November 27, 2009

Thursday, November 27, 1930: Dow 183.11 -2.36 (1.3%)

Assorted historical stuff:

Editorial: Pres. Hoover recently emphatically rejected the idea of the Federal govt. taking over “suppression of local racketeers in a dozen cities.” By sheer coincidence, Mayor Walker appeared the same day as a defense witness in a trial involving sale of a New York judgeship. Rackets are made possible by shortcomings of local police and “outright venality of some of the lower state courts.” In a score of cities, rackets “bear with particular cruelty upon the small business man, who cannot afford to buy adequate protection and is without the political influence to obtain it.” Pres. Hoover's declaration “serves notice upon the city political machines” that they can't use the smokescreen of Federal responsibility. It also usefully reminds the rest of us that we get the government we deserve.

In spite of promises of political truce, some statements that might be interpreted as political attacks have recently been made by officials of both parties.

Rep. Strong (R., Kans.) urges Pres. Hoover to support his bill authorizing the Fed. Reserve Board to use its funds to avoid deflation as far as possible.

Count Guiseppe Volpi, a prominent Italian public utility executive, currently visiting US to discuss state of Italian electric power industry. Attributes tremendous progress in production and consumption of electricity in recent years to aid of the Fascist government, which has helped it to develop “on sound and natural lines.” Total output of electricity in Italy in 1929 compares favorably with that of any other nation in Europe; consumption in first half 1930 was up 14% from 1929; equipment in use is most modern and compares in many respects with that in use in the US.

S. Baldwin promises first act of the next [British] Conservative govt. will be emergency tariff on all manufactured goods.

NY City Emergency Employment Committee contributions now over $2.5M; about 10,000 heads of families have so far been put to work at wages of $5/day.

Market commentary:

Market wrap: Trading was slow in the pre-holiday session; while much of the session was extremely dull, such activity as did crop up was on the down side. Bears said encouraged by weakness in leading shares late Tuesday, resumed “hammering tactics” for first time since recent recovery. Traders also had to digest reported declines from last week in steel production and freight loadings. While selling volume was small, liquidation was observed in brokerage accounts and leading stocks worked persistently lower as the session went on; declines grew sharper toward the close. Bond market moderately active, prices generally weaker; almost all classes showed mostly declines, including foreign govts. and highest grade corp.; US govts. relatively strong, with some bonds at yearly highs.

A “stubborn short interest” still exists, consistently selling on rallies; while some short covering goes on during reactions, “many of the recent successful bears still are maintaining their short position.”

Observers now expect a renewed test by bears of the early Nov. lows following the Thanksgiving holiday. However, recent investment buying has “by no means been exhausted,” and buying should become more aggressive if the early Nov. lows are approached again.

Good scale support has come into the market in the past few days; buying has come “from important interests that had taken profits at or near the highs, apparently because they did not desire to have the market move ahead too rapidly.”

Recent rally has still not recovered much of the last decline; the Dow lost 73.49 points from Sept. 10 - Nov. 10, and only gained 11.51 in the rally since then.

Brokers' loans have declined so much that some brokers are now reportedly lenders instead of borrowers of money.

Reduction in steel production in past week wasn't considered disturbing since trend hadn't been expected to improve until mid-January, when a gradual uptrend was expected into the spring on rail, auto, and structural demand. However, drop in freight car loadings of 52,150 for week ended Nov 15 was unexpectedly large.

K. Collins, R.H. Macy executive VP, says intelligent advertising to stimulate public buying will be one of most potent factors in relieving the business situation.

Economic news and individual company reports:

US Steel ingot production for week ended last Monday was at 45% vs. 47.5% prev. week and 70% in 1929; independents were at 37%, vs. 41% and 68%; industry total was 40%, vs. 43% and 69%. Definite improvement seen starting Jan. based on scheduled auto production, construction, and rail equipment inquiries.

Rumored steel price advances haven't materialized, but recently set minimum prices have been holding well, though scrap prices are weaker.

Public utility bonds in default increased $49.2M to $285.0M in year ended Nov. 1. Most were traction (mass transit); defaults rare in gas, electric, or water cos.

Ten of the 70 Arkansas banks that closed this week have now been reopened.

First 41 rails report Oct. operating income up 7.3% from Sept. but down 24.5% from Oct.1929; revenues were up 3.5% from Sept. but down 19.3% from 1929.

Companies reporting decent earnings: Crown Cork & Seal, Chesebrough Mfg. (Vaseline).

Book:

The Work of the Stock Exchange - “Commencing with a history of security markets in general, dating back to the Roman Forum, the volume briefly describes the establishment of the Stock Exchange in 1792, and its development down to present times.”

Theater:

Pressing Business - Comedy set in the cleaning and pressing establishment of Goodman & Small; main storyline is romance between Ben Goodman and Peggy O'Day; features four of the cast members from Abie's Irish Rose.

Angna Enters - creator of “many striking costume-pantomimes in dance form” offers her annual series of performances; her “forte is mimicry of an unusually satiric nature.” Numbers this year include a burlesque reminiscent of the Isadora Duncan school of dancing, and two Elizabethan dance creations - “Shaking of the Sheets” and “Daunce We Praunce We.”

Joke:

“A bricklayer said to a foreman on a new job: 'I'd like to work here, but I can't find a place to park my car.' The foreman replied: 'I guess you won't do. This is a high class job, and we only want bricklayers who have chauffeurs.'”

+ The Boring Stuff:


Continued disagreement on possible extra session of Congress in 1931 (following current short “lame duck” session; next scheduled session is at end of 1931). Prospects for the extra session seem less on agreements with “insurgent” Republicans to bring some bills to a vote in current session; farmer's organizations have also indicated they won't press for the debenture at this time. However, some still call for the extra session; Rep. Rankin (D, Miss.) predicts it will be needed since there's “no hope ... of beneficial legislation” with current Congress.

Editorial by T. Woodlock: Two ideas are emerging on dealing with the depression: the “high wages” theory, and use of “long range planning” for business. These must be combined to have a chance of success, since increasing wages and production without coordinated planning across the economy would run into limits on demand. Some blame business leaders for the depression and believe this planning must be done under public control, but a better alternative might be to make business leaders freer to act by relaxing our antitrust laws, as the rest of the world has done; we may be paying a high price for our “worship at the anti-trust shrine.”

Farm Board chair. Legge warns that Russia's revival as a large-scale wheat exporter may make world price of $1/bushel unusual; calls for curtailing US production to domestic requirements.

Dr. P. Silverberg, Harpen Mining chair., attributes German financial crisis to “capital destruction,” including unproductive investment, social policies, and excessive reparations. Speaks out against “political phantasies of the extreme right parties”; calls for utmost economy in public finances, centralized control and reorganization of local govts., and private enterprises taking responsibility for themselves instead of “throwing it upon the state.”

Italian Foreign Min. and Soviet Commissar of Foreign Affairs confer on perfecting existing trade agreement; Italy wants to increase shipments of manufactured goods to Russia while Russia wants to ship more raw materials to Italy.

Cuban Pres. Machado's request for “virtually dictatorial authority” over all of the country approved in principle by Cuban Senate and House.

Cuba notifies League of Nations it has accepted the Root Protocol revising World Court statutes; this reportedly removes final barrier to US entry to the Court.

Turkish govt. notifies Paris Debt Council that only about a third of $4.5M currently due on Ottoman public debt can be paid.

Editorial: New York State faces the decision of whether to turn control of the Erie and Oswego Canals over to the Federal govt., thereby saving millions a year in expenses. The NY State Waterways Assoc. opposes the turnover as an effort to kill the canals as possible competitors of the proposed St. Laurence shipway between the Lakes and the Atlantic. This belief may be justified, but the St Laurence will in any case be developed if feasible - which in itself isn't certain. Even if the canals were kept under New York control, there's little prospect of undertaking their “enormously expensive” conversion from barge canals to shipways.

Vermont is harvesting its Christmas tree crop - over 250,000 trees will be shipped in the next few weeks, filling 200 railway cars.

Conservative observers say real test to come when stocks approach lows at which recent rally started; if resistance develops around that level, stocks should be bought for a rally. Advise keeping liquid position to take advantage of declines from renewed bear pressure.

Dow theory adherents feel the recovery since Nov. 10 was largely technical; bearish operations had been “pushed to the utmost,” driven by “exaggerated pessimism” on business. Investment buying by “powerful banking interests” came in, drawn by yields over 5% in high-grade stocks such as US Steel and AT&T; however, this buying was unwilling to follow the rally up to higher price levels. This resistance at higher levels brought experienced bears in again to renew pressure.

Broad Street Gossip: “Some of the large banking interests and wealthy individuals have been placing fairly large scale buying orders under the market in certain of their favorite stocks.”

Demand by short sellers for stocks in the loan market was fair, particularly for US Steel, and Westinghouse.

Drop in gasoline in storage considered encouraging; current total of 36.532M barrels is lowest since Oct. 18 and not much above 35.805M on Nov. 23, 1929.

Number of stockholders in 31 oil cos. Mar. 31 was 419,199 vs. 338,125 in 1929 and 200,556 in 1925. Standard Oil NJ holders on Feb. 15 were 103,689 vs. 26,829 in 1925. Most of the companies have no funded debt.

Commodities mixed. Grains slightly higher. Cotton down moderately. Copper market near standstill, with small amount available at smelters at 10 1/2 cents, large producers holding at 12 cents, but “insufficient metal changing hands to indicate any real price at the present time.”

Electric light and power industry expected to show increase of 3%-4% in revenues this year; this is one potential bright spot for copper, since the electric industry is one of its largest consumers.

W. Storey, Atchison pres., says 6-hour railroad work day “entirely impracticable”; wouldn't increase employment on train crews but just result in more overtime. Recent conference of rail unions was unable to agree on proposal for changing working hours; unions will meet in early Dec. to try again; options include 6-hour day with 6-hour pay, 6-hour day with 8-hour pay, and 26-day month.

After many months of lean business, locomotive companies report some signs of better demand, with large inquiries from NY Central, St. Paul, and IRT.

German unemployment Nov. 15 was 3.484M vs. 1.760M a year ago.

J. Rosenwald, Montgomery Ward chair., denies knowledge of resumed negotiations for merger with Sears: “I am here in Chicago, and if people want to talk in New York, I cannot help it.”

Vortex Cup Co. (paper cups) stock about 20, yield 10%, earnings for year ended Sept. 30 were record high of $5.01/share.

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