December 30, 2009

Tuesday, December 30, 1930: Dow 160.16 -0.14 (0.1%)

Assorted historical stuff:

Washington report: Pres. Hoover has addressed the nation by radio 37 times this year, a record; Pres. Coolidge made the same number of broadcasts in seven years. Sen. R. Wagner (D, NY) says US must finally accept unemployment insurance despite opposition; has introduced bill in Congress. Editorial: It's not surprising that Sen. Norris [Republican insurgent] rejected an offer of party leadership; as a political malcontent, he would rather stay outside the system and throw inaccurate charges at it. Wickersham Commission said unlikely to recommend changes to Prohibition; will report to Pres. Hoover in second week of Jan. Sen. Vanderburg (R, Mich.) proposes allowing veterans in need to borrow more against compensation certificates; administration said sympathetic.

Recovery in 1931 hoped for by British Premier Ramsay MacDonald, AFL pres. W. Green, Bush Terminal Co. pres. I. Bush.

AFL pres. Green sees basis for business prosperity in high wages, organization of wage earners, shorter working hours, and coordinated control of industry. Hopeful on spring recovery; Dec. increase in unemployment much less than Nov., and less than usual Dec. increase.

Dr. J. Klein, Asst. Commerce Sec., says European unemployed may exceed 7.5M by Feb., unless ranks of unemployed decline “we may expect recurrences of political instability.” Editorial: Much of the European economic weakness is caused by misguided tariffs supposedly enacted to help domestic economies. For example, many countries have raised wheat tariffs to encourage domestic production, with a resulting huge wheat surplus. In the machine age, nations are inescapably dependent on each other; this type of economic warfare makes all losers.

China enacts new tariff schedule with some drastic increases. Denmark, Holland, Sweden, Norway, and Belgium/Luxembourg sign tariff agreement barring increases without notice.

[Ay Chihuahua! dept.] Agriculture Dept. says Russia blessed with abundant first-grade wheat land; may increase production to take care of domestic needs using collectivization and mechanization, and export as much as 200M bushels by 1933.

Broad Street Gossip: Soviet leader Stalin charges that US workers don't benefit because of capitalist control. If Mr. Stalin would take the time to go over shareholder lists of AT&T, US Steel, GE, etc. he would find the great majority are workers and small holders. This is because of wages sufficient to buy homes and cars, educate their children, and put money into savings and stocks.

[Strangely familiar.] Response of borrowers to Fed. easy money policy awaited; “The cook has done his job and the food is ready. ... It is up to the hungry to 'come and get it.'”

[Interesting.] 1930 hailed by Met. Life Co. as record health year for US and Canada; no widespread outbreaks of contagious disease, and even cancer mortality declined after a long series of increases.

General Foods says yearlong test marketing of Birdseye quick-freezing process in Springfield, Mass. successful; can deliver meat products to consumer at same prices charged for fresh meat, cuts selling costs.

Diners on the Boston & Maine RR vote 78%-22% to allow smoking in dining cars; women voted 74%-26% and men 80%-20%.

A fundamental defect seen in production of talkies is lack of unified control. One person does adaptation, another writes additional dialogue, then director does production, then an editor unfamiliar with the director's concept edits the film for final showing. Needed is more producer-directors able to oversee entire production as reached a high point in silent films under Charlie Chaplin, D.W. Griffith, and Eisenstein; Edmund Goulding is already having success doing this with talkies.

A famous Paris hotel has bought two four-passenger airplanes for use by its patrons. The largest will be used for travel to London, Berlin, or Madrid; the smaller is for travel to golfing or gambling resorts. Charges are 80 cents/mile for the large plane and 50 cents for the small one.

Market commentary:

Market wrap: Stocks fluctuated irregularly through the day, but leading shares were resilient considering weakness in bonds and grains and rise in call money. Bond market unusually active, strong early but weakens after rise in call money rate; govts. steady to firm; corp. mixed, with highest-grade issues rising but many new lows in weak issues. Commodities mixed; cotton up, but grains very weak.

Bethlehem Steel dropped after merger ruling. Investment trusts were weak. Technicolor stock has declined from 86 1/2 to below 6; “colored moving pictures have, thus far, been by no means as popular as had been predicted”; prospects not considered bright unless process is improved.

[There was about another 74% of downside from here.] Broad Street Gossip: Break in the market since Sept. 10 has been one of worst in history of the NYSE, with Dow declining 84.93 to 160.16. Repeated bottom calls have been made, only to have stocks go lower. No favoritism has been shown; good stocks have declined along with bad. Many time-honored market rules have failed to hold, particularly the one about “not selling a dull market”; hundreds of new lows have been made on low-volume days of 1.5M-2M shares.

Bond men optimistic on bond market recovery based on NY Fed rate cut, thoroughly liquidation.

Grains extraordinarily weak. In the Liverpool market, where records go back to 1594, wheat hit a low of 4 shillings (about 58 3/4 cents)/bushel; aside from a panic in 1894, this was the lowest price since 1654. Corn broke to the lowest price since July 1923, despite the smallest crop since 1901.

A number of important traders have stepped out of the market until the new year, including operators who have been bearish the past 6 months.

With dull markets expected until the new year Street speculation has turned to what might be in store then. Here signs are more hopeful; although no immediate business upturn is seen, signs were seen that “the great and deflationary movement in stock prices was nearing its conclusion.” These signs included enormous reduction in brokers' loans, easy money, high yields on many leading stocks, and the prevailing extreme pessimism among traders usually seen at bottoms. While well-informed circles aren't calling an absolute bottom, opinion is growing that sound stocks are at very attractive levels for investment buyers.

Sir Josiah Stamp sees recovery in US before Europe; recovery unlikely to start before April, will start weakly and not gain momentum until 1932. Sees some 18 valid causes for the depression; immediate cause was overspeculation on NYSE, next was overproduction of raw materials, but an underlying problem has been the limited quantity of gold compared to production volumes. Calls for continued easy money, govt. economy and balanced budgets, assault on gold problem, and avoiding new Stock Exchange boom [Interesting that this was still a concern].

Harvard Economic Society says based on historical pattern, commodity prices are unlikely to improve until after general business upturn.

J. Scoville, Chrysler statistician, sees recovery to normal auto production by about Sept., 1931. S. Ker, Sharon Steel pres., sees steel plants much better employed by mid-first quarter, gradual uptrend in general business in 1931.

Royal Bank of Canada reports relatively favorable conditions in Canada against background of worldwide depression; employment holding up fairly well, new industries coming in large numbers, agricultural diversification progressing.

Economic news and individual company reports:

Judge D. Jenkins issues unexpected decision on one of the most bitter and costly trials in industrial history; blocks the Bethlehem Steel - Youngstown Sheet & Tube merger opposed by Cyrus Eaton. Case took 6 months of continuous examination, involving “vast mass of evidence” and arguments on “many complex and often novel questions of fact and law.” [I wonder if lawyers also billed by the hour back then.] Merger would have created steel giant second only to US Steel.

Dominick & Dominick predict over $18.5B of life insurance sales in 1930, down 4% from the 1929 record and up over $1B from the 5-year average. “Life insurance policies ... constitute the largest reserve fund of savings, both total and per capita, of any country in the world”; used both for emergencies and ultimate family security. Total life insurance in force at end of year will be over $108.5B; payments made in 1930 will be $2.2B.

Call money advanced to 4%, due to withdrawals by out-of-town banks. However, this was seen as a typical year-end flurry, with easing expected quickly.

US new car registrations in Nov. were 93,066, down 38% from Oct. and 49.3% from Nov. 1929; first 11 months were 2.530M, down 32.4%.

Steel production in 1930 estimated at 29.6M tons, down 26.6% from 1929. Industry that used the most steel was building construction at 19%; second was automotive, 15.5%; third was rails, 15%. Automotive industry was largest user in 1928 and 1929.

In first 9 months, Europe received 46.3% of US exports, a new high, vs. 42.7% in 1929 and 44.7% in 1928.

Crop value that held up the best in 1930 was oats, down 15% to $454.0M; value of 62 other crops was $6.275B, down 28.4%.

NY Fed. reports metropolitan area department store sales in first 24 days of Dec. were about 4.5% below 1929; volume comparison is more favorable due to price declines.

Statement of closed Chelsea Bank said to indicate equity sufficient to cover depositors and leave $36/share for stock. Aldine Trust of Phila. ($9.3M deposits) closes after heavy withdrawals; offers $10,000 reward for conviction of those responsible for false rumors.


“Mother - Is it true that you put an advertisement in the paper to obtain a husband? Daughter - Yes. Mother - I don't know what your father would say to such scandalous goings-on. Did you get any answer? Daughter - Only one - from father.”