Wednesday, October 1, 1930: Dow 204.90 -3.24 (1.6%)

Assorted historical stuff:

Editorial: Wheat futures have plunged from 99 cents/bushel to below 73 cents in less than two months. This is sheer panic: “Wheat is selling below its worth and there is nothing behind this drive but unreasoning and unreasoned fear.” There has been one story after another advanced to justify the decline, from depression to German elections to Russian short-sales; none of these hold up to examination. World wheat supply is larger, but this should be countered by use of wheat as feed due to shortage of corn. “Sometimes an elephant will take fright at a mouse and create a stampede in the herd. Market psychology seems about on the same order.”

One man's opinion on why wheat prices are down: “some people consider it a disgrace to be fat. It is a hipless, thin limbed age, and that means a big falling off in the consumption of wheat.”

French Foreign Min. Briand advocates aid to Germany; predicts 4M German unemployed this winter; “It is an inevitable law that misery and suffering push people toward extremes. ... Germany crushed is a danger for peace.”

Breuning cabinet in Germany proposes drastic budget cuts along lines advised by S. Gilbert, former Amer. Agent-General for Reparations; calls on the people to subordinate party politics to good of the nation. Plan approved by Pres. Von Hindenburg; Fascist leader Hitler attacks Von Hindenburg, demands his indictment if he establishes a dictatorship to force the reform package through. German stocks up following plan.

Japanese income tax returns show 11 individuals earning income of $500,000 or more; top income is Baron Hachoroemon Mitui with $1.403M.

M. Blondeau, dir. French tobacco monopoly, authorizes production of cigar specialized for feminine demand.

Market commentary:

Market wrap: In spite of good rally in grain markets, stocks continued to plunge for the fifth consecutive day, making the longest streak since the collapse last fall. Many margin accounts forced to sell. Monday's decline had taken leading industrials to new yearly lows, and rails below the panic lows of last fall. This encouraged bears to launch further aggressive drives across the list. Two attempted rallies in the morning gave way to renewed pressure. Volume increased to highest level since June. Bad breaks in trading favorites; whole market showed weak tone, was irregular at close. Bond market unsettled, moderately lower.

National City Bank monthly business review: Thus far business in Sept. has shown some improvement, but not strongly enough to convince that the uptrend is here to stay. However, without minimizing the depression, which is caused by serious and fundamental maladjustments, we also shouldn't “magnify the difficulties out of all due proportion.” While it's true no two depressions are identical, they have been studied for many years and general characteristics are fairly well understood; business activity indexes in July and Aug. touched lows of 1921, “warranting the assumption that the decline must have nearly, if not entirely, run its course.”

Broad Street Gossip: “It is a very wealthy country, and remarkable in the fact that the consuming power is still large notwithstanding a severe contraction in business. In time the country will emerge ... stronger and healthier than ever, and that means [good stocks] will soar to levels above the peak prices of last year.”

G.M.P Murphy & Co. point out year-over-year comparisons should start looking better in the fourth quarter since this is when the business slump intensified in 1929. Point to a series of unlucky events as delaying recovery, including drought, tariffs, political unsettlement, and unusually hot weather in September.

Oil industry seen facing test of continuing to balance production with consumption in seasonally period now starting.

Dow closed at a new yearly low, and within 6.21 points of the Nov. 13 panic low of 198.69. There were 5 stocks at new yearly highs and 312 new lows.

Economic news and individual company reports:

Aug. exports were $293.9M vs. $381.4M in 1929; imports $218.4M vs. $369.5M.

NYSE transactions in Sept. totaled 53.544M shares vs. 100.135M in 1929 and 90.232M in 1928.

J.A. Sisto suspended from NYSE due to insolvency; stocks they sponsored fluctuated wildly, for example Cuneo Press went from 31 1/2, to 16, back to 23 1/4.

Rail freight loadings for week ended Sept. 20 were 952,512 cars, down 13,201 from previous week, down 18.4% from 1929, and down 16.7% from 1928.

Wholesale gasoline in Chicago market down to 6 - 6 1/2 cents/gallon from 6 1/8 - 6 1/2 cents previously.

World crude oil production for 1930 estimated 1.444B barrels, down 44M from 1929; US about 937M, down 69M.

Companies reporting decent earnings: American Machine & Foundry (machinery for producing 5-cent cigars).

Joke:

“'What time do you get up in summer?' 'As soon as the first ray of sun comes in my window.' 'Isn't that rather early?' 'No. My room faces west.'”

+ The Boring Stuff:

Editorial: Current system has Treasury Sec. as chair of the Fed. Reserve Board. This makes the Fed's decisions subject to political criticism; for example, Sen. Wagner is accusing Sec. Mellon of preventing the Fed from applying the brakes in 1929, as the New York Fed wanted. Regardless of whether Sen. Wagner's accusation is true, the fact it can made is bad for the banking system. Considering the immense power the modern Fed wields, they must be as immune from political attack as the Supreme Court; this should be ensured by ending the Treasury Sec.'s influence over the Fed.

Treasury Sec. Mellon rumored to have bought “The Annunciation” by Van Eyck from the Hermitage collection for $800,000.

Esperanto slowly gaining adherents; seen benefitting from talking pictures and wide dicussion of Briand's plan for United States of Europe.

J. Lonsdale, Amer. Bankers' Assoc. Pres., addresses annual convention. Sees signs of business improvement including better buying, increase in employment, and higher savings; speed of recovery in hands of bankers who control flow of credit; largest obstacle to business progress is high taxes. Suggests it may be time to modify Sherman (antitrust) law; says present business conditions are result of wartime and postwar overproduction without developing markets sufficiently.

Caldwell & Co. note increasing amount of bank buying of bonds due to weak credit demand from business; a year ago leading banks had 41.7% of outstanding credits in business loans and this has declined to 36.5%; Fed borrowings at these banks have gone from $761M to $79M. This is believed a large factor in current and expected future bond market strength.

Bears reportedly successful at short covering in recent sessions due to extensive liquidation; at times, only buying has been from shorts.

Conservative observers still advise against going long; believe stocks not yet at attractive buying levels.

Rumors that Fed. Reserve was forcing banks to liquidate security loans dismissed; no evidence of liquidation seen, and this would be against recent Fed policy.

American Can finally succumbed to market weakness in spite of good earnings and yesterday's announcement of extra $1 dividend in addition to regular $1 div.

Woolworth has been finding support on theory that lower merchandise cost and cheaper items should benefit it in times of depression.

J.C. Penney said planning to place large orders in next month for staples for early spring delivery; seen as reflecting confidence in next year's business prospects.

Hudson Motor Car said planning aggressive campaign for 1931 model year, after having cleared decks this year by slashing inventories from $16M to $6.4M.

Corn Belt Farm Daily says only serious farm problem currently is wheat, but says crisis is overblown; points out it only accounts for 10% of farm income, with livestock alone at least 5 times as valuable.

S. McKelvie, Farm Board member, says main goal of the Board is an efficient private distribution and marketing system controlled by farmers, reducing the current large spread between producer and ultimate consumer.

Commodities mixed. Grains up, corn and wheat rallied sharply. Cotton touched new lows below 10 cents but rallied to close up. Copper reduced 1/2 cent to 10 cents/pound, with some producers withdrawing from the market for the present. New lows were hit in sugar and rubber.

More trade stats: First 8 months exports were $2.596B vs. $3.407B; imports $2.175B vs. $3.009B. First half exports increased to only 7 of 69 major markets; imports from only 13 of 68. Automotive exports in Aug. were $18.559M vs. $18.977M in July and $39.922M in Aug. 1929; first 8 months were $233.6M vs. $440.1M.. Grain exports in Aug. were $26.4M vs. $30.7M in 1929.

Amer. Petroleum Inst. weekly report for Sept. 27: refineries at 71%, up from 69.2% prev. week; gasoline in storage 37.222M barrels vs. 37.260M prev. week and lowest since Nov. 1929; crude oil production 2.390M barrels/day, down 32,050 from prev. week and down 510,650 from 1929.

US Bureau of Mines reports storage of crude and refined oil in Aug. declined 7.0M barrels vs. decline of 4.4M in July and increase of 4.9M in 1929; amount in storage at end of Aug. was 685.9M barrels, up 7.2M from 1929.

Independent US oil producers call for oil tariff; several Senators pledge support.

German exports in first 8 months were 8.025B marks; imports were 7.405B. Aug. showed a surplus of 175M marks vs. a deficit of 116M in 1929.

British registered unemployed on Sept. 22 were 2.110M vs. 2.103M on Sept. 15 and 1.175M on Sept. 23, 1929.

European wheat crop estimated down sharply from last year, and of lower quality; France down from 320M bushels to 209M-239M; Italy from 261M to 213M.

London Rubber Growers' Assoc. calls for cutting production as much as possible to expedite balancing supply and demand.

Net indebtedness of 250 cities with more than 30,000 pop. in 1928 was $5.828B, or $134.07 per capita.

Detroit making effort to relieve unemployment by construction of public buildings; Fisher Bros. also proceeding early with construction of large office building.

Locomotive orders down sharply, with little prospect seen of improvement until spring 1931; may be problem since manufacturers have large factory investments.

198 commercial airplanes were produced in Aug. by 61 major aircraft manufacturers; 217 were delivered, with total value of $945,719 not including motors.

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