November 17, 2009

Monday, November 17, 1930: Dow 186.68 +2.65 (1.4%)

Assorted historical stuff:

Advertisement: “The unemployment situation in New York is critical. Unless it is speedily met, we face a winter of hunger and distress for families whose bread-earners are without work and without funds. The great majority of family men now unemployed are asking not for charity, but for a job. In the richest city of the world, where the vast majority are at work, it is unthinkable that anyone should be permitted to starve. The Emergency Employment Committee is composed of New York business and professional men, formed at the request of experienced welfare organizations of the city. It is raising funds which will be used by these organizations to give temporary work to heads of families and to relieve distress caused by unemployment without regard to race, creed, or color.” Followed by endorsement from Pres. Hoover and appeal for funds.

Sen. Smoot denies tariff is retarding business recovery, says it has saved thousands of jobs and helped maintain wages and preserve farm purchasing power; points out only one country has increased its tariff since US adopted revisions; says question now is whether tariff is high enough, not whether it is too high.

George Washington letters recently sold at auction in Philadelphia: letter to Maj. Gen. Heath on his retirement - $1,200; two-page letter to General Nathaniel Greene on July 20, 1776 - $875; letter from Mary Washington, mother of George, on Christmas Day 1748 - $1,450.

First public use of gaslight in London was for Westminster Bridge in 1807; first street to be gaslit was Pall Mall in 1812, now lit by high-pressure gas lamps.

For the first time in the history of the New York Cocoa Exchange, no trades were recorded yesterday.

Market commentary:

Market wrap: Stocks were slightly lower early in the weekend session, attributed to profit taking on recent gains. However, impressive demand developed on moderate decline; many Exchange brokers had advised buying standard stocks on setbacks.Upward trend resumed; majors including US Steel and American Can rose above Friday highs, and buying spread through the list; amusements, utilities, and oils strong. Some irregularity at close, but day's highs fairly well maintained. Bond market continued recent uptrend in corp. issues, particularly speculative and convertibles; US govts. dull, slightly lower; foreign steady.

Week in review: Stocks mounted sustained rally for first time in 3 months; attributed to stronger technical conditions, good copper news, and more support from “prominent industrialists” and “powerful banking interests.” Money continued extremely easy; “funds accumulated in banks until money became almost unlendable”; banks heavily buying bankers acceptances; call money lent at 1% - 1.5% in outside market, though official rate stayed at 2%; Fed “somewhat more aggressively expansionist.” Corp. bonds very weak early in the week, with many low-grade issues down sharply to new lows; general recovery set in at midweek; US govts strong, foreign irregular. Grains and cotton moved irregularly. Copper rose dramatically from 9 1/2 cents to 12 cents in a few days.

Good buying reported from “prominent industrial and banking interests.”

Bankers who have made a thorough investigation of conditions state that the financial horizon is now much clearer than it has been since midsummer ... At the moment no forced selling is overhanging the market.” Barring unforeseen development, don't anticipate selling similar to what caused past 2-month decline.

T. Lamont of J.P. Morgan says plenty of precedent for current depression in the 13 crises suffered over past 130 years; hopeful we're at bottom of cycle and “the extreme of our depression is probably as unwarranted as the extreme of our exaltation was 14 months ago.” Thankful that people are now working and saving instead of speculating and spending. Cautions against attempts to overstimulate ailing business with nitro-glycerine pills, which might cause further explosions. Says tariffs have complicated situation to some degree, though “we cannot class them as controlling factors in our present depression.” As causes of depression, lists overproduction, artificially supported commodity prices, fall in price of silver, movements of gold holdings, political unrest, and overspeculation.

Prof. B. Ohlin of Stockholm Univ. of Commerce says depression rapidly nearing an end; sees upward movement in US by spring if not sooner.

Oil outlook: Little if any increase in gasoline consumption seen in Q4 1930 and Q1 1931; preservation of even current low prices for crude oil and refined products likely to require further curtailment of production and refining.

Outlook for US shoe industry said threatened by flood of cheap foreign shoes.

Economic news and individual company reports:

NY State savings bank deposits were down $4.4M in Oct. to $4.598B, first decline since May, but much smaller than Oct. 1929 decline of $85.2M.

While Pres. Hoover hasn't publicly changed stand in favor of continuing 1% income tax reduction, there's growing sentiment even among those close to the Administration that it would be inadvisable to do this and chance a large budget deficit (as high as $300M). Some believe “a deficit is not such a fearsome thing,” particularly when the govt. can borrow at such low rates; however most presidential advisers apparently believe this is a bad idea in the long run.

Irving Fisher's index of 200 commodities for week ended Nov. 14 was 82.2, unchanged from previous week and vs. 92.6 a year ago.

BLS reports employment in 13 industrial groups was down 1.4% in Oct., with payrolls down 0.8%; Oct. employment was down 18.6% from 1929.

More optimism on steel: Youngstown District operations up 2% to 52% this week; rumors of advance in steel prices. Observers also note that even stabilizing prices would help earnings, since prices have often been “shaded” in recent months. Optimism that most steel producers will now follow lead of the large companies.

Movie:

Renegades, a Fox picture - yet another movie “for those not already surfeited with movie tales of the French Foreign Legion and its troubles with the Riffs in Morocco.” This one is noteworthy for an appearance by Bela Lugosi as a Moroccan tribal chief.

Jokes:

'Where did you learn to sing?' 'I graduated from correspondence school.' 'Boy, you sure lost lots of your mail.'

“'Do you object to hecklers?' 'Not under certain circumstances,' replied Senator Sorghum. ' They're a great help if you can meet 'em beforehand and have 'em well rehearsed.'”

+ The Boring Stuff:


Editorial by T. Woodlock: US faces a difficult choice. Other countries, particularly Germany, are aggressively cutting costs to make exports more competitive. To lower wages in response would be difficult, to increase productivity would make unemployment worse, and there's not much room left to cut on the profit side.

German leaders including Chancellor Breuning, cabinet ministers, and Dr. Luther, Reichsbank pres., admit failure to obtain adequate price reductions, call on German housewives to arouse public opinion and exert pressure on dealers.

Gov. Larson of New Jersey signs law allowing cities to issue bonds in excess of debt limits to speed up public works and aid unemployed. Hershey estate, controlled by Hershey Chocolate Co., plans $2M construction program to prevent unemployment in area of its plant. General Foods offers to contribute several thousand packages of “Post Toasties” as well as sufficient Walter Baker chocolate to supply many thousand people.

Treasury Dept. preparing new rules placing burden of proof on importer to show goods not made by convict labor.

Greater NY rapid transit and surface car lines carried 3.009B passengers in year ended June 30, up 36M from previous year; revenues were $161.6M, up $2.4M.

Los Angeles installs 400,000'th phone; new lines were 16,021 so far in 1930.

Demand by short sellers for stocks in the loan market considerably lighter than earlier in the week.

Many market observers impressed by advance in the past week, particularly resistance to profit taking and to several efforts by bears to start another reaction.

Market has reacted strongly to positive copper news and hopes for stabilized steel prices; it had also apparently become “ripe technically for an abrupt turnabout.”

While the Dow has rallied 15.08 points since last Monday, it still has 58.41 points to go to reach the Sept. 10 rally peak of 245.09.

Broad Street Gossip: “Bankers, brokers, and traders” seem more cheerful; majority doesn't expect a rapid recovery in business or stock prices, but does believe “bottom has been reached and that from now on things in general will be better. Everything is now on a deflated basis - stocks, commodity prices, brokers' loans, and money. Probably no better foundation ever existed from which to build.” Inventories are at rock bottom and corporations now have billions in cash on hand; while a year ago that money could be lent out at 6%, it “now can be more profitably employed in rebuilding inventories and new construction.”

Wall Street element has changed its sentiment substantially”; with two basic industries of copper and steel showing signs of substantial improvement, “a radical change may take place in general business in the near future.” Most observers now strongly in favor of buying stocks on reactions.

Col. L. Ayres in Cleveland Trust Co. monthly bulletin: It's probably true that business recovery can't take place until commodity prices stabilize; therefore encouraging to see some signs of this stabilization happening; if this continues, we'll be justified in believing we've “reached the bottom both of the price decline and of the depression”. Increasing reason to believe a real upturn will start in spring. Although previous severe depressions also been international in character, this is probably the first one where the “international interdependence of business” has been widely recognized in the US. Bear market in stocks has also been international; although it started at different times around the world, the market bottoms will probably be much more closely grouped. Important to take international developments into account rather than just looking at US markets.

Commodities mixed. Cotton little changed. Grains sharply lower; wheat hits season lows on future months on rumors of Canadian Wheat Pool dumping large amounts on market. Copper held at 12 cents, with heavy foreign buying. No indication seen of Dept. of Justice action against copper curtailment program.

Deposits at world's 10 largest banks as of Sept. 24 totalled $13.868B vs. $13.632B at end of last year. British big five banks account for $7.826B, four US banks for $5.336B, and one Canadian bank for $706M.

A. Van Duzer, Amer. Road Builders' Assoc. pres., says much more than half of money authorized for road and bridge construction goes to workers.

Cuban House and Senate approve sugar stabilization law.

Companies reporting decent earnings: General Amer. Tank Car.

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