November 11, 2009

Tuesday, November 11, 1930: Dow 171.60 -1.54 (0.9%)

Assorted historical stuff:

Editorial: Offer by 7 Democratic leaders of cooperation for the common good and positive response by the Administration are hopeful signs. While some partisanship could be detected even in this exchange, there are still real reasons for hope. Newly elected Dem. Sen. Bankhead has rejected idea of allying his party with insurgent Republicans to organize the Congress “on the basis of a division of the spoils.” Likewise, Sen. Walsh of Montana has called for end to partisan attacks. Public has right to insist both Republicans and Democrats stick to the agreement in good faith.

Pres. Hoover to ask Congress for special emergency appropriation to expedite public works for unemployment relief.

Chair. Woods of Emergency Committee on Employment says will attempt to get more accurate figures on number and distribution of unemployed in US; charts prepared by the Committee based on Labor Dept. statistics show uniform decrease in unemployment in recent months, with increasing part time work.

Movie industry execs move to throw power of “talkies” behind “buy now” campaign using nationwide showing of trailers, newsreels, and other advertising.

F Sargent, Chicago & North Western Rwy. pres., attacks Agricultural Marketing Act as unconstitutional; “I strongly criticize the establishment of government agencies to compete with private business as constituting unlawful confiscation of property.”

British Conservative leader S. Baldwin predicts even with tariffs, England will have “thundering hard job” over next decade to return prosperity.

A banker returning from New Mexico, Arizona, and Mexico reports that messengers there carry bags of gold and silver without gun or bodyguard, whereas here in New York, transfer of a bag of coins requires armed escort.

Anne Nichols, author of “Abie's Irish Rose,” loses appeal in lawsuit for plagiarism against producers of “The Cohens and the Kellys.”

C. Fritsche, Detroit Aircraft pres., asks Pres. Hoover for help in getting $4.5M authorization to construct all-metal airship 550 feet long, 120 feet in diameter, with 100 gross ton lift capacity and 100 mph speed. Ship would use oil-burning engines and helium for lift.

Market commentary:

Market wrap: Stocks briefly rallied during first hour (attributed to pledges of Democratic-Republican cooperation on economy), but a flood of selling quickly reappeared, spreading throughout the list. Several stocks which had previously resisted the selloff dropped sharply, including Amer. Tobacco, Nat'l Biscuit, and United Drug. US Steel hit new low since 1928; new bear market lows in Amer. Can, GE, Westinghouse, GM. Utilities, oils, and investment trusts also weak. Commodities also broke sharply. Bond market continued active; corp. generally lower, especially convertibles and rails; US govts. firm, foreign down mildly.

Many stocks are depression-proof based on increasing earnings, but in the recent decline no stocks have been bear-proof.

Broad Street Gossip: Many traders believe the recent fast and severe decline in stocks will be balanced by a sharp rally when the bottom is hit. However, picking the bottom of this downtrend can be tricky - one trader reports he's picked 6 bottoms and counting.

Experienced observers believe recent increase in short-selling by small traders is hopeful: “Just as a rapid expansion in brokers' loans heralds the culmination of a bull swing, general switching from long to short positions by inexperienced speculators is a familiar feature of the final stages of a prolonged decline.

Dow made new post-panic low. There was one new yearly high and 376 new lows.

Economic news and individual company reports:

Total value of all NYSE listed stocks Nov. 1 was $55.026B vs. $60.143B on Oct. 1; borrowings by NYSE members were down $925.3M in the month to $2.556B, declining from 5.79% of total value to 4.65%, vs. 8.51% on Nov. 1, 1929.

Fed. Reserve member banks weekly report for Nov. 5: loans on securities up $24M to $8.081B, “all other” loans up $8M to $8.715B.

Some encouraging steel news seen in increase of 57,425 tons in US Steel unfilled orders during Oct. to 3.482M, and in announcement by Carnegie Steel (US Steel subsidiary) that they would maintain a $1.60/hundred pound minimum price on steel bars, shapes, and plates - seen as first step toward stabilizing steel prices.

Sentiment in France said better, but “still nervous despite reassuring statements by the Premier, the Finance Minister, and the Governor of the Bank of France to which wide publicity was given.” Rumors persist about some banks, may result in mergers.

NY State Industrial Commissioner F. Perkins reports NY index of factory employment down 2% in Oct. vs. 84.6 in Sept; first Oct. decline since 1920.

Companies reporting decent earnings: Amer. Gas & Elec., Charles E. Hires (drinks, syrup, extracts).

Stock market joke:

The Room Wit speculates that if this decline keeps up, we may start quoting earnings-price multiples instead of price-earnings.


“'There is nothing so satisfactory as a clear conscience.' 'No,' answered Senator Sorghum; 'and the next best thing is a good lawyer.'”

“'I went West in '89,' said the New Yorker. 'How fur did ye git?' queried the miner. 'Buffalo,' said the New Yorker. 'I went East the same year,' replied the miner. 'Went as fur's Butte, Montana. Nearly ran into each other, didn't we?'”

“'Now that I'm going to marry Mary, there's one thing I'd like to get off my chest.' 'What?' 'A tattooed heart with Jessie's name in it.'”

Financial etymology:

Modern banks date back to Italy in 808; word comes from “banco,” or bench, which was set up in a market for sale and exchange of money. British merchants originally deposited funds in Royal Mint, until Charles I seized it and gave them IOU's, after which they started depositing at goldsmiths in Lombard St. Oldest bank now in existence is Bank of Barcelona, founded 1401; one of earliest banks in London was founded by Francis Child, a goldsmith, in 1663.

Origin of the term bear dates back at least to Exchange Alley in London as early as 1719, when phrase “sell the bearskin” was used, from proverb “to sell the bear's skin before one has caught the bear.”

+ The Boring Stuff:

Post-election comments: Washington officials now free to be more realistic on economic picture: “It is to be hoped that 'Washington optimism' is a thing of the past, and there are indications that this is the case”; current best Washington opinion, contrary to popular impression, “not one of wild optimism”; however, some signs noted of more solid foundation for stock market. World conditions aren't good, but US believed able to lead recovery; more emphasis on domestic market likely; spread in prices between manufacturer and consumer must be reduced. Less “friendly intervention” by govt. in business likely; “advice to let business alone is becoming louder.” Govt. not disposed to join in any of ideas for economic “panacea,” most of which boil down to currency inflation to stop falling prices and stimulate spending; while “perfectly possible,” after-effects likely worse than the disease; memory of wartime inflation still fresh and little desire to repeat it.

S. Insull, Commonwealth Edison chair., says depression has caused a lack of perspective. “I know of no way to judge the future except by experience of the past. ... In the thirty-seven years since 1893, we have had more than one business depression; we have had some that I thought were worse than the one we are passing through. These depressions have not stopped the growth of our city or our country. ... On the contrary, business depressions have induced economies in many directions. ... In 1893, some people were fearful that we would never get over the effects of the panic of that time. Yet, investors have put 48 times as much money into the electricity business as was invested in it in 1893, and we have 214 times as many customers as we had then.”

Editorial by T. Woodlock: Rails face difficult future traffic trends; traffic in raw materials best handled on rails is flattening out, with pressure on rates, while for manufactured items, other tranport is more competitive. Situation calls for “thorough overhauling of rate structures, together with a tightening up of executive control over traffic policies.” Preferably, in each region one “group-rate-commissioner” should be empowered to control rates, acting for all rails in the region.

Both miners and operators blamed for chaotic conditions in coal industry; ACLU dir. R. Baldwin urges unionizing as remedy for mining trouble.

Deadlock” reported on NY City negotiations for unification of rapid transit lines (including BMT and IRT); related stocks decline, though there's still hope of a change in the situation.

Many NYSE brokers continue to report large increase in odd-lot buying by investors across US either having stock transferred to their name or delivered to their banks; the buying has been selective, favoring well-established cos. with long earnings records, and showing a “bargaining tendency”, picking up on market dips.

Short interest said to have increased substantially since election; much of it in small (100-1000 share) and odd lots.

President of a large industrial co. says main worry isn't production levels but prices: “If we can maintain even 65% operations we can make a little money and hold wages ... But when prices go down with production, it is difficult to keep wages at peak ...”; notes difficulty maintaining prices due to antitrust laws.

Royal Dutch Shell board of directors says sees continued difficult conditions in oil industry, with only largest and most conservative firms producing profitably.

H. Thornton, Canadian Nat'l. Rwys. pres., returns from talks with Michigan auto execs, sees definite signs of moderate improvement in auto trade.

Commodities very weak. Wheat plunged to new lows on bearish crop news, with Dec. futures at 69 3/8, off 4 1/8 and low for Dec. future since 1902; other grains also weak, with corn showing best resistance. Cotton down sharply, reversing Saturday gains. Copper still at 9 1/2 cents, producers awaiting results of negotiations for curtailment.

Total financing (bonds, notes, and stocks) by domestic and foreign corporations in Oct. was $208.0M, vs. $328.2M in Sept. and second-all-time high of $1.357B in Oct. 1929; lowest monthly total since Sept. 1923. First 10 months total was $5.6B vs. record high of $10.3B in 1929 and $6.6B in 1928.

Agriculture Dept. Nov. 1 corn crop estimate was 2.094B bushels, up 2.3% from Oct. 1 est. but down 20% vs. 1929 crop and 22.4% vs. 5 yr. average crop.

Standard Oil NJ reduces tank car price of gasoline 3/4 cent to 7 cents/gallon at the refinery.

Fed. Reserve reports Sept. department store sales up 34% over Aug., somewhat less than the usual seasonal gain; Sept. sales were about 12% under 1929.

British budget running into deficit; planned expenditures were 787.2M pounds, and deficit of up to 20M pounds is now expected.

Canadian stats: index of employment in Oct. was 116.2 vs. 116.6 in Sept. and 125.6 in 1929; Sept. car loadings 302,890 vs. 281,150 in Aug. and 335,340 in 1929; Sept. imports $87.9M vs. $77.9M in Aug. and $99.3M in 1929; exports $82.1M vs. $70.6M and $89.4M.

Chrysler increases prices of three high-end “imperial eight” models $250 each to $2745 - $2945.

Fire at Crown, Cork, and Seal plant in Baltimore; over 3,000 tons of raw cork lost, valued at about $300,000.

1 comment:

  1. Trying to keep up with the gyrations in the market on a day to day basis sure isn't easy. And I think that until the policymakers in Washington wake up (or are woken up by enough voters) and learns to understand that the basic foundation of our financial system and economy need to be rebuilt so that we aren't attempting to fix a debt crisis by creating more debt (just like giving a drug addict more drugs to cure the problem), we cannot not have a sustainable recovery. As such, for most people I think they should remain primarily in cash, as well as some exposure to the gold sector, through the gold price and gold mining companies. The government's efforts to fight deflation are supporting the gold price because of the easy monetary policies and money printing, and I don't see this trend ending in the near future. I recently found a really interesting article called What Gold Bubble? Setting the Record Straight which I think is particularly useful for investors to read to get a better sense of what's going on in the economy and the govt's role in influencing it. But getting back to the government's misguided programs, there are so many unintended consequences that I believe have yet to come to the forefront. I would strongly prefer to have a more positive view on the future, but unfortunately this is the way I view things when I look at our current situation.