October 18, 2009

Saturday, October 18, 1930: Dow 187.37 -9.25 (4.7%)

Assorted historical stuff:

Pres. Hoover organizes Cabinet committee including Secretaries of Treasury, Commerce, Labor, Interior, and Fed. Reserve Board Gov., to survey unemployment situation; asks committee to “formulate and submit to me plans continuing and strengthening the organization of federal activities for employment during the winter.” Sees possible directions for action as cooperation with local govts., cooperation with industry, and direct federal employment in public works.

Editorial: Merit seen in plan by NY City financial and industrial leaders to raise about $150,000 weekly to provide work for about 10,000 unemployed. A large number of those now unemployed are recently prosperous heads of families now in urgent need of work; plan aims to provide them with some work, even if it only pays “a pittance.” That there's a need for this plan is unpleasant, but “there is no use blinking at the actual conditions.”

White House sees indications of a business revival; Pres. Hoover met Thursday night with Bernard Baruch to discuss the general business situation; this is one of a series of meetings with others including A. Sloan, GM Pres., and R. Whitney, NYSE Pres.

H. Dougan, Great Northern Rwy. Pres., says Russian rails in need of modernization; doesn't see Russia becoming huge wheat exporter; believes current exporting is to pay for 5 year plan, and within a few years Russia will permit its people to eat more and more wheat until domestic consumption nears production.

AFL adopts resolutions asking for almost total exclusion of immigration during depressions.

NY Telephone conducting extensive program of personal visits, leaflets, and advertising to prepare for addition of numeral to phone numbers on Dec. 16.

Navy awards aircraft carrier contract to Newport News Shipbuilding; construction to take up to 40 months at cost of $15.6M.

Transcontinental & Western Air to begin 36 hour service between Newark and Los Angeles Oct. 25; fastest previous service was 48 hours.

NY movie houses doing their best to keep patrons happy. Aside from movies, additional entertainment provided includes “artistically costumed” musicians, handwriting analysts, telegram service, voice recording, dances after the last performance, and “freak show complete with giant, ... sword swallower, and barker.”

Names of boys sheltered at Hiram House [a charitable settlement house near Cleveland] included Elijah Donkeyo, Dairy Lunch, Oldham Bacon, Pictorial Review Johnson, and Admiral Dewey. Girls' names included Marietta Pickle, Ivory White, Vaseline Malaria, and Queen Esther.

Market commentary:

Market wrap: Stocks continued downward, with new lows in most averages, many majors including GE, Sears, GM, New York Central, and “numerous other issues of lesser importance.” Weakness shown from open, with several rally attempts unsuccessful; selling increased materially in afternoon with weak final tone. “Nothing happened in the outside news to account for the continued weakness in the general list.” Bulls possibly discouraged by prospect of poor upcoming third-quarter earnings reports, and by end of period when seasonal improvement could be expected. Bond market irregular; foreign govts. strong, particularly South American; US govt. firm; corp. bonds react in sympathy with stocks.

Trading remained orderly in most stocks, with plentiful bids “on a scale” down, indicating possible demand from short covering and “long-pull” buying.

Bradstreet's and Dun's weekly reviews see continued uncertainty in trade movements; some favorable factors including higher cotton exports in Sept. and “less hesitancy in a number of branches,” but disappointment “at the showing even of those industries which revealed a moderately better trends in Sept.”

Particularly uncertain earnings outlook seen for automotive, steel, and oil companies.

Dow made new post-panic low. There were 2 new yearly highs and 121 new lows [Note: most of these new highs are in preferred stocks].

Economic news and individual company reports:

Brokers' loans reported by member banks in NY City have declined $470M in the past 3 weeks to $2.752M, lowest total since Feb. 1927.

There are now 24 corporations with assets over $1B; total assets of these are $40.9B, or about 12% of total US wealth.

US debt reduction this year may be only the legal minimum of $445M, vs. about $800M annually in the past few years (debt is now about $16B).

NY State savings banks continue trend of increased deposits; net gain in Sept. was $22.6M to $4.603B, vs. $18.7M gain in Aug. and $8.9M loss in Sept. 1929.

Egg prices crack” to lowest level in many years.

Companies reporting decent earnings: Scott Paper, Vortex Cup, Peoples Gas, Light & Coke, Household Finance Corp., Bessemer Limestone & Cement.

Company reports since Oct. 1: 58 companies reported higher earnings vs. 1929 and 67 lower; 163 dividends unchanged, 18 increased, 23 cut.


“Her Mother - Do you always greet Ferdinand with a kiss when he comes home from work? Mrs. Snoops - Yes, always. How else could I find out if he's been drinking?”

+ The Boring Stuff:

Editorial: S. Untermyer [prominent NY Democrat] has now recognized the “genius for self-government” of the NYSE. This is a welcome conversion since Mr. Untermeyer had previously been understood as favoring “public” authority over the Exchange. He does claim there are abuses other than “bear raiding” to be corrected, particularly manipulation of stock prices by pools; however this may be difficult for the Exchange to control while maintaining a free market. “It is bootless to expect perfection in any sphere of human activity, and the Governing Committee of the Exchange can do but little more to protect the speculator.”

War Dept. plans in the event of war include setting up a Federal industrial body with representation from finance, agriculture, industry, and labor, that would control uses of raw materials and fix prices for material and services.

S. McKelvie, Farm Board member, asks FTC to investigate “vicious propaganda” directed against Board by the Minneapolis grain trade. “There is some doubt in government circles outside the Farm Board that Trade Commission has the legal authority to make the investigation called for.”

German report: Stocks have rallied strongly since Tuesday on new loan and expectation of small parliamentary majority for Breuning govt. Sentiment also improved by “universal ridicule” of “radical and impractical” Fascist financial program, seen as making it “obvious that they could never make their financial ideas count for much.” Capital flight seems to have eased, the mark is stronger, and it's generally felt the crisis is past.

Spanish situation said to be improving; there are reports of economic plans to stabilize currency, and general elections may be held in Dec. for the first time since Primo de Rivera became dictator in 1923.

Henry Ford raises wages in Berlin plant to 2.5 marks/hour from 2.4, says raise will lead to increased purchasing power.

Pres. Hoover to open new $25M tunnel linking Detroit and Windsor, Ontario; construction took 29 months instead of planned 36, cost about 10% under budget.

Navy to increase aviation maintenance personnel by 560 at naval air stations in San Diego and Hampton Road, Va. Expenditures to be cut $3M this year.

Broad Street Gossip: about 20 years ago the copper industry faced an even worse surplus compared to consumption than the current one. It emerged with flying colors; today's industry likewise “eventually will emerge with flying colors to make new peaks. ... Progress, electrically, over the next 10 years should be even more rapid than over the last 10 years. And if the uses of electricity are to multiply, copper will have to move in sympathy.”

Conservative observers continued keeping clients out of market, urged not buying “until it has been definitely established that a resistance level has been reached.”

One positive factor was a further decline in volume, taken to indicate most of selling had been completed last week. Market thought “nearing a position of stability, although it was admitted that a painful period of backing and filling would probably be seen before the list was ready for a sustained recovery.”

G.M.P. Murphy & Co. see standard rail stocks and industrials as far better now than in pre-war depressions; rail stock yields are now 6.72% vs. 4.25% bonds.

C. Dickey, speaking at Investment Bankers Assoc. convention, defends record of investment trusts (similar to mutual funds) over the past year; investors have suffered severe losses on these, but claims much of the decline in inv. trust values was due to their selling at a premium to asset value when in fashion in 1929, and now selling at a discount; claims decline in asset value has in most cases been less than decline in market averages.

Commodities quiet. Grains up moderately. Cotton almost unchanged. Copper buying continues quiet; some concern over continued high production in Sept.

New NYSE securities listed in Sept. were $211.1M vs. $357.9M in August and $1.160B in Sept. 1929, of which bonds were $90M vs. $141.9M and $81.1M.

Scrap steel in Chicago market continues decline to $11.25-$11.75/ton, down $0.25 from prev. price.

Youngstown district steel operations seen continuing at 53% next week.

Gasoline in Chicago wholesale market is 5 1/8 - 5 7/8 cents vs. 5 1/4 - 6 previously.

US radio exports in first 8 months were $11.904M, up $15,050 from 1929.

Production of silver by companies accounting for 87% of world total in 1929 was 16.5M ounces in July vs. 18.6M in June and 21.7M in July 1929.

World production of copper in Sept. was 151,005 tons vs. 149,843 in Aug., and highest this year since January.

German wholesale prices were down 16% in the past year, and retail prices down 6%.

Manchester cotton market more active, prices steadier. Business from India higher, “Calcutta sent inquiries for dhooties and placed orders for fancies.” Good demand also seen from Africa; other markets including China, Near East, and Egypt continue quiet.

NYSE seat sold for $255,000, up $4,000 from previous sale.

AT&T stock about 200, yield 4.5%, earnings near $11 expected for 1930 vs. $12.33 in 1929; number of shareholders 570,000, up 70,000 in 1930.

Union Carbide Q3 earnings expected substantially better than Q1 and Q2, though still below 1929; full year should be over $3/share vs. $3.93 in 1929.

Packard (cars) reports Sept. retail deliveries 24% up from Aug., Oct. holding gain so far; seeing normal seasonal pickup those sales for first 8 months were down 35% from 1929.

1 comment:

  1. "US debt reduction this year may be only the legal minimum of $445M, vs. about $800M annually in the past few years"

    Why were they reducing public debt in 1930? They saw there was a liquidity problem in the economy, right?