November 10, 2009

Monday, November 10, 1930: Dow 173.14 -1.24 (0.7%)

Assorted historical stuff:

Seven Democratic leaders make conciliatory statements; pledge cooperation with administration in promoting business revival; promise to abstain from “rash policies” and say business “should not be frightened”; say will limit tariff changes to those recommended by economic experts; praise Fed. Reserve Board.

Editorial: Gesture by Dems. is sincere, but may be passing: “Before an election politics is at its height. The men in the heat of the fight honestly regard the opposition as either fools, criminals, or both ... Once the ballots are counted ... the pendulum swings to the other extreme ... even the politicians are eager for a rest from politics for a time.” Statement is still encouraging since it suggests Dem. leaders will curb the wilder schemes and more radical proposals of some of their party members.

Col. A. Woods summarizes reports on unemployment from governors: main problem is in Great Lakes and US industrial centers; almost all states reported they're “stimulating public works and pushing ahead work which had been planned for a later date”; general feeling is to provide work for unemployed rather than relief.

W. Melville, Pres. of Melville Shoe, sends telegrams to 508 store managers saying positions are secure, urging them to buy for future needs.

Editorial: People may disagree on the meaning of Tuesday's elections, but one result is absolutely clear: public sentiment against Prohibition is rapidly increasing. People are starting to understand “morality can never be accomplished by law.” Instead, the effects of the “noble experiment” have been seen in “an increase in crime, the placing of almost unlimited wealth in a criminal class, and the spread of drinking among young men and women. ... People have been revolting against our prohibition laws; the elections show the revolt is changing to revolution before which this legislative tyranny must fall.”

Dr. L. Wilson, Mayo Foundation dir., calls for establishment of $200M endowment for cancer research, diagnosis, and treatment in 20 large US universities.

Law against importing rabbits into Australia has been revoked, and fancy fur-bearing varieties of the Angora and Chinchilla type are being imported in great numbers in hope of establishing a new industry; “some of the bucks are valued at $1,000 each.” It's hoped the common rabbit can be exterminated or “crossed with his aristocratic fur bearing relative and thus changed from a pest to an asset.”

New Brunswick provincial officials warn motorists to drive more carefully after several accidents involving moose fatalities.

Gov. H. Caulfield of Miss. orders investigation of lengths of trucks and trailers after his car is forced off highway; rigs said to often reach 60 feet in length.

Market commentary:

Market wrap: Rails came under continued selling pressure; leading industrials were firmer in early trading but selling became general in second hour; Southern Pacific, New York Central, and US Steel hit multiyear lows while GM, Radio, du Pont and Bethlehem hit new bear market lows on heavy volume; utilities also came under continued pressure. Bond market active and irregular; US govts. firm, foreign generally steady, corp. of all grades continue downtrend.

Week in review: Further drastic declines following Election Day holiday; all Dow averages well below fall panic levels; active banks stocks generally at lowest levels since 1928; considerable investment buying seen but overwhelmed by large scale forced selling in impaired margin accounts. Bonds generally down on moderate volume; only govts. and highest grade rails resisted pressure, and many corps. were down sharply. Money slightly tighter but rates little changed. Grains break to new season lows; wheat only 1 1/4 cent above record 1906 low. Cotton sagged in midweek but recovered later and stayed above season lows. Steel output continued lower; prices slightly weaker. Oil production down, price cutting continues. Rail traffic seasonally higher.

The past two months' bear market has been one “of the most severe, as well as one of the most aggravating, declines in the history of the Exchange.” The Dow has declined from 245.09 to 174.38, with almost no interim rallies in which traders who bought on breaks could sell at a profit. Causes seem to have been tax selling and liquidation due to poor earnings and dividend cuts; however, if trade reviews are accurate business is not much worse than is was on Sept. 10. Some investment buying is seen, but selling has outweighed it; consensus is the decline can't last much longer, “but the Street has been thinking that way for the last several weeks.”

Broad Street Gossip: Patient investors will, in the long run, make a lot of money buying good stocks at current prices. Some people are in fact doing this, as seen in record numbers of shareholders in US Steel, AT&T, GM, and others; “The little fellow has been getting in on the ground floor while the big fellow with the big income has been busy seeking ways and means to cut down his 1930 tax payments.”

Executives in wide variety of industries agree future earnings will depend mostly on sales volume, since costs have been cut as far as possible.

Dow made new post-panic low. There were no new yearly highs and 261 new lows.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Nov. 7 was 82.2 vs. 82.4 in previous week and 93.3 a year ago.

Report of Committee on Petroleum Economics to the Fed. Oil Conservation Board recommends additional 7% cut in oil industry operations; also suggests industry measures beyond production curtailment, including restriction of drilling and plant expansions, and unit (cooperative) operation in new development areas.

Reports from Paris state Oustric banking crisis has passed and the banks and brokers involved are of minor significance. However, heavy withdrawal of balances from New York and London to France has continued for the past few days as French banks attempt to increase confidence and prepare for any emergency.

Rail freight cars ordered in Oct. were 3,291 vs. 565 in Sept. and 17,207 in Oct. 1929; first 10 months were 36,428 vs. 83,397.


“A teacher in a Lagrande (Oregon) school asked for pupils to tell who the world's smartest man is, and give the reasons. One urchin suggested Thomas Edison, 'because he invented the phonograph and the radio so people could stay up all night and use his electric light bulbs.'”

+ The Boring Stuff:

Editorial: All three Dow averages are now below last fall's panic lows; the rails were first, followed by the industrials during the violent selloff since Sept. 10, and finally the utilities. The six bear markets this century (aside from the 1912-14 one caused by war) averaged about 12 months; this one is now 14 months old; prices will be closely watched over the next few weeks to see if the “business situation as a whole has completed its liquidation. ... Though it has not yet been indicated in prices, all reasoning from experience tells us that the completion of the market decline cannot be far away in time, whatever prices may do in the short interval.”

Editorial by T. Woodlock: The late J.P. Morgan on two occasions turned grave US economic crises around through bold action- in 1896 when the Treasury was being drained of gold, and on Oct. 24, 1907 when Exchange brokers desparately needed money for deliveries (on this occasion, “Mr. Morgan is said to have asked whether the banks had not still 'reserves' and what bank reserves were for”). Similar bold action is called for now; “a riot of unreason ... is loose in men's minds” but fundamental such as inventories and production/consumption balance are improving; “all that the stock market needs now to produce a swift change of mood is evidence that somebody has some reason and some 'confidence' left - and it need not be a great deal.”

Closely divided Congress seen making it difficult to pass many bills.

Dr. C. Warburton, Fed. Drought Relief Committee chair., reports many firms buying a year's supply of lumber ahead to help drought areas; warns farmers in distress that they would probably be worse off if they moved to cities this winter.

US recognizes new Brazil govt. headed by Getulio Vargas.

J. Scullin, Australia PM, says country suffering from decline in commodity prices, sudden cutoff of loan availability; has had to take drastic measures to correct exchange position by reducing imports and stimulating exports; however, says nation is solvent, denies “irresponsible talk” that country may repudiate debts. Australian bonds decline several points after govt. fails to adopt Niemeyer [austerity] recommendations.

J. Baum of Amer. Bankers' Assoc. reports US bank theft losses have exceeded $12M/year in past 5 years and are steadily increasing.

Broker R.H. Gibson to open South Bend office Nov. 10; Knute Rockne will be in charge, assisted by former Notre Dame teammate Al Feeney.

Hardest subject in New York high schools last year was mathematics, with 26.9% failing; only 13% failed English and 5% failed music and “domestic science.”

Record-setting phone call recently made between Sedalia, Mo. and Sydney, Australia; total transmission distance was 15,000 miles. Call started at a Sydney telephone, went to local radio station, was amplified and sent to London, received there and switched to regular transatlantic circuit to AT&T's receiving station at Houlton Me., forwarded to New York, and then over regular land lines to Sedalia.

Market ups and downs in 1930 have tended to parallel those of the steel industry; the Street is therefore looking closely at future steel prospects. Sentiment in the trade is hopeful “the bottom is being scraped,” and steel operations generally rise significantly in Jan. and Feb.; this “might mark a turn for the better in general business,” and, after the recent extensive liquidation in stocks, “furnish the groundwork for a sustained rally.”

Broad Street Gossip: Dominant issue in the 1930 elections will probably be people's desire to see business back to normal. “Therefore, the opinion of old and experienced traders is that no party will attempt to enact legislation detrimental to business.”

Brokers continue to report increasing buying on market declines by odd-lot (small) investors “who have taken the shares out of the Street. ... Eventually, the accumulation of stocks for the accounts of the smaller investors must have a beneficial effect on the market structure.”

Heavy selling throughout the list was seen as indicating large scale forced liquidation of impaired margin accounts; this was expected to strengthen market internal conditions, and “shrewd interests” were picking shares up on expectation of a sharp technical rally.

There's still some surplus money left for investment, as seen in bond offerings for the first 10 months of $4.842B vs. $2.852B in 1929.

Curb Exchange report: (later the Amex; small companies) One of the largest Curb stocks, Cities Services (oils and utilities) plunged about 3 points to 17 1/4; with almost 30M shares outstanding, the decline from the 1929 peak of 65 has reduced the market cap by $1.440B. Lily Tulip Cup is now yielding about 8%, and earned its dividend for the first 9 months twice over.

F.J. Lisman says coal burned with up-to-date equipment remains cheapest fuel, calls heating with oil and gas a luxury; notes coal trade in very bad shape.

Commodities mixed. Wheat closed down moderately after failing to hold early gains; corn also down moderately. Cotton up sharply after slightly lowered USDA crop forecast (to 14.438M bushels from 14.486M Oct. 1 estimate).

Electric output by public utilities in Sept. was 7,763 GWHr vs. 7,878 in Aug. and down 4% from 1929; of Sept. production, 5,506 GWHr was generated by fuels and 2,257 by water power.

F.W. Dodge reports construction started in 37 states east of Rockies in Oct. was $337.3 M vs. $331.9M in Sept. and $445.6M in 1929; first 10 months $4.022B vs. $5.047B.

Railroad labor leaders to meet next Wednesday in Chicago to consider problem of railroad employment.

Rail executives announce emergency freight rate reductions in drought areas won't be further extended beyond Nov. 30.

Youngstown District steel operations at 50% this week, down 2% from last week.

Dealer stocks of new cars Oct. 1 were down for seventh month in a row, and are now 37% under 1929 level.

Survey of Chicago chain and independent groceries finds chains offer prices about 10% lower on average.

Reports from Paris that Russia plans to dump 400,000 tons of sugar on European market; French beet sugar growers ask govt. protection.

Final argument in Bethlehem-Youngstown merger trial presented by plaintiff representing Eaton-Otis interests trying to block the merger. A decision from Judge D. Jenkins isn't expected for 6 - 10 weeks, since the Court must examine extensive arguments, testimony, and briefs, as well as over 900 exhibits.

Companies reporting decent earnings: Diamond Match, Pennsylvania Water Co.

Patent and proprietary medicine shipments by mfrs. engaged primarily in that line were $263.0M in 1929, up 12.4% from 1927.

Civil aircraft on scheduled air transport in first half flew 16.903M miles with 6 fatal accidents; on other flights 51.767M miles with 144 fatal accidents.

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