December 25, 2009

Thursday, December 25, 1930: Dow 165.20 +2.27 (1.4%)

Christmas editorial:

[Strangely unfamiliar.] “A year has passed since the US kept its first recent Christmas of disillusionment ... We cannot fail to look about our own doorsteps with more than ordinary sympathy. ... This Christmas season is the beautifully appropriate time for a generous courage in helping others to help themselves, for doing more than a too prudent minimum toward re-creating busy workshops and homes of secure contentment. ... This year the day may well be one for unwontedly humble searching of minds and hearts ... That cannot render the day less beneficient than it has been these 20 centuries.”

Assorted historical stuff:

[Strangely familiar.] NY State to investigate short selling of bank stocks and spreading of false rumors in connection with Chelsea Bank failure; various brokers subpoenaed. J. Wayne, Phila. Clearing House pres., says banking situation in Philadelphia back to normal.

[Pretty amazing ... kind of makes you feel bad about what happens.]S. Insull, electric utility executive, says recovery from depression won't happen overnight; gains must be fought for and held. However, in the long run, in spite of depressions and even panics, progress continues. “When I remember that with my own hands I gave the first service on the first telephone exchange ever installed in London; when I remember that the vast industry with which I am connected was not even a dream when I was born... when I remember that the invention of automotive transportation, airplanes, and a thousand other things ... have all been achieved during my day, how can I think that we even know what ... tomorrow may require of us?”

Washington report: Republicans are increasingly calling for the party to “come to grips with the insurgent element in a definite and final manner ... If the process means party disruption and possibly a national defeat, there are plenty willing to let that come.” Matter has come to a head due to feud between Sen. Norris, who bolted the party's Presidential candidate in 1928, and R. Lucas, party leader, who is being investigated for secretly paying for literature opposing Sen. Norris in the recent election. It can at least be said for Sen. Norris that he “insurges quite as actively” in election years, unlike most of the insurgents who “manage to get on the edge of the reservation” around reelection time. Sen. Wagner (D, NY) will introduce Federal unemployment insurance bill; opponents see danger from “the political demagogue demanding increasingly liberal provisions until he finally has something very like the dole.” This could be avoided by having private industries and states cooperate to set up the system.

AFL pres. W. Green puts current US total of unemployed at 5.3M. However, seasonal Nov. increase was only 5% vs. 28% in 1929 and 17% in 1928.

Editorial: The Farm Board now says the US farmer can't compete on the world market. “Possibly the American breast will swell with pride as the majestic strains of that Song of Defeat pour from the throats of the $500,000,000 choir, but probably it will not.” The US farmer can compete by using more efficient production on larger farms, and by crop rotation and fertilization; if the Farm Board used its remaining $100M to encourage this “the song of defeat would be forgotten.”

Rawleigh Foundation attributes movement of US pop. from farms to cities over past 30 years to agricultural depression and unfair taxation of farms.

US shipyards in 1930 built private yachts costing a total of over $20M; have contracted to build more than this in 1931.

Pan American Airways to start new Miami - Jamaica - Panama route Dec. 30, requiring 7-hour flight over Caribbean; will be longest over-water route by almost 400 miles, and a “laboratory line” for developing service across the Atlantic. Details of service worked out by technical committee headed by Col. Lindbergh.

[Somehow this never catches on ... ] Public mores have been radically changing. Fifteen years ago men stared when a woman showed her ankle, and a woman smoking a cigarette was enough to bring the world crashing down. Even greater changes seem to be in store; the French tobacco monopoly has now created a cigar especially for women.

The Cotton Exchange celebrated Christmas with a rousing display; firecrackers exploded around the exchange floor and the room was filled with confetti and colored ticker tape. An old-timer said the scene was the happiest he'd witnessed on the Exchange in a quarter century.

Market commentary:

Market wrap: Stocks opened firm and advanced steadily on quiet holiday trading, with many traders out until next week. Bonds higher on very dull trading; US govts. firm; foreign steady; corp. generally higher. Commodities firm on narrow trading.

Oils were a weak spot following last week's increase in gasoline storage. Coppers were strong after Anaconda maintained its regular dividend. American Tobacco and Woolworth were strong.

American Tobacco has had success in concentrating on its Lucky Strike cigarette brand; its sales will increase about 6B this year, while the industry as a whole will produce about 119B, almost unchanged from last year. Sales of other Amer. Tobacco brands have held surprisingly well.

Conservative observers see improvement in rail securities within next few months; should benefit from consolidation and from any improvement in general business.

Market resistance to selling pressure after closing of Chelsea Bank Tuesday considered encouraging, sign of strong technical position.

Extent of decline in foreign trade in Nov. was unexpected by govt. officials who had looked for only a slight seasonal decline.

Year-end inventories are expected in most cases to be the lowest in many years; one expert estimated total inventories might be 50% under a year ago.

Steel industry production is now as low as it's been in 25 years, but large companies are in better shape than in past depressions; most continue to pay dividends.

Bond market comment: Recent sharp reaction seen due to “local causes of a transitory nature” [probably meaning bank failures]; however, “credit position of the country is strong, money is cheap, and prospects point to a steady improvement from now on.” Highest grade municipals have held up relatively well; average price decline was about 2% from Oct. 15 - Dec. 16. Foreign loans of $362.7M scheduled to mature in 1931 vs. $115.7M in 1930, but refinancing has already been arranged for most of the total.

Surprise cut in New York Fed. rediscount rate didn't seem to bring strong reaction in stock and bond trading, though financial community is said pleased with “open door” [easy credit] policy of the Fed. Aside from effect on credit, the rate cut is calculated for psychological effect. Main result will be to simulate bond market, but it's believed the cut will also benefit other securities. “There is a general feeling that this reduction in the local bank rate may easily prove to be the turning point in the whole economic and financial situation, here and, ultimately, throughout the world.”

The year closes with the picture radically changed from the end of 1929. Stocks and bonds today are as cheap as they were expensive only a little over a year ago. The pendulum has swung too far in the other direction in the case of many high-grade securities.”

Economic news and individual company reports:

First 15 rails report Nov. net operating income down 44.7% from Oct., 26.0% from Nov. 1929, and 37.3% from Nov. 1928; gross revenue was down 19.6%, 18.0%, and 21.2%, resp.

Eastern rail conference on consolidation continues between representatives of main lines (Pennsylvania, New York Central, the Van Sweringen's Chesapeake & Ohio - Nickel Plate system, Baltimore & Ohio); good progress reported.

US Steel ingot production for week ended last Monday was at 41% vs. 44% prev. week and 64% in 1929; independents were at 30%, vs. 33% and 62.5%; industry total was 34%, vs. 37% and 63%. Substantial reduction to as little as 20% expected this week due to holiday shutdowns, but a relatively sharp expansion is expected early next year.

Fed. Reserve reports 981 US banks closed in the first 11 months of 1930, a record high; 236 failed in Nov.

S.W. Straus estimates US conservatively needs $4.5B of public works construction, not including private building. About $1.2B is currently going forward.

Worldwide assoc. of tin producers proposes two-year program of export restriction.

Java sugar producers seen unlikely to cooperate with production cut plan; raw sugar declines 5-9 points, with Dec. futures at 1.11 cents/pound.

French wine crop disastrous; 1.109B gallon total vs. 1.663B in 1929, poorest in decade in both quality and quantity.

Steamships operating Caribbean cruises report unprecedented holiday demand. Bookings have been slack for round-the-world cruises.

NYSE seat sold for $200,000, off $10,000 from previous sale.

Companies reporting decent earnings: Briggs Mfg. (auto bodies, only large co. in the industry to show profit gain over 1929).

Reo Motors bucks severe slump in rest of industry; new car registrations in 39 states for Nov. are up 38% vs. 1929, compared to industry decline of 46%.

Depression joke:

The editor of a Minneapolis newspaper dictated a letter to the pres. of one of the largest banks there asking for a 300 word end of year summary of business conditions. Unfortunately, the two zeros were inadvertently dropped by the typist; the reply received was “Gone to hell.”

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