November 12, 2009

Wednesday, November 12, 1930: Dow 173.30 +1.70 (1.0%)

Assorted historical stuff:

Pres. Hoover says US should play a part in World Court; in Armistice Day speech, declares belief world will within a few years become firmly interlocked with arbitration and conciliation agreements, and disputes not resolvable through diplomacy will be arbitrated; sees important role for Court: “In the development of methods of pacific settlement ... a great hope lies in ever extending the body and principles of international law ... Our duty is to seek ever new and widening opportunities to insure the world against the horror and irretrievable wastages of war.”

Col. Woods of emergency unemployment committee says pleased at better cooperation from big employers than in 1921. Reports that auto and construction industries, which has sales of $4B each a year ago, have fallen off by about $1.5B each; estimates this has led to 900,000 unemployed in these industries alone.

Republican Nat'l Committee chair. Fess says Prohibition will be a chief issue in 1932 Presidential campaign, deviation from dry law enforcement will mean defeat.

Art exhibitions now at galleries include Rembrandt etchings at Knoedler's, a “Currier & Ives epidemic” at the print shops, and Lucille Douglass series of pastels and etchings, mostly of the ancient temple at Angkor. Offered at auction are the entire contents of Mrs. Charles V. Bob, wife of the promoter who recently vanished.

Medical dept. of NY Edison Co. develops treatment for pneumonia by inhaling mixture of oxygen and carbon dioxide; said to cure all but most hopeless cases.

First US-controlled aircraft factory in foreign country opened by Curtiss-Wright in Santiago, Chile.

One of world's largest rubber-covered conveyor belts manufactured in a single length: 891 feet long by 67 inches wide, one inch thick, weight 28,565 pounds.

Market commentary:

Market wrap: Stock price movements indicated relentless declines had finally produced an oversold condition. Heavy morning pressure on AT&T and Nat'l Biscuit normally “would have been extremely disturbing,” but only had a temporary unsettling effect. Strong rallying tendencies developed in the afternoon; short covering seen; specialties including Case and Auburn rose sharply, and US Steel led recovery in the major industrials, rebounding 5 points from recent low; upturn was checked in late afternoon by news of further slump in steel production, but efforts to renew decline were stubbornly opposed. Bond market moderately active, irregular; corp. up after sharp late rally, speculative and convertibles strong; foreign govts. weak, particularly South. Amer.; US govts. active, mostly higher.

Recent trend of odd-lot investing may have found its ultimate example in one broker's customer who in the last year bought 192 shares of 192 different companies.

Poor business sentiment partly attributed to market decline, since there are over 10M shareholders of record in the US; “the experience of having what they hold shrink day after day is not a stimulant to optimism by any means.”

Middle West Utilities Oct. survey of business and crops in territories they serve finds conditions still uneven but some general improvement over Sept.

Experienced observers see market approaching selling climax and turnaround; “another day or so of selling in the heavy volume seen on Monday might well bring the end of the present phase of the market, and be followed by a recovery that could run for several weeks.”

Curb Exchange report: (later the Amex; small companies) Goldman Sachs Trading Corp. [investment trust started by Goldman Sachs in Dec. 1928, peak in 1929 was over 100] hits new low ground under 8. Great Atlantic & Pacific among last chain store stocks to fall below 1929 panic low at 162, about 15 times earnings.

Economic news and individual company reports:

Rail freight loadings for week ended Nov. 1 were 934,640 cars, down 24,695 from prev. week and down 137,594 or 12.8% from 1929 week.

ICC denies petition of rails for reconsideration of lowered Western grain rates.

US Steel ingot production for week ended last Monday was at 47%-48% vs. 52% previous week and 75% in 1929; independents were at 41% vs. 44% and 72%; industry total was 43% vs. 47% and 73%.

Copper producers agree worldwide production cut of 20,000 tons/month desirable, to about 130,000 tons/month; producers seek permission from Washington to allow agreement in spite of antitrust law.

Barnett Nat'l. Bank of Jacksonville warns Florida bondholders against adjustment committees formed for profit attempting “to scare holders of Florida bonds into 'dumping' them at sacrifice prices”; urges holders to get information from dealers who sold the bonds or other reliable sources.

Suez Canal shipping traffic in first half was 12.212M net tons, down 4.642M from 1929.

Halsey, Stuart study reports newspaper circulation up 39% in past decade, advertising revenue up 60%.

Companies reporting decent earnings: Fox Film, Equitable Office Bldg., Pet Milk Co.


“'You mean to say you were not at your own daughter's wedding? Where were you?' ... 'I was looking for a job for the groom.'”

Financial etymology:

[Note: This is the first time I've seen “blue chip” defined as a particular price. Still not sure about the origin, but would guess it might be from poker.]The White Chip Club now has a big waiting list and has taken over most of the floor space of the Blue Chip Club.” At end of trading Monday, only one stock was traded at a “blue chip” price (over 200), though there were 8 more quoted over 200 that didn't trade. Total number of stocks that traded over 200 sometime in 1929 was 94. First stock to trade over 200 was Pennsylvania Coal, at $275, in Feb. 1876. Average price of all listed shares Nov. 1 was $42.43.

+ The Boring Stuff:

Pres. Hoover addresses Assoc. of Nat'l. Advertisers; praises advertising as having “stirred the old lethargy of supply and demand” and raised living standards; credits it with speeding up the application of new discoveries and inventions; purpose is “to create desire, and from the torments of desire there at once emerges additional demand.” At one time advertising was resented as intrusion and “clamor to the credulous. But your subtlety and beguiling methods have long since overcome this resentment.” Stresses need for probity in advertising, praises self-regulation by industry as “curing abuse without the interference of government.”

Editorial: Steel producers' decision “stoutly to resist further price demoralization” is a very important development. A year ago, during Pres. Hoover's conferences for industrial stabilization, steel men “heartily accepted” proposition that wage levels should be maintained. If prices continue declining, this would become very difficult; some smaller producers are already operating at a loss. “In the steel trade it is widely believed that a firm refusal of further price concessions will bring in a substantial amount of new business.” Outcome will prove “whether the industry's maintenance of the long existing scale is or is not sound practice.”

Congress to convene Dec. 1; this session will still have large Republican majority in House and coalition control in Senate. Glass subcommittee to inquire into banking, Fed. Reserve and its relation to stock market, and other issues. Some radical stock market proposals including banning short selling and margin buying considered very unlikely to pass. Some measures regarding power regulation and formation of Federal Communications Commission. Doubtful how much legislation can be passed, though new spirit of cooperation may allow progress on some items.

Pittman Senate subcommittee reportedly will recommend US loan of 1B ounces silver to China; Administration opposed; opinion was espressed that use of the loan for public works in China would help break up the warring forces, many of whom are said to have joined up to avoid starving.

Rio de Janeiro population has been growing steadily and is now over 2M; many large apartment buildings went up a few years ago when, like many other cities, they were experiencing severe housing shorrtages. Now, there are over 10,000 empty dwellings in the city that landlords won't rent for what tenants will pay.

Outright buying of stocks [for cash] in the past 6 weeks was estimated at $600M-$1B or more based on brokers' loans figures.

Banks apparently not forcing liquidation of security loans; reports of member banks as of Nov. 5 show no important declines in any major cities.

Recent declines attributed mostly to forced liquidation and tax selling rather than aggressive short selling; “the lower stocks have gone, the heavier has been the liquidation”; continued downtrend has impaired many margin accounts that were in strong shape two months ago. However, demand by short sellers for stocks in the loan market remains high, with several large issues including US Steel at a premium.

P.F. Cusick, Kent, & Co.: “It is our opinion that we are rapidly approaching, if we have not yet reached, the actual bottom of the bear market.” Point out that every bear market since 1897 has hit bottom above the preceding bear market low, but below the second-preceding bull market high; Dow is now between these two points (162.31 and 173.90).

The Chronic Optimist notes stocks are less risky to own now: “Many stocks ... could drop to zero now and the loss per share held would not be as great as the same stocks suffered in the October-November breaks of last year.”

Bond dealers less optimistic on outlook for bond market, a marked contrast with Sept. when most saw a good market imminent; increasing opinion that market won't show sustained improvement until business conditions do.

Many utility companies now selling below 15 times earnings, lowest ratio for past few years.

A. Sloan, Jr., GM pres., says GM able to stay profitable by starting adjustment a year ago when co. realized conditions were changing; sacrificing some current profits to keep production and inventories low; hasn't reduced wages, believing “prosperity of the US is founded on a high wage scale.”

Commodities dull. Grain markets closed in observance of Armistice Day. Cotton up moderately. Copper situation unchanged; good foreign buying, domestic producers reluctant to sell at 9 1/2 cents, awaiting rumored curtailment agreement among world copper producers.

Volume of bond trading on NYSE in Oct. was $272.1M vs. $231.0M in Sept. and $353.2M in 1929; heavy activity in foreign loans due to political unrest.

Gasoline stocks at refineries Nov. 8 were 37.012M barrels, down 203,000 in week; refineries operated at 63.8% vs. 64% prev. week; oil production was 2.297M barrels/day, down 65,800 from prev. week and down 333,950 from 1929.

W. Donovan, former Asst. US Attorney General, says oil industry should try to regulate itself to solve overproduction, warns that public wouldn't consent to modification of antitrust law without a price that “may well be the surrender to government of a greater participation and control than now exists.” E. Reeser, Amer. Petroleum Inst. pres., calls for permanent solution to overproduction, says immediate outlook depends on business improvement, but increased demand certain in long term due to fundamental role of petroleum in present-day industrial life.

Interior Dept. says prospects good for adoption of unit (cooperative) development for oil and gas at Kettleman Hills; called test case in oil and gas conservation.

Most rail equipment companies will cover dividends in spite of almost negligible buying since early in 1930, due to good buying in late 1929 and early 1930. Prospects for early 1931 look unfavorable, though strong financial positions should protect dividends unless slump is prolonged.

Editorial: Anticipated short corn crop suggests price will rise enough to result in other grains being substituted.

Assoc. of Cotton Textile Merchants reports Oct. sales were 335.8M yards, 146.7% of production; shipments were 118.1% of production; stocks on hand declined over 41M yards or 10.6% to lowest level in 12 months, while unfilled orders increased 22.9%.

Public is reportedly so eager in its search for exceptional values that stores offering genuine bargains sell out without advertising. One large drug store chain has sent buyers across the country looking for “job lots” of bargain merchandise; efforts have been successful beyond expectations.

Amer. Machinist reports machine tool demand slightly improved, but industry sees no tangible improvement until start of 1931.

Directors of European Ford subsidiaries report business ahead of 1929 everywhere but Italy; attributed to Ford offering best value.

Beneficial Industrial Loan Corp., largest firm specializing in small loans, reports new loans in first 9 month were $46.0M, up 14.7% from 1929. Reports only 68 “surrenders” in first 9 months out of 400,000 non-selected accounts vs. 146 in last year.

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