October 9, 2009

Thursday, October 9, 1930: Dow 200.56 -3.06 (1.5%)

Assorted historical stuff:

Off-year election coming up in Nov. not expected to give Democrats control of the House or Senate, though they may gain more than in the usual off-year due to dissatisfaction with the economy.

Royal Bank of Canada Oct. letter advocates restoring prices to 1926 level [well above 1930 level] and stabilizing them there; disagrees with view that period of general price deflation strengthens business structure - “a period of decreasing prices has always been marked by widespread unemployment” and labor unrest.

Farm Board asks FTC to investigate “insidious campaign” against the Board by its enemies.

Provincial report for Bengal (largest and most populous in India): 83% of population agricultural, using 86% of available land; 6M people farming 31M acres, most live at subsistence level. Many suggestions made to increase agricultural productivity and attract long-term capital.

J. Mooney, GM VP and manager of exports, calls for recognition of Russia as necessary for development of normal trade relations.

A. Pinkerton, head of detectice agency, dies at 54 from effects of gassing in France during World War.

Strands of wire in the 4 suspension cables of the new Hudson River [later George Washington] Bridge, if placed end to end, would reach halfway to the moon.

Henry Ford now owns the Wayside Inn once frequented by Longfellow (Tales of a Wayside Inn, including that old midnight ride of Paul Revere); Mr. Ford drops in occasionally to see how things are going.

Market commentary:

Market wrap: Stocks opened firm but then “developed sagging tendencies,” reaching new lows in many sections; volume was low most of the day. Signs of further bear pressure on leading stocks, particularly US Steel; rally attempts were weak and possibly due to short covering. Stocks drifted lower; however, “impressive resistance” developed at the lows with trading drying up and the tape halting frequently between transactions. Coppers and utilities weak. Poor sentiment was attributed to bad business news including declines in car loadings and steel production; this “offered little incentive to trading activities on the constructive side.” On the other hand some bear activity may have been deterred by the recent campaign against bear raids. Bond market generally weak; South American govts. sharply lower, heavy liquidation extended to other foreign govts.; US govt. steady; corp. and convertibles down.

An optimist reports looking at cars on the road and finding almost all needed a new tire or two; similarly for shoes, “and so it does all the way down the line from automobiles to the end of the alphabet. Everything wears out. You and the other 121,999,999 people must buy soon.”

W. Procter, Pres. Procter & Gamble: "In our opinion we have passed the bottom of the curve and business is slightly but unmistakingly better and in our opinion will continue to improve slowly."

Conservative observers keeping customers on sidelines despite lower prices, say “the market will indicate when it will be profitable to adopt the long side again.”

Use of stop loss orders has become more popular and may be intensifying breaks in the market.

Odd-lot (small) buying has markedly increased lately; considered good technically since stocks are paid for outright and removed from floating supply.

Economic news and individual company reports:

US electric output for Aug. was 7,879 GWHr, down 6% from 1929 and largest decline this year; first 8 months output is still above 1929 level; manufacturing areas showed largest declines while farming areas showed continued increases. Hydro was 32% of output, lowest this year, due to drought.

Steel ingot production in Oct. 6 week estimated at 56.5% vs. 60% previous week; US Steel 61%-62% vs. 65%; Sept. order spurt seems to have petered out.

Iron Age reports price weakness in both finished steel and scrap. American Metal Market sees no visible prospect of increased steel production for rest of year.

French foreign trade has declined through this year; first 8 months had imports of 35.0B francs and exports of 29.3B, vs. imports of 39.6B and exports of 32.8B in 1929; Aug. figures were 4.1B and 3.1B, lowest this year.

Dept. of Commerce says cable and radio reports received indicate trend to economic improvement in Europe and Far East, while South America is unchanged.

Ford passenger car registrations in first 8 months were 871,366 or 41.3% share of market, vs. 972,608 or 32 .8% share in 1929.

Agriculture Dept. volume index of agricultural exports for Aug. was 87, highest since Jan. and above Aug. 1929 and 1928 figures.

Companies reporting decent earnings: Procter & Gamble, General American Tank Car, Continental Can, Q.R.S. Neon Corp.


“A bobbed haired waitress, very much out of sorts, sailed haughtily to the table at which sat a grouchy customer. She slammed down the cutlery, snatched a napkin from the pile and tossed it in front of him, then, striking a furious pose, snapped 'Watcha want?' 'A couple of eggs,' growled the customer. 'How you want 'em?' 'Just like you are.'”


Bill “Bojangles” Robinson appearing at the Liberty Theater in musical comedy about adventures of a company of black soldiers in the World War. Cast includes “some of the nimblest dancing talent in Harlem ... Mr. Robinson seems to find it as easy to dance as the audience finds it easy to watch him, although one of his arms at present is in a sling, due to a bullet wound, the result of mistaken identity. His dogs do not bark; they purr.”

+ The Boring Stuff:

Editorial: Agriculture Dept. reported value of farm land Mar. 1 down 1% vs. 1929, attributing the decline to “abnormally large supply of available lands, and a readjustment of values to earnings”; only the second explanation is necessary. “There is but one principle of valuation, and that is the relation between price and earnings. That principle holds good whether it be in the Stock Exchange or on the farm.” In the postwar period wheat sold as high as $3.50 a bushel and corn $2.17; this naturally led to inflation of land values about 70% above prewar levels. When commodity prices fell back down, “liquidation was as inevitable as it was in the stock market after the break of a year ago.” That liquidation has been going on for 10 years and caused considerable pain, but is unavoidable. While those living on the land may “attach a sentimental value to it ... those who loan money on farm mortgages cannot have this feeling.”

F. Payne, Asst. Sec. of War, describes emergency industrial plan in case of war. While based on the plan used in 1917-1918, feels it will avoid mistakes made then; objectives are to control uses of raw materials, fix prices for commodities and services, and set needed regulations. There's no intention of taking possession of industries, but “they must do their duty ... as does the soldier.” Drafts of necessary bills are ready to submit to Congress when major emergency is declared.

Brazil govt. takes control of telegraph and cable companies, and suspends all airplane service.

Commerce Dept. says US textile makers will face increasing competition from Japan and other Asian makers, eventually moving to better quality goods; recommends establishing cotton mills in Far East using local labor.

Broad Street Gossip: “The Broadway trader who has been accumulating stocks since the early part of the year added nine issues to his list over the last week. He now has 41 different issues, not one of which he can sell at a profit. ... The shorts have made a lot of money over the last several months ... In the past, other chronic bears at times made a lot of money. But for some reason or other they didn't keep it.”

For the first time in almost a week, bullish rumors were making the rounds of “brokerage wires,” including a large buying order for US Steel and resolution of some “weak situations [that] ... might have brought considerable liquidation into the market.”

Market said still dominated by professional traders; this may account for targeting of theoretical support or resistance levels.

Short interest is reported to have declined substantially under cover of recent market activity.

Railcar loadings for week ended Sept. 27 had by far the largest drop so far this year vs. 1929 (21.0%); nonetheless, “there is reason to believe that the worst is past in so far as comparison.... with 1929 and 1928 is concerned,” since yearly peaks were Sept. 27 in 1928-29, after which they showed sharp seasonal declines.

Spanish currency declines on resignation of official from Central Exchange Office.

Lawrence Stern & Co. says consensus of reports from bond dealers is optimistic on bond market, less than 4% seeing a poor outlook; most see general business outlook as fair, with 20% saying it's poor; almost all favored bonds over stocks. Many dealers are now recommending “second grade” obligations as bargains.

Commodities mixed. Wheat down substantially, other grains mostly down slightly. Cotton up moderately after govt. crop forecast. Copper buying much quieter, price unchanged at 10 cents. Coffee and cocoa up sharply on fears Brazil revolution to interfere with crops.

NY City's 19 largest banks and trusts all showed lower deposits as of Sept. 24 vs. June 30; attributed to smaller volume of stock trading and lower business activity. Largest was Chase National with $1.852B gross deposits vs. $2.065B June 30; next was National City with $1.344B vs. $1.560B.

Middle West Utilities Sept. survey of 24 states they operate in shows relatively gloomy conditions, with Maine the only state showing improvement over 1929. Some states were more severely affected by drought including Illinois, Kansas, Kentucky, and Oklahoma; industrial activity was generally slow.

US Steel is to report unfilled orders as of Sept. 30 tomorrow; some decrease is expected.

Agriculture Dept. Oct. 1 estimate of US cotton crop was 14.486M bales, up 146,000 from Sept. 1 estimate.

Representatives of cotton trade to meet with administration and Farm Bd. officials to help with “continued decline and demoralization of the cotton market.”

Assoc. of Cotton Textile Merchants reports Sept. production of standard cloth was 182.4M yards, down 32.1% vs. 1929; sales were 292.0M, 160.1% of prod.

Production of footwear in Aug. was 27.8M pairs, up 15.4% from July but down 23.6% from 1929. First 8 months was 210.4M, down 12%.

Mexican oil companies anticipate increase in Canadian business due to planned new Canadian reprisal tariffs on US oil.

Pacific Gas and Southern California Edison have committed to buy 20M pounds of copper, covering estimated requirements until the end of next year.


  1. Republicans had 270 seats (out of 435 members total, the same as today) in the House in the 71st Congress, elected with Hoover's considerable 1928 coattails -- not as large as Harding's 1920 landslide election delivered (302), but still larger than immediately preceding elections.

    Republicans had 56 seats in the 96 member Senate in the 71st Congress; the Democrats only 40 seats. The Republican majority in the Senate, too, had swelled considerably in Hoover's election, from what had previously been an almost even division.

    The 71st Congress, elected in Nov 1928, recessed on July 3, 1930 and remained out of session for the whole Fall campaign season, but would stage a lame duck session, from Dec 1, 1930-March 3, 1931, which was not unusual practice. The 72nd Congress, elected in Nov 1930, did not actually assemble in its first session until Dec 7, 1931, more than a year after the election.

    I won't disclose the election result, though. Better to preserve the suspense!

  2. Thanks, Bruce - interesting stuff, and thanks for preserving the suspense!