September 22, 2009

Monday, September 22, 1930: Dow 229.85 +0.83 (0.4%)

Assorted historical stuff:

Agriculture Sec. Hyde charges Russia with short-selling wheat to drive prices down, prompting blizzard of activity. CBOT Pres. Bunnell asks for evidence; CBOT member Bennett ridicules idea that Russia would do this since they have wheat to sell; Iowa Sen Brookhart looks into closing the CBOT; Farm Board member McKelvie says believes the CBOT could stop short-selling by Russia; Russian Rep. Belitsky denies large-scale short-selling.

Russia announces 8 executed and 438 exiled to concentration camps for gold hoarding and counter-revolutionary activity.

International Paper says have received official assurance that convict or forced labor not used to produce imported Soviet lumber or pulp wood.

Editorial supporting yesterday's speech by K. Hogate, VP Dow, Jones, that recommended distribution of corporate surpluses to shareholders. If the surplus was paid out to its rightful owners (the shareholders), almost $4B would flow into the economy, relieving unemployment and stimulating business. Money can be piled “mountain high and yet, if ... not moved into consumption, nothing but stagnation will ensue. Goods and services ... cannot be moved into consumption unless there is individual purchasing power. ... A dollar in an individual income travels much faster and works harder than one held in a surplus account.”

P. Cherington, of J. Walter Thompson, addresses Financial Advertisers Association meeting: “The banker has only recently come to realize that he has marketing problems as pressing as those of the manufacturer or distributor of merchandise.” Calls for application of marketing approach to selling of securities.

Commerce Dept. optimistic on soundness of German economy; notes resistance to severe depression, well-maintained export trade.

While Friday's rumors of German revolution turned out to be baseless, there are now increasing reports that results of the German election might cause reopening of the reparations issue and possibly of Allied war debts to the US.

Former French Premier A. Briand summons 27 European nations to confer on his project for European union; 8 nations propose reciprocal trade program.

Experimental secure wireless telephone tested; device transforms spoken words into unintelligible state and retransforms them on receipt.

Market commentary:

Market wrap: Some early selling attributed to professionals and margin calls sent out after Friday's close. Selling was easily absorbed and good support came in to US Steel, spreading to other leading issues and moderately to the rest of the list. Volume slackened on the recovery and stocks backed and filled for some time; near the close, market tone improved again. Rubber stocks up on reported industry understanding. Bond market active and strong; US govt. firm; foreign govts. steady, including German; rails strong; convertibles firm.

Week in review: “Recrudescence of gloom” blamed on disappointment over pace of recovery, anticipated poor Q3 earnings, German rumors, and renewed bear pressure. Still uncertain if correction is merely technical.Credit remains easy. Some improved steel buying. Wheat hits new post-1914 lows.

Market has continued to confound the majority; less than two weeks ago vast majority of brokers were bullish on both technical and fundamental grounds following advance past 241 resistance level, but between Sept. 10-19 Dow has declined from 245.09 to 229.02.

Conservative observers see continued bear pressure this week until resistance is hit. Advise using rallies to sell long positions and strengthen margined accounts.

Henry Ford says economic crisis is worldwide, but still has great hopes for the future; particularly optimistic about market possibilities of Africa, China, and Japan.

E. Kulas, Pres. Otis Steel: “Underlying conditions affecting prices and demand in the steel trade have changed for the better and the outlook is steadily improving.”

E. Loomis, Pres. Lehigh Valley Rail., notes improvement in business conditions and general outlook, although sentiment is a little ahead of actual improvement.

Economic news and individual company reports:

Trade reviews showed moderate expansion in fall buying, though early September spurt in trade lost some momentum.

Irving Fisher's index of 200 wholesale commodities for weekend ended Sept. 19 was 83.6 vs. 83.4 previous week and 96.0 average for Sept. 1929.

GM reports retail sales by dealers in the past three months were 263,891 units, or 29,440 more units than GM shipped to dealers. This contrasts with 1929, where GM shipped 14,928 more cars to dealers than they sold; encouraging indication that stocks of unsold cars are being depleted rapidly.

August new car registrations in 21 states and were 55,968 vs. 74,290 in July and 106,081 in Aug. 1929.

Company reports since July 1: 242 companies reported higher earnings vs. 1929 and 494 lower; 1165 dividends unchanged, 55 increased, 112 cut.


“Impatient Man (outside telephone booth) - Can I help you to find the number you want?
Young Woman (sweetly) - Oh, I don't want a number. I'm looking for a pretty name for my baby.”

+ The Boring Stuff:

Perhaps as long as cotton is traded in, the cotton market will be linked with the name of Daniel J. Sully,” dead at 69. In a remarkable one-year career in the cotton market in 1903-04, he raised the price of cotton from what was already a bull-market peak of 9 cents to 16 cents, before collapsing in March '04.

German Chancellor H. Breuning and Prussian government deny reports of coup d'├ętat, putsch, or military preparations by any political group.

[Note: for clarity, I marked the sarcastic parts of this next editorial with a *]
Farm Board should improve its already good prestige* by saving our vital* domestic sugar industry that supplies almost a fifth of our needs. Beet sugar farming must he helped, being so well suited* to US conditions that under tariff protection and using thousands of poor Mexican workers, production has declined over the past 10 years. The brilliant, simple* cure is to simply raise the sugar tariff; the burden of this will fall only on the luxury loving wealthy*. Luckily* the existing tariff, having only been doubled in the last nine years, is still a modest* 174% on Cuban imports. Cuba is clearly profiting* by dumping sugar, as the “handsome receivership melons” handed out to stockholders of Cuban sugar companies demonstrates. We can clearly ignore* future prosperity of a strategically important country in which the US has $1.5B invested.

Tokyo tests new radio station broadcasting to San Francisco; preparing for celebration of Japan's ratification of London Naval Treaty.

Car motor being constructed designed to propel racing car at 300mph, develop 1,200 hp; to be used for attempt at world speed record of 231mph.

League of Nations budget for 1931 estimated at $5.7M.

ILGWU threatens strike of 4,000 Fifth Ave. custom dressmakers; would affect Bergdorff-Goodman, Henri Bendel, others.

C. Nash, Pres. Nash Motors, says solutions to depression is not “high sounding theories” or “political promises,” but building things people need at the lowest possible cost; this is “the one way to increase the value of the dollar to the point where buyers will reenter the market”

Recent strange increase in brokers' loans as market declined attributed to tax payments made from brokerage accounts.

Copper was considered a “well-regulated industry” up to a year ago, but “someone kicked over the traces” and price has declined from 18 cents to 10 1/2.

Commodities weak. Cotton down slightly. Wheat down slightly after sharp fluctuations following charges of Russian short-selling; other grains mostly down.

Bureau of Labor reports total cost of building permits issued in 291 cities in Aug. was $137.9M, down 16.2% from July.

Youngstown District steel operations to be at 57% of capacity this week, unchanged from last week.

British iron and steel market reports improved demand although consumers still not inclined to commit far ahead.

First half exports of rubber tires by 8 leading countries were down 12% vs. 1929.

US exports of electrical equipment in July were $9.6M in July vs. $10.8M in June and $12.7M in 1929; first 7 months were $81.2M, down $1.8M from 1929.

Sugar Beet and Sugar Cane Advisory Committee considering measures to help sugar industry, including clearinghouse and raising tariff.

Annual expenditures on miniature golf estimated at $228M.

IRT continues fight to avoid being forced to buy 289 new subway cars.

Companies reporting decent earnings: Lambert (toiletries and medicinals), American Ship Building, Chesapeake and Ohio (rail, against general trend), Traung Label & Lithograph (canned goods labels).

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