January 17, 2010

Saturday, January 17, 1931: Dow 164.94 +2.12 (1.3%)

Assorted historical stuff:

A farmer in Edmonton, Canada brought a load of wheat to town, but was told by the grain elevators that they could only give him credit tickets to the bank holding a mortgage on his crop. Deciding that if the bank wanted the grain it could have it, he drove there, broke the bank manager's window in, and filled his office with wheat, covering desk, chairs, etc. The bank manager was said to be thankful he didn't have a mortgage on the cows.

Letters to the editor: H. A. has some strong words for Wall Street: “That lump of gold before their eyes, blinds them to the situation in the whole land. When gold possesses the soul God help the man ... Will the dumbest spot in our fair land awaken before it is too late? There is just a very short time to make amends. Remove the gold lump and take just one good look and they will see that there is need to start repairing the damage done in 1920 and on.” C.L.S. responds to T. Woodlock: Heredity and environment are equally important. Therefore, criticizes aristocratic control since many of the best minds come from humble origin; also criticizes democratic regime of social control and regulation as obstructing opportunities for development. Advocates “govt. of limited powers, keeping order, and abstaining from granting any monopolies through the restriction of the freest competition.”

Washington report: Sen. Robinson is repeatedly raising question of $25M appropriation for food relief in drought areas, threatening serious delay and possibly extra session; Pres. Hoover might need to reach compromise on the matter. Distribution of loans under $45M drought relief measure likely to start next week; farmers may use loans for fertilizer, feed, seed or tractor fuel. Pres. Hoover's Emergency Employment Committee estimates local govts. (other than Federal and state) made $700M available for public works in past 100 days. Analysis: Real objective of liberals in the Federal Power Commission and Muscle Shoals controversies is govt. ownership and operation of power plants.

Interior Sec. Wilbur says only remedy for oil industry is agreement between oil-producing states approved by Congress to ensure fair play, reasonable planning, and cooperative development where possible; calls for conservation, defined as development of areas to give maximum ultimate recovery. Editorial: The proposed oil tariff can't help the industry as claimed; similarly to wheat, the US exports more oil than it imports and a tariff would be as ineffective in supporting prices as the current duty of 42 cents/bushel on wheat.

New Zealand has a compulsory unemployment insurance fund supported by equal govt. and worker contributions; unemployed draw $5.25/week, $4.36 for spouse, and $1/child.

Cuba drastically restricts immigration from countries other than US and Spain as means of solving economic and labor problems.

Strong sentiment seen in Russia for second trans-Siberian line to open up vast, untouched timber resources.

Senate approves probe into why price of bread hasn't declined in proportion to price of wheat.

T. Conway, member of Gov. Roosevelt's St. Lawrence Power Commission, submits minority report saying plan to use existing utilities to distribute power would put state and customers at mercy of utilities.

Twenty-sixth annual NY Motor Boat show opens Friday at the Grand Central Palace.

B.F. Goodrich perfect rubber airplane wing coverings to prevent ice formation in freezing conditions.

New type of violin demonstrated in Paris - invented by Makhonin, it has no sound box but is electrically amplified. The amplified tones are very pure, and soar above background of string and brass.

George Honeyball is now living as a pauper in the Transvaal province of South Africa. In 1886, he was one of the prospectors who discovered the Witwatersrand goldfield; about $6B worth of gold has been extracted from there since.

J. E. Meeker cites biblical origins of some Wall Street concepts: business cycle anticipated in Joseph's seven fat and lean years; short selling in Esau's sale of birthright for mess of pottage (since not in possession of birthright at the time).

Market commentary:

Market wrap: Stocks continued under pressure in the morning, with declines through the list; however, liquidation was heavy only at the open. Shorts switched to covering about noon; volume dried up but a rally developed leaving many stocks with good gains. Bond market less active; US govts. firm around year's highs; foreign mostly firm; corp. mixed with high grade strong but speculative lower. Commodities weak; grains down; cotton up slightly; silver down 5/8 cents, back to last week's record low of 28 1/2 cents.

Bethlehem Steel weak on poor earnings estimates. Merchandising shares weak, particularly mail order; attributed to recent report by Col. Ayres predicting lower retail prices; in rebuttal, merchandising interests say profit margins have held up in spite of price cuts due to lower purchasing costs.

American Can subject of various bear rumors. Anaconda seen likely to lead copper group when any improvement develops.

Professionals seen controlling market in absence of much outside interest; some recent bear attacks have been "announced before they were begun," bringing in some additional outside selling. Rallies develop when bear pressure lifts, indicating available supply of stock is not large. Observers believe the market will continue to be a range-bound affair dominated by traders, though breaking through resistance levels to the downside could increase supply of stock from outsiders.

Short position has increased considerably, with some outside short selling attracted by recent weakness. This should technically strengthen market in near term.

Dramatic decline in brokers' loans continued last week. While the trading community didn't take much note, observers looking to the longer term saw the decline as very important, indicating extent to which stocks have been passing from weak to strong hands. While this factor probably will stay in the background until business improves, it indicates the market is technically ready to respond promptly to any business upturn.

Bank statements last week indicated further shift to secure investments in spite of already liquid position; banks sold $15M of non-govt. securities while adding $18M to already large govt. holdings; both brokers' loans and loans on securities to non-brokers continued down sharply. Drop in non-broker loans seems to indicate selling by more astute and conservative group of investors.

Broad Street Gossip: Due to increased investment buying, the floating supply of US Steel common stock is down to 16.31% of total shares, the lowest percentage ever. This will in time affect the stock's market fluctuations.

Steel co. earnings difficult to estimate due to year-end adjustments, but expected to be poor in both the last and current quarter. Automotive operations are currently improving, but production in the first quarter is still likely to be considerably below 1930 levels. Oil industry immediate outlook poor, with price cuts expected to spread. One encouraging sign is curtailment of drilling.

Cotton situation is grim; world consumption for the 5 last months of 1930 was at least 1.250M bales below 1929, while supply for the season was 20.470M bales vs. 19.233M. Although cotton is cheap by any standard, consumers aren't responding by increasing buying.

Dr. G. Mez, chair. of largest German office machine mfr., says wages had gone up too rapidly in Germany since 1924, stabilization needed; some signs this is happening; believes US should be optimistic on business recovery, conditions now typical of those at bottom of depression.

Economic news and individual company reports:

US exports in 1930 estimated at $3.850B vs. $5.241B in 1929; imports $3.025B vs. $4.399B.

NY State savings banks deposits showed record 1930 gain of $205.8M, to record high of $4.733B.

New bond financing this week was $253.5M, mostly by public utilities. This was up sharply from $39.0M last week, and the highest total in a year. Demand was considered fairly good considering the sharp jump in supply.

NYSE notes marked drop in “velocity” of security sales in past 30 years; attributed mainly to increased taxes.

Bradstreet's and Dun's weekly reviews report continued gains in sentiment and in some lines of business, though recovery still appears gradual.

Morning newspapers report plan is under discussion for reorganization of failed Bank of U.S.

Canned goods consumption reportedly holding up well, though stores are keeping inventories small. Sales of “fancy” grade goods are down.

Willet & Gray estimate record world sugar production of 28.1M long tons in 1930-31 season vs. 26.9M in 1929-30.

French-British discussions resumed in London on means of avoiding future sudden withdrawals of French funds from London.

German Fin. Min. Dietrich sees budget for next year as sound in spite of continued economic decline; no tax increases contemplated; wages in industrial centers have been reduced 5%-6%, along with some prices. Dietrich plan to create new work for unemployed abandoned. Germany had trade surplus of $357.1M in 1930 vs. a deficit in 1929. Foreign debt increased by $238.1M due to interest on existing debt.

Canada Dept. of Nat'l Revenue collections in 9 months ended Dec. 31 was $181.0M vs. $244.0M prev. year.

French Ministry of Labor says 17,000 unemployed receiving dole, estimates 100,000-200,000 partly unemployed.

New Chinese tariff became effective Jan.1; sizeable number of reductions, but most changes are upward, particularly on luxury goods.

Union Trust of Cleveland estimates motorists to buy 61M tire casings in 1931, 14% over 1930. Production in 1930 was 53.5M vs. 70M in 1929. See further promise for 1931 rubber industry based on production curtailment and better cooperation between manufacturers.

Aviation Corp. of the Americas, holding co. for Pan American Airways, likely to show 1930 loss due to heavy development expenses, but now operating in the black, should show net profit for 1931. Co. has built world's largest air transport system, with 22,000 miles of airways; carried 32,000 passengers in 1930, with no passenger injuries, vs. 14,000 in 1929; fleet of 98 planes serving 31 countries.

Vanadium estimates 1930 earnings slightly above $3 dividend requirements; 60% of earnings came from resale of company stock, and second half showed a small loss, but business so far in Jan. is reported good and the dividend is expected to be maintained.

Sears-Roebuck denies reports of further price cuts beyond those in upcoming spring/summer catalog.

Company reports since Jan. 1: 26 companies reported higher earnings vs. 1930 and 71 lower; 156 dividends unchanged, 9 increased, 28 cut.

Companies reporting decent earnings: Maine Central RR (against industry trend), Pacific Western Oil (against industry trend), D. Emil Klein (cigar maker).


The Bat Whispers - Outmoded in these days of realistically written detective melodramas; "secret staircases, swinging fire-places leading to hidden rooms, and criminals who frighten people by assuming fantastic guises no longer possess their former capacity to thrill and chill audiences."


"A bleary-eyed man entered a savings bank and hurried to the teller's window. 'Lemme have two cases right away,' he said, pushing two $50 bills through the grating. 'What do you mean? Two cases of what?' replied the teller. 'Hanged if I know what name you give it, but I saw a sign outside that said four percent, and I'll drink whatever it is.'"

Doctor - Did you give the medicine according to directions? Mrs. Jackson - Well, doctor, I did my best. You said give one of these pills three times a day until gone, but I ran out of pills yesterday and he still ain't gone.

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