September 30, 2009

Tuesday, September 30, 1930: Dow 208.14. -4.38 (2.1%)

Assorted historical stuff:

Editorial: “New economics” statements that consumers are now buying too little and saving too much have just enough truth to be “dangerous pabulum for the popular mind.” Consider the savings people have in banks and life insurance. “Is it conceivable that it can be for the general good ... that these savings should not be made and that the money should be spent in consumption? Will the country be better off as a whole if the mortgage on the home is allowed to remain and instead a second car placed in the garage? The question answers itself. ... Thrift and extravagance succeed each other as do the tides, and the wheel invariably comes full turn. ... A little patience is all that is necessary ...”

Spanish political situation clouded after 20,000 people rallied in Madrid's old bullring Sunday, condemning dictatorship and monarchy and calling for resignation of the king. Rally was orderly but “promises of revolution were frequently made” and Army was asked for aid in carrying out program. Currency plunged.

Cuban banking crisis reportedly averted by shipment of $25M to Havana over the weekend.

More than 50 countries now have airmail service.

British bank devises ingenious method to prevent check forgery - stamps bearing portrait of depositor to be pasted on signed checks.

Daniel Guggenheim, leader of the Guggenheim family, mining man, capitalist, philanthropist, and sponsor of Goddard's rocketry experiments, dead at 74.

Market commentary:

Market wrap: Following “a brave attempt to rally” led by US Steel and American Can, stocks gave way to another deluge of selling around mid-day. Pressure began in oils, including Standard of NJ; attributed to weakness in gasoline prices. Some stocks declined on dividend concerns including IT&T and Montgomery Ward; also weak were trading favorites including Vanadium and Radio. Weakness spread to the major industrials; utilities also broadly down including AT&T and Consolidated Gas; insurance weak. Selling picked up increasing momentum in the last hour, with bad breaks in active stocks throughout the list. Bond market generally weak, though US govt. and rails were strong, with Dow 40 corp. bond avg. up to new 1930 high of 97.68. Foreign govts. and convertibles down.

Conservative observers say it's useless to try for technical rallies in this market; advise waiting until stocks “can hold their advances for more than a few hours.”

One visitor from Utah's opinion: “Utah people are not excessively optimistic … but they are convinced conditions will mend. Here in New York, you might get the impression that we were all headed for bankruptcy.”

US Steel policy of keeping as many workers as possible and distributing available work among them has been favorably commented on in many quarters; “the recommendation is made in the financial district that the adoption of such a policy by other large employers ... would do much to alleviate unemployment this winter.”

Broad Street Gossip: “On the basis of present prices, wise is the investor who buys and holds on.”

No evidence yet of organized market support as came in during declines in June and August.

Baar, Cohen, & Co. contrast current stock market with debacle last fall. Back then, business had been declining since June but the market kept rallying; now business has hit bottom and should improve, but the market “ignores this condition just as it ignored the business decline ... A year ago the public was in the market up to its neck - in fact, in some cases, above its head. Today the public is afraid to own stocks. We know of no better indication that a turn for the better is near.”

Ambassador C. Dawes, speaking in Belfast Ireland, sees return of world business to normal by summer or fall of 1931.

H.K. McCann, Pres. McCann-Erickson, says newspaper advertising is an excellent business barometer, is encouraged by increase in advertising contracted for by clients in first half of 1931 vs. last half of 1930.

Dow closed at a new yearly low. There were 11 stocks at new yearly highs and 210 new lows.

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Sept. 24: loans on securities up $57M to $8.461B, “all other” (commercial) loans down $24M to $8.453B.

Call money renewed at 1 1/2%, lowest rate since 1915; attributed to heavy margin selling, possibly also to weak commercial credit demand.

August net operating income for all class 1 rails estimated at $96.8M vs. $141.4M in 1929 and $128.4M in 1928.

US crude oil production in 1929 was 1.007B barrels, up 12% from 1928; motor fuel production was 439.4M barrels, up 15%.

Companies reporting decent earnings: National Dairy, Metro-Goldwyn Pictures.


“'And there, son, you have the story of your dad and the Great War.' 'Yes, Dad, but why did they need all the other soldiers?'”

+ The Boring Stuff:

Home planning conference created by Pres. Hoover to be composed of about 20 committees and involve about 1,000 people throughout the country. Chair is Commerce Sec. Lamont, who estimates that $50B will be spent on new residential construction in next 20 years, with $500M now spent annually on maintenance. Conditions now called favorable for homebuilders, including lower prices of raw materials, ample number of skilled workers, and first mortgages at reasonable rates.

Editorial: Due to large wheat crops in many countries, US faces possible “insurmountable oversupply, as Cuba has found in sugar and Brazil in coffee.”

German update: stocks rose due to rumors Reichstag will not convene until January, rather then expected Oct. 13, giving Chancellor Breuning's cabinet more time to find support; large outflow of gold and foreign-exchange continues from Germany.

Stanley Baldwin's committee of economic experts plans wheat quota for Britain specifying 25% homegrown, 66% Dominions, and 9% from all other countries.

G. Baumeister, Ulen & Co. VP, reports revolutionary movement in Chile has no important backing and should cause no concern for US business operating there.

J. Bunnell, CBOT Pres., tells Congress he gave govt. first information on Russian short sales of wheat. CBOT has decided to bar all foreign govts. from shorting.

In heavy declines during the final hour, many stocks broke through their lows on the reactions of the past few months.

Several statements were made last week that the market appeared technically oversold, but it continued to drop through theoretical resistance levels.

Some amusement stocks disappointingly weak, including Technicolor and Fox Film; attributed to excess speculative interest that came in during the spring rally.

Some observers looking for a day or two of heavy liquidation to mark climax to selling and set stage for a technical rally.

Some favorable factors seen for stocks, including strength in bonds and preferreds, larger short interest, deflation of overpriced stocks, and easy credit. Some dispute the last point, saying easy credit is a reflection of slack business demand.

New Canadian tariffs potentially shift hundreds of millions in production to Canada, but some of this might not materialize due to lack of manufacturing experience.

Colonel W. Procter, Pres. Procter & Gamble, says bottom of depression probably reached in July, sees gradual return to normal business sometime in 1931, although we may have an intermediate dip in January or February. Cautions against forcing recovery, saying it must come naturally when inventories are exhausted. Urges industries to study markets carefully and “see if operations can be regularized” so as not to be forced into large layoffs in dull periods. P&G for the past 7 years has guaranteed 48 weeks of work a year to all employees of more than 6 months service.

Harvard Economics Society notes recent renewed decline in commodity prices; while they have still not broken out of the range prevailing since July, “in view of recent declines, a conclusion that the stabilization of prices will take place at these levels is not yet justified.”

Commodities very weak. Wheat declined again, hitting new lows; Sept. contract was 72 3/4, lowest since Jan. 1907; other grains mixed. Cotton was down again to new lows, reaching lowest prices since Sept. 1915. Copper market nominally holding at 10 1/4 - 10 1/2 cents, but with little buying and further weakness anticipated. Rubber, raw sugar, and silk reached new low prices in the history of their exchanges.

Rails and public utilities obtained $2.689B in new capital in first 8 months of 1930, a new record, $900M over 1929 and $1.346B over 1928. State and local governments obtained $941M, up $114M from 1929; foreign govts. obtained $411M vs. $57M in 1929.

Supply of money for first mortgages reported adequate; prevailing rates at 5.5% - 6%; foreclosures and delinquencies reported decreasing.

US loans and investments in Canada are now about $3.7B of a total $15B invested abroad, about twice as large as next-largest borrower (Germany). US has replaced Britain as Canada's largest creditor; since 1913 US total is up 900% while Britain's is almost unchanged.

Canadian employment at 7,334 firms was 1.024M on Sept. 1 vs. 1.042M on Aug. 1.

California daily oil output in week ended Sept. 27 down 20,900 barrels to 590,000; making progress towards new production ceiling of 550,000.

NYSE seat sells for $265,000, down $10,000 from last sale.

August meatpacking sales were up 1% from July but down 17% vs. 1929; this was improved from July's 20% decline vs. 1929.

Exports of leaf tobacco in first 8 months were 327.4M pounds, up 12.5% from 1929; average price 21.6 cents/pound vs. 23.6 in 1929.

Gillette - Autostrop merger negotiations continuing; nothing definite decided yet.

Westinghouse Elec. bookings and net income expected down for Q3 vs. Q2, which was already down substantially from 1929. Backlog remains at record level.

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