November 25, 2009

Tuesday, November 25, 1930: Dow 188.27 +0.23 (0.1%)

Special banking report:

Merger announced among four large NY City banks: Public National, Bank of United States, Manuf. Trust, and Int'l Trust. New bank's chair. to be J. Herbert Case, currently chair. of NY Fed.; bank will be fourth-largest in NY with over $700M of deposits, 1M depositors and almost $1B of resources. Following announcement, Public and Manuf. were up sharply, but Bank of US “dropped perpendicularly” 6 1/2 points to all time low of 15 1/2 bid; other leading bank stocks closed only slightly changed. Merger considered very constructive, “calculated greatly to strengthen and stabilize the general banking situation at this center”; the new bank will apply to join the NY Clearing House Assoc. Merger terms “have been tentatively agreed upon,” but “are still subject to modification in one particular.”

Several recently closed banks reopen, and mergers reportedly in progress for others; however, two Ark. insurance cos. declared insolvent, and small banks in Ill., Mo., and Ind. were closed.

Stocks yesterday may have been helped by better banking news, with “various institutions in the interior” reopening.

Assorted historical stuff:

Editorial: In the past year US businessmen have become concerned about the ability of capitalism to deal with automation, or, as Chesterton calls it, the “insatiable monster who serves us at the price of our slavery.” “Will the laboring multitudes whose services have been so brilliantly economized be able to absorb the fruits of a productivity almost unbelievably expanded?” Problem is complex, but not unprecedented; industry has grappled with it since dawn of the industrial revolution.

J. Stalin, Sec. Gen. of Soviet Communist Party, denies rumors of revolts, mutinies, arrests of high Soviet officials and generals, and other recent alarmist stories. Denies general dumping of goods possible due to small Soviet production, but predicts will be “world's largest grain producer” in two years. Talk of “selling below cost, forced labor, etcetera is sheer nonsense.” Says if political ties with US not possible, “Soviet Union at least desires to strengthen its economic ties ... And America, being a great, wealthy, technically progressive and developed country, must appreciate the advantages of such economic intercourse as much as we do.”

Democrats and Republicans both seen divided by Prohibition issue, with wet-dry dissension within each. Dems. seen more likely to adopt extreme wet position in 1932, with chair. Raskob and prominent possible candidate Roosevelt both wets, and possible strategy of using wet stance to appeal to North while depending on South to stay Democratic. Republican strategy uncertain, although some form of modification might unite the party.

British Air Ministry orders 200 bombers and fighters for Royal Air Force from Hawker Engineering; largest single order for airplanes ever made.

Burial place of seven Dutch sailors on Jan Mayen Island in Arctic found this year by radio operator for the Norwegian weather service. Sailors were left on the island in 1633 by a whaling expedition and found dead the following year when the ship returned. Also found was diary of one of the unfortunates; final words April 30 were: “Wind as before. Sun shines. Who ---”

New car features to be exhibited at the 26th Annual NY Automobile Salon Nov. 30 at the Hotel Commodore: a recessed side vanity “illuminated by a tiny lamp and giving all the conveniences of a boudoir table”; and, for the back seat driver, a rear instrument panel including speedometer, clock, altimeter, and radio set.

Market commentary:

Market wrap: Bears exerted early pressure on theory market had become technically vulnerable after past two weeks advance; leading issues including US Steel and American Can were pushed down with moderate success for first three or four hours, but resistance was stubborn, with volume drying up and declines relatively small. A recovery set in during the last hour, with leading stocks rising above last week's closing levels, and the whole market displaying “a greatly improved aspect”; mail-order shares strong. Bond market very dull, prices irregular; US govts. continue firm; foreign mixed; corp. heavy with most issues down.

Market observers now expect further uptrend over Thanksgiving, and possibly for the next several weeks. Encouraging factors include: advance of both Dow industrial and rail averages; recent impressive resistance and buying support on price recessions; extensive deflation in brokers' loans; seasonal trade improvement.

Tax sellers who disposed of stocks in Sept. and Oct. have had a rare opportunity to buy them back at much lower prices.

An “important foreign operator” who took a huge short position last spring reportedly covered last week on advice from important bankers.

Recent market action seen “in line with the desires of important interests” who don't want either drastic declines or spectacular rallies; declines now are likely to be met with “scale support” because “important interests want to keep the market stable.”

P. Snowden, British Chancellor of the Exchequer, reports signs of improving trade in Britain and elsewhere, sees better times for world before much longer.

Season of increased retail buying for holidays usually starts right after Thanksgiving; retail trade will therefore be watched closely in coming weeks.

Economic news and individual company reports:

Fed. Reserve Bulletin reports retail trade up considerably more than usual seasonal amount Oct. 1 - Nov. 15, but industrial production and employment down; commodity prices declined further; money rates slightly easier.

Fed. Reserve member banks weekly report for Nov. 19: loans on securities down $66M to $7.838B, “all other” loans up $89M to $8.852B.

Treasury issues new rule placing on importers the burden of proof that goods are not produced by convict labor.

Companies reporting decent earnings: Canada Dry Ginger Ale, Illinois Central RR (against industry trend), Blaw-Knox (road building machinery), Thompson-Starrett (construction).


“Doctor - Your constitution is not so good. Patient - How about a little amendment, doc?”


The Metropolitan presents a “delightful and affecting” performance of Puccini's Madame Butterfly with Maria Mueller as Cio-Cio-San.


Just Imagine, a Fox picture - “presents a picture of what New York may be like in 1980,” when airplanes have virtually replaced motor vehicles, television apparatus has supplanted telephones, people are known by number instead of name, and eating is replaced by “simple swallowing, three times a day, of a small pill containing the essential essences of roast beef, vegetables, and desert.” However, Prohibition is still in force, though people get around it using liquor pills. Film's main interest is in introductory scenes showing how life is led in 50 years, and in glimpses of future male and female dress styles; “incidental song numbers and dances are unimportant, and the long expedition to Mars” is relatively boring.

+ The Boring Stuff:

James H. Oliphant & Co. look on positive side of the depression - there are some important constructive measures that are “only possible ... in consequence of severe economic distress.” For example, panic of 1907 led to Fed. Reserve system, “without which is painful to imagine what would have happened in the war period, the 1921 industrial paralysis, the 1929 stock inflation, and the 1932 deflation.” Suggested measures now include modification of Sherman antitrust law, and abolition of capital gains tax (“only the US has this uneconomic form of tax”) - revenue could be replaced with taxes on alcoholic liquor after legalization.

Rep. Snell (R. NY) says favors a vote in upcoming session of Congress on the Norris bill for govt. operation of Muscle Shoals [electric power] rather than having a special session; personally opposes govt. operation, but “This thing has been hanging like a sword over Congress for years. I am in favor of cleaning this and other controversial matters up in the coming session rather than allow them to come up in a special session which probably would last until Sept..”

Total drought relief spending requested by state committees estimated at $111M, not including request to advance $125M of road building funds from 1932.

Editorial: Advocates in Congress likely to reintroduce misguided farm relief idea: “Of all sad words of tongue or pen, the saddest are 'the debenture is back again.'”

Gen. L. Brown, Army Chief of Engineers, says Mississippi system of waterways may be developed as much in the next 10 years as in the past 100.

Editorial by T. Woodlock: Greatest opportunity for permanent gain in rail “economy of operation” is now upgrading of locomotives; while requiring considerable capital, this would be “obviously wise” if savings produced by modern locomotives would be enough to pay back buying costs over 15-20 years.

Will H. Hays offers cooperation of movie industry in helping recovery; “will do everything possible to help counteract unsound psychological factors that have retarded prosperity and employment.”

A rarity recently was presented to the stock transfer offices of the Chicago, Burlington & Quincy Railroad - an 1857 stock certificate for 30 shares that have remained in the name of the same estate ever since. This railroad is one of the few that hasn't passed through bankruptcy or consolidation in the past 75 years, though it's now 97% owned by the Great Northern and Northern Pacific railways.

Failure of yesterday's bear attempts to bring out liquidation “strongly suggested that distressed holdings were no longer overhanging the market.”

In spite of considerable recent short covering, a large short interest reportedly still exists.

Conservative observers remain positive; advise scale buying on reactions, taking profits on good rallies, against taking short side since trend appears to be up.

Old traders encouraged by recent “coming to life” of a large number of stocks that have been “dead” for months.

Broad Street Gossip: “Why is it that after stocks have a break of 50 to 100 points or more, they look less attractive to the average trader than when they are hitting peak prices?”

Foreign markets sell off to start new week. Berlin's sharp decline attributed to US selling; leading shares now yield 8%-12% based on last dividends. French market weakness partly attributed to remaining shadow of Oustric bank failure. London, Milan also down.

Wheat stability considered important for stocks; “on numerous occasions an upward trend in securities was halted by unsettlement in grains.” Therefore it's encouraging that there's “growing belief that the situation in wheat is under better control now than at any time” since downtrend began; “important grain interests are more cheerful on the outlook than they have been in a long time.” Farm Board reportedly believes it can sustain price of US wheat at 75-76 cents.

T. Hardin, world's largest wheat farmer, praises past week's Farm Board action for preventing drastic break in wheat, very bullish on wheat due to use as feed.

Some rails are starting to show much better traffic comparisons with 1929, although comparison is with a period when rail loadings began to drop sharply.

Harvard Economic Society says commodity prices, after pausing in summer, resumed decline in mid-Sept.; recent decline concentrated in agricultural products. See stabilization of wholesale prices within a few months, but price recovery unlikely before business revival.

Harvard investment portfolio showed sizeable increase in stocks over past year; as of June 30, total investments were $103.3M, of which industrial stocks were $12.6M, up 75% in year; utilities $5.9M, up 20.2%; rails $4.8M, up 25%; banks and insurance stocks $2.0M, up 35%.

Commodities mixed. Grains up moderately. Cotton down somewhat on dull trading. Copper remains at 10 1/2 cents - 12 cents, with few sales but fair amounts available secondhand and from smelters at the low price.

Direct foreign investment by US corps. and businessmen at end of 1929 was $7.478B. Areas with most investment were Canada, $1.960B; South America $1.548B; Europe $1.353B; Cuba/West Indies $1.054B. Largest investment types were utilities $1.625B; manufacturing $1.525B; mines $1.2B; oil $1.115B.

Five rail unions meeting in Chicago agree to appoint subcommittees to consider relief measures. A. Whitney, pres. of Brotherhood of Railroad Trainmen, says conference endorsed principle of 6-hour workday; reports 21 rail labor unions currently have 1.5M members with about 400,000 out of work.

Canada is world's third-largest producer of gold and silver; annual gold output $40.3M, or 9.9% of $405M total; largest producer is South Africa with 52.2%.

Canadian rail freight loadings in year to Nov. 15 were 2.842M cars vs. 3.185M in 1929 and 3.273M in 1928.

Ice industry to set records in 1930 at over 65M tons, $450M in sales.

Butter, at 28 1/4 cents, and eggs, at 18 1/4 cents, set new records lows for Dec. deliveries; little improvement expected due to heavy receipts of eggs and butter.

NYSE seat sold for $250,000, up $19,000 from previous sale.

Pennsylvania RR expected to earn about $4.75/share in 1930 vs. $8.82 in 1929 and six-year average of $6.79.

All fulltime GE employees to contribute 1% of wages to company unemployment fund; company will match contributions.

Kellogg Co. adopts 6-hour day to increase number of workers 25%; plant continues to operate 24 hours.

No comments:

Post a Comment