October 31, 2009

Friday, October 31, 1930: Dow 188.07 -2.66 (1.4%)

Assorted historical stuff:

W. Green, AFL Pres., says 20M will be “threatened with acute need” this winter, and number of unemployed will rise from 3.5M to well over 5M.

Many industries have adopted “staggered” plan to distribute available work while avoiding layoffs as in past recessions; this reduces weekly income of workers but helps greatest number of people and “alleviates suffering and need”

Dr. R. Senese, pres. of Sene, Inc. of NY (cosmetics), visits White House, proposes $5B loan to mature in 5 years, to be used in national construction program to restore prosperity; to be funded by 1% income tax surcharge on those earning over $25/week.

Germany reportedly feeling out US govt. on reparations and Allied war debts, but hasn't yet declared a moratorium on reparations payments due to US attitude and need to reconstruct economy. Allied nations said to want renegotiation of war debts in case of German moratorium; US reportedly believes war debts and reparations are independent, and there's no need at present to adjust debt payments; points out that annual payments are only a few percent of total budgets.

Australian govt. expected to present balanced budget to House of Representatives at end of Oct.; will include spending cuts, tax increases; “The old alternative of borrowing with the accompaniment of lavish spending of public funds is no longer open.”

10 years ago, 5 farms remained on Manhattan Island. Now only one does, occupying a block at Broadway and 213th St., growing vegetables and some chickens.

American Rolling Mill Co. research developed continuous steel rolling process over 15 years, by which a hot steel ingot weighing 12,000 pounds moves 800 feet in a straight line through a series of mills and furnaces, being converted to sheets at the end of the line.

Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.

Market commentary:

Market wrap: Market less active; substantial liquidation was attributed to tax loss selling, particularly in AT&T, Consolidated Gas, and Radio; US Steel was also weak. There were also bad breaks in specialties including Eastman Kodak and Air Reduction, and heavy selling in soft drink companies including Coca-Cola, Canada Dry, and White Rock on fears of beer legalization. Bulls, however, were encouraged by general market resistance to these unfavorable factors and to recent bad business news; bears did not make much headway and volume dried up on declines. Market tone improved in afternoon. Bond market mixed; foreign govts. rallied; US govts. moderately active, firm; corp. mixed on weaker stock market, but rails steady and investment-grade little changed.

While some stocks have higher earnings in 1930 vs. 1929, there have been few new stock price highs. Stocks that have acted relatively well this year include Amer. Chicle, Amer. Tobacco B, Coca-Cola, Cream of Wheat, Cudahy Packing, General Foods, National Biscuit, Reo Motor, White Rock, Woolworth.

Many still talk about last November's panic, but the current market “has been what some might term a creeping panic, with the prices of many stocks edging off week after week until they now make the Nov. 1929 lows look high in comparison.”

H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.

Investment authorities point out that many stocks are selling below value of net current assets, ignoring value of plants and earning power.

Amusement shares (movies) have been working lower recently, possibly due to disappointment they haven't been as depression-proof as previously thought.

Economic news and individual company reports:

Bethlehem Steel Q3 net was $.63 a share vs. $1.86 in Q2 and $4.01 in Q3 1929. E. Grace, pres., says prices are more stable than a few weeks ago and inventories low, but “business is not picking up a bit” and “there is nothing in sight to indicate improvement in Nov.”

Fed. Reserve reports money in circulation Oct. 29 down $24M to $4.426B, total Reserve Bank credit outstanding down $5M to $985M. Member banks in NY City report brokers' loans down $101M to $2.512B vs. $5.538B in 1929 and lowest since June 1926, “all other” (commercial) loans up $120M to $2.616B.

Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.

Amer. Bureau of Metal Statistics estimates Q3 consumption of copper for electrical manufacture was 53,000 short tons vs. 68,000 in 1929; by auto industry was 18,000 vs. 35,000, for building was 11,000 vs. 16,500, and for use in exports was 18,600 vs. 17,800.

Companies reporting decent earnings: Autostrop Safety Razor, Grand Union (9 month net up 29.6%, did not increase store count).


“Mrs. Gee - William, how do you suppose those dozens and dozens of empty bottles got into our cellar? Mr. Gee - I'm sure I don't know, love. I never bought an empty bottle in my life.”

“'Is this beef or is it mutton, waiter?' 'Can't you tell by the taste?' 'No.' 'Then what difference does it make?'”

+ The Boring Stuff:

France allocates $480M for national defense in 1931 budget.

I. Laughlin, US Ambassador to Spain, tells Pres. Hoover conditions in Spain don't warrant recent fall in currency; says unemployment low, economic conditions relatively good, some disturbances but not of serious nature.

Situation in Brazil uncertain; banks in Rio reported closed; Dr. G. Vargas, head of revolution, reported en route to Rio to take control of govt.

Canadian fur farming industry was founded 52 years ago when three farmers near Prince Edward Island captured 15 wild silver foxes. There were 100,000 silver fox cubs born this year on Canadian fox farms, all descended from the original wild stock. Prices for this type of fur have held up better than any other kind.

Western Electric says has shortened hours at some plants to keep maximum number of trained workers employed; at end of Sept., 1/4 of workforce was working 40 hour weeks, 1/4 working 44 1/4 hours, and 1/2 working full-time 48 hour weeks.

Editorial: Fundamentals for cotton prices are improving; mills are holding production down to work off excess inventories. While futures were down Tuesday following a sharp rally since Oct. 18, those who wait to buy “may find that procrastination is the thief of profits.”

Short interest reportedly has been decreasing recently. Wall Street still discussing the recent steps to discourage short selling. Advocates say steps were not directed against short selling in general but against “concerted action on the part of the bears.” Jackson Bros., Boesel & Co. say “obstacles in the way of extensive short selling have not been removed ... We are seeing less and less of the old tactics whereby resistance points on the downside were riddled with heavy concentrated offerings”; the more prominent bear crowd “is disintegrating. Vicious bear tactics, it is assumed, would meet with criticism.”

Some market observers are wary, noting recent renewed selling and expected bad earnings news. Investment buying is favoring stocks selling at low earnings multiples, that cover dividends comfortably, are in a strong financial position, and that should participate in general business recovery.

Broad Street Gossip: “The safest kind of an asset in these days of deflation is a good gold mine.” Newmont Mining has succesfully developed one out West.

Canadian trade circles estimate govt. wheat pool liability may be 50 to 80% greater than official $10M estimate.

Commodities weak. Grains down moderately. Cotton down. Copper buying still heavy, some producers refusing to fill all orders; talks on curtailment continue.

Dow average of eight finished iron and steel products was $44.56/ton vs $44.70 prev. week, new low for 1930. Scrap prices generally lower. Youngstown district steel operations likely to be reduced next week from current 54%.

US Steel's success in earning Q3 dividend in spite of low prices and production at 60%-65% attributed to production modernized by $1.6B spent on improvements since 1901, and to diversification into rail, steamship and other lines of business.

J. Farrell, US Steel pres., optimistic on future of structural steel industry; points out shipments in first 8 months were ahead of 1929's record pace; says use of steel in construction expanding, including “residences of all steel frame, with steel floor construction.” Criticizes unfair and irrational competition, including quoting of unprofitable prices; “no satisfactory substitute has been found for the Golden Rule, whether in the field of economics or any other phase of existence.”

NYSE expels G. Forman and M. Orr, directors of Prince & Whitely Trading Corp., charging them with failure to properly segregate assets of the Trading Corp. from the sponsoring Prince & Whitely brokerage house, which recently failed; also charged improper inflation of Prince & Whitely's financial condition.

Two Toronto brokers fined total of $250,000 for “gaming in stocks.”

Tariff Commission to hold hearings concerning pig iron and crude oil.

Champlin Refining files another suit against Oklahoma oil proration in Federal District Court, charging antitrust violation and favoring of major operators.

Middle West Utilities reports first 8 months residential sales of electricity were 294.6 GWHr, up 22.5% from 1929; rural sales were 41.9 GWHr, up 46.6%; large power sales were up 6.2%.

Some Gillette stockholders sue company and directors regarding some terms of the proposed Autostrop merger.

Chesapeake & Ohio Rwy. stock about 43, year's range 40 - 51 3/8, yield 5.8%, first 9 months earnings $3.27/share vs. $3.46 in 1929.

New York Central railroad asks 40% increase in commuter fares into and out of Grand Central; points out fares have only had one 10% increase since 1910.

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