from Aug. 30 and lowest since Dec. 7, 1929.

Agriculture Dept. crop estimates as of Sept. 1: corn 1.983B bushels, down sharply from Aug. 1 estimate of 2.212B but slightly above recent private estimates; avg. estimate for all crops down 2.5% due to continuation of record-breaking drought, extension of drought damage to previously unaffected states.

Farm Board says it won't support US-Cuban plan to curtail sugar since US doesn't have domestic surplus; also believe some excess wheat and cotton acreage might be switched to growing sugar.

Silver market stronger recently; may be benefitting from more stable situation in China. World production in first half was 108.9M ounces vs. 102.1M in 1929; increase was entirely in Mexican production.

Southern Railway reports some success in cutting costs to adjust to lower revenue: July revenue was down 17.7% from 1929 but operating income was down only 15.6% from 1929 vs. a 46.8% decline in the first half. Company has cut costs in most departments.

Lily Tulip Cup stock about 26, earned $2.34 in first half, yield about 6%.

Hershey reports earnings slightly lower in July and Aug. vs. 1929 due to heat wave (small retailers refused to stock up because of loss to meltage). However, co. is benefitting from lower raw material costs and Sept. sales have recovered; net for third quarter may approach 1929 level.