October 13, 2009

Monday, October 13, 1930: Dow 193.05. -5.45 (2.7%)

Assorted historical stuff:

Editorial: Alice Meynell said: “Rhythm is the law of human hopes, fears, and loves; perpetual oscillation ... reflects itself in all things human.” Poets over the ages have agreed; while they generally haven't written about the stock market, nothing exemplifies this principle better or reflects hope and fear more directly. It's the essence of the market that when hopes are highest their frustration is at hand, while “when fears crowd in like the Mongol horde” and shake the stoutest hearts, the danger has already passed. For successful investing it would suffice to have an instrument measuring current intensity of emotions and, “the stronger they are, the more resolutely act against them.” Simple, but no easier than Ovid found it 1,900 years ago; perhaps we can start by recognizing “fears are now running riot.”

US Chamber of Commerce says expects more government regulation and participation in business to be proposed in upcoming session of Congress; “measures seen as forerunner of more sweeping political control of economic activities.”

Manifesto calling for abolition of military training and conscription published around world; British signers include H.G. Wells, Bertrand Russell, Aldous Huxley.

Chess increasingly popular in Britain; only two games permitted in Parliament are chess and checkers.

NY City tentative budget of $615.869M accepted by Board of Estimate; will require significant tax hike.

47 of 48 Republican ward leaders in Philadelphia switch parties to support J. Hemphill, wet Democratic candidate for governor, after Republicans nominate a dry.

Plans for national full fashioned hosiery exchange will probably be abandoned due to waning interest.

Leading toiletry co. has created new advertising novelty - books of matches cleverly made into miniature replicas of tubes of shaving or dental cream.

German fire insurance cos. report largest cause of fires is children playing with matches or imitating elders.

Market commentary:

Market wrap: Stocks opened firm following Friday's dramatic late rally, which raised the Dow from 186.70 to the close of 198.50. Some fractional gains in first half-hour; an attempt to extend the rally under leadership of US Steel brought out heavy selling, and early momentum was lost; most traders seemed content to take profits before the holiday [Columbus Day] weekend; leading issues closed lower. Bond market active and strong; sharp rallies in many foreign govts.; domestic corp. and convertibles markedly higher; observers surprised at sensitivity of bonds to stock market movements.

Week in review: Stocks heavily liquidated almost without interruption until late Friday rally; Dow broke below last fall's panic level. Failure of Prince & Whitely (major broker) may have contributed to downturn, though unclear if creditors will suffer losses. Bond market also declined, with highest grade domestic resisting pressure best and foreign particularly weak. Money noticeably tighter, with call rates up to 2%. Substantial increase in commercial loans, decrease in brokers' loans. Weak figures from steel and rail loadings. Grains and cotton down. Unexpected German rate hike. Political disturbances in Brazil and Spain.

Many high-grade stocks now seem to be good “long pull” investments at current prices. For example, US Steel stock is 146, yield 4.8%, and averaged almost $15 a share annually in earnings over past 4 years. GM stock is under 40, yields about 8%, and earned a total of $21/share over past 4 years.

Not in years have so many disturbing rumors circulated; unfortunately, “one or two” proved correct, leading to natural tendency to pay more attention to all.

Strong rumors Friday from “usually well informed quarters that banking support in the market had become aggressive”; may have contributed to sharp late rally.

Samuel Insull, head of Insull utility group: Continuing large capital investments; taking long-term view; consider depression temporary; electricity still growing, gas sales flat, and transportation declining; “I have the greatest confidence that the conservatively financed utilities ... will weather the present business depression.”

Economic news and individual company reports:

Fed. Reserve Bulletin reports money market conditions remained easy in Sept., against usual seasonal trend; member banks' deposits are high, Reserve borrowings low, some growth in investments and loans on securities while “all other” (commercial) loans remained low.

Irving Fisher's index of 200 commodities for week ended Oct. 10 was 82.9 vs. 82.3 in previous week and 94.4 in Oct. 1929.

Julian Oil is now battling proration (production control) in Okla. State Supreme Court, in Federal Court, and in a hearing at the Okla. State Corp. Commission.

Belgium reportedly resisting recession relatively well in spite of export-based economy; while stocks are down and some individual industries are suffering, unemployment remains low; attributed to low costs of living and production. Belgium also has low tariffs and taxes.

Companies reporting decent earnings: Otis Elevator, Crown Cork & Seal, Wesson Oil, Gray Telephone (biggest maker of pay phones), Hawaiian Pineapple.


“'In time of trial,' inquired the speaker, 'what brings us the greatest comfort?' 'An acquittal,' interrupted a man at the back of the hall.”

+ The Boring Stuff:

Editorial by T. Woodlock, former ICC member: Rails face a difficult long-term situation: revenues are declining due to large and inevitable factors including motor transportation and pipelines, while avoidable expenses have mostly been wrung out of the system already. Expected traffic in coming years won't support the system at the quality we're used to, so we will need to either pay more or cut it back; the ICC will manage this process as well as possible.

British cabinet decides against Canadian proposal of reciprocal trade protection between dominions.

Supreme Court to rule in current session on 6 rail industry cases involving contested orders by Interstate Commerce Commission.

One of world's largest oil tankers built for Standard Oil NJ - cost $2M, capacity 150,000 barrels.

15 years ago today, NYSE switched from quoting stock prices in percent of par value to dollars per share.

Friday's trading suggested oversold condition; in first 3 1/2 hours Dow declined 5.30 points on 4.750M volume, while rally of 11.80 took place on 1.5M volume.

Market possibly was technically weakened by sharp rally late Friday, which caused mild “bear panic” and short-covering, though good-size short interest remains. Many bears also believed to have closed their positions on Friday “because they desired to leave the Street for an extended week-end.”

Consensus seemed to be to let market prove itself after “erratic and nervous condition which had developed toward the latter part of the week.” In spite of Friday rally many observers were concerned about possibility of further liquidation.

Conservative observers still advise remaining on sidelines until “market has demonstrated conclusively that a point of resistance has been established.”

Editorial: For the first time since 1816, when there was a frost every summer month, it looks likely we'll run out of corn this year before the next crop. Wheat can make up some of the deficit but not all. This should be a seller's market for feed grains, and corn shouldn't be cheap; farmers are likely to raise less cattle this winter.

Commodities mixed. Corn plunges, other grains down substantially. Cotton again up moderately.

Prince & Whitely receivers appointed in NY and Chicago; no accounting of firm's financial condition yet available.

Refined copper stocks in North and South America Oct. 1 were 360,650 tons, up 12,962 in month and vs. 94,751 on Oct. 1, 1929.

Youngstown District steel production expected to remain unchanged at 53% next week.

Gasoline in Chicago wholesale market was 5 1/2 - 6 1/4 cents/gallon vs. 5 5/8 - 6 1/4 previously.

881 lumber mills reported orders for the week ended Oct. 4 were 14% above production of 255.2M feet; production is about a third below 1929 levels.

Nat'l. Assoc. of Cotton Mfgr. outgoing Pres. calls for continued curtailment, cooperation in textile industry; says elimination of night work for women and children will help. G. Sloan, Cotton Textile Inst. Pres., says situation improving; sales have been below production for 3 months and inventories have declined to minimum.

British imports in Sept. were 78.7M pounds vs. 79.9M in August and 98.4M in Sept. 1929. Exports were 42.7M vs. 42.8M and 55.1M.

Germany report: Discussions continue on new $125M loan; French banks hesitating on cooperation, decision unlikely until Reichstag's attitude on financial program clear. Central bank heads meeting in Basel reportedly were asked to activate Young Plan clause allowing postponement of some reparation payments. Marks lower; Reichsbank rate rise to 5% apparently ineffective in preventing further capital flight. Official count of unemployed was 3.088M as of Sept. 30th, about 2M of whom are receiving unemployment insurance benefits.

Many bankers believe worldwide recovery will be difficult until France starts lending its “enormous unused balances”; however France is so far “giving no signs of entering the foreign loan market in a sizeable way.”

Los Angeles Chamber of Commerce reports Sept. showed continued improvement in most Los Angeles district industries; employment was up from Aug., while building permits and postal receipts were above Sept. 1929 levels.

Visitors to national parks in year ended Sept. 30 were 2.819M vs. 2.681M in 1929; most popular was Yosemite with 458,566.

Pennsylvania RR has paid dividends continuously since 1847.

Woolworth sales continue improvement of last month; based on present business, 1930 sales may be close to the 1929 record year and profit is likely to be better. Current store count is 1,890 in US, Canada, and Cuba, with 65 opened this year.

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