September 9, 2009

Wednesday, September 10, 1930: Dow 244.29 +1.45 (0.6%)

Assorted historical stuff:

Editorial: We should consider raising Congressional salary from $10,000 to $50,000 - not so much to improve Congress as to make them willing in turn to give adequate salaries to important government executives. This would enable us to keep good people such as former Fed. Reserve Gov. Young. Of course, “practically all congressmen” would then be getting more than they're worth, but this is true now so “the objection is one of degree and not of fundamental principle.”

White house receives report from State Dept. on tightening immigration law, points out all countries are tightening restrictions to deal with unemployment.

Effects of drought have been relieved by extensive US rail system; less severe droughts in parts of the world without adequate rail transport have caused “famine and pestilence, and the starvation of hundreds of thousands of people.” Agriculture Dept. declares 1,012 counties in 20 states eligible for discounted freight rates for drought relief.

Germany requires gasoline to be blended with 2.5% alcohol to benefit potato farmers.

Nine-man counterfeiting ring arrested in Newark, charged with producing over 100,000 fake 5-cent city bus tokens.

Market commentary:

Bulls encouraged by good business news continuing to trickle in yesterday, including Aug. rise in steel production and $30M rise in commercial loans in latest week. Several bear attacks failed, and stocks strengthened in late afternoon. Retail shares rallied impressively on news of recent sales improvement, including Woolworth, Macy, Best & Co., Associated Dry Goods, Abraham & Straus. Banks, utilities strong. Oils weak on lawsuit against curtailment. Bond market firm, particularly convertibles and preferreds. South American bonds higher. US govt. dull, unchanged.

Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible “stampede of orders” due to underproduction; says it's as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.

Chicago Assoc. of Commerce produces symposium on business outlook; leading Chicago executives believe fall will bring improvement but are guarded as to whether fully normal conditions will return before next spring.

Southeast Shippers' Advisory Bd. says worst of present crisis over, confidently expect improved business conditions in fall.

One prominent steel manufacturer foresees production averaging at least 75% of capacity before end of year.

Oct. considered critical month for market; earnings reports expected to be poor, but market reaction may depend more on business trend looking forward.

R. Whitney, NYSE Pres., blames depression on overproduction caused by artificial price-fixing efforts (made production artificially profitable). Says market crash didn't cause depression but followed decline in business by a few months; blames lag on lack of accurate economic statistics. Criticizes proposed Stock Exchange regulation as making “prices on the Exchange a false reflection of the state of business”; denies stock market speculation harmfully diverted funds from other uses.

Economic news and individual company reports:

Retail sales at stores of 7 types in 24 cities were $560.7M, down 6.7% from 1929. Store types included furniture, electrical appliances, women's specialty, etc.

US class 1 rails net for first 7 months was $458.9M, a return of 3.3% on property investment, vs. $686.4M, or 5.5% return in 1929. Revenues were $3.149M, down 13.2% from 1929.

Railway passenger traffic has declined continuously since 1920 in spite of large expenditures on better service.

Rail freight loadings for week ended Aug. 30 were 984,504 cars, down 15.2% from 1929 and 11.8% from 1928, but up 43,955 from previous week.

Report of 29 major US airlines for first half: 315 planes in service, 133,005 passengers carried, 3.125M lbs. mail delivered, 10.725M miles flown. Miles have increased steadily every month this year; total for June was 2.231M miles.

Companies reporting decent earnings: Pacific Telephone, Mesta Machine (steel mill equipment), Bon Ami (household cleaner), Best & Co. (retailer).

Company reports since July 1: 192 companies reported higher earnings vs. 1929 and 457 lower; 955 dividends unchanged, 43 increased, 75 cut.

Coca Cola is one of the few stocks that sold at a record high this year; 1929 high was 178 5/8, high this year was 191 3/8.

Ode to the new high-speed stock ticker:

“A clever contraption within its black box -
Its figures flash out swift and sure on all stocks;
No matter how hectic the trading may get,
what millions it mounts to, its pace shall be met.
Ah, had we but had it last fall 'neath glass bell -
Twelve million, sixteen - whole world wanting to sell -
those agonized hours when the truth none could know -
the old ticker smothered because 'twas too slow.
This dainty swift prodigy, blithely abreast
of any big market, such fears sets at rest.
And yet this great boon - human nature is such -
at moment of getting it doesn't seem much.
Like Flora McFlimsy of Washington Square,
(that worthy young lady with nothing to wear)
this nifty speed marvel that's just come on view,
has cause for complaint - it has nothing to do.”

+ The Boring Stuff:

Editorial: Argentina situation is of interest to US since it has about $800M invested there. US should consider recognizing new Argentina govt. if stable, backed by the people, and willing to fulfill international obligations. Wilson policy of not recognizing govts. coming to power by revolution had good intentions, but may not be practical in this case.

G. Wheat, VP United Aircraft, speaks at opening of Newark Metropolitan Airport as eastern air mail terminal, predicts 24-hour air passenger and mail service across US; current mail transport time is 30 hours.

This year is 2,000'th anniversary of birth of Roman poet Virgil, known to every student of Latin.

European steel cartel controlling about 29% of world production under severe strain, but likely to be continued in some form due to “danger of complete demoralization of the steel market following an abandonment.”

British registered unemployed on Sept. 1 were 2.060M vs. 2.040M on Aug. 25 and 1.152M on Sept. 2, 1929.

Mexican census reports number of unemployed was 89,960, or 0.546% of the total population.

Administration officials question Sen. Barkley's contention that Smoot-Hawley tariff will lead to agitation for reduction of European war debts.

T. McMahon, Pres. United Textile Workers, says only solution to textile unemployment is shorter workweek and abolition of night work for women and children.

Wall Street sentiment seen less pessimistic; “state of mind of the average trader is calmer,” and general feeling is a definite turning point for the better has been reached. However, most don't expect “a rapid recovery in either business or stocks.”

A number of industries have been preparing to expand activities in Oct. and Nov. This should reduce unemployment and eventually stimulate trade.

Some conservative observers still staying out of the market until it's clear if business increase in only seasonal; waiting until “advices from industry are more uniform and favorable.” Leading C.O.'s advise against buying stocks indiscriminately, recommend taking profits on good rallies.

Bond houses generally anticipate strong fall bond market, expect lower-grade bonds to participate.

Commodities mixed. Cotton up slightly. Corn up, other grains down. Copper demand remains very light, price unchanged.

Average rate of interest on national debt in fiscal year ended June 30 was 3.80% vs. 3.94% previous year.

Indiana Limestone Co. estimates new US construction for first two-thirds of year was $3.7B; business now marking time but “It is generally conceded that demand is overtaking supply” and they expect “a much more active building program” in the fall.

Crude oil production for week ended Sept. 6 was 2.438M barrels/day, down 35,440 from previous week and down from 2.952M in 1929; refineries operated at 67% of capacity vs. 69.2% and 84%.

Steel sheet producers in Chicago increase prices $1-$2/ton.

Wheat exports in July and Aug. were 36.235M bushels vs. 31.116M in 1929.

World cotton consumption in 1929-30 season was 24.579M bales vs. 25.767M previous year.

Lumber production at 862 mills for week ended Aug. 30 was 275.8M feet vs. 291.3M previous week, and down 35% from 1929.

Tractor exports hit record high of $40.5M in first half vs. $33.0M in 1929, helped by Russian demand.

Utility earnings will break string of strong growth years, but are still expected to be slightly higher than 1929. However, future problems are seen in trend of lower revenue per invested dollar and attitude of public to utility industry.

Canadian rail revenues in first half were $218.2M vs. $257.0M in 1929; net was $25.2M vs. $41.2M.

AT&T stock selling at about 17 times earnings, yield 4.17%.

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