November 3, 2009

Monday, November 3, 1930: Dow 184.89 +1.54 (0.8%)

Assorted historical stuff:

Editorial: Recent events in Europe suggest “political skies there may soon be perceptibly brighter,” particularly Chancellor Bruening's success in persuading the Reichstag to reject all motions by extremist parties to modify reparations. Even Mussolini's recent speech celebrating the eighth anniversary of the march on Rome “seemed to reveal some appreciation of the risks inherent in unrelieved swashbuckling.” A less pleasing aspect of Mussolini's speech was his bid for German and Austrian support in undoing the Versailles Treaty; however, German reaction indicates they're increasingly recognizing “that their relations with France ... are the key to both political and economic improvement on the continent.” Much depends on Berlin continuing to resist “temptation to play upon the relations between France and Italy”; if the current govt. stays the course, “little need be feared from either the periodic fireworks from Rome or the obviously unsettled reparations settlement.”

Colombia reportedly has suffered less political unrest due to Colombian coffee prices not declining as much general coffee prices.

Average height in Japan has been increasing; doctors attribute this to “athletics, more open air living, and better diet and sanitary conditions.” As one result, the Tokyo police force has increased the minimum height one inch to 5 feet, 2 inches.

An interesting new use for old rail cars and locomotives has been discovered by an enterprising Midwestern showman: taking the old equipment and staging sensational train wrecks, to which he charges $1 a head admission. The first show netted over $16,000.

Town of Hickman, Ill., consisting of store, post office, house, and two smaller buildings, auctioned off for $1,053; buyer will move buildings and use as corn land.

Market commentary:

Market wrap: Market unsettled in short Saturday session. Some stocks heavily pressured, including AT&T and specialties such as Gillette, Fox Film A, Warner Bros., and Auburn Auto; some weakness in other leaders including Allied Chemical and American Can. Bulls cautious on signs “liquidation had not been fully completed,” and main body of stocks was under pressure most of the session, though trading was light. Moderate improvement developed throughout the list toward the close, with particularly brisk recoveries in Bethlehem and US Steel. Bond market more active on reinvestment demand, prices generally steady; US govts. firm.

Week in review: Stocks declined extensively on weak business news and election jitters; a particular low point was Bethlehem Pres. Grace's pessimistic statements; many leading stocks hit new bear market lows. Money remains extremely easy, and brokers' loans continued sharp decline; banks continued heavy purchases of securities, with investments now at record levels. Grain prices eased off, while cotton lost part of an early week rally. Oil and steel prices declined. Main feature in bond market was strength of foreign govts., particularly Brazil on reassuring statements by revolutionary govt., and Germany; US govts. lightly traded, strong; domestic corp. irregular: highest grade rails firm, utilities steady, industrials and lower-grade weaker.

K. Hogate, Dow Jones & Co. GM, reports recently improved sentiment in East although as yet no signs of generally improved business. “The feeling exists in important places that the depression has gone far enough, and it has been decided that no more important houses are to be allowed to fail, provided they are meritorious, so that several sore spots have been healed. ... The one thing that is necessary to revive business is shortage. That is the one 'panacea' that has always worked us out of depressions in the past. We now have actually reached a point of shortage ...”; this should be felt in retail business first, as is apparently happening. Revival of business has so far been postponed because “most individuals went into the current depression better supplied than in any previous depression. ... There may be nothing sensational in immediate prospect, but ... we are, I believe, definitely beyond the really disheartening phase.”

National City Bank Nov. circular says there's little doubt depression is now scraping bottom; sees several signs of improvement; while timing of general recovery is impossible to predict, believes “next important movement will be upward.” Positive factors include impressive gains in industrial efficiency, recent stability in commodity prices, and improvement in textile and lumber industries.

GM earnings considered encouraging; Q3 net of $0.53/share was slightly above most optimistic estimates, and company now expected to comfortably cover year's $3 dividend requirement in spite of “great business unsettlement.”

Economic news and individual company reports:

Bureau of Securities charges Prince & Whitely with taking $2M-$3M from Prince & Whitely Trading Corp. and falsifying books to show loan had been repaid, and with using stock supposedly bought for the Trading Corp. for its own brokerage business.

Fed. Reserve Oct. review notes usual peak period for credit demands passed with only slight, temporary tightening in money market; banks continue to increase holdings of investments; bank positions considered strong, with little Fed borrowings and many having surplus funds seeking profitable employment. Savings banks showed unusually large increases vs. 1929; Oct 10 deposits were up 6.4% year over year vs. a 2.7% increase in 1929 and an avg 5.5% increase in prev. 4 years.

BLS reports cigarette production in year ended June 30 was 119.9B, up 150% from 1920 and 3,600% from 1900. Avg. hourly earnings for workers in the industry were 37.8 cents for males and 26.8 cents for females.

Ford Motor Co. says saves $4M - $5M annually by salvaging old materials including used lumber, waste paper, glass, rubber, etc.

Technicolor operations reportedly down to about 50% due to lower motion picture business; 1930 earnings will be about $2/share, well below earlier estimates.


“'Your silver wedding anniversary, is it? Congratulations, old boy.' 'Yes, that's the first twenty-five years of it over.'”

“Foreman - Well, everything is all right? Night Watchman - Yes, I haven't done so bad for the first night. I've checked off everything, and there's only one thing missing - the steam roller.”

+ The Boring Stuff:

Editorial from Boston: The Justice Department recently asked us “in confidence” whether we favored prohibition. Since we have at least as much confidence in our readers as in the Bureau of Prohibition, we will share the questions and answers with you. “Question 1. Is your paper in favor of prohibition? Answer: No. Question 2. Is your paper against prohibition? Answer: Yes. Question 3. Is your paper neutral on the subject of prohibition? Answer: No. Question 4. Will you state briefly your reasons for adopting the policy you are advocating? Answer: 'Prohibition' inevitably promotes intemperance and has already undone a generation's progress toward temperance.” Prohibition is based on “the mistaken assumption that law and legislation are identical, and on a misunderstanding of human nature.” Its continuation “constitutes a demoralizing menace to constitutional and representative government.”

Editorial: New York's Central's attempt to raise commuter fares is bound to turn over a hornet's nest. “To raise these fares means to start a small riot in each of literally scores of communities, in each of which is then presented a glorious opportunity for 'defenders of the public interest' to distinguish themselves.” Without prejudging the merits of the business case, the rails might be better off keeping the current fares to avoid losing more business to buses.

NY Gov. Roosevelt asks thorough investigation of NY Central rate hike request, states “this seems hardly the appropriate time to ... make living expenses of suburban dwellers higher.”

Five Southwestern rails join Northern and Western carriers in petitioning ICC on recently ordered reductions in grain rates, climbing rates are already too low to provide a fair return as mandated by law.

Work on Boulder [later Hoover] Dam to start in about two weeks; Interior Dept. to put $60M - $70M of contracts up for bid by about Dec. 1.

Western states to undertake enormous engineering projects in next few years, including Colorado River - LA aqueduct estimated to cost over $225M, and two other projects on the same scale: Columbia River development in Washington and water conservation program for Northern and Central Calif.

Bulls discouraged by Friday's new bear market low and “dissipation of hopes” for immediate recovery in business. This was said to explain reduction in buying and market decline on low volume; also cited was increasing short selling by small traders. However, looking slightly further ahead, the next few weeks may “mark the transition from the prolonged downward movement ... [of stocks] since September 1929.” The market seems close to completing its adjustment to current business conditions, and fundamentals should start being more favorable soon. Usual holiday improvement in merchandising, and Jan. and Feb. improvement in steel trade will now be accompanied by vastly improved margin situation, very easy credit, and attractively valued stocks.

French stock market nervous over troubles of Oustric Bank.

Increasing hopes for copper curtailment; some observers point to succesful effort in 1921 when a similar surplus was built up.

Short covering said to be relatively small recently, with short interest down considerably. Stop-loss orders said increasingly popular, and a factor in recent declines.

Commodities mixed. Wheat up slightly, other grains down. Cotton down slightly.

Bureau of Securities reports Oct. security fraud losses of $11.765M, bringing total to $51.015 for first 10 months; Oct. said most active month in Bureau history.

Dun's reports 2,124 business failures in Oct. with total liabilities of $56.297M, vs. 1,963 with $46.947M in Sept. and 1,822 in Oct. 1929.

Agriculture Dept. reports agricultural exports in Q3 were $286.3M vs. $336.7M in 1929.

Irving Fisher's index of 200 commodities for week ended Oct. 31 was 82.4 vs. 82.7 in previous week and 93.7 a year ago.

South Penn Oil Co. cuts Pennsylvania crude oil prices $.15 a barrel. Texas Railroad Commission approves cut in allowable oil production in Panhandle from 80,000 barrels/day to 70,000.

Ford Motor Co. owns or controls Ford companies in Great Britain, Irish Free State, almost all European countries and others. Some manufacture their own parts, while others just assemble cars, or distribute cars built elsewhere.

German shipyards inactive, with only 200,000 tons of 1M capacity commissioned vs. 270,000 at end of 1929 and 500,000 at end of 1928.

German coal production in Q3 was 34.4M metric tons vs. 34.2M in Q2 and 42.3M in Q3 1929.

Chinese Fin. Min. Soong denies China seeking loans abroad at this time.

877 lumber mills reported orders for the week ended Oct. 25 were 4% under production of 260.2M feet; first time in 6 weeks orders fell below production.

Youngstown District steel operations expected to decline 2% to 52% this week. Auto business down; further slow decline expected until Jan., followed by slow advance on automotive demand.

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

Detroit factories and shops reportedly called 3,446 men back to work in past week and 5,727 in past 2 weeks.

Metro. Los Angeles district had 194 new industrial plants and expansions for $24.4M announced in first 9 months vs. 196 for $22.6M in 1929.

Three NYSE seats sold for $232,000 - $235,000, up $12,000 - $15,000 from previous sale.

Melville Shoe reduces retail shoe prices 10%.

Companies reporting decent earnings: Ulen & Co. (engineering and construction), Melville Shoe.

Canada Dry Pres. P. Saylor says co. is unlikely to be hurt by repeal of Prohibition, pointing to Canadian subsidiary's tremendously increased profits since 1924 even though every Canadian province with the exception of Prince Edward Island was dry in 1924 and is wet now. Also expressed his belief that more beer is made and consumed today under Prohibition than was ever made or consumed prior to Prohibition.

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