October 29, 2009

Wednesday, October 29, 1930: Dow 194.95 -0.14 (0.1%)

Assorted historical stuff:

Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”

Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.

NY Gov. Roosevelt addresses Advertising Club: “We have had our financial fun following false prophets. We know once and for all that prosperity is not the handmaid or creature of any political party ... Continued optimistic statements by individuals ... or by politicians do little real good.” Says necessary to find the cause of depression, whether foreign markets or overproduction, and then to employ every means to restore business to a stable basis.

GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.

Art collecting news: Knoedler Galleries exhibiting a collection of French masterpieces from 19th Cent. - present, including paintings by Corot, Degas, Cezanne, Gauguin, Van Gogh, de Chavannes, Seurat, and Delacroix. John Ringling [circus impresario] has purchased an important picture by Peter Paul Rubens.

College football games, though the main season is only 7 weeks long, attract a total attendance of 7M, with a total gate of $20M and total spending at least $50M.

Market commentary:

Market wrap: Recent rally was “maintained in good style,” with leaders again showing “recently acquired resistance” to isolated weak spots; only a brief reaction followed poor Bethlehem earnings announcement. Leaders including US Steel, American Can, and Union Carbide hit new rally highs in the morning and were well supported in the afternoon. “Rallying tendencies” then spread through the list, with some trading favorites including J.I. Case, United Aircraft, and Vanadium up briskly. High grade rails strong on expected better traffic comparisons vs. 1929. Coppers strong on prospects for curtailment. Some late weakness, particularly in US Steel and Eastman Kodak. Bond market irregular but mostly trending up; convertibles, rails, and Peru govts. strong; US govts. dull, firm.

One of the largest industrials reports a recent revival of construction in New England; “it is an absolute fact that the ending of all past depressions has always begun with an improvement in New England” construction; attributed to New Englander's shrewdness, “saving his money until he can buy a lot for it."

Many large industries are now operating at 50% of capacity; in past depressions, things have been much worse, with steel at times down to 30%. However, these depressed levels don't remain very long; “The United States is not a 50% country.”

Several quarters” report a more confident feeling based on improvement in commodities, lower brokers' loans, thorough deflation of many security prices, and recently expressed confidence by economists and business leaders.

Central Trust of Ill. says current pessimism unjustified based on actual reduction in total incomes of only 5%. Sees hopeful sign in inventory declines, indicating consumption has exceeded production for some time; buying has decreased more than buying power; readjustment of retail prices will restore sales.

Economic news and individual company reports:

US income tax collections for first 9 months were $1.779B, down $148.3M from 1929; individual collections were down $133.0M and corporate $15.3M.

Rail freight loadings for week ended Oct. 18 were 931,085 cars, down 23,789 from prev. week and down 254,479 or 21.4% from 1929 week.

Dominick & Dominick point out greatly improved labor relations vs. previous depressions; in first half, there were no major strikes and 399 “minor disagreements” vs. 2,385 disputes in 1921. Wage scale has been maintained in “unprecedented manner,” though hours worked have been shortened.

Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.

First 70 rails report Sept. operating income $91.6M, up 10.1% from Aug. but down 21.2% from 1929.

US Steel Q3 net was $2.06/share vs. $5.57 in 1929; first 9 months was $8.44 vs. $15.82; regular quarterly $1.75 dividend was declared, but no extra.

Assorted Q3 earnings: IBM $2.85/share vs. $2.91 in Q2 and $2.80 in Q3 1929; Studebaker $0.20 vs. $0.41 and $1.24; Conde Nast $0.73 vs. $1.04 and $1.11.


The Virtuous Sin - Walter Huston plays a ruthless Russian general, Kay Francis a woman interceding on behalf of her husband, a scientist who was drafted just as he was on the verge of a scientific discovery that would save thousands of lives, and has been sentenced to die for attacking the military system. She is forced to use her feminine wiles to persuade the general; in the end, her husband's life is spared but she falls in love with the general.

Stock market joke:

A strong man, as part of his show, held a lemon up and crushed it in his enormous hand. He then pinned a $100 bill to the backdrop. “Whoever can extract another single drop from that lemon is entitled to the $100,” he announced. A wizened old man made his way to the stage. The strongman roared with laughter and handed him the lemon. The old man squeezed the lemon firmly, and three drops fell into the cup. “Who are you?” gasped the strongman. “I'm a margin clerk in a brokerage house,” replied the old man mildly.

+ The Boring Stuff:

NY City police census shows 15,164 heads of families jobless in city; Commissioner expects figure to go higher. Police to donate $35,176/month from salaries.

Essex County movie theater employees join strike by Newark musicians against cut in size of orchestras.

Market over the past week has been allowing bull traders to do some “profitable in-and-out trading” since it's rallied more following breaks.

One broker reports most short selling is now by small traders.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Some of buying attributed to short “squeezing”; a large short interest remains, and some have had trouble borrowing shares; frequent calls have been made for return of shares, “necessitating strenuous efforts to replace them” or in some cases forcing shorts to cover.

Bond men report expected yield on high-grade municipals is about 4%, 2nd grade 4.20%, 3rd grade 4.50%, slow-moving issues 5%.

Curb Exchange report: (later the Amex; small companies) Auto shares selling at “nominal prices” discounting no improvement in the industry (Stutz at 1, American Austin at 2). Very thin market in many specialties. Wide differences in valuation; highest grade oils yielding over 6% while some utilities at 20 or more times earnings.

R. Hose, Anglo South Amer. Bank chair., says South and Central American countries in active stage of development, large producers of commodities. Encouraged by recent stabilization in commodities; expects quicker economic recovery than in “older countries already having fully exploited resources.”

H. MacLean, US rep. to Int'l. Chamber of Commerce, notes European companies face difficulties including heavy short term debts, large inventories, and lower sales; sees severe trouble for the “less efficient and less fortunate” but notes heroic efforts to reduce costs, says readjustment period will be shortened by speed at which “hitherto unreachable cost levels have been arrived at.”

Increasing rumors Spain will attempt to stabilize currency on gold standard.

Editorial: Conditions in the wheat market favor a higher price before end of season, “providing business conditions will permit.”

Commodities strong. Wheat up strongly; other grains somewhat higher. Cotton up sharply on govt. stabilization efforts. Copper buying improved at 9 1/2 cents.

Total cars financed by 485 cos. in Aug. were 246,539 for $102.9M vs. 285,234 for $118.4M in July and 347,565 for $163.8M in Aug. 1929.

Gasoline stocks at refineries Oct. 18 were 36.655M barrels, up 379,000 in week; refineries operated at 65.7% vs. 66.2% prev. week; oil production was 2.378M barrels/day, up 7,450 from prev. week and down 491,500 from 1929.

Several companies cut crude oil prices in various sections of the US other than Calif.; typical cuts were $0.25/barrel.

Auto parts and equipment manufacturers report improved shipments to wholesalers in Sept. and Oct.; wholesalers also report improved business. Mfr. shipments of service parts in Sept. were 139% of Jan. 1925 level. vs. 132% in Aug. and 173% in Sept. 1929; accessory shipments were 76% vs. 60% and 84%.

Aug. operating income for 103 telephone companies was $21.536M vs. $22.545M in 1929.

American Machinist reports machine tool market remains static, no major improvement expected until start of next year.

Fed. Reserve Midwest (7th) District reports Sept. 15 industrial payrolls down 1.6% from Aug. 15, total earnings down 1.3%.

Canadian construction permits in 61 cities in Sept. were $11.1M, down 19.8% from Aug. and 35.3% from Sept. 1929.

European steel cartel prolonged until Dec. 31 with 12% reduction in output.

Bethlehem Steel Q3 net expected about $0.60 vs. $4.01 in 1929; first 9 months about $5.05 vs. $13.30; will maintain $1.50 quarterly dividend.

Edsel Ford, Ford Motor pres., says will keep making Model A indefinitely without major change; company “in the midst of the greatest expansion program in our history,” building plants throughout world; these will produce model A cars and AA trucks.

National Biscuit record earnings attributed to lower commodity prices and less spending on plant expansion; successful acquisition strategy focuses on buying cos. with products popular in local markets, then selling them through National's countrywide merchandising system; rumors it may acquire Wheatsworth.

Companies reporting decent earnings: American Ice, Davison Chemical (began selling fertilizer direct to farmers), Continental Can, Texas Pacific Land Trust.

New book:

They Told Barron, an edited collection of the recently deceased C.W. Barron's “Conversations and Revelations.” Considered “the father of modern financial journalism,” he assumed management of the Wall St. Journal around 1900 and developed it to its current position. People talked to him not only because of his powerful position, but his appearance and personality: “Short of stature but impressive in breadth and girth, his sparkling blue eyes, ruddy cheeks, and whitening beard completed a Santa Claus picture which did not belie its owner, for his heart was as benevolent as his appearance.” Covers development of industries including rails, steel, autos, oil, chain stores, etc.; with conversations and comments on many pioneers and contemporary leaders in those fields.

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