November 21, 2009

Friday, November 21, 1930: Dow 187.09 -0.48 (0.3%)

Assorted historical stuff:

Editorial by T. Woodlock: in a recent speech, Gov. Roosevelt asked public support in a “war” between those against special regulation of utilities and those who recognize their necessity and seek to prevent them from giving “unreasonable profit” to the few. “Here is a summons to a 'Jehad' - a 'Holy War' issued by a man whose election ... as Gov. ... attracted the attention of the nation as perhaps” the next Democratic Presidential candidate. Stripped of the rhetoric, Roosevelt's stand is unfair; it means all the benefit of innovation and skills applied by the utility owner to provide more efficiency and lower costs must go directly to the users.

Rail executives ask for “new spirit and attitude” from regulators; point to difficult trends for rails since 1920, not even taking depression into account; claim that in spite of vastly improved efficiency, rails have never produced the 5 3/4% return on property investment contemplated in current law. However, in spite of lower earnings executives pledged to as far as practical “carry on ... work which may provide employment for the greatest possible number of men during the winter.”

Bulls arguing for wheat based on “increase in the demand for bread which always accompanies a period of depression. ... As a result of relief measures, millions of loaves of bread daily are being purchased from the various bakeries throughout the country with money raised to satisfy the hungry.”

New Jersey Legislature convened in special session to act on needed budgetary reforms after thorough investigation of state affairs by Abell committee aroused public sentiment. “New Jersey is still in a chaotic state of irresponsible officialism even worse than that from which Alfred E. Smith rescued New York.”

M. Tremaine, NY State Comptroller, points to soundness of NY State finances; net debt is under 1% of total assessed value of $28B; “The state does not issue bonds except for projects that last at least a life time.”

Over 1/3 of the 165,000 tons of sauerkraut packed in the US last year came from area of Geneva, NY. One plant has 77 vats, each of which has a capacity of 80 tons of kraut. Recent discovery of vitamins in sauerkraut has given a big boost to the industry.

Market commentary:

Market wrap: Leading stocks made further progress on the rally. Bulls encouraged by optimism from steel industry and Farm Board, by more foreign buying, and by market ability to resist bad news. Major industrials including US Steel, American Can, and GE, staged good gains in first 4 hours. Reactionary tendencies developed in late afternoon on profit taking, but sales were well absorbed on moderate price recessions, with the setback appearing technical. Bond market more active; US govts. and high grade corp. strong; speculative corp. irregular; foreign govts. mixed.

Broad Street Gossip: The head of one prominent Exchange firm has been seeking opinions among his 1,200 customers; finds that experienced traders are now optimistic, having “been through numerous panics” in the past only to see the country recover and become “more prosperous than ever before”. On the other hand, the young trader with less than 10 years experience “can see nothing but black clouds ahead ... and just cannot see how industry can get back on its feet again.”

In past few weeks, fire insurance company funds have been increasingly invested in common stocks of leading companies with safe dividends; viewed as significant since these investments “are directed by shrewd and conservative observers.”

S. Strawn, Montgomery Ward chair., says recovery depends on business men not politicians; warns against “drift toward Bolshevism”; says great problem now is gearing production down so that it will “synchronize with consumption”; implies some wage cuts may be needed.

Market ability to resist bad news is in contrast with a short time ago, when it “ignored any favorable development.” In past week, market has dealt with failure of an Exchange house, wheat irregularity, decline in rail car loadings, bank failures, etc., with little more than a hesitation in the upward trend.

Economic news and individual company reports:

US internal revenue collections in Oct. were $80.041M vs. $86.774M in 1929; collections Jul. 1 - Oct. 31 were $788.4M vs. $857.6M; corporate income tax collections in that period were $324.1M vs. $338.1M; individual income tax collections were $259.2M vs. $302.0M.

Series of small banks in Ga., Ky., Mo., and N.C. closes; two sizeable Cincinnati banks taken over by Cinn. Clearing House Assoc. (acting for 8 member banks).

Some congressmen discussing reducing payments to “sinking fund” (for reducing national debt) in order to continue last fall's 1% tax reduction without deficit.

Commerce Dept. reports total US retail credit business of $20B/year; avg. loss on open credit sales 0.6%, on installment sales 1.2%.

Nat'l Industrial Conf. Board monthly survey reports Oct. business activities at low point for the present recession, Nov. so far at same level, but see signs “industry has reached a point where replenishment should begin.”

Companies reporting decent earnings: F. & W. Grand-Silver Stores, City Ice & Fuel, Mahoning Coal Railroad, Gibson Art (greeting cards).


“'Thankful! What have I got to be thankful for? I can't pay my bills.' 'Then, man alive, be thankful you are not one of your creditors.'”

An old and practical New England lady was on her deathbed. She called her favorite niece Grace and said “'I want to be laid out in my black silk dress; but take out the back panel and make yourself a dress from it.' Grace said: 'Oh, Aunt Mary, I don't want to do that. When you and Uncle Charlie walk up the golden stairs, I don't want people to see you without any back in your dress' 'They won't look at me,' the old lady replied. ' I buried your Uncle Charlie without his pants.'”

+ The Boring Stuff:

Editorial: Domestic cotton mills are making great progress in reducing inventories of cloth by cutting production to a low rate. This improvement in “one of the great industries of the country is as pleasing as would be the voices of bluebirds on a wintry day.” Results should be seen when “the expected revival of business comes.”

Australian cabinet presents financial plan involving 2.5%-15% salary cuts for govt. workers, promoting new works to aid unemployed, and raising taxes on income derived from property.

Census Bureau reports US shipments of perfumes, cosmetics, and toilet articles in 1929 were a record $207.5M vs. $178.5M in 1927.

Modern automatic railway signals are amazingly reliable; in one district on the M-K-T line, the record for nine months shows one signal interruption for each 185,777 signal operations.

Hiram W. Ricker, Maine capitalist and developer of Poland Springs, dead at 73.

Brokers continue to report good “long-pull” public buying, “small individually but fairly large in the aggregate.”

Stocks that have continued down during the recent rally have generally been those not available to loan, “preventing a cushion of short covering.”

Conservative observers continue advising buying on a scale during reactions; advise buying on a larger scale if leading issues “demonstrate conclusively” that they're supported above last week's lows.

Bull pools” reportedly almost completely inactive, a marked contrast to last year before the fall panic, when dozens were in active operation.

Investment trusts (similar to mutual funds) to start releasing 1930 reports in a few weeks; almost all expected to report substantial depreciation in portfolios, and many have done considerable switching into stocks considered stronger. Proponents believe this year's reports will show the trust structure “safeguards resources in a bear market more thoroughly than can the average individual.”

E. Kulas, Otis Steel pres., expects price firmness for some steel products to spread; price quotations “seem definitely to have reached bottom.”

J. Edgerton, Nat'l. Assoc. of Mfrs. pres., reports on survey of 18 presidents of state manufacturing assocs. - while business still below a year ago, some improvement in past few months; employment slightly better; confidence on upswing; see gradual and definite recovery in late winter or early spring.

Farm Board chair. Legge says wheat problem being worked out by use as (animal) feed, pointing out one pig will eat as much wheat as 5 people. Actual extent of wheat use as feed is still largely a guess. G. Milnor, Grain Stabilization Corp. pres., says wheat consumers can safely buy against future advances.

Commodities mixed. Grains up substantially, corn rises particularly sharply. Cotton down moderately on setback in final hour. Large copper producers holding price at 12 cents, while some smelters offer it at 10 1/2.

Fed. Reserve reports money in circulation Nov. 19 up $5M to $4.482B, total Reserve Bank credit outstanding down $32M to $1.003B. Member banks in NY City report brokers' loans down $50M to $2.185B vs. $3.587B in 1929, new low since May 1925; “all other” (commercial) up $72M to $2.716B.

Dow average of eight finished iron and steel products was $44.42/ton vs. $44.56 prev. week and low for 1930; 1929 range was $49.88 - $51.25. Scrap market mixed, no general improvement. Steel shipments up slightly in Oct. vs. Sept. but unfilled orders down.

ICC expected to ask Congress to regulate railroad “holding” companies; it's not clear if individuals or groups can buy control of multiple rails under existing law. Two holding cos. attracting particular ICC attention are the Allegheny Corp. formed by the Van Sweringens, and the Pennroad, formed under Penn. RR. auspices.

Electric output by US light and power industry for week ended Nov. 15 was 1,718 GWHr vs. 1,731 in prev. week and down 5.1% from 1929.

Federal regulation of electric power considered unlikely in near future; almost no chance of tackling it in upcoming short Congressional session, and there's also pending litigation and two investigations (by the FTC and a Senate committee) to clear up.

Imperial Bank of India raises discount rate 1% to 6% to defend rupee in face of tense political situation and pessimism on results of London round-table conference; current level of rupee thought to favor British exports and has aroused popular resentment, with M. Gandhi asking return of former value.

British govt. denies reports of long-term loan from France to help defend sterling against francs.

Spanish currency improves following conclusion of general strike and rioting in Barcelona.

French trade declines 9.9B francs ($397M) in first 10 months; imports off 10%, exports off 13%.

Rep. Langford (D, Ga.) says commodity production control needed; proposes amendment to Federal Farm Act providing that when 75% of farm members of a cooperative agree to limit production of any commodity, the board would in turn advance the farmer the 10-year average price of the commodity.

By contrast with Oct. decline of 255.2M in total US cigarette sales vs. 1929, sales of Lucky Strikes gained 504.7M in Oct. vs. 1929.

Coarse Grain Commodity Advisory Committee recommends increasing corn duty from 25 cents to 37 1/2 cents.

US merchant marine on June 30 totaled 25,214 ships of 16.068M gross tons.

W. Washburn, asst. att'y general, estimates US investor losses on fraudulent securities in first 10 months on 1930 at $500M.

Harvard Univ. reports for year ended June 30: total revenues $12.248M; income from funds and gifts $5.406M; tuition fees $3.131M; receipts from athletics $1.283M; income from varsity football $693,713 and expense $126,662; book value of endowment $108.1M.

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