October 21, 2009

Tuesday, October 21, 1930: Dow 193.32 +8.03 (4.3%)

Assorted historical stuff:

Visitor who said NY City will be a great town when they get it finished would now find it further from completion than ever. A record number of buildings are being torn down in 1930 - 1,598 in the first 8 months, and an almost equal number more by year-end; this will be about half the number wrecked in the 10 years ending in 1922. Wrecking is also becoming more expensive; it cost $900,000 to clear the old Waldorf Astoria from the Empire State Bldg. site.

Editorial: Grand Rapids, Mich. is starting campaign to bolster public spirits, calling upon “each American to do his utmost in starting the wheels of commerce.” This recalls the “prosperity clubs” established in 1907 on the theory that depression was largely psychological. One danger of these efforts is that they may be overdone. “Repeated assurance that business is reviving loses its force after a while unless accompanied by tangible evidences of improvement.” Radio talks and sermons won't “make a man out of a job feel that he has had a square meal.” City govts. should back up their resolutions with genuine relief efforts and spending of cash reserves.

Agriculture Sec. Hyde to ask Congress to make 1932 federal funds for road-building available immediately where states can use them to relieve unemployment.

NY City businessmen's committee to relieve unemployment will make special appeal to Wall Street, since many currently unemployed were laid off from there.

French police launch investigation of “panic-mongers” who spread alarmist rumors blamed for plunge in stocks last week; say will prosecute those engaging in operations intended to produce artificial rise or fall in value of securities.

New record for flight between England and Australia set by C. Kingsford-Smith - time of 9 days, 23 1/2 hours beats old record by 5 days, 2 1/2 hours.

New German railroad car driven by 400 hp airplane engine attains speed over 100 mph.

Passenger sues a Western railroad for placing a car of hogs in front of his coach, claiming the odor “demoralized his digestive system, permanently incapacitating him”; asks $10,000 in damages.

First section of new elevated highway along Hudson River from Canal Street to West 22nd to be opened Nov. 13.

Market commentary:

Market wrap: Instead of the anticipated flood of selling following the large Fri.-Sat. declines, an impressive recovery took place; majors including US Steel, Westinghouse, and AT&T opened with substantial gains and extended them as the session went on; seen as reflecting “influential buying” that first appeared during Saturday's highly unsettled trading. Active covering by “disconcerted” bears helped recovery in the general list. Stocks under recent pressure rallied briskly, including GM, GE, Sears, Fox Film, rails and utilities. Market closed near day's highs. Bond market volume considerably lower; prices opened weak but generally rallied through the day as trading slowed.

Declines in leading stocks from 1929 highs, while dramatic, don't give a true idea of the damage suffered by most NYSE-traded stocks, hundreds of which have declined 50%-75% or more. Examples include Warner Bros., 80 1/4 to 16 1/8; Chrysler, 43 to 16 3/8; Glidden, 38 to 10 1/2; US Rubber, 35 to 11.

Banking conferences over the week-end” said to bring out overwhelming sentiment stocks had declined to attractive levels; extensive foreign buying reported; some recent buying by investment trusts (similar to mutual funds) also reported.

Broad Street Gossip: “The other extreme from last year's peak prices has been reached ... many stocks ... in October, last year, may have been entirely too high. Many stocks are now entirely too low. Some are selling ex-bad earnings, ex- ... passed dividends, and everything else.”

J. Raskob [DuPont and GM exec., builder of Empire State bldg.]: “there is no question in my mind that anyone with money should invest in good common stocks at the present time.” Sees depression at bottom, believes upturn will gather momentum much faster than expected.

Harvard Economic Society says in past, only “great war or a threat to the soundness of the domestic financial structure” has been able to put off recovery after a decline like the current one; see nothing to indicate an upturn will not come; in fact, after decline as large as this one, upturn is typically sharp.

G. Hodges, Advertising Fed. of America Pres., says depression due to fear, calls for resuming “spending spirit,” use of “biggest buying power we have ever had.”

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Oct. 15: loans on securities down $10M to $8.258B, “all other” (commercial) loans up $61M to $8.606B.

US and Canada motor vehicle production in Sept. was 230,888 vs. 232,840 in Aug. and 429,729 in Sept. 1929. First 9 months were 3.067M vs. 4.875M.

Agriculture Dept. reports farm exports in year ended June 30 were $1.495B vs. $1.846B prev. year; were 32% of all exports vs. 40% average from 1925-29.

More big company earnings: Western Union 1930 net about $9 vs. $15.11 in 1929 and lowest since 1921; Westinghouse Q3 net $1.12 vs. $2.40 in 1929.

Companies reporting decent earnings: Commonwealth Edison, General Railway Signal (equipment said to create savings for railroads), Beatrice Creamery, Cream of Wheat Corp., Waldorf System (restaurants).

Jokes:

“'Has Harry traveled much?' 'Has he! He's been to half the places on his suitcase labels.'”

“Layoff actor approached Benny Ryan [vaudeville performer], saying: 'Hello, pal, lend me a nickel, will you? I want to call up a friend.' 'Here's a dime; call up all your friends,' Ryan answered.”

+ The Boring Stuff:


Editorial: Prof. I. Fisher [Yale economist, made ill-timed “permanently high plateau” call at 1929 market peak] suggests a new idea for protecting stock investors: margin loans should be for a particular period during which investors shouldn't be “molested” by margin calls. While this idea has the single merit of novelty, it's otherwise absurd: “speculation in stocks is a most difficult and dangerous art for which few people are by nature adapted, and not a pastime in which an ignorant 'public' has an inalienable right to engage at the risk and expense of its banker and broker.”

T. Campbell, prominent Montana wheat farmer, meets with Hoover, predicts within 3 years Russia will be exporting 150M bushels annually.

German report: Reichstag gives vote of confidence to Breuning govt. and adjourns to Dec. 3; $125M loan provides German govt. funds for winter expenditures; stocks up sharply; capital flight stopped and expected to reverse; strikes continue but govt. trying to mediate. Prospects after reassembly of Reichstag still obscure. Govt. expected to tackle crisis by reducing cost of production through wage cuts. Hitlerites believed to have lost prestige by recent conduct; “evidence is accumulating that a large number of those who voted the Hitler ticket are peace-loving citizens who did not desire disorder but a vigorous handling of the economic crisis under a strong and stable government”; however, Hitlerite campaign against the Young [reparations] plan remains very popular.

Tardieu govt. reportedly ready to cooperate financially with neighboring countries using France's huge gold reserves. Loan to Italy under discussion; political crisis in Germany is holding up aid there.

League of Nations committee established to study fluctuations in purchasing power of gold and their effect on the world economy says world likely to run short of gold in next several years; suggests measures including reducing amount national banks required to keep against money in circulation; also notes mal-distribution of gold attributed to postwar disorders, with US holding $1.5B surplus and 15 countries holding 90% of reserves.

M.J. Meehan & Co. discontinues shipboard brokerage on ocean liner Berengaria.

Argentina provisional govt. says previous administration systematically withheld financial picture from public, drastic reforms and spending cuts necessary.

Potter County, Texas has field containing largest known supply of helium-bearing natural gas; rare “non-inflammable” gas is used for filling dirigibles operated by Army and Navy, and may come into commercial demand for use in airships like the Graf Zeppelin.

NY City reports work on 8th Ave subway proceeding well, opening next fall seems assured.

Interesting Barron's study comparing brokers' loans to loans on securities by banks finds brokers' customers always borrow more heavily at market tops and liquidate as the market is hitting bottom, while bank customers tend to be smarter money, i.e. to borrow more at bottoms and less at tops. It's may therefore be positive that since the market break in June, brokers' loans have been falling while bank security loans have been rising.

Conservative observers still inclined to stay on sidelines until market proves ability to maintain gains; look for lows on leading stocks to withstand thorough test.

Rally appeared to have caught traders by surprise; most brokers' letters expected further tests of lows. This may demonstrate “danger of pushing selling operations too far when sentiment in speculative quarters is universally pessimistic.”

Loan market for stocks sold short remained tight, with all active stocks loaning flat or at a premium.

J. Harris of Harris, Upham & Co. notes large increase in buying by individual investors; says on Monday his firm tranferred total of over 53,000 shares of stock in 1,046 individual transfers. Suggests corporations should express belief their stock is undervalued by buying it back.

Baar, Cohen & Co.: “those who have been delaying the purchase of sound securities should make up their minds that current opportunities may not be available a few months hence.”

Commodities firm. Grains up strongly. Cotton up moderately. Cocoa up sharply. Copper buying continues small at 10 cents, dull period expected.

Canadian stats for 6 months ended Sept. 30: Customs duties were $73.6M vs. $97.8M in 1929; sales and stamp taxes $17.4M vs. $27.9M; income taxes $65.5M vs. $63.0M. Exports were $433.5M vs. $571.6M in 1929; imports were $514.7M vs. $660.3M.

Gasoline in Chicago wholesale market is 5 1/8 - 5 5/8 cents vs. 5 1/8 - 5 7/8 previously.

NYSE seats sold for $217,000 and $220,000, vs. last arranged sale for $230,000.

Curtis Publishing (publishers of Saturday Evening Post, Ladies Home Journal) Q3 net down badly to $1.31/share vs. $2.32 in Q2 and $1.75 in Q3 1929.

American Tobacco reports sales of Lucky Strike cigarettes in Sept. were up 655.4M vs. 1929, largest monthly increase vs. 1929 since January. Increase for first 9 months was 4.643B, vs. total increase for industry of 1.517B.

Sinclair Oil stock about $14; cash on hand about $14.50/share; net quick assets about $19.50; 1930 expected earnings of about $1/share.

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