October 6, 2009

Monday, October 6, 1930: Dow 211.10 -3.08 (1.4%)

Assorted historical stuff:

Editorial: France's accumulation of gold is starting to “threaten the smooth workings of the world's reserve banking machinery,” although a previous episode in the 1870's turned out fortunately through sheer accident. This recalls the German maxim about trying to forecast the future: “It always comes out different.”

Southern California has become a tourist mecca; in 1929, 1.067M visited, spending $418.5M; as many as 1 in 10 stayed, with population of 10 Southern Calif. counties growing from 1.424M to 3.284M in the past 10 years.

Times are changing in Manhattan real estate. In the past 15 years many landlords did as little as possible for tenants; repairs were kept to bare necessities unless tenants paid, and “requests for redecorating were as often as not received with dignified silence.” Recently, a tenant requested a number of quite expensive jobs; the landlord's letter back concluded “Our decorator will be around in the near future to arrange for the work at your convenience.”

Judge G. Hahn of Cleveland rules against lawsuit to stop planes flying over property that was based on ancient Roman legal principle “whosoever controls land controls it from the center of the earth to the zenith”; decides effective possession of property only extends 500 feet up.

Berlin radio engineers build mammoth loudspeaker audible over a 25 mile diameter, plan to attach speaker to a balloon anchored 3,000 feet high to broadcast concert to the city. Loudspeaker creates airwaves that can be felt 150 feet away.

Market commentary:

Market wrap: Saturday short session opened mixed, advanced moderately on low volume with activity concentrated in recent bear targets; short-covering was apparently active; majors including US Steel, GE, Westinghouse, American Can, GM showed strength. Late in the session a vigorous bear attack started in AT&T and spread to rails and other investment stocks; sharp drops in these spread to other sections and early gains were wiped out; market closed weak. Bond market moderately active; investment grade and US govt. firm; lower grade and speculative issues weak; German bonds mixed, other foreign govts. mostly firm.

Week in review: Dow at Tuesday's close was about 6 points from last Nov. panic low, dropping about 40 points in 3 weeks. Improvement in grain markets brought some optimism as week closed, and pressure lifted from stocks. Interest rates broke to lowest levels since war, though weekly bank reports showed encouraging increase in commercial loans and currency circulation. Steel prices mixed; rail figures weak. Bond market opinion generally gaining enthusiasm.

G. Verity, Pres. Amer. Rolling Mill Co.: “I think it is pretty well conceded that we have reached or passed the bottom of this depression and from now on can look to gradually improving business”; industry should be back to normal by end of Q1 1931; company business in Sept. up 25% over Aug.; Business recession has been costly, but cost will be recovered thanks to removal of “deadwood acquired in prosperous times.” Looks forward to tremendous prospects in all industries.

S. Archer, Pres. Archer-Daniels-Midland, says Sept. business largest of any month this year, inventories remain low; “with the more general feeling of optimism that is being manifested, we expect the holding off tendency which has been so pronounced to give way to more liberal buying from now on.”

AFL Pres. Green says worker's buying power key to prosperity. Suggests policies to combat depression including buying ahead, cutting overhead other than wages by modernizing equipment and cutting waste, improving product quality, and increasing advertising. Notes optimistic business signs but sees danger in increasing number of wage cuts.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Oct. 3 was 82.3 vs. 83.1 in previous week and 94.7 in 1929.

New car registrations for Aug. were 203,737 vs. 254,098 in July and 376,886 in Aug. 1929; first 8 months were 2.111M vs. 2.965M.

F.W. Dodge reports construction contracts awarded in 37 Eastern states during Sept. were $331.9M vs. $347.3M in August and $444.4M in Sept. 1929. First 9 months was $3.685B vs. $4.601B in 1929. Residential construction in Sept. was $98.5M, highest total since May.

Youngstown district steel operations down 1% this week to 53%; consumers said unwilling to book heavily due to mixed business and price picture.

US Ambassador W. Edge asks French Commerce Min. to rescind recent doubling of duty on US raw and refined lard.

Federal grand jury indicts six former employees of Manhattan Elec. Supply for manipulation of the stock; tactics included employing a group to send out letters, market sheets, and telegrams to the public, and paying money to brokers in return for advising customers and the public to buy the stock.


Cecille B. DeMille's Madame Satan: Theme is “the eternal triangle.” Bob Brooks is dissatisfied with his marriage and turns to a pretty vaudeville singer. His wife Trixie decides to win him back; masquerading as Madam Satan, she walks into a masked ball aboard a Zeppelin “singing a vigorous song of defiance and woos her husband away from the temptress.” Meanwhile, lightning strikes the Zeppelin and “all the characters are sent hurtling through the air in parachutes.”

+ The Boring Stuff:

Editorial: Rails are facing increasing competition from passenger buses and freight trucking. They've done a good job of cutting expenses since the depression of 1921, cutting expenses and letting 350,000 employees go; further large savings are unlikely. They must now try to increase traffic through competition. For passenger traffic this can be done through rates, while for freight, service is also important - rails should offer door-to-door service and handle less than carload amounts as trucks do.

Editorial by T. Woodlock, former ICC member: The ICC (Interstate Commerce Commission, regulates railroad operations) disposed of 2,120 cases in 1929; a rather complicated calculation shows each commissioner disposes of a case every 2 1/2 official working hours. In reality commissioners must work 80 to 90% of their waking hours including Sundays and holidays, and depend on staff to do much of the research. “Raw material” on which commission decides cases includes about 50M words of oral testimony a year and scores of thousands of exhibits; published record of decisions is about one volume/month.

Recent statements by Pres. Hoover seen as advocating more tolerant treatment of rails by the ICC; Hoover said to be concerned about rails' recent revenue decline. Rails have complained about ICC's stinginess on rates while they're being called on to assist in various emergencies, at substantial cost to their revenues.

NY Trust Co. branch at 57th St. and Fifth Ave. to be decorated with one of largest murals in the city, a 200 foot canvas depicting 4 centuries of NY shipping and architecture ranging from an early Dutch merchant ship to “a speed-boat of today shooting beneath Brooklyn Bridge.”

Municipal bonds continue strong, especially highest grade; Wall St. Journal avg. of 20 long-term state and city bonds yields 3.94%, lowest since May 1928.

Expanding number of state and municipal bond issues expected to result in increased employment rolls in the near future; about $400M will be voted on in Nov.

Broad Street Gossip: Foundations for a bull market are now strong as they've been in years, though an early and sustained uptrend can't be taken for granted. Favorable factors include brokers' loans down drastically, much money available for investment, low rates, low inventories, and record low commodity prices; these are the opposite of conditions when past panics happened. In the Oct.-Nov. crash many rushed to buy stocks because they were cheap, with even John D. Rockefeller, Sr. buying and advising others to; now most stocks are well below those bargain levels.

Recent notable stock movements: Banks, trusts, and insurance companies closed sharply lower on the week. Newmont Mining (copper) stock now at 64, which is below its total earnings for the 3 years ending Dec. 31. Woolworth has shown strength on expected Sept. sales improvement. Technicolor has rallied nicely over the past few days; attributed to large short interest and bargain hunters speculating on prospects of color movies.

Conservative observers continue to advise remaining on sidelines until market has shown ability to hold upturns.

Bear traders who had covered shorts earlier in the week were reported selling the market again on Friday and Saturday, encountering little resistance.

Economists closely watching trend in electric power output in coming weeks; should reflect any improvement in industry.

Some attribute decline in Montgomery-Ward Sept. sales to declining farm buying power.

Commodities weak. Grains down moderately in dull market. Cotton again down moderately despite midmorning rally.

US-Europe trade stats: about 40% of total US foreign trade; total trade surplus including merchandise and service of $612M in 1928 and $412M in 1929 (merchandise surplus alone was over $1B each year); US investments in Europe at end of 1929 were about $4.3B, not including war loans from US govt. of $6.6B; estimated net balance including merchandise and service trade, debt payments, and capital investments was surplus of $418M in 1928 and $688M in 1929.

Agriculture Dept. reports production of wheat for 1930 in 30 countries was 2.802B bushels, up 5.9% over 1929.

US officials say will probably not know if Russia will import wheat until winter, when Soviet collections of grain from farmers will be complete.

Movement launched in Texas for law to curtail cotton planting due to low prices. Gov. Moody advises calling on Farm Board instead to bring about drastic cuts in cotton acreage nationwide by recommending concerted action in all cotton states.

Congress expected to appropriate between $5M and $25M for loans to farmers to purchase seed in drought areas.

Railway Age reports Aug. freight car orders were 565 vs. 4,257 in 1929; locomotives were 25 vs. 84; passenger cars were 62 vs. 0. For first 9 months freight cars were 33,137 vs. 66,190 in 1929; locomotives were 330 vs. 672; passenger cars 623 vs. 1059.

Bonds called in advance of maturity in Oct. were $43.4M vs. $49.2M in Sept. and $19.2M in Oct. 1929; first 10 months was $352.2M, lowest since 1924.

NYSE committee on business conduct asks members to send to it all telegraphic communications sent or received in 2 weeks ended Oct. 3 relating in any way to the financial conditions of members of the exchange.

National Auto Show reports applications for space in the 1931 show's parts and equipment sections at near record volume.
Chesapeake & Ohio Rwy.
reportedly saving substantially on maintenance thanks to new equipment, though interest charges are higher due to capital outlay.

Companies reporting decent earnings: Beatrice Creamery.

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