December 18, 2009

Thursday, December 18, 1930: Dow 165.60 +8.09 (5.1%)

Assorted historical stuff:

Jacob Ruppert [former brewer, reasonably successful Yankees owner 1915-39] says return of “real beer” inevitable, would provide work to 1M men, aid commodity prices, provide $300M in tax revenues.

Editorial: The Dept. of Justice is already investigating bread prices [why they haven't declined along with wheat prices]; now “the Senate has been asked to seize its investigation spade and begin mining operations on the other side of the loaf. The probable benefits to the public are exactly nothing.” Flour is only 20%-25% of bread cost, and other costs are mostly fixed except wages, which it would be undesirable to cut.

Commerce Sec. Lamont, speaking at aeronautics regulatory conference, says govt. policy is to interfere as little as possible with industry; hopes industry will conduct itself so that little regulation is necessary. [Without fear of governmental authorities people would swallow each other alive - Rabbi Chanina, Ethics of the Fathers]

US District Judge W. Clark finds Prohibition void due to invalid ratification method; US to appeal immediately to Supreme Court.

Washington report: Sen. Watson (R, Ind.), Republican leader, assures Pres. Hoover Congress won't adjourn for Christmas holidays until emergency drought relief and unemployment bills passed. E. Meyer nomination for Fed. Reserve governor seen likely to pass in Senate; Rep. McFadden's fears of foreign entanglements seen unrealistic by Fed observers. Pres. Hoover to withhold Wickersham Commission report (investigating Prohibition) until Dec. 1931 to avoid controversy at this session of Congress. Senate requests Col. Woods' report on unemployment due to reports his suggestions were rejected because of cost; Pres. Hoover says Col. Woods made no formal report.

[Strangely unfamiliar.] Agriculture Sec. Hyde says only $25M needed for drought relief; expansion of loans dangerous; seed loans had started during war but are now “annual recurring propositions”; these loans are step toward the dole; if food is included this time, next time it will be clothing; if loaning to farmers, why not to laborers?

G. Swope, GE pres., gives radio address on N.B.C. outlining plans GE provides to its workers for life insurance, help in buying homes, pensions, and now a proposed unemployment insurance supported by combined worker and company contributions.

Editorial: Anger in Congress over rail opposition to waterways begs question of what rail's attitude should be. Advocates of waterway transport seem to believe it inherently cheap as an article of faith. Owners of railroads have a right to ask that economic soundness of each waterway project be established by “competent and disinterested” authority before public funds are spent; engineering opinion isn't enough since “engineers are notoriously unreliable in their commercial judgements.”

Rep. Luce (R, Mass.) denounces Rep. McFadden's statements attacking the banking system and Gov. Meyer of the Fed. Reserve. [see yesterday]

Guatemalan govt. overthrown; revolutionary leader Gen. M. Orellan named provisional pres.

A. Hitler, German Fascist leader, sues Werner Abel, former Hitlerite, for perjury in claiming Hitler received funds from Mussolini in exchange for understanding that when Fascists attain power in Germany they would relinquish claims to the Southern Tyrol.

Customs war between Czechoslovakia and Hungary seen inevitable after delegates unable to reach trade agreement to replace one that expired Monday.

Australia seen having reached financial crossroads after successfully dealing with $500M of maturing loans in 1930 by redemption and new loan subscriptions (recently completed with new $140M loan); govt. successfully resisted attempts by “extremists” to force postponement of maturing loan repayments.

Wall Street's panic of 1884 seen as unique for having been caused by fraud in high places (two bank presidents misdirected millions into “the market maw”).

NY Emergency Employment fund has final meeting at Hotel Astor; total of $8.269M raised. Owen D. Young, committee member, spoke: Fund is not charity but means of relieving impact of a disaster, like a flood or earthquake, that affects some more than others. Confident “disease of unemployment” will ultimately be mastered; the process is slow because US doesn't want economic dictatorship any more than a political one.

Manhattan on Dec. 16 is first area to adopt new system of telephone exchanges involving name+number (“Murray Hill-2”) instead of just name.

Market commentary:

Market wrap: Heavy selling continued in the morning, with many leaders hitting new lows, but a violent rally began shortly after noon, with sweeping comebacks in the leaders and rallying throughout the list. Bond market suffered heavy early liquidation followed by sharp late rally, with most issues ending lower; US govts. slightly lower; foreign mixed with many record lows; corp. mostly lower. Commodities strong; cotton and grains up sharply in the afternoon.

Sharp rally was met with cheering on the Exchange floor and in customers' rooms.

Rumors were widespread that the banking consortium that stabilized the market in Oct.-Nov. 1929 had decided to step in again, but these were baseless.

Recent rail weakness seen disturbing the market; many brokers had been recommending them.

Broad Street Gossip: Following several months of predicting a bottom, market observers are now almost all noncommittal. Those discouraged by current conditions should recall that in some past depressions you could buy govt. bonds in the 80's, and you were lucky if you could withdraw money you deposited in the bank yesterday.

Recent market action strongly suggests a temporary climax to the downtrend that “may represent the lowest levels for several months at least.” If the market continues to parallel 1920-21, stocks may move in a narrow range in early 1931, higher in mid-year, then hit final lows in the summer about 10% below the year-end bottom. In any case, market is seen in strong technical shape for near-term recovery, and banking circles are confident this will happen.

T. Gerlach, Illinois Mfrs. Assoc. pres., sees business ready to spring forward. “Even the most conservative must see signs of vast improvement over 1930's industrial doldrums. ... People have been making the old things do, but the desire to spend is inherent in American life and accounts largely for our high standard of living that is the admiration of the world”; over $2B will be distributed this month in interest, dividends, bonuses and Christmas clubs; this is slightly below last year's total but will buy more. The one cloud on the business horizon is the possibility of unsettling legislation; it's to be hoped Congress will adhere to the constructive statements made after the election by both parties, and restrain the more radical elements there.

Henry Ford says believes business recovery will start soon although improvement will be slow.

Sharp increase in GM sales attributed to dealer restocking of new models rather than pickup in purchasing demand.

Economic news and individual company reports:

[Pretty amazing drop.] US Agriculture Dept. estimates value of all 1930 crops at $6.275B vs. $8.675B in 1929. Canadian Agriculture Dept. estimates value of all 1930 crops at $629.1M vs. $949.0M in 1929 and $1.125B in 1928.

[Green shoots dept.]
Steel trade reviews report better forward buying; seasonal upturn expected in Jan. US Steel ingot production for week ended last Monday was at 44% vs. 43% prev. week and 64% in 1929; independents were at 33%, vs. 34% and 63%; industry total was 37%, vs. 37% and 63.5%. This was better than expected; a year-end decline had been seen as likely.
Survey of 500 diversified plants in Cleveland finds 40% definitely expect employment increase in Jan., 50% no change, and 10% decrease.

Auto finance company earnings have unexpectedly held up better than other auto-related cos. in spite of lower volume, due to lower rates and small loan losses.

Freight traffic handled by class 1 rails in Oct. was 39.292B net ton miles, down 17.9% from 1929 and 18.5% from 1928 [somewhat worse than the car loadings drop.]

Call money rate eased back to 2%.

Twelve Arkansas banks closed, taken over by state banking dept.

Calif. allowable oil production quota reduced 40,000 barrels/day to 500,000; actual Nov. production was 604,573.

New York and London banks returning more capital to Germany following decree making Breuning financial program effective and adjournment of Reichstag.

World sugar producers hopeful compromise can be reached with Germany to restrict production.

Christmas card sales are reported running ahead of 1929.

Companies reporting decent earnings: F. & W. Grand-Silver Stores, Telautograph (machines transmitting diagrams by wire), Citroen (French, cars).

Newmont stock (copper) price is about equal to total earnings per share for 1928 and 1929 ($36.28).


Sophia Delza made her dance debut; chief virtues are great personal charm, costumes, and “a temperamental understanding of the Russian mood of pathos.” Highlights included Lament, to music by Bartok, Eastern Beggar's Prayer, to music by Daf, and the particularly striking Dance of Frenzy, unaccompanied by music. [Died in 1996, later became instrumental in popularizing tai chi in the US.]


“'I am sorry,' said the dentist, 'but you can not have an appointment with me this afternoon. I have eighteen cavities to fill.' And he picked up his golf bag and went out.”

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