September 29, 2009

Monday, September 29, 1930: Dow 212.52 -0.75 (0.4%)

Assorted historical stuff:

Editorial: Market reaction to Hitler's tirade in court was a crying shame: “It is a wonder, as well as a pity, that good securities must be made a football of a bombastic radical who since [1919] has succeeded in making an ass of himself.” Germany has had a hard time since the war; Hitler has taken advantage for his own selfish purpose. He formed his present party in 1921 with no platform but opposition: to Parliament, to capitalism, to rights of the Jews, and now to the Young plan. Four months later he tried to march on Berlin to “save” Germany, which showed no interest. They are even less likely to adopt his program now that much progress has been made toward reconstruction. Hitler's testimony showed his true colors. “The almost certain reaction will be a wave of disgust that will line up the people against any further progress of his party ... it is likely that his career will prove like a glass of soda water now frothing but quickly simmering down to nothing.”

Denial of use of convict labor in Russian lumber production called absurd by Aaron Kopman, who spent 2 years in Russian prison camps from 1924-26.

W. Graham, Pres. Great Britain Bd. of Trade, notes British spend $325M/year on drinking, smoking, and betting; suggests unemployment would be much improved if they used the money to buy commodities instead.

To relieve Mexican unemployment, governors of Vera Cruz and Tobasco offer state-owned lands for colonization by jobless.

Air travel record set at Newark Airport when 114 passengers landed or departed within 2 hours.

Veteran Pony Express riders recall carrying mail between St. Louis and Sacramento in 10 days at $12/letter; now airmail takes 14 hours and costs 5 cents.

Knute Rockne, Notre Dame head coach, to join R. H. Gibson & Co. as special partner; will devote his time to brokerage business except during football season.

Market commentary:

Market wrap: Bears, encouraged by Friday's decline below Aug. resistance level at 217, launch further drives hoping to penetrate June bottom at 211 and thereby provoke extensive liquidation. Pressure directed against coppers and rails, majors including US Steel and AT&T, and stocks displaying recent weakness including Radio, Vanadium, and GM. Traction shares continued strong. Bear operations may have been further helped by weakness in the grain markets. Some short covering and unimpressive rallying towards the close. Bond market active - high grade corp. strong; convertibles weak; govts. irregular with German and Italian down.

Week in review: stock and commodity markets very weak; bond market strong; general business shows some improvement; short term money extraordinarily easy; commercial loans and money in circulation down; foreign markets nervous.

Stop-loss orders have been popular; the resulting automatic selling has been a factor in recent market breaks.

Some banks in last few days rumored to be buying “stocks sponsored by them”, though not on large scale.

Bears are targeting GE because it has a high price-earnings ratio, but it's always sold too high on that basis and noone has ever made money shorting it long-term.

Dr. B. Anderson of Chase Nat'l. Bank criticizes Fed. Reserve use of open market operations; allows they may have been necessary to arrange war financing at low rates, but use has increased greatly since, mainly to lower rates; doing this “can generate almost incredible abnormalities in the monetary picture.”

Dr. J. Klein, Asst. Commerce Sec., predicts greatly improved business conditions by end of Oct., prices back to 1928 level by end of the year. Notes history of depressions in past 50 years; average length has been 13 months and drop in price 15% (current price drop is 11%, drop in 1921 was 25%). Says US financial position stronger than ever; savings up tremendously over past 10 years, as is purchasing power (wages up 2.1% annually while cost of living hasn't increased).

Economic news and individual company reports:

European unemployment much worse in summer of 1930 than 1929; almost all countries showed large increases in unemployed, many more than doubling.

F.W. Dodge report construction at low ebb country-wide in Aug., though NY metro area improved; slight uptrend seen first 3 weeks in Sept. Sees “slow and steady upward movement” rest of year, followed by year of moderate activity in 1931 possibly gaining momentum toward end.

Irving Fisher's index of 200 wholesale commodities for weekend ended Sept. 26 was 83.1 vs. 83.6 previous week and 96.0 average for Sept. 1929.

Wheat production in 30 countries for 1930 estimated at 2.804B bushels, up 6% over 1929.

Standard Oil of Indiana cuts retail gasoline prices 2 cents/gallon in all its territory, says due to long-term unsound condition in oil industry; Texas Co. matches cut.

Companies reporting decent earnings: International Cement, Caterpillar Tractor, Gaumont British films.


“Motorist's Wife - What lovely, fleecy clouds. I'd just like to be up there sitting on one of them. Motorist - All right: you drive ...”

+ The Boring Stuff:

Editorial: Modern medicine is practiced very differently from 50 years ago, when the doctor carried all his instruments in a small bag, had no modern diagnostics like x-rays or cardiagraphs, and told the patient whatever he chose to. Nowadays patients know their temperature, pulse, blood pressure, etc., and usually manage to see their charts though they're not supposed to. Similarly, in modern business, the “patient” is kept continuously informed of much more information than ever before. But, as in the case of medical patients, you can't help wondering whether “an intense preoccupation with symptoms ... really conduces to an earlier and more thorough convalescence.” Further, in business we have that one particular violently fluctuating indicator with no medical analogy: the stock ticker, which may outweigh in the business “patient's” mind more fundamental information, “causing him to alternate too frequently between despondency and hope.”

Fish Congressional committee continues investigation of Russian short-selling of wheat; J.S. Bache and others describe sales of over 8M bushels on Sept. 9-11, but deny sales depressed market; All-Russian Textile Syndicate dir. Belitzky says sales were for hedging purposes.

Monthly Labor Review publishes study of 543 unemployed men who applied to a Boston employment agency. About half were unemployed due to seasonal or business depression; 38% were foreign born but 75% had been in Boston at least 15 years. About half were heads of families, with average of 3.2 children.

Rail crossing accidents in first half were 2,335 with 962 deaths, lowest since 2,276 with 914 deaths in 1925; cars on road have increased 33% in that time.

Ninth annual convention of Assoc. of Bank Women to be held in Cleveland Sept. 29 - Oct. 1 as part of American Bankers Assoc. convention.

New York Cocoa Exchange celebrates 5th anniversary; has replaced London Exchange as world's largest cocoa market.

Guaranty Trust of NY sees mild seasonal upturn in business over past few weeks, leading to better sentiment. Recognize seriousness of worldwide depression, but see some signs of bottoming and don't see justification for “exaggerated pessimism that has been visible in some quarters.”

Bond market strength attributed to low short term rates, abundance of funds seeking investment, switch from stocks.

Some believe short interest is at highest level of the year.

Conservative observers continue to advise staying on sidelines, though some outsiders have been tempted by current prices.

German bonds sold at 90 as part of the Young plan in June have declined to 80 since. Rumors of revolt have been discounted, and Commerce Dept. reports the German economy has been quite resistant to depression; however, it can't be denied that in a time of unemployment some discontent will arise about foreign debts.

While some stress European conditions as contributing to the market decline, there is the case of the depression 10 years ago when European conditions were much worse, yet the US recovered independently for several years before Europe began to. Probably a larger factor in the market decline has been overproduction in commodity and other industries. However this has gone a long way toward correcting itself, and many noted economists feel the bottom has been seen.

Rails and oils have been disappointingly weak after being recently recommended by some market observers.

Winthrop, Mitchell & Co. note oils are close to yearly lows, believe they are attractive in long term though quick recovery isn't expected due to seasonal factors.

Nothing seen to account for sharp wheat decline except for rumors of increased Russian selling; G. Milnor, Farmers National Grain Corp. GM, predict wheat surplus will be absorbed due to large-scale use as animal feed to make up shortages of feed grains such as corn.

Commodities weak. Grains suffer liquidation; wheat hits lowest level since 1907, other grains down sharply. Cotton prices again down moderately to new low.

First 57 rails report Aug. operating income $77.907M, down 31.6% from 1929 and 22.8% from 1928.

Copper production continues to run ahead of consumption; increase in inventories expected for Sept.

Uptrend in cigarette production has slowed in 1930; first 8 months production was 81.9B, gain of 2.09% over 1929, vs. gain of 13.23% in 1929 over 1928.

Furniture production in August was at 52% of capacity vs. 48% in July, the first increase this year. Production is down about 40% from 1929.

881 leading lumber mills reported new orders 101% and shipments 95% of total production of 273.6M feet.

German unemployed on Sept. 15 were 2.983M vs. 2.873M at end of Aug.

Youngstown district steel operations down 3% this week to 54 1/2%.

Detroit employment index was 80.8 on Sept. 15 vs. 83 on Aug. 31 and 127 on Sept. 15, 1929.

Wells Fargo reports Calif. life insurance sales in first 7 months up 10%, though general business somewhat depressed; retail sales in first 8 months down 4.3%.

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