November 6, 2009

Thursday, November 6, 1930: Dow 179.81 -5.58 (3.0%)

[Note: Unfortunately the blather on contemporary events I tried to write yesterday kept expanding so I didn't get it done - will try and finish it soon!]

Election Special:

Congressional returns incomplete; Democrats appeared to gain control of the House and make inroads into Republican Senate majority. Regardless of exact outcome, neither party expected to have any effective control in Congress; administration expected to be “greatly embarrassed in pursuing its policies over the next two years”; Washington center stage to be occupied by “political jockeying and maneuvering for the preferred position in 1932.”

Editorial: This year's swing away from the Presidential party is apparently “more pronounced than the traditional mid-term reaction,” but to call all of Tuesday's results a repudiation of Hoover's leadership, “as the Times does,” is exaggeration; there are many other issues involved. Most importantly there's the depression; rightly or wrongly, “voters who have half a job or none visit their resentment upon the party in office.” Tariffs always cause a reaction at the polls, and Prohibition influenced many votes. We must wait for completed Congressional returns to see how much of a “national overturn” has taken place. A Democratic Congress, by historical precedent, might foreshadow a Democratic President in 1932, “but much water is to go over the dam in the intervening two years.”

NY Gov. Roosevelt reelected by record 3/4 million margin; “more than ever stands out as the likely presidential selection of his party two years hence.” While greatly strengthened, his candidacy still might be resisted because of anti-Prohibition stand and New York political affiliations. Also gaining as a possible presidential candidate was Robert Bulkley, elected senator from Ohio on a wet platform.

Editorial: Gov. Roosevelt's victory in New York, while impressive, may not have been a referendum on Hoover but largely driven by local issues. Roosevelt's program of social relief naturally had special appeal in a year of depression. His opponent was little known, had an incompetent party organization, and his only noteworthy issue was the Tammany Hall scandals. “Thus the unprecedented Roosevelt majority in this state was primarily a personal and local affair.”

Prohibition expected to become outstanding issue in 1932 Presidential and Congressional elections. Wets in House increased from about 75 to 125-150; gains in Senate were small but considered influential. Wets expected to move aggressively toward showdown, though change considered unlikely by this Congress.

Bulk of the local public works bond issues on the ballot were approved, for total of about $300M.

Assorted historical stuff:

Report to White House child conference estimates annual crime bill at $16B and annual child welfare cost at $5B.

Alien immigration to the US was 17,792 in Sept. vs. 28,020 in Sept. 1929.

Officers and workers of Chicago area railways join to aid rail workers in need; cash funds for aid gathered from voluntary contributions; commissaries at important points will provide necessities including coal, food, and medical care.

Speech from British throne censures government for having no constructive program to cure depression and unemployment. Liberal party presents plan to reduce unemployment by one million by reducing production costs, govt. stimulation of new enterprise, encouragement of agriculture, and public works.

Prohibition movement advancing slowly but surely in Europe: following “ten years propaganda in favor of total abstinence,” village of Mengsdorf, Czecho-Slovakia unanimously adopts resolution to refrain from drinks and revoked liquor license of town's only inn.

Gov. Dern of Utah says will remain neutral in lawsuit filed by Arizona to stop construction of Hoover Dam.

Gallery exhibitions include a show of 50-odd Degas pastels and drawings at the Seligmann Galleries, and paintings by Max Backmann, the leading modern artist in Germany, at the New Art Circle. The Museum of Modern Art regrets to report that one of Daumier's finest small works, “The Print Collectors,” valued at $35,000, was stolen from its exhibition walls last week. “A detective is now constantly on guard at the museum to prevent any further thefts.”

Westinghouse creates automatic fire extinguisher able to operate without human attention. An electric eye is rotated by a motor. When it detects a fire, it stops the motor and directs a stream of water toward the source of the flame; After extinguishing the fire, it begins to rotate again. In a recent demonstration, the eye found and extinguished 5 separate fires in various parts of a room in that many minutes.

Dr. H. Eckener says all future German Zeppelins to use helium gas due to danger of hydrogen shown in R-101 disaster.

Market commentary:

Market wrap: Whole market under pressure most of the session; “results of the election were undoubtedly the principal factor”; as additional results became known and it became clear Democratic gains were larger than expected, liquidation increased; commodities also came under severe pressure. Leaders including AT&T, Westinghouse and Standard Gas hit new 1930 lows; selling spread to rails; US Steel broke to lowest point since 1928 on further decline in production. Volume was not heavy and decline orderly but steady; activity increased in final hour when new lows were established. Bond market more active; high grade corp. generally higher; US govts. firm; foreign govts. steady, Brazil higher.

Utility shares were heavily sold; apparently due to Roosevelt and Pinchot victories in NY and Pennsylvania; “ideas of neither man are in harmony with normal private operations of utilities”; Gov. Roosevelt's prominence as 1932 Presidential candidate seen as “unpleasant cloud on the horizon.”

Eastman Kodak hit new 1930 low on reports holiday outlook not promising; however, company reportedly has attractive Christmas line including “Kodatoy”, a $12 movie projector for children projecting the 16mm film used for home movies, as well as the “Beau Brownie” and “Kodak Coquette.”

Technicolor hit new low under 11 but found support; traders said attracted by long-range possibilities of color films.

R. Budd, Great Northern Rwy. pres., sees business starting to definitely improve next summer and back to normal by end of year; points to depleted inventories as providing stimulant when consumption returns.

Dow made new post-panic low. There was one new yearly high and 127 new lows.

Economic news and individual company reports:

American Bankers Assoc. reports savings deposits at US banks and trusts June 30 were a new record of $28.485B, up $267.2M vs. 1929. Number of depositors was 52.769M, up 5,048.

Rail freight loadings for week ended Oct. 25 were 959,335 cars, up 28,250 from prev. week and down 175,025 or 15.4% from 1929 week.

Class 1 rail employees in Aug. totaled 1.514M and were paid $215.8M vs. 1.532M paid $217.9M in July and 1.760M paid $260.0M in Aug. 1929.

French banking difficulties continue; stocks declining, “advices from Paris hint of possibility of further difficulties before liquidation has run its course.”

Companies reporting decent earnings: United Light & Power, Federal Water Service, Loews.


“Dr. John B. Watson was recently quoted as follows: 'In fifty years there will be no such thing as marriage.' Consulting 'Who's Who,' I find that I am able to write with a degree of confidence that in fifty years there will certainly be no further prophecies from Dr. Watson. - Rev. David A. Poling.”

“'What are you standing over there throwing rocks at that little boy for?' 'I dasn't go closer, ma'am. He's got the whooping cough.'”

+ The Boring Stuff:

Strange editorial by T. Woodlock where he points out that stock market fluctuations don't result in overall total money gain or loss across society since the buys and sells all balance out. Doesn't seem to acknowledge potential of bubbles to increase borrowing, resulting in over-consumption, over-expansion by business, etc.

Survey by authorities in Kiangsi Province of China finds “so-called 'Communist' bandits” blamed for killing 81,300, destroying $214M worth of property, and burning down 37,700 houses in the province in first 9 months of 1930.

Aviation Corp. of Canada to be formed with Canadian Railway participation; to control several existing Canadian airway cos. and provide coast to coast service.

Many industrials have greatly increased cash holdings as a result of lower inventories and smaller accounts payable.

Up to Sept. 10, the day the last rally ended, 75% of traders believed the market had definitely turned; now, 75% are bearish.

Thus far in the bear market it's been the long-term bear that made money, while those traders who try to switch between long and short have had difficulty.

Steel trade interests see further declines in production before change for the better due to seasonal factors.

D. Willard, B. & O. Rail. Pres., attacks government subsidized inland waterways and free use of highways by trucking companies.

Increase in freight loadings considered encouraging, since at this time in 1929 loadings were trending down; comparison vs. 1929 was since Aug. 30; however, market interests inclined to wait for next few week's results before placing too much importance on the increase.

Commodities weak. Wheat down sharply to new season lows, corn little changed, other grains also down sharply; several month contracts down to lowest levels in 20 years or more. Cotton down sharply on late weakness. Copper buying continues active abroad; domestic producers not anxious to sell, seen buying time and hoping for production curtailment.

Currency Comptroller reports resources of 7,197 national banks Sept. 24 were $28.379B, down $737.9M from June 30 but up $454.4M from Oct. 4, 1929.

US Steel ingot production for week ended last Monday was at 52% vs. 55% previous week and 80% in 1929; independents were at 44% vs. 47% and 75%; industry total was 47% vs. 50% and 77 1/2%. Scrap steel and iron prices reported sharply lower. Iron Age reports “steel trade still clings to the opinion that production is close to bottom,” counting on rail and structural steel buying; machine tool orders reported down in Oct.

Gasoline stocks at refineries Nov. 1 were 37.215M barrels, up 560,000 in week; refineries operated at 64% vs. 65.7% prev. week; oil production was 2.363M barrels/day, down 15,150 from prev. week and down 456,400 from 1929.

State and municipal borrowing in Oct. was $157.1M vs. $72.6M in Sept. and $122.3M in Oct. 1929; first 10 months $1.202B vs. $1.090B.

Bradstreet's reports Oct. business failures were 1,943, up 10.2% from Sept. and 17% from Oct. 1929; liabilities totalled $74.2M, up 31.1% and 146%; first 10 months were 19,818, up 21.2% from 1929; liabilities totalled $744.0M, up 49% and a new record high.

World copper production in Sept. was 302.0M pounds, down 23.3% from peak in April 1929 when copper was 24 cents; US prod. was 137.0M, down 37.9%.

Japanese business activity reported about 27% below 1929 level, and foreign trade about 30%. Stocks have steadily declined since July, 1929; total value of shares listed on Tokyo Stock Exchange Sept. 1 was 1.671B yen, down 989.2M since Sept. 1, 1929. Business uncertain on govt. policy; many who favored “deflation and rationalization” when current govt. took power in July 1929 are now in favor of inflation, with govt. providing emergency aid for all classes of business by giving funds to the Industrial Bank of Japan and having it “endorse any commercial bill or note of which there was even a remote chance of repayment.”

Industrial machinery exports in first 9 months were down 5% from 1929 but up 19% from 1928.

Q3 production of fats and oils was 1.087B pounds, of which 482.6M were vegetable oils and 339.4M were lard.

NYSE seat sold for $240,000, up $8,000 from most recent sale.

Assorted Q3 earnings: Mack Trucks $0.62/share vs. $1.85 in Q2 and $2.67 in Q3 1929; Standard Oil of Calif. $0.83 vs. $0.80 and $1.13.

The last survivor of the original 54 subscribers to stock of the old American Electric Co. is A. Sloper. This company was a predecessor to GE formed 50 years ago to market an electrical arc-light. The stock issue was 3,500 shares at $25 par, of which Mr. Sloper took 20 shares for $500; had he held on to the stock he would today have GE stock worth a total of $35,669.

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