October 23, 2009

Thursday, October 23, 1930: Dow 184.98 -1.42 (0.8%)

Assorted historical stuff:

Editorial: The cynical might dismiss the new Hoover unemployment efforts as just a continuation of last fall's business conferences, with their dubious results. However, the attitude now seems different. Last fall, there was much enthusiastic publicity and overconfidence; now, the committee is being discreet and seems to understand hard work is needed with local govts., and with corporation leaders not “as amenable to the presidential mandate” as last fall. A renewal of efforts to stimulate employment “by all safe means” and to help “those least able to withstand” the depression is worthy of unstinted support from business and government.

Vice Pres. Curtis and Pennsylvania Gov. Fisher endorse “buy now” campaign of Phila. Chamber of Commerce to help employment and trade.

US and Canada railroad labor unions plan campaign for 6 hour working day with no reduction in pay, estimate would put 50,000 unemployed men to work.

W. Edge, US Ambassador, says France “like an oasis surrounded by depression on all sides,” with unemployment practically nil; acknowledges differences with US on tariff, but “is this not always the case when two nations maintaining high protection barriers try to agree?”; says gold accumulation by France an internal matter.

New type airplane, claimed to be safest yet constructed, tested in Berlin. Plane resembles duck in appearance and seems to be flying backwards when in motion.”

Dictaphone to introduce “Telecord” for recording phone conversations onto wax cylinders.

Austin Co. to erect factory building with several new design elements: for uniform lighting, building will have no windows or skylights but be ventilated artifically and lit by hundreds of 1000-watt lamps supplying ultraviolet rays; walls and ceiling will be noise-absorbent; machinery painted orange, and walls blue, green, and white.

Tiffany's, most famous jewelry store in the US, has no sign or other distinguishing mark on its Fifth Avenue storefront; strangers can only find it by its number (409).

Market commentary:

Market wrap: Leading stocks “follow highly irregular course.” Market opened “as though the bottom was about to fall out” on bad rail and steel news. US Steel plunged to lowest level since 1928; many other stocks sank below previous 1930 support. Another bad break seemed in store, but pressure abruptly lifted by end of the first hour and action greatly improved. Rallying appeared in leading stocks, and some trading favorites were up sharply; disconcerted bears helped the movement along by covering shorts. Sentiment may also have been helped by stronger grain markets.Trading again turned highly uncertain in the final hour, with renewed selling in much of the list. Bonds more active, irregular but mostly weaker; South Amer. turn lower; US govts. firm; corp. weak.

In connection with the abrupt first hour market turnaround, “reports were heard that a sore spot in the market's internal position had been healed.”

Bear market is now worse than any in last 25 years; Dow is down 52% from Sept. 3, 1929 peak vs. 47% decline in 1921, 40% in 1917, and 45% in 1907.

Some traders say upcoming Congressional elections may be weighing on the market.

Extensive bargain hunting by small investors reported by leading brokers, with “outright purchases covering many sheets on the order books while selling transactions were confined to a few columns.” This was also reflected in steady gains in the stockholder counts for leading corporations.

A. Reynolds, Continental Ill. Bank & Trust Chair., sees “signs in a good many different directions that business is picking up somewhat”; gains are uneven, not general; “improvement ... will probably come in this spotted way and gradually work into a more general betterment,” probably starting with small businesses and moving to large. Commodity prices relatively stable since July, seem to have bottomed.

C. Sherrill, Kroger Grocery VP, says sales per store in Sept. were up vs. 1929 for the first time this year; since stores are largely located in drought areas and automotive industry centers, believes this reflects slight improvement in general US business.

H. Stephens of Oakland Motor Corp. blames depression partly on high pressure and unsound selling methods in a number of industries, leading to consumer over-indulgence; remedies are delivering good value to consumers and readjusting production to sales; auto industry is essential to recovery, employing 4.7M workers.

Economic news and individual company reports:

NY City banks showed decreased deposits on Sept. 14 vs. June 30, though many out of town banks showed increases; banks with highest deposits were Chase National $1.852B, National City $1.344B, and Guaranty Trust, $1.181B.

Steel ingot production for week ended last Monday was at 52% vs.55% prev.week and 56.5% two weeks ago; US Steel was at 58% vs. 60% and 61%.

Pennsylvania crude oil cut $.15/barrel to $2.40.

Judge D. Jenkins, presiding at the Bethlehem-Youngstown merger trial, asks for reopening of evidence to amplify testimony already given. Attorney for Eaton-Otis interests opposing the merger describes Bethlehem Steel methods as “ruthless, czarlike, brass-knuckle, throw 'em down and choke 'em.”

Total transatlantic passenger traffic east and west bound up to Oct. 17 was 1.139M people, down 43,379 from 1929. Third-class passengers increased.


“Into an apartment in the West Fifties place three chorus girls. Add one song-writer, one kindly 'benefactor' from Wall Street, and two debonair members of the underworld ... Sprinkle with wisecracks and boil briskly until you hear the pop of two revolvers ... and you will have Sisters of the Chorus, an appetizing dish of entertainment that will satisfy all but the most squeamish and overly cultivated artistic tastes.”


“A revivalist said to the congregation: 'There is a man among us who is flirting with another man's wife. Unless he puts $5 in the collection box, his name will be read from the pulpit.' When the collection box came in there were six $5 bills in it, and a $2 bill with a note pinned to it, saying: 'this is all the cash I have, but will send the other $3 Wednesday.'”

“Mrs. Highbrow - Does your son keep a diary while at college? Mrs. Putton-Ayres - Yes. He saves all his check stubs.”

+ The Boring Stuff:

Effect of Smoot-Hawley tariff on trade still uncertain. July, first month of tariff, saw trade decline, while Aug. and Sept. showed some improvement, possibly just seasonal. Eight countries have increased tariffs since July, but how many of these were retaliatory is unclear. Some may have been in response to economic trouble, for example in Argentina and Cuba. On the other hand, some were clearly aimed agains the US, such as European tariffs on US cars. The Foreign Policy Assoc. has surveyed effects of the Smoot-Hawley tariff on different countries; those countries most affected are the ones that raised tariffs.

Pres. Hoover's unemployment commission to set up local organizations to cooperate with state and city govts. as well as industry; details of what is to be done will be left to local organizations, which know conditions better. Hoover has discussed unemployment with business leaders including GM Chair. A. Sloan, Westinghouse Chair. A. Robertson, and NYSE Pres. R. Whitney.

Britain and France settle dispute about oil pipeline from Iraq to Mediterranean; pipeline will divide, one side running to British controlled Haifa and the other to French Tripoli; necessary $800M for building the line likely to prevent speedy completion.

British cabinet seen against announcing temporary moratorium on war debts in spite of budget deficit; French public opinion seems strongly opposed to five-year moratorium on reparations and war debts.

F. Warburg and Lord Melchett resign from Jewish agency for Palestine to protest British report [Passfield White Paper limiting Jewish immigration and critical of Zionists], calling it “unparalleled act of treachery.”

Phone system stats as of June 30: Total of 35.260M phones worldwide, of which 20.243M were in the US and 15.690M were in the Bell System; 88% of world's phones can be connected with any Bell phone; conversations per day in US in the year ended June 30 were 79.5M local and 3.580M toll; total phone wiring was 80.3M miles. Bell System had 358,000 employees on June 30 vs. 317,180 at end of 1929; 136,000 were men and 222,000 women. About 1M people own securities in AT&T and associated companies; over 500,000 AT&T shareholders own less than 100 shares apiece, with no shareholder owning 1%.

Editorial: The recent Investment Bankers' Assoc. report is correct in coming out against federal regulation of the electric power industry. The industry is local in character, and not analagous to rails with their predominantly interstate business. The report does “offer mild but useful criticism of the power industry in respect to excessively intricate corporate structures and to impolitic reticence concerning inter-company transactions.”

W. Storey, Atchison, Topeka & Santa Fe Rwy. Pres., addresses 7th Conf. of Major Industries, surveys rail industry since the Transportation Act of 1920. Points to problems including failure to get rates of return guaranteed in law, tendency to nibble away at rates, and govt. subsidy for competing waterway transport.; neverthless, says law has been a net positive, most importantly because “it protects us from each other and prevents us from doing foolish things ... You business men know something of the evils of unbridled competition. I am a thorough believer in regulation even though such regulation may at times pinch us.”

Otis & Co. see market trying to form “a temporary base” even if prices headed lower; pointed out that even in the panic of 1907 no liquidating move ran as long as 6 weeks without an intervening rally or period of range bound trading.

Experienced observers point out that a bull market in stocks has usually begun within 7 months of an upswing in bonds; it's now 13 months since the current bond upswing began; also note that never before in past 50 years have bonds advanced this far without a bull market starting. Also point to decline in short term interest rates as always having been followed by a bull market within a year.

Based on brokers' reports, liquidation by public seems complete; however, liquidation due to pools, investment trusts, and bank loans may still hang over market.

Conservative observers see possible technical rally in next day or two, but advise against trying for it; longs urged to protect positions with stop-loss orders.

Dow made new post-panic low. There were no new yearly highs and 221 new lows.

Leading executives in the farm equipment industry see major companies in the industry unlikely to cut dividends this year; point to large cash surpluses.

H. Freeman, North Amer. Co. VP, defends higher price-earnings multiple given to utilities as reflecting their opportunity to reinvest profits into further growth; says public utilities are currently the only industry “faced not only with the opportunity, but with the absolute necessity for expansion.”

Commodities strong. Wheat and corn up sharply; other grains also gain. Cotton up slightly. Copper buying remains quiet at 10 cents; future price trend said dependent on success of production curtailment.

Iron Age notes continued caution in iron and steel buying, but increase in railroad and construction orders. General demand not seen improving as long as business sentiment remains this conservative. Machine tool orders were up 18% in Sept. over Aug., following 25% increase in Aug.; current business reported dull.

Manufactured ice industry represents investment of $1.1B, sold 70M tons in last 12 months, up 12% over previous year.

German tax receipts in 6 months to Sept. 30 were 4.581B marks, 10% below estimates.

Charge for transporting a bushel of wheat from central Canada to Liverpool is 1 1/2 cents less via Vancouver then via Montreal, though the Vancouver route is 7,000 miles longer.

Gasoline in Chicago wholesale market is 5 - 5 1/2 cents vs. 5 - 5 5/8 previously.

NYSE seat sold for $220,000, unchanged from last sale.

Candy sales by 435 manufacturing, wholesale, and retail cos. were $32.6M, up 47.2% from Aug. but down 14.1% from 1929. First 9 months down 7.8%.

Autostrop Safety Razor shareholders to vote on proposed acquisition by Gillette.

Companies reporting decent earnings: Merritt-Chapman & Scott (construction), Sweets Co. of America.

Du Pont Q3 earnings were $1.05/share vs. $1.30 in Q2 and $1.80 in Q3 1929.

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