Wednesday, October 15, 1930: Dow 196.70 +3.65 (1.9%)

Assorted historical stuff:

Editorial: R. Kelley of the Denver land office has accused the Interior Dept. of favoring large oil companies with leases on Western oil shale lands worth $40B. While the charges have yet to be decided, the $40B figure is absurd; the present value of this land is much smaller since extraction of oil is more costly than from present oil fields, and it's unlikely the reserves will be needed in the lifetime of anyone now living in the US.

Editorial: Experts in NY not disturbed by Fascist riots on Reichstag reopening; say mostly by irresponsible young men; even Hitler has called them “inopportune.”

Spanish situation reportedly “feverish following rumors and false reports of public unrest”; “strikes and political uncertainty have produced a state of chaos.”

Chiang-Kai-Shek, Chinese Nanking govt. Pres., estimates casualties of last 7 months of civil war at 300,000.

Marie Harriman Gallery opens with exhibit of paintings by Cezanne, Renoir, Gauguin, Matisse, Van Gogh, and Picasso, “all secured last year and all accepted as perfect examples of that group of masters. A short time ago these paintings would have been called extremely modern. Today they seem slightly conservative in comparison to Chagall and Soutine. Ten years ago an uproar would have been provoked; today they are ... a matter of course.”

Telephones per 100 people in various countries: US 16.3, Canada 13.7, New Zealand 10.2, Sweden 9.4, Germany 4.6, Britain 3.8, France 2.3.

Ford now salvaging 600 cars/day in experimental plant; “everything in them is reclaimed to serve some useful purpose.”

N. Smith of Bureau of Mines believes some of the fractions refined from crude oil may eventually be used as shortening and cooking oils.

Pabst Brewing installs almost $1M worth of beer-producing equipment in anticipation of legalized beer “in the not far distant future.”

Market commentary:

Market wrap: Market opened with a flood of early selling accumulated over the long weekend; sizable breaks occurred in majors including US Steel, American Can, and AT&T. However, this appeared to exhaust “liquidation of distressed holdings” blamed for last week's collapse, and was “absorbed in noteworthy fashion.” General list then rallied in orderly but impressive fashion, most vigorously in issues that had recently been under pressure. Amusement stocks particularly strong including Fox film and Loews. Market closed firm. Rally may have been helped by recovery in wheat market and short covering. Bond market improved; distress selling absent; corp. high grade steady, some rallies in lower grade; rails weak; US govt. dull, firm; foreign govts. firm, South American stronger.

“Intimations [came] from responsible banking sources that some of the sore spots in the speculative structure were rapidly being healed.”

Broad Street Gossip: Although most market letters now are cautious (as usual during declines), many stocks are clearly very cheap if bought for “a long pull.” For example, many companies are selling at market caps below the cash they've put into property and plant over the past 5-10 years. While a long-pull view may be needed since these companies' earnings are currently below normal, “the big fortunes of Rockefeller, Mellon, ... and others were made buying and holding stocks.”

Outsiders recently looking to enter the market have been advised by brokers “to give more than the usual amount of study to intrinsic values and earning power.”

Brokers report number of recent margin calls, while large, was far short of the number sent out during last fall's panic.

While the $7.578B shrinkage in stock values last month was sizeable, it's just 10% of annual US earning power and 2% of estimated total US wealth of $400B.

K. Fulton, General Outdoor Advertising Pres., announces Sept. contracts best in co. history, says fluctuations in sales have generally foretold changes in general business several months out; “It will be surprising if the sharp upturn in sales ... [doesn't fortell] a substantial improvement in general business ... in the near future.”

M. Traylor, First Nat'l. Bank of Chicago Pres., says prosperity won't return because of “a great increase in spending,” but because of “hard work, thrift, and wise investment”; says spending without saving was one of main causes of current depression.

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Oct. 8: loans on securities down $215M to $8.268B, “all other” (commercial) loans up $15M to $8.545B; considered to reflect “further strengthening of an already strong nationwide banking condition.”

Rail freight loadings for week ended Oct. 4 were 972,492 cars, up 22,111 from prev. week, but down 207,455 or 17.6% from 1929 week. Canadian loadings were 70,897 cars, up 100 from prev. week but down 8,535 from 1929.

Some major Q3 earnings somewhat down but still decent: AT&T $2.55/share vs. $2.77 in 1929; GE $.46 vs. $.59; Western Union $2.22 vs. $3.89.

Number of large power laundries in US was 5,962 in 1927; about 2/3 of operatives were women, about half working 48 hours/week or less, almost all working day shift; median week's wage for white women was $16.10, for black women $8.85.

Joke:

“Cautious Father - My dear, if you want a truly good husband, marry Mr. Easie. He really and truly loves you. Daughter - How do you know that? Cautious Father - Because I've been borrowing money off him for six months, and still he keeps coming.”

Movie:

Half Shot at Sunrise - Comedy about two privates AWOL from US Expeditionary Force during the World War.

+ The Boring Stuff:

Editorial by T. Woodlock: Current to-do over short selling has “something of an ancient and fishlike smell.” Most arguments have been made many times before, often in the same words. However, we should clear up one misconception about short selling - the idea advanced by its defenders that it acts to stabilize the market by restraining it during advances and providing some support during declines. It's well established by margin loan figures that bull traders are most active at the top; it's therefore almost inescapable by symmetry that traders on the opposite (bear) side are least active at the top (the NYSE stated this was the case last Sept.), and grow more enthusiastic as prices decline; “panics are bred by the 'bull,' not by the 'bear.'” Rather than defend short selling by inaccurate argument, “if we are to have a market at all it must be a free market and a free market must be open to 'short selling,' and that seems to be the 'long' and the 'short' of it.”

Advertorial placed by Imperial Smelting Corp. Chair. R. Horne: Cause of current trouble is appreciation of gold; “nothing is worse for trade than wide fluctuations in the value of gold”; demand for gold should be coordinated to avoid fluctuation in purchasing power due to competitive efforts by countries to secure reserves.

Germany report: New $125M loan two-year loan at 6% arranged with US, Swedish, Dutch, and German banks; Britain and France refused to participate; France demanded passage of financial program first, but Germany refused this condition. Stocks were up on new loan, while marks hit a new yearly low. Reichsbank reportedly has lost $125M in gold and foreign currency since the election, is considering another discount rate hike. Berlin “referee” decided on 8% wage reduction for 140,000 factory workers; large majority of workers have resolved to strike. Unions ask abolition of reparation payments. Reich now enters critical period; for stability of Breuning cabinet, support of Social Democrats is essential. While prospects for parliamentary majority are doubtful, statement of P. Loebe, Social Dem. and Reichstag Pres., is reassuring: “We [will] oppose the Nazis ... with our iron will, but if necessary, with our iron fists also. Germany cannot afford to let herself be ruined ... by a gang of irresponsible brawlers.”

A. Tsikhon, USSR Commissar of Labor, says currently no Soviet unemployment due to growth of socialized industry and agriculture; national shortage of 500,000 workers; plans drafting of all unemployed.

New York Central says carried 13.94% of US passenger rail traffic in 1929, has had no accidental passenger deaths in past 3 years, or over 13B passenger miles.

Daily “loan crowd” session for loaning stocks to short sellers was “one of the most excited ... ever witnessed,” with some leading issues loaning at a premium (borrowing fee), including US Steel.

Study of historical bear markets in 1903, 1907, 1910, 1917, and 1921 shows current bear market has now declined about as much from the highs as in those major downward swings. This has brought extensive investment buying of high-grade stocks on theory prices are somewhat near bottom even though “further moderate declines may be seen.” Technically, end of these bear markets has usually been marked by several weeks of sluggish trading in a narrow range.

Conservative observers still don't advise buying stocks; this might change if leading stocks showed definite resistance above previous lows.

A large number of professional traders continue pessimistic on the immediate future; this may indicate a secondary tests of market strength is coming.

“In certain quarters” it's pointed out that price swings habitually overshoot on Wall Street, perhaps as much on the downside this year as on the upside in 1929.

Col. L. Ayres of Cleveland Trust notes seasonal business improvement in past month; believes it's probable depression has hit bottom, but no sure way of estimating how long bottom will last.

GM shares traded as low as 34 1/4 on rumors $3 annual dividend may be cut, closed at 36 1/2.

South American bonds have plunged recently, many trading 40 points below their 1930 highs and with yields in the mid-teens. Brazil revolution has affected bonds much more than other recent political upheaval in Bolivia, Peru, Argentina, and Chile; bonds in other South Am. countries have also sold off. Effect of depression being acutely felt in lower commodity prices, resulting in trade imbalances and loss of gold to US.

Canadian Bank of Commerce reports moderate and uneven seasonal recovery in Canadian business, says future depends on conditions elsewhere since export markets account for large share of Canadian production (40% of grain, 80% of lumber and paper, 60% of metal).

Commodities mixed. Grains down early, with wheat hitting new season lows, but rallied sharply to close with substantial gains. Cotton fluctuated, closing down moderately. Copper buying remains dull; small amounts reportedly offered at 9 3/4 cents. Cocoa sharply lower after reports Brazil revolution had not yet interfered with crop movement.

R. Whitney, NYSE Pres., visits Pres. Hoover; White House “would neither confirm nor deny that the subject of short selling was discussed.”

Gasoline stocks at refineries Oct. 11 were 367.125M barrels, up 684,000 in week; refineries operated at 66.5% vs. 67.2% prev. week; oil production was 2.367M barrels/day, down 20,150 from prev. week and down 471,300 from 1929.

Oklahoma Supreme Court upholds state's oil proration (production control) law, deciding against Julian Oil.

Natural gas produced and marketed in US in 1929 was 1,918B cubic feet, up 22% from 1928; avg. increase in past 10 years was 10%.

Aliens admitted to US in Aug. were 34,540 and leaving 34,411 vs. 41,785 and 29,294 in 1929; US citizens arriving were 69,957 and leaving 88,372 vs. 70,783 and 70,551 in 1929. Of arriving aliens 14,816 were classified as immigrants; most popular countries of origin were Britain, Germany, Italy, and Ireland.

Mexican Chamber of Deputies presented with bill suspending payments on De Oca debt plan for 5 years; De Oca plan has not yet been approved by Chamber.

British registered unemployed Oct. 6 were 2.176M vs. 2.162M prev. week and 1.207M in 1929.

Newsprint produced by Canadian mills in Sept. was 195,490 tons vs. 202,043 in Aug. and 227,665 in 1929; US produced 95,261 vs. 101,601 and 108,155.

Gasoline in Chicago wholesale market is 5 3/8 - 6 cents vs. 5 1/2 - 6 1/4 previously.

Gillette and Autostrop Safety Razor directors meet all day Tuesday regarding merger, hope to sign agreement today.

Companies reporting decent earnings: Chesapeake, Industrial Rayon, Congress Cigar.

Wrigley (largest chewing gum mfgr.) stock about 69, yield 5.8%; earnings have tripled in past 10 years; 1929 net was $5.80/share, 1930 expected to be higher.