One year ago today:
[Note: Ending the recap of the 1929 Great Crash - the summary below describes Oct. 29, subsequently known as Black Tuesday.
Epilog: The market fluctuated violently for the next two weeks. For example, on Wednesday John D. Rockefeller, Sr. announced he was actively buying stocks; the Dow on Wed. and Thurs. was up 28.40 and up 15.04. After this the market was closed for two days to allow the overwhelmed Exchange facilities to catch up. When it reopened Monday, the plunge resumed with drops of 15.83 and 25.55 in the next two sessions. The 1929 low was hit on Nov. 13, at 198.69 on the Dow; this held almost a year until October, 1930, as covered in the blog. The fall panic was followed by a very strong rally into the following spring, now known as the sucker's rally - the high for the rally was reached on April 17, at 294.07, and the blog starts as this rally is wearing off in June.
The Sept. 3, 1929 Dow peak of 381.17 wasn't passed until Nov. 1954.
Black Tuesday's record volume of 16.410M shares traded stood until 1968.]
Market wrap: “Necessitous liquidation” resulted in further bad breaks in “the main body of stocks.” Wholesale margin calls were sent out overnight due to the extraordinary decline in Monday's session; this caused heavy early liquidation for those accounts “unable or unwilling” to add funds. The market ignored positive morning announcements on lower call rates and margin requirements. An avalanche of selling proceeded through the morning, leaving no stocks untouched, though the decline was again orderly; bankers were said placing bids to prevent “demoralization from overwhelming the market.” Ticker quotations again fell far behind. Bankers were reportedly urging affliliated interests to buy stocks at current levels. In addition to banking support, substantial buying was reported from investment trusts, utility operators, large individual investors, and odd-lot (small) investors. This support finally checked the urgent selling in early afternoon, and some good recoveries from the day's lows were scored by leading issues.
Volume Tuesday was 16.410M shares, breaking the record just set Thursday of 12.895M. Largest individual stock volume was GM at 971,300 shares. There were no new yearly highs and 551 new lows.
The bankers' group met early in the day and after the close. After the second meeting a spokesman announced the group had been and would continue to support the market; however, the group would not bid stocks up but step in to prevent “hysteria.” The spokesman also expressed optimism, saying public seemed to be coming back to its senses, and a considerable amount of “first class investment buying” was in the market Tuesday. R. Whitney, NYSE VP, said the Exchanges board of governors had met but decided no action was necessary.
Broad Street Gossip: Many stocks are down 50% or more. “All of which means that bargain days are near ... look over the list and you will find many good common stocks that are yielding 6% to 8% or more. ... And some of these stocks are earning 50% to 100% or more above dividend requirements.”
Baar, Cohen & Co.: “There is no question but that a preponderance of stocks are now quoted many, many points below even a conservative market valuation. We believe the time is not far distant when we will look back upon these prices as a golden opportunity to buy something for less than its true worth.”
A. Conway, State Superintendent of Insurance, recommended leading insurance cos. put a substantial amount of assets into leading stocks at current levels.
Many brokers report a good increase in odd-lot (small) buying for cash; seen as “bargain hunters” taking “long pull” positions.
The break in stocks over the past two months will probably go down as the “shortest and most drastic major bear movement on record.” Decline was 39%, about the same as in 1920 and 1907, but those took about a year. This slump differs from past ones in that many more individuals were ruined, though there “has been no institutional difficulty as yet.” There's no inflation in commodities or inventories, and industry is on a “sound basis with no real indications of a depression in prospect.” Slump was apparently caused by over-issuance of stocks, a moderate letdown in business starting several weeks ago, and bear operations; these caused a panic among the speculative public; no one can now guess if “liquidation will be completed in a matter of hours or days.” While industry is sound, the market slump may worsen the letdown. However, in the long run the decline should be beneficial by releasing funds from speculation to industry and foreign borrowers.
Heard on the street: “It was blue Monday with a vengeance. And then some.” “We are now convinced that some things were selling too high.”
“It is impossible to get a prediction on the market. All observers admit that one guess is as good as another under the prevailing circumstances.”
Economic news:
The Stock Exchange announced before the open that call rates had been cut from 6% to 5%.
The bankers' group issued a statement in the morning reassuring the financial community that “There is plenty of money and it will be loaned freely.” They also announced that leading New York banks would reduce margin requirements on loans to customers to 25% of closing quotations from the previous practice of 40%, and would only enforce the margin at the close, not during a session.
Rail freight loadings for the week ended Oct. 19 were 1.186M cars, up 6,503 from last week and up 22,375 from 1928.
US Steel and American Can each declared an extra $1 dividend, with American Can also raising the regular rate from $3 annually to $4.
US Steel Q3 earnings were $5.57 vs. $6.68 in Q2 and $3.31 in Q3 1928; first 9 months were $15.82 vs. $8.17 in 1928.
Allis-Chalmers expects 1929 earnings substantially ahead of 1928, though recent business is slightly behind that in the first half.
E. Reeser, Amer. Petroleum Inst. Pres., says believes Calif. producers who slashed crude prices 40%-50% two weeks ago will restore old schedule at once, and other producers won't cut prices to avoid disrupting the general industry price structure.
K. Kingsbury, Standard Oil of Calif. Pres., says knows nothing to account for extraordinary break in oil stock prices; on contrary, believes prospects for effective conservation (cutting production to match demand) are better now than ever.
Cotton exports for first 9 months were $546.3M vs $619.8M in 1928.
Other stuff:
Editorial: Recent news from Russia is disturbing. Until recently it was barely possible to excuse use of “officially organized terrorism for political reform” due to dire necessity, and as characteristic of major revolutions. But the revolution is now 10 years old and almost as bloody as ever. Opposition is coming largely from peasants previously successful at providing for themselves. Summary trials and executions on a large scale, as many as 50 a day, are being used to impose political and economic ideas that millions of Russians abhor; these actions are “almost cheerfully” reported by official communique. This kind of government offers nothing on which friendly relations with Washington can be built.
NY Gov. Roosevelt says next great political issue will be regulation of public utilities; says Democrats would have been blamed for stock market panic if in power, but Republicans have received little blame.
Movie: Harold Lloyd in his first talking film, Welcome Danger, plays the son of a famous detective investing an opium den in San Francisco's Chinatown.
Amusing observations:
“'Never sell America short,' remarked one trader. 'All of which is true and a good thing to remember,' remarked another trader. 'But some traders are now so bearish they would sell America, the Treasury, Bank of England, Europe, Brooklyn Bridge, and the Federal Reserve Board short if they could borrow them.'”
Comment from London, Berlin, and Paris called the market break “inevitable” or “as expected”; based on this, “great fortunes must have been made by foreigners on the short side.”
Tobacco companies considered promising - it was noted that many Wall Streeters who prefer not to smoke during business hours “have abandoned their policy and are consuming cigarettes rapidly.”
The Trader's Lament:
[Note: This actually appeared a couple of days later, but what the heck ...]
“They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”
Essex County movie theater employees join strike by Newark musicians against cut in size of orchestras.
Market over the past week has been allowing bull traders to do some “profitable in-and-out trading” since it's rallied more following breaks.
One broker reports most short selling is now by small traders.
Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.
Some of buying attributed to short “squeezing”; a large short interest remains, and some have had trouble borrowing shares; frequent calls have been made for return of shares, “necessitating strenuous efforts to replace them” or in some cases forcing shorts to cover.
Bond men report expected yield on high-grade municipals is about 4%, 2nd grade 4.20%, 3rd grade 4.50%, slow-moving issues 5%.
Curb Exchange report: (later the Amex; small companies) Auto shares selling at “nominal prices” discounting no improvement in the industry (Stutz at 1, American Austin at 2). Very thin market in many specialties. Wide differences in valuation; highest grade oils yielding over 6% while some utilities at 20 or more times earnings.
R. Hose, Anglo South Amer. Bank chair., says South and Central American countries in active stage of development, large producers of commodities. Encouraged by recent stabilization in commodities; expects quicker economic recovery than in “older countries already having fully exploited resources.”
H. MacLean, US rep. to Int'l. Chamber of Commerce, notes European companies face difficulties including heavy short term debts, large inventories, and lower sales; sees severe trouble for the “less efficient and less fortunate” but notes heroic efforts to reduce costs, says readjustment period will be shortened by speed at which “hitherto unreachable cost levels have been arrived at.”
Increasing rumors Spain will attempt to stabilize currency on gold standard.
Editorial: Conditions in the wheat market favor a higher price before end of season, “providing business conditions will permit.”
Commodities strong. Wheat up strongly; other grains somewhat higher. Cotton up sharply on govt. stabilization efforts. Copper buying improved at 9 1/2 cents.
Total cars financed by 485 cos. in Aug. were 246,539 for $102.9M vs. 285,234 for $118.4M in July and 347,565 for $163.8M in Aug. 1929.
Gasoline stocks at refineries Oct. 18 were 36.655M barrels, up 379,000 in week; refineries operated at 65.7% vs. 66.2% prev. week; oil production was 2.378M barrels/day, up 7,450 from prev. week and down 491,500 from 1929.
Several companies cut crude oil prices in various sections of the US other than Calif.; typical cuts were $0.25/barrel.
Auto parts and equipment manufacturers report improved shipments to wholesalers in Sept. and Oct.; wholesalers also report improved business. Mfr. shipments of service parts in Sept. were 139% of Jan. 1925 level. vs. 132% in Aug. and 173% in Sept. 1929; accessory shipments were 76% vs. 60% and 84%.
Aug. operating income for 103 telephone companies was $21.536M vs. $22.545M in 1929.
American Machinist reports machine tool market remains static, no major improvement expected until start of next year.
Fed. Reserve Midwest (7th) District reports Sept. 15 industrial payrolls down 1.6% from Aug. 15, total earnings down 1.3%.
Canadian construction permits in 61 cities in Sept. were $11.1M, down 19.8% from Aug. and 35.3% from Sept. 1929.
European steel cartel prolonged until Dec. 31 with 12% reduction in output.
Bethlehem Steel Q3 net expected about $0.60 vs. $4.01 in 1929; first 9 months about $5.05 vs. $13.30; will maintain $1.50 quarterly dividend.
Edsel Ford, Ford Motor pres., says will keep making Model A indefinitely without major change; company “in the midst of the greatest expansion program in our history,” building plants throughout world; these will produce model A cars and AA trucks.
National Biscuit record earnings attributed to lower commodity prices and less spending on plant expansion; successful acquisition strategy focuses on buying cos. with products popular in local markets, then selling them through National's countrywide merchandising system; rumors it may acquire Wheatsworth.
Companies reporting decent earnings: American Ice, Davison Chemical (began selling fertilizer direct to farmers), Continental Can, Texas Pacific Land Trust.
New book:
They Told Barron, an edited collection of the recently deceased C.W. Barron's “Conversations and Revelations.” Considered “the father of modern financial journalism,” he assumed management of the Wall St. Journal around 1900 and developed it to its current position. People talked to him not only because of his powerful position, but his appearance and personality: “Short of stature but impressive in breadth and girth, his sparkling blue eyes, ruddy cheeks, and whitening beard completed a Santa Claus picture which did not belie its owner, for his heart was as benevolent as his appearance.” Covers development of industries including rails, steel, autos, oil, chain stores, etc.; with conversations and comments on many pioneers and contemporary leaders in those fields.