October 2, 2009

Thursday, October 2, 1930: Dow 214.14 +9.24 (4.5%)

Assorted historical stuff:

Editorial: Chancellor Breuning's plan for German economy calls for drastic cuts saving about 1B marks/year. If adopted, “one obstruction in the way of a geneal recovery of world business will be removed.” Adoption seems likely since Pres. Von Hindenburg backs it, and apparently has authority to declare a dictatorship to carry it out if parliament can't agree. While it would be preferable for moderate parties to put politics aside and agree on a govt., we can't find fault if a dictatorship is necessary - this would be similar to Lincoln's Civil War statement that he would save the country with the Constitution if possible, but without it if necessary.

Dr. Nicholas M. Butler: unemployment no passing ill but danger to social organization; desperation of millions of jobless may lead them to try “something new.”

Dr. K. Vaugoin forms Austrian minority cabinet to hold office until Nov. elections; first ministry in which Heimwehr (Fascists) are represented as separate party.

British bankers including Sir O. Niemeyer of Bank of England arrive in Australia to discuss solution to financial difficulties; Australia has about $180M of floating obligations coming due in London shortly with no clear way to settle them.

Amer. Beauty Congress told women spend almost $750M/year on cosmetics with no decline this year; 30% spend over $150/year.

Fabian Society celebrates 46 years of “street corner debating, soap box oratory, and parlor socialism.” Now 2,000 strong, members include George Bernard Shaw and 8 British cabinet ministers; Prime Minister is former member.

Market commentary:

Market wrap: “Remorseless” drop in market that had run for six consecutive days was broken by strong rally, attributed to support finally coming in for main trading shares and to short covering. Market improved from the bell, opening at 206.16, up from 204.90 at Tuesday's close. Rally gained breadth as session wore on; US Steel and American Can led the rally; GE, Westinghouse, Allied Chemical, other majors also participated vigorously. Oils strong with Standard of NJ leading; trading favorites including Gillette, Worthington Pump, J. I. Case sharply higher. Volume moderately heavy but lower than Tuesday and fell off in afternoon; major stocks maintained gains and rose to day's highs in final hour. Bond market opened down but improved to close generally higher; foreign markedly stronger, convertibles up, corp. up narrowly; Dow 40 corp. bond avg. at new 1930 high of 97.70.

Rally considered influenced by technical factors; Dow had declined over 40 points since Sept. 10, and had declined 9 of the last 11 sessions. Increased volume of 4.497M shares also thought to indicate selling climax, since trading for two weeks ended September 23 averaged less than 2M shares.

On Tuesday, 54% of NYSE stocks traded below fall 1929 panic levels; taken as indicating liquidation has been more thorough than indicated by Dow averages (since leading stocks have held up better). Group that held up best was utilities, with 26 of 29 above 1929 low.

Some margin calls have gone out in the recent decline, but they've been relatively light compared to the fall panic when many traders were wiped out overnight.

Many bull pools reported to have accepted their losses and disbanded.

Call money is at 1 1/2% and going begging; stocks are at lows with no takers; commodities are at record lows with little demand.

Experts say some seasonal increase in business may have been delayed by unusually warm Sept. weather.

Many estimates for third quarter earnings lowered due to slower than expected Sept. business.

F. Lisman & Co. see bull market in “seasoned, dividend-paying” rail stocks due to low money rates: “The present generation in Wall Street has never seen the powerful lever which easy money exerts to raise the price of high grade stocks.” Sees prices discounting much adversity, says rails have adjusted to hard conditions.

Economic news and individual company reports:

Railcar loadings for week ended Sept. 20 were down 18.4% vs. 1929 and 16.7% vs. 1928; considered disappointing, largest percentage drop this year.

Fed. Reserve reports department store daily avg. sales in Aug. down 8% from 1929; first 7 months down 6%.

US Steel ingot production for week ended Sept 29 at about 65% vs. almost 66% prev. week; industry at 60%, down slightly from prev. week.

Federal circuit court in Oklahoma allows oil proration to continue until federal trial, expected soon. State Supreme Court decision on the issue expected Tuesday.

Companies reporting decent earnings: Fox Film, Amer. Water Works & Elec., Amer. Tank Car, Chicago Great Western Rwy., Jantzen Knitting Mills.

Western rails arrange conference with ICC requesting reconsideration of large cuts in grain freight rates; say cuts are unaffordable and deny them lawful return.

Estimates of grain crops as of Oct. 1 are somewhat improved over Sept. 1 due to rainfall relieving some drought areas; corn still about 20% below last year.


“The owner of a cheap watch brought it in to the jeweler's shop to see what could be done with it. 'The mistake I made, of course,' he admitted, 'was in dropping it.' 'Well, I don't suppose you could help that,' the jeweler remarked. 'The mistake you made was picking it up.'”

+ The Boring Stuff:

Editorial: Russian dumping of commodities on world market has an “atmosphere of malefic mystery and diabolic ingenuity,” since it supplies them with funds to industrialize while also intensifying depression in “capitalist” world. Looked at calmly, it's not that mysterious. Any govt. with the necessary raw materials and ability to persuade or compel its labor to work for less can take over markets if it wishes. Theoretically the world could boycott Russian products, but this isn't really practical, and “if a people deliberately desires to play helot for other people, why not let it do so?” Soviet govt. is unique historically in that it's put us on notice that it aims to destroy Western civilization, and that its word is worthless, even in business. “Even the Hottentot and the Bushman have a code by which they will live but the Soviet has none ... It is about as complete a characterization as one could make of the modern 'liberal' mind today that it seems to think well of all this.”

IRT news: G. Dahl, chairman of BMT and advocate of unification with city transit lines, elected chairman of IRT, which had previously been putting off unification talks until other issues were settled. Some talk of quasi-public company to run all transit lines. IRT comptroller H. Berry testifies that removal of 6th Ave Elevated line without prompt compensation would put IRT into bankruptcy.

Rally partly attributed to long-term investment buying by insurance cos., banking interests, and investors, brought in by attractive prices and yields; bears may also have felt that a reversal was near and therefore covered shorts on a large scale.

Market value of 100 representative stocks was down 13.3% in Sept. to $25.9B; worst group was amusements, down 24.9%, best was rails, down 7.1%; value was down 41% from peak on Aug. 29, 1929, but 7.7% above lows of Nov. 13.

Conservative observers advise against following rally until it's maintained for more than a day or two; recommend stop loss orders to protect any long positions.

Fed. Reserve Bank of NY notes unusually small seasonal demand for credit and currency in Sept., resulting continued ease in money market.

Col. L. Ayres, VP Cleveland Trust, predicts large increase in savings in 1931 as business starts to recover from depression.

Commodities up strongly. Cotton continued recovery, closing up substantially though off day's highs. Wheat, most other grains up sharply. Copper buying was very active at 10 cents, with some producers no longer willing to sell at that price; 10 cents seen as possible long-term bottom. Rubber at new low.

Index of farm prices Sept. 15 was 111% of prewar level, up 3% from Aug. 15 but down 30% from Sept. 15, 1929, and lowest Sept. level since 1915.

Iron Age and American Metal Market reports: demand holding recent seasonal gains but not showing further improvement as would normally be expected at this time. Price picture mixed, with scrap and pig iron prices weaker but finished product prices showing some increases.

Dun reports 1,963 commercial failures in Sept., up 2.6% from Aug. and 25% from 1929; liabilities $46.947M, down 4.5% from Aug. and up 37.6% from 1929.

German index of industrial production for June was 85.7 vs. 109.8 in 1929 and 100 in 1928.

German marks stronger, stocks up, flight of capital reported down; attributed to relief over financial program.

US-Soviet trade for 1929-30 fiscal year was $177M, up 28% from previous year, of which US imports were $32M, up 3.5%.

Chicago wholesale gasoline prices continue to decline to 6 - 6 3/8 cents vs. 6 - 6 1/2 previously.

S.W. Straus reports building permits issued in Chicago for Sept. were $13.382M vs. $11.316M in Sept. 1929, and highest level of the year.

NY City property assessment for 1931 fiscal year is $19.791B, up $769.6M from 1930. Buildings started or completed were 8,416 vs. 16,515.

NY State in Sept. chartered 1,899 stock and no-par-value corporations with capital of $22.5M vs. 1,704 with $21.4M in Aug. and 1,708 with $68.9M in 1929.

IT&T was exception to the rally, declining to new yearly low on international political trouble.

NYSE seat sold for $260,000, down $5,000 from previous sale.

National City Bank adds $20M to reserves for unforeseen contingencies due to “world wide economic disturbances”; says has not experienced undue losses so far and is making good earnings. Action is praised as “ultra-conservative” in banking circles.

About 60% of all raw materials, fuel, and supplies are used in 1% of the US made up of about 80 highly industrialized counties. Largest are New York county (22 square miles), Hudson, NJ (43 sq.m.), and St. Louis (61 sq.m.).

US rayon production for 1930 about 130.4M pounds, up from 123.1M in 1929 but down 20% from estimate at start of year; world production about 420M.

US flour production in 4 weeks ended Sept. 30 was 6.985M barrels, up 140,000 from 1929; Q3 production was 20.933M vs. 20.821M.

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