September 16, 2009

Tuesday, September 16, 1930: Dow 236.62 -3.72 (1.5%)

Assorted historical stuff:

Today is 10th anniversary of deadly bombing at Wall and Broad Streets; bomb exploded 12:01PM, closing Stock Exchange and almost all financial operations.

German elections result in National Socialist (Fascist) party gaining sharply to 107 seats vs. 12 formerly, and Communists 76 vs. 54 (total seats in Reichstag are about 576, and largest party is Social Democrats with 143). German observers were pleased Communist gains relatively modest. Gain in radical parties seen as result of depression. Communist party is affiliated with Moscow, while National Socialists are “anti-Republican, anti-Parliament, anti-Young Plan, ... anti-League of Nations, anti-Semitic, and anti-capital,” advocating establishment of “extreme dictatorship with socialist features.”

Editorial: Result of German election is hopeful. Two radical parties have made gains; if they took power, parliamentary rule could end, as well as reparations; this would create worldwide business unsettlement. However, radical parties are still in minority, and strongly oppose each other. There are several moderate parties that could form a coalition to continue the present govt.; this would ensure business has no cause for fear.

W. Graham, Pres. British Bd. of Trade, warns League of Nations Britain may withdraw from tariff truce in March; blames current economic crisis on US.

American Motorists Assoc. estimates car accident deaths for 1930 at 36,000, vs. 33,060 in 1929.

First Japanese sound film being made in Hollywood; to be shown in Japan and in the many Japanese areas in California.

623-year old lawsuit between Romanian cities of Feldioara and Sorkutza over possession of grazing land adjourned for new testimony.

Market commentary:

Market wrap: Weakness in wheat market translated to pressure on farm-related stocks including J.I. Case, Sears, Woolworth. Weakness spread to the leading industrials including US Steel, Westinghouse. Volume again dried up on declines, and liquidation wasn't apparent. Banks weak, insurance stocks firmer. Technicolor and Diamond Match hit new yearly lows. Some late rallying took place off the day's lows. Bond market very dull; US govt. higher, foreign govts. firm except for substantial declines in German issues; convertibles weak.

Aside from commodity price weakness, business outlook continues encouraging; recent merchandising and transportation conditions point to further improvement in coming weeks, and steel industry reportedly will make a concerted effort to raise product prices. Aside from technical setbacks, market recovery is seen continuing at least another month, until it's apparent how strong the seasonal recovery is.

A large number of market students are “watching the trading for a sign that a turn has come.”

Reports of depression are difficult to square with ever-increasing numbers of stockholders, strong bond prices, and last but not least “the unabated rush in the subway. ... Business has fallen off, but the country is now so rich that 1930 will probably go down in history as a 'good bad year.'”

Recent renewed confidence in market outlook has brought back some of the operators who sponsored stocks during the Coolidge (1920's) bull market; among the stocks they have been quietly accumulating are Radio, Vanadium, Montgomery Ward, National Cash Register.

A. Robertson, Westinghouse Chair., sees slow, orderly return to normal conditions in business.

Economic news and individual company reports:

Fed. Reserve member banks weekly report Sept. 10 shows “all other” (commercial) loans up $16M to $8.462B, loans on securities down $32M to $8.351B.

Call money dropped back to 2% from 2 1/2%; prime commercial paper is at 3%; bankers' acceptances are at 2 - 2 3/8%.

Bond market showed strength in all classes in August; Dow Jones combined bond index closed Aug. at 82.93, highest since Nov. 1928. Low point for the past several years of 77.23 was reached in Sept. 1929.

New life insurance purchases in Aug. were down 8.7% vs. 1929; first 8 months were up 0.3%. Number of $1M policies was 357, up 45 from 1929.

Automotive exports in July were $19.0M, down 17% from June and 62% from 1929; first 7 months were $215.1M, down 46% from 1929.

Companies reporting decent earnings: General Foods, Jewel Tea (careful buying of coffee inventory).

Company reports since July 1: 221 companies reported higher earnings vs. 1929 and 477 lower; 1044 dividends unchanged, 50 increased, 89 cut.


Storm over Asia, directed by Pudovkin. “Another striking example of the Russian film producers' brilliant knowledge of the peculiar art of the cinema.” Sweeping film with beautiful photography”; story concerns Mongolian revolt against army of intervention; “the bourgeoisie are again bitterly lampooned”; film closes with wave of revolt symbolized by storm sweeping over Asia.

+ The Boring Stuff:

Former French Pres. Poincare says regardless of German election outcome revision of the peace treaty is out of the question.

Berlin market opened sharply lower, with some recovery during the day; other European markets were generally lower. However, there was no panic selling and marks held up well - seen as signs of belief in German stability in informed circles.

W. Graham of Graham Engineering accuses British oil interests of overthrowing Pres. Legula of Peru to prevent granting of oil concession to 3 US companies.

B. Delgass, former VP Amtorg Trading, charges Amtorg with diverting Russian trade from US to force recognition of Soviet govt.

Editorial: United Textile Workers proposal of a 30-hour workweek to combat unemployment would increase production costs and ultimately reduce employment.

State Farmers Convention in North Carolina attended by 1,200, of which 70% were women.

Never before in history has the country emerged from a period of depression with its banking resources not only showing no signs of impairment, but in a position of impressive strength. For this reason, experienced economists are gradually veering around to the view that the recovery in stock prices may set a more rapid pace in the autumn and winter than the revival in trade.”

Col. L. Ayres of Cleveland Trust says low point of depression so far seems to have been reached at end of July. There have been gains since in most important industrial activities, including freight loadings, construction, and steel output. This advance may ultimately be “disappointing, like that of last spring, but there are reasons for believing that it is not likely to”; other economic indicators are also signalling recovery, including the stock and bond markets.

Conservative observers continue to advise staying out of the market and using rallies to take profits.

Commodities weak. Grains generally down; wheat touches 16-year low below 80 cents/bushel, closes about 80. Cotton little changed. Some copper sales at 10 1/2 cents, major producers asking 10 3/4 cents, but with no takers.

Production of wheat in 1930 in 27 countries was 2.778B bushels, up 6.6% from 1929; corn in 9 countries was 2.306B bushels, down 24.6%.

Canadian news: July imports were $84.5M vs. 114.2M in 1929, and exports $77.9M vs. $98.3M. July average daily output of central electric stations was 45.630 GWHr vs. 47.481 in June and 45.506 in July 1929. Total net debt Aug. 31 was $2.145B, down $4M from 1929. Royal Bank of Canada, in Sept. letter, says Canadian business is generally down as a result of the depression, but “there are few countries which have come through this trade reaction as well as Canada.”

International Steel Cartel extended to end of year with further production decrease of 15%, making total of 25% for the last quarter.

Gasoline in Chicago wholesale market was 6 3/8 - 6 1/2 cents, up from 6 1/4 - 6 3/8.

California expected to cut allowable oil production to 550,000 barrels/day from current 608,800.

Shell Oil matches 1-cent/gallon increase by Standard of Calif.; Union Oil and Rio Grande Oil will also match the increase.

Nelson, Hunt, & Co. report new realty financing in first 8 months was $144.7M vs. $428.6M in 1929, decrease of 66%.

Exports of machinery in July were $38.0M vs. $56.8M in 1929; first 7 months were $352.0M vs. $361.6M. Largest category is agricultural machinery.

Conferences are ongoing concerning merging NY City transit lines with the BMT; valuation is a problem, with a wide range of suggested offers. Recently a BMT-affiliated group has gained some seats on the IRT board; this has raised hopes for IRT joining unification, and stimulated traction (mass transit) shares generally.

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