September 24, 2009

Wednesday, September 24, 1930: Dow 226.75 +3.97 (1.8%)

Assorted historical stuff:

Today is the 61st anniversary of Black Friday, on which Jay Gould and Jim Fisk engineered a corner of the gold market that the government had to break by releasing $4M of gold from its stockpiles. That number makes an interesting contrast with the $26B decline in security values in the fall of 1929.

Editorial: A number of leading British industrialists are calling for “a measure of common sense” to address the current depression. Britain's economic situation is difficult. Its national debt has been little reduced since the war at $37B; its budget has been steadily increasing and is now about $4.4B, up $500M over 6 years [US figures are about $16B debt and $4B budget]. “The greatest drawback to progress has been the dole ... as much a cause as it is an effect of the depression in England today. Once a dole system gets engrafted into a nation it is hard to dislodge it” since it's a great vote-getter. The Labor Party may in fact be lukewarm on protectionism because it would tend to raise wages and therefore operate against the dole. Inability of English politicians to try the logical way out of difficulties “explains why its businessmen are rising in desperation and crying for a return to sanity”; indications are that English workers may also be ready for new leadership.

There's been a dramatic turnaround from front-page talk of drought and famine a few weeks ago to plunging grain prices now.

Canada PM Bennett says will help US investigate Russian wheat short sales; Romania Min. Madgearu asks protection from Russian dumping of farm products.

J.H. Case, Pres. Natl. Assoc. of Community Chests, calls for “peace-time patriotism” and increased giving by those with wealth in this time of unemployment.

Radium is most costly mineral in the world; in Czechoslovakia a 300-man plant makes 3 1/2 grams a year, valued at about $2.5M.

Buster Keaton returns from Europe; reports continuous British propaganda against US films, says Germany more receptive.

Market commentary:

Market Wrap: Leading trading stocks rallied following a climactic selloff in final hour Monday when trading was at a rate of 5M shares. Market seemed in better shape technically, with larger short interest inducing some covering; also possibly helping was better feeling regarding Germany. Volume was lighter, possibly partly due to Jewish holidays, but became more active toward close; rally spread to most of list. Leading industrials including American Can, Steel, Westinghouse, rallied strongly from Monday's close. Coppers weak. Bond market less active; govts. generally steady; strength in corp. with Dow 40-bond avg. at new 1930 high.

German news more favorable: Reichsbank defends mark; German bonds up in most markets; German stock market up for first time in several days; leading Berlin bankers express confidence in economic soundness and favorable resolution of political situation, say no possibility of default on external obligations.

Better stock action considered especially impressive in view of continued commodities weakness.

Conservative observers insist that market was due for technical rally, advise taking advantage to reduce long positions, recommend waiting attitude.

Business men continue optimistic on conditions; retail and wholesale trade is gaining and inventories are low; more forward buying of raw materials seen. On the other hand, there is some nervousness over situations in Europe and South America, commodity price declines, and lack of automotive improvement.

Irving Bush, Bush Service Corp. Chair., returns from 3 month European trip. Says conditions still unsatisfactory; US is generally blamed for depression based on “bursting of the bubble of over-extended prosperity” and on tariff. However, tariff damage is “more sentimental than actual”; retaliation so far has not been serious. Optimistic on Europe, most encouraged by evident desire to raise workers' wages and living standards.

Powerful banking interests reportedly were buying stocks in the morning.

Prices of art reportedly have declined much less than stocks or commodities.

Economic news and individual company reports:

Total internal revenue collections in Aug. were $77.2M vs. $87.0M in 1929.

Rail freight loadings week ended Sept. 13 were 965,713 cars, up 109,076 from previous week but down 16.2% from 1929. Loadings year to date were down 11.4% from 1929.

Total farm revenues were $11.851B in 1929 vs. $11.741B in 1928.

Cigarette production in Aug. was 10.577B vs. 10.931B in 1929.

Companies reporting decent earnings: National Biscuit, American Ice, Brown Shoe.

James Boring Travel Service files for bankruptcy.


The Spoilers, with Gary Cooper - story of corrupt officials in Nome, Alaska gold mining country; sentimental melodrama, but excellent acting and good production “represents a return to the best elements of the silent pictures... climax ... is the most vigorous and thoroughly realistic [fistfight] the talkies have yet shown.”

+ The Boring Stuff:

Editorial: Recent firestorm over Soviet short sales of wheat indicates function of the futures market in wheat is still not understood. It gives those who sell, mill, or distribute wheat and its products a way to insure themselves against losses from price fluctuations. Speculators provide this insurance, If they didn't speculate the merchant and the miller would have to. While there no doubt is irresponsible speculation, the only way to abolish it would be to get rid of the market itself. Finally, the idea that speculators can permanently affect the price of wheat by short sales “is so patently absurd that discussion on the point is a waste of time.”

Largest contributors to League of Nations are Britain $559,712; US $450,000, and Germany $429,728. Of US contribution about $430,000 is private, mostly from John D. Rockefeller, Jr. US is not a member of the League.

Editorial by Thomas Woodlock, formerly of Interstate Commerce Commission (ICC): Following a long history of rail regulation culminating with the US taking over the rails during the war and then returning them to private hands with the Transportation Act of 1920, the ICC now has approval power over every important decision by rail managements except dividends. This naturally leads to two major problems: “temptation to attempt an acceleration of the evolutionary process” and, more dangerously, “the bureaucratic spirit, ...[an] expression of the fundamental human instinct - the lust of power. It is the nature of this spirit ever to seek extension ... of its authority and ever to view with disapproval what is done within that sphere without its intervention or aid.” Policy should instead be “hands off management.”

Observers believe little liquidation of investment holdings has taken place in Sept.; market break is attributed to bull pools becoming discouraged and selling out stocks they were sponsoring. While business pessimism has returned in past 10 days, there doesn't seem to be reason behind it other than the market decline.

Department stores reportedly have shown improved volume business in the past few weeks, but are suffering from lower prices, since they operate on narrow profit margins and it's difficult for them to reduce overhead. Much will depend on next 3 months, in which 75% of profits are usually earned.

G. Cox of Cox & Jordan presents paper to Empire State Gas & Elec. Assoc. calling for clearer financial reporting by utilities; criticizes various accounting methods used by utilities making it impossible for investors to make fair comparisons.

Some foreign buying of US shares reported, particularly US Steel and Bethlehem.

Recent notable weakness in Kreuger & Toll (attributed to foreign conditions) and Vanadium (no indication of concerted support in spite of earlier rumors).

Norman J. Wall, USDA senior economist, predicts commodity price recovery based on low production, relatively high consumption, and depleting inventories.

Commodities weak. Wheat down sharply to new season low; other grains also down. Cotton dips to new season low. Sugar hits new record low at 1.01 cents, rallying to close at 1.10. Crude rubber hits record low at 7.70 cents, rallies to close up. Copper buying moderate, producers trying to make stand at 10 1/2 cents.

American Petroleum Institute reports refineries operated at 69.2% in week ended Sept. 20 vs. 69.4% previous week; gasoline stocks at refineries were 37.260M barrels vs. 37.832M previous week. Oil & Gas Journal reports crude oil production averaged 2.420M barrels, up 2,737 from previous week.

First 11 rails reporting Aug. earnings had net operating income down 24.3% from 1929, and down 10.8% from 1928.

Study of copper production finds about half of current output, or 1B pounds, is being produced unprofitably.

CBOT has started investigation of source of anonymous report that Canadian wheat pool was in trouble.

Registered British unemployed Sept. 15 were 2.103M vs. 2.140M Sept. 8 and 1.148M in 1929.

Increasing opposition to Montes De Oca Mexican debt settlement seen in both houses of Mexican Congress.

Standard Oil of NJ cuts gasoline prices two cents a gallon throughout its territory, probably to meet price cuts by independent dealers.

Beech-Nut Packing stock about 55, yield 5.5%, net for 1929 was $6.06/share, first half net $2.96/share.

No comments:

Post a Comment