October 7, 2009

Tuesday, October 7, 1930: Dow 202.76 -8.34 (4.0%)

Assorted historical stuff:

Pres. Hoover addresses AFL. Praises cooperation of labor and business after fall market panic, says measures adopted “served as a practical system of unemployment insurance”; notes public works and construction by rails and utilities in first 8 months was $4.5B vs. $4B in 1929; “a new and improved tool has been added to the working kit for the solution of our future problems.” Says some regulations that lead to destructive competition and instability may need to be modified. Praises scientific and labor saving development as gain to employers, workers, and consumers; recognizes problem of “technological unemployment” but believes new discoveries and inventions will absorb workers displaced from older industries.

NY Stock Exchange warns bear operators against “raiding tactics.” Article XVII, Section 4 of the Exchange constitution forbids buying or selling securities for the purpose of “bringing about a condition of demoralization in which prices do not fairly reflect market values.” Recent aggressive attacks on leading securities together with several recently circulated unfounded rumors have caused the Exchange's Business Committee to “decide upon a firm attitude.” Committee has warned members that all messages sent over private wires must be kept on file, and called several members in for questioning yesterday.

Uprisings break out in 4 Brazilian states; Pres. W. Luis declares “state of siege” throughout republic; banks in Rio de Janeiro closed for 15 days; banks in Santos and Sao Paolo also closed; coffee breaks to lowest price since 1915, and Brazilian coffee exchanges suspend trading indefinitely.

Prohibition Bureau estimates illicit liquor production in US in year ended June 30 at 876.3M gallons; estimates consumption at 40% of 1914 level.

British R-101 airship crashes [killing 48 on board]; Rear Adm. Moffett blames fire, loss of life on use of hydrogen, urges lifting of ban on exporting helium.

Scientific research is of increasing importance to industry, with corporations including GE, AT&T, du Pont, and GM maintaining their own research labs. Many important industrial applications began as pure research, some of it in these industrial labs. Bell Labs now researching “two-way television, color television, sound picture making, and research on the three-dimensional photo camera.”

Higher education suspected of discouraging marriage in women students. Of living graduates of Wellesley College, less than 1/3 are married at the present time; of 400 women just graduated from Northwestern, only 23 stated in a final poll that “matrimony was their preferred career.”

Atlanta sues to force Census to increase population from 270,367 to 360,692; Houston protests it would suffer great injury by being demoted to third city in South.

Market commentary:

Market wrap: Stocks dropped sharply on moderate volume; attributed to reports of “serious outbreaks” in Brazil, to unsettled industrial conditions at home, and to decline of several representative stocks to new yearly lows “with unsettling effect on the entire market structure.” After early selling had spent itself, market turned dull and drifted irregularly on small volume, with little professional activity seen in either direction; disturbingly, trading dried up completely on any rallies. Some issues showed further weakness as session progressed including utilities, rails, insurance, Eastman Kodak, Allied Chemical, AT&T, US Steel. Bond market active and irregular; corp. bonds generally weak; US govt. firm; South American govts. down sharply, other foreign govts. irregular.

Harvard Economic Society says current business statistics are not reassuring though there's still time for normal seasonal gains to materialize.

Natl. Assoc. of Manufacturers annual trade survey reports signs of upturn; while slump in trade and employment has been sizeable, current favorable signs include reasonable level of inventories, wage scale generally holding, labor peace, and optimism found in survey sent to members: prospects for winter were called excellent by 2%, good by 18%, fair by 59%, and poor by 21%. J. Edgerton, President, criticizes “emotional proposals” advocating govt. solutions for unemployment as unworkable, praises Smoot-Hawley tariff as moving tariffs away from politics.

Dow closed at a new yearly low, and within 4.07 points of the Nov. 13 panic low of in 198.69. There was 1 stock at a new yearly high and 93 new lows.

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Oct. 1: loans on securities up $22M to $8.483B, “all other” (commercial) loans up $79M to $8.530B.

Rails initially pleased about statement in Hoover's speech that rails should be assured of returns sufficient to maintain them in strong enough condition to extend relief in national emergencies. Upon further reflection, however, “the prospect of repeated requests of this sort from the government was not very cheerful.”

Class 1 rails net operating income in Aug. was $95.6M, a return of 3.38% on property investment, vs. $141.8M and 5.1% in 1929; first 8 months was $555.3M, return of 3.59%, vs. $828.4M and 5.48% in 1929.

American industries most affected by “five year dumping program” of Russia form temporary “Joint Conference on Unfair Russian Competition” to gather information; industries represented include lumber, matches, sausage casings, glue, coal and manganese.

Companies reporting decent earnings: Woolworth.


“Cashier - You will have to bring someone here to identify you before we can cash this check. Do you have any friends in town? Stranger - No. I'm a tax collector.”

+ The Boring Stuff:

Editorial: Some AFL officers have blamed depression on lack of workers buying power, calling for higher wages. Henry Ford is optimistic on future, seeing ever increasing wages and living standards based on intelligent management and improving productivity. This could happen if we had leadership with the right capacities and a public with the “enlightened selfishness” to select them, but both of these are in doubt. This recalls Walter Lippmann's “drift or mastery”; perhaps the best we can do is drift in the right direction.

Editorial: Wheat for December delivery, which on Monday a week ago sold below $.76 a bushel, closed the week over $.82. This looks like a return of reason. While the wheat outlook is not good, it's not disastrous as implied by the recent market plunge. Russia will be exporting some wheat but the amount is unclear; “as in most bear stories the size of the animal is likely to be greatly overestimated.” On the other hand, Europe will be 100-150M bushels short of last year, and the US will be using a sizable amount of wheat for animal feed.

Henry Ford's visit to Paris has focused attention on battle for European auto market among US carmakers. GM bought control of Opel last year, and GM Pres. A. Sloan has pointed out the potential of this market. Due to recent tariffs, US carmakers are shifting from setting up European assembly plants to manufacturing all or most of the car parts in Europe.

Germany awaits formation of new govt. following surprise radical election gains. Radical govt. seems unlikely; Communists are opposed on principle, and Fascists have only the vaguest practical program, having “promised everyone everything.” Likely solution is moderate parties uniting behind Breuning cabinet, but there are important disagreements to be settled: Breuning govt. wants to cut unemployment benefits to balance budget, while Social Democrats feel they're already too low; on the other hand, Social Dems. want to raise income taxes while Breuning parties say they're already too high.

Canada plans to spend about $90M to stimulate industries not benefitting from their new tariffs, mostly on rail and highway construction; some money to go for direct unemployment relief. One important project is national highway from Nova Scotia to Vancouver.

Supreme Court opens fall term; Arizona sues to stop work on Boulder (later Hoover) dam.

US govt. is trying to reintroduce musk-ox (looks like small buffalo) in Alaska after it's been wiped out by hunters; importing herd from Greenland. Musk-ox is not thought to compete for food with reindeer, which was already reestablished in Alaska by the govt.

Whaling is almost a lost art in the North Atlantic but is successful in the North Pacific and thriving in the Antarctic region. Companies operating whaling fleets include the California Sea Products Co. and the Mexican Whaling Co.

Discussions continue on city acquisition of BMT and IRT; questions include financing of purchase, and method of operation of the combined city transit company; Mayor Walker understood to be against direct city operation, possibly in favor of quasi-public operating company.

Representatives of Bronx civic organizations testify that removing the 6th Ave Elevated line would cause serious hardship for the traveling public.

Recent declines in many high-grade issues attributed to liquidation by investment trusts reducing their portfolios; blue chips considered more attractive to sell since they haven't declined as much as more speculative stocks. One such case in the past two days has been AT&T, which has also attracted some short selling anticipating poor Q3 earnings; the stock now yields 4.5%, and has over 500,000 shareholders. Another case is US Steel; the preferred and common shares are now both about 150, each paying annual dividends of $7.

While some predict a midweek rally, conservative observers advise clients against trying for it, and don't advise buying even gradually until the market shows the ability to move forward for more than a day or two.

Tax selling (for establishing losses and lowering taxes) reported to have been much larger than expected recently.

Copper surplus expected to increase, though it's hoped that the current low price will now start forcing small producers to stop production.

Steel price's better stability vs. copper attributed to consumer policy of buying only necessary requirements instead of buying ahead.

Commodities mixed. Most grains moderately higher, corn up substantially. Cotton down slightly. Rubber down sharply; coffee plunges on Brazilian unrest; raw sugar futures up sharply on technical recovery from last week's liquidation. Copper buying continues active, but thought to be largely for stocking up.

Rails in several territories, as well as grain shippers and millers, filing petitions with the ICC about recently lowered grain rates.

Only 2 of 52 rails show gain in loadings vs. 1929 for 2 weeks to Sept. 13; rails serving auto industry do worst.

Atchison Topeka and Santa Fe Rwy. expected to earn about $14.50/share this year vs. early estimate of $18; decline attributed to lower revenues and to keeping promise to administration to help business and employment situation by keeping up high level of maintenance and improvement work in the first half.

World sugar crop for 1929-30 estimated at 30.045M short tons vs. record 30.435M crop in 1928-29.

Lumber industry continues to hold production close to or under new orders; for week ended Sept. 27, orders were 8% above production of 269.0M feet.

World production of Ford cars and trucks in Sept. was 97,885 vs. 99,142 in Aug. and 161,305 in Sept. 1929.

Julius Kayser (one of the largest makers of silk products) stock about 20, dividend recently reduced from $4 to $2.50, earnings for year ended June 30 were $2.83, earnings for previous 3 years totalled $26.19.

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