November 1, 2009

Saturday, November 1, 1930: Dow 183.35 -4.72 (2.5%)

Election editorial and endorsement:

Treasury Sec. Mellon in his radio address disputed those blaming the administration for the depression and said it was due mainly to worldwide conditions over which they had no control. This is valid, “but is there much ... sound thinking to be found in the heat of a political campaign?” The administration should fairly be judged on the measures taken since the economic storm broke. On this they have a strong record; Pres. Hoover, as Mellon points out, has great experience and expertise in reconstruction work, large public works are being undertaken to increase employment, and Treasury's house is in order. To quote Mellon, “It is not time for divided authority. It is rather a time for strong and united action ... in this way we shall attain most quickly that full measure of economic recovery which is inevitable in a nation so self-reliant.” As Coolidge said this week, “this is no time for rash experiments in men or measures.” Also, consider Lincoln's advice on changing horses in midstream. This administration knows “the needs of industry and trade,” and is headed by men of recognized business judgment and ability; they should be entrusted with the task of putting business on its feet again. To hamper them now wouldn't be good business, to say the least.

Assorted historical stuff:

Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.

Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”

Bank of Manhattan Trust Co. sponsors series of lecture on finance for women at the NY Junior League; several prominent financial figures to lecture.

One New York suburb contains a family that has lived on the same piece of land for almost 200 years, originally farm land purchased by the first settlers from the Indians. Europe has some examples of families that have lived in the same place over 1,000 years, but 200 years is a rarity in greater New York.

Treasury officials say over half of imported antique furniture is fake.

Market commentary:

Market wrap: Further substantial selling in main body of stocks brought Dow to a new bear market low, though rails and utilities held slightly above previous lows. Bethlehem's poor earnings report had been expected, but Pres. Grace's statement that no improvement was in sight “attracted widespread attention.” With both traders and investment buyers increasingly reluctant, selling took place “on a descending price scale.” Slight improvement at mid-day, but selling resumed broadly in the afternoon; general list came under severe pressure; leaders including US Steel, Westinghouse, and AT&T hit new lows on the decline; sharp breaks in Auburn, Sears, and J.I. Case. Bond market active, mostly firm; notable strength in South American govts., rails; utilities firm; industrials weaker.

Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.

Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”

One banker says the cry of too much oil, too much copper, ... too much this and that is founded on facts, but temporary facts ... in later years, the cry may be not enough oil, copper, coal and so on if producers do not strive to conserve.”

C. Denney, Erie Rail. Pres., sees constructive elements now at work leading to gradual and well sustained recovery before many months; says the Erie is maintaining spending on improvements and maintenance to aid unemployment.

Total NYSE volume in Oct. was 64.497M vs. 141.667M in 1929; largest day was 6.297M vs. 16.410M; Dow range was 183.35 - 214.18 vs. 230.07 - 352.86.

Dow made new post-panic low. There were no new yearly highs and 94 new lows.

Economic news and individual company reports:

Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.

Interesting items in recent reports by Fed. Reserve member banks in NY: brokers' loans down sharply while loans on securities to non-brokers are increasing; seen as stronger buyers (those borrowing from banks instead of brokers) absorbing selling from weaker ones. Banks have been left with such high surplus funds that “they were forced to invest heavily in securities and bankers' acceptances”; last week's increase in “all other” loans was due to heavy buying of acceptances.

Bradstreet's and Dun's weekly reviews continue to see uneven picture, with some encouraging spots but no sign of marked improvement in near term.

Bank of England reportedly considering cutting discount rate, possibly in preparation for 5% war loan conversion.

Index of farm prices Oct. 15 was 106% of prewar level, down 5% from Sept. 15 and down 34% from Sept. 15, 1929, and lowest Oct. level since 1915.

Rates on 150 and 180 day banker's acceptances down 1/8% to 2 1/8% - 2 1/4%, indicating “reign of extremely easy money in NY is by no means near an end.”

Gasoline in storage Sept. 30 was 38.254M barrels vs. 33.181M in 1929, but down 3.370M in month; consumption was up 6.9% over 1929.

Companies reporting decent earnings: Canada Dry Ginger Ale, United Gas Improvement, Lincoln Printing.

Assorted Q3 earnings: GM $0.53/share vs. $1.17 in Q2 and $1.58 in Q3 1929; Auburn Auto $0.97 vs. $4.25 and $6.72; Nat'l Tea $0.30 vs. $0.21 and $0.53.

Company reports since Oct. 1: 116 companies reported higher earnings vs. 1929 and 256 lower; 297 dividends unchanged, 32 increased, 44 cut.


“The witness was certainly no chicken, and the young barrister thought it would be to his advantage to get her rattled. ' And now, madam,' he said, 'I must ask a personal question. How old are you?' 'Young man,' she replied, 'it isn't more than an hour since the judge there objected to hearsay evidence. And I don't remember being born; all I know of it is hearsay.'”

“Teacher (to new scholar) - How does it happen that your name is Allen and your mother's name is Brown? Little Lad (after a moment's thought) - Well, you see, it's this way; she married again and I didn't.”

+ The Boring Stuff:

Editorial: One of the chief causes of wasteful and inefficient overproduction is nationalism in commodity production, or the objective of national self-sufficiency in commodities; “the idea itself is a survival of war-time modes of thought. ... An economically self-contained nation, be it a Balkan monarchy or a far-flung empire, is today an impossibility.” If any country could achieve it it would be the US, “but it cannot hope to do so for all its wealth and area, unless it wishes its civilization to recede to that of the Civil War period.” The first remedial measure against the depression should be to turn our back on this idea.

Editorial: Pres. Hoover's denunciation of the Kelley oil charges as political was strong, but may have been justified. Many public servants make financial sacrifices with the only possible reward aside from service being in reputation. “After all, not everything 'goes' in politics!”

Washington authorities dismiss rumors of early action on Prohibition by Pres. Hoover or Congress; dry majority in Congress is expected to last until 1932 election, when cities gain larger representation; however, that Congress won't meet until Dec. 1933.

US Gypsum Pres. S. Avery selected as industry liaison to Col. Woods' emergency employment committee.

Australia total imports for year ended June 30 were $655.7M vs. $718.2M in 1929; imports from US were $149.5M vs. $176.5M.

China to seek 1B ounce silver loan worth about $360M from US for rebuilding; US govt. expected to be skeptical.

New York World reports revolution breaks out in Greece.

Unification of many leading NY City private charities planned to facilitate aid to unemployed, Emergency Employment Committee reaches agreement with Catholic and Jewish charities and Salvation Army; $150,000 weekly goal to be raised.

Hawaiians, proud of the fact that their islands are an integral part of the United States,” are always annoyed when tourists ask what kind of stamps to use on postcards. However, Hawaiian stamps of the past are highly collectible and prized in many collections around the world.

Trans-Arctic Submarine Expedition Co. formed to take over U.S. Navy submarine in which Captain H. Wilkins intends to explore Arctic.

Charles F. Brush [developed arc light, first wind turbine generator] estate valued at $5.2M.

Stop loss orders reportedly hit in large numbers, while short covering was much smaller (attributed to efforts to minimize short selling).

Some are paying more attention to action of preferred stocks and bonds, believing these are less affected by technical market conditions and therefore indicate company prospects more accurately than common shares.

The more optimistic are encouraged by lower volume in recent sessions during reactions, indicating a lack of urgent liquidation or concentrated bear pressure.

Some market letters continue to urge caution to prospective buyers. With the market as low as it is, a few words of caution to short sellers also might be helpful.”

Dr. P. Atkins, economist for Ames, Emerich & Co.,: “low point in business activity has been touched if it has not already been passed, and there are good prospects that the start of a slow but certain upward trend in business activity is at hand”; sees resulting upward trend in lower-grade bonds.

Commodities weak. Wheat off moderately, other grains down substantially. Cotton down moderately, recovering somewhat from early lows. Copper buying continued in good volume, with some producers refusing to fill all orders; however, curtailment prospects seen doubtful.

For a group of 530 industrial stocks continuously listed from Mar. 31, 1925 to Mar. 31, 1930, the number of common stock holders increased from 961,027 to 2.062M, while preferred shareholders increased from 447,583 to 498,097; number of shares outstanding increased from 272.6M to 527.0M.

Panama Canal toll traffic for first four weeks of Oct. was 10% above Sept. but 8% below Oct. 1929.

Cotton cloth buying has shown a notably improved sales and price trend in the past few weeks; considered interesting since in 1921 the cotton market turned up in January, followed in June by general business improvement.

German cabinet approves increase in import duty on raw tobacco from $19 to $95 per 100 kg; total tobacco revenue from taxes and duties estimated at $303M.

O. and M. Van Sweringen provide $15M of US Treasury certificates to the Van Sweringen Corp. to maintain the required 50% in liquid securities against $30M corporate notes outstanding; these replace Alleghany Corp. common shares formerly used.

Warner Bros. (movies) reports business has improved from slump that started last May, thanks to release of new productions and return of normal fall attendance.

International Nickel reports improved sales trend since July, though Q3 earnings will be well under dividend requirements.

Rudolf Wurlitzer Mfg. (radios) reports operations at 100%, production greater than a year ago; F. Wurlitzer, Pres.: improvement “clearly indicates that a genuine upturn in business is under way.”

Gillette shareholders lawsuit said not seeking to block Autostrop merger but aimed at some directors alleged to have profited from stock dealings with the co.

IRT and NY City reach cost sharing agreement on purchase of 289 new subway cars.

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