October 25, 2009

Saturday, October 25, 1930: Dow 195.09 +6.99 (3.7%)

Assorted historical stuff:

Glass Senate subcommittee to meet about Nov. 15 to investigate financial matters, particularly use of Federal Reserve funds to help finance speculative operations.

Marine Midland group of NY State banks will start “buy now” advertising campaign; G. Rand, Pres., says recovery being retarded by “false economy.”

London insurers raise rates to insure property in US against civil disturbances.

Brazilian rebels score unexpectedly quick victory with little bloodshed when federal troops in Rio de Janeiro join revolt; Pres. Luis resigns; provisional govt. expected until new elections; revolutionary leader A. Amaral says will honor foreign obligations; bonds strong, coffee down.

Chinese Pres. Chiang-Kai-Shek unexpectedly baptized as Methodist; seen as blow at Communists.

Standard Oil of NJ points out foreign oil areas are becoming more important; while US is still the premier oil producer, it is not completely dominant as before (foreign producers accounted for 36% of oil in 1910, 28% in 1923, 32.5% in 1929, and 35.5% in first half 1930). Calls for world cooperation in crude oil development, says “the country should draw judiciously upon its remaining reserves if the American oil man expects to stay in front of his fellows in the future.”

AT&T to begin phone service to Australia Oct. 27; calls from New York will be $45 for first 3 minutes and $15 each additional minute.

George Washington bicentennial commission plans for 1932 include having “every man, woman and child in this nation sing 'America' over a nationwide radio hookup,” with accompaniment by the combined US Army, Navy and Marine bands.

The Hellabrun Zoo in Munich now has two hybrids born of a lion and tiger; very few successful lion-tiger crosses are known to zoologists.

Market commentary:

Market wrap: Bulls encouraged by further $139M decrease in brokers' loans, seen as evidence of stocks passing from weak to strong hands. Also encouraging was Thursday's session, when Van-Sweringen-connected rails plunged but industrials were up strongly; seen as indication “market as a whole was breaking away from the influence of specific weak spots” and had “largely corrected its position.” Market rallied across the list; rails staged a brisk rebound, while GM was up sharply on positive statements by J. Raskob; other major industrials also showed extensive gains; active short covering. Bond market active, rallies in many sections; Brazil and other South American issues higher; US govts. firm, close to yearly high; corp. generally higher; speculative and convertibles up moderately.

J. Raskob, GM finance committee dir. and Democratic Nat'l. Committee Chair., optimistic on auto industry: “There have been indications during the past six to eight weeks showing that the depressed conditions in the automobile industry have reached bottom and are slowly turning into more normal channels. ... Sharp revival in the motor industry may be expected to begin with the automobile shows in early January. It will stimulate all other lines of business activity. ... There can be no doubt that the motor industry will show substantial improvement in 1931. ... Optimism should now be the order of the day.”

B. Block of Benjamin Block & Co.: “On Thursday, for the first time in many months, I advised without reservation the purchase of sound stocks. ... A little over 14 months ago people looked at me in amazement when I advised the liquidation of all stocks. ... Since then the greatest deflation movement the stock market has ever witnessed has carried stocks to levels where unfavorable developments for many years to come have been more than discounted. It has been another case of sentiment running to extremes, with underlying fundamentals ignored.”

Amer. Iron and Steel Institute meets at the Commodore Hotel; prominent steel executives speak, including C. Schwab, E. Grace, etc. Price cutting seen as main problem facing the industry; over-expansion also cited. Industry praised for maintaining salaries and staff as far as possible. Long-term optimism expressed; C. Schwab calls for looking beyond “immediate but transient gloom,” says business in general has weathered the recession in a most assuring way. “Apply the heat treatment of an intelligent glowing optimism to the current warped point of view and most of the stresses and strains will disappear.”

One large broker says it's unusually difficult to make forecasts, with the market apparently ruled by technical factors and psychology.

Recent increase in bank loans on securities to non-brokers seen as indicating buying by stronger and more experienced investors.

Economic news and individual company reports:

Fed. Reserve Sept. report: factory output and employment increased, but by less than the usual seasonal amount; construction little changed; average wholesale prices little changed from Aug. but trending downward; commercial loans up; bank holdings of investments up but loans on securities declined rapidly in early Oct.

BLS reports new construction permits in Sept. in 291 cities were $147.7M, up 6.4% over August and reverse of usual seasonal decline.

Several companies report earnings down but sufficient to cover dividends, including Sears, Safeway, Youngstown Sheet & Tube, Kansas City Southern.

Federal investigation started into Charles V. Bob, promoter of a long string of mining stocks who recently went missing; two of his firms put into receivership.

Company reports since Oct. 1: 86 companies reported higher earnings vs. 1929 and 152 lower; 238 dividends unchanged, 26 increased, 35 cut.

Stock market joke:

So far, shorts haven't had an opportunity to establish market losses against 1930 tax payments.”


“Artist - Do you think I have depicted the horrors of war strongly enough in my new picture? Critic - Yes, I have never seen such a horrible picture.”`

+ The Boring Stuff:

Pres. Hoover says no need for special session of Congress on unemployment. Col. Woods says unemployment relief organization getting splendid cooperation; will spend next week gathering information; plans to continue policies set up a year ago to cooperate with states and industries; aim is employment first, then relief.

Employees and execs of Insull group of utilities to contribute one day's pay a month to aid unemployed; will raise over $100,000/month.

Editorial: The current “Buy Now” campaign to relieve the depression is too simplistic; people in financial trouble aren't going to be “stampeded into purchasing things they can do without.” The irresistible force that will start the buying movement is the “bargain allurement”; when prices are low enough “the desire of possession may be relied upon to overcome economy tendencies.” W. Wollman of the NYSE correctly points out that retail prices haven't yet come down as much as wholesale and commodity prices; when this happens consumption will increase and unemployment will go down.

Several more US bankers disagree with Macauley proposal for Fed to buy govt. bonds in order to stabilize prices; say some stabilization in commodity prices already seen; would prefer natural recovery, even if slower, to artificially stimulated one, since business would be more confident in permanency.

M Traylor, First Nat'l. Bank of Chicago Pres., says current depression is a repeat of previous ones, and recovery will come; calls for normal conduct by business leaders; says artificial methods will not help, particularly “unreasonable anticipation of future needs”; says 1928-29 boom was of unprecedented size due to a number of factors; deflation has not yet been sufficient but need not present unsolvable problems due to efficient production.

Editorial: Two Southwestern railroads have now cut rates for transporting gasoline by 40% to meet pipeline competition. The situation now developing in rail gasoline traffic is extremely unfortunate; these price cuts may be “in the nature of a rearguard action by a retreating army.”

Market Data Handbook of the US reports over half of manufacturing activity is in 37 of the 2,073 counties in the US.

Metropolitan Opera seeing record demand demand for tickets and subscriptions.

Market resisted afternoon break in Montgomery Ward on passing of dividend.

Experienced market observers believe further substantial declines are unlikely without a substantial intervening rally; stocks have declined for a 43 days without a significant recovery; technically, this suggests a reversal of trend and recapture of at least a third of the decline.

Conservative observers still advise waiting for market to prove itself.

Substantial selling of rail shares in past few weeks has led some market students to conclude “a profound revaluation” of rails is in progress.

Initial opinion on Q4 earnings is that they will fall below Q3 in many industries.

Possible origin of a common market expression: “Baron Rothschild, during the Commune following the Franco-Prussian war [the Paris Commune of 1871] suggested French rentes [bonds] were cheap to a brother banker; the latter remarked: 'Why, the streets of Paris are flowing with blood.' ' That is why you can buy rentes cheaply,' replied Rothschild.”

Commodities mixed. Grains down moderately. Cotton continued rally with moderate gains. Copper now offered at 9 1/2 cents/pound by all producers (after having broken below 18 cents about 6 months ago), but buying remains light.

Bank and insurance stocks have become much more widely held over the past few years; 81 banks and trusts reported 354,024 individual shareholders as of Mar. 31, up 412% from 69,139 for 57 banks in 1925; for insurance companies, 91 reported 121,391 shareholders, up 114% from 57,686 for 70 cos. in 1925.

First 12 rails report Sept. operating income $22.3M, up 10.2% from Aug. but down 13.8% from 1929 and down 19.0% from 1928.

Gasoline in Chicago wholesale market is 4 7/8 - 5 1/2 cents vs. 5 - 5 1/2 previously.

Several refiners increase price of refined sugar 1/10 cent for the second time in two days, to 4.75 cents/pound.

Manchester cotton market reports improved tone; business in most markets improving, including India, China, Egypt, South America, and Europe.

German imports from the US in first half were 729.2M marks vs. 948.6M in 1929; exports to the US were 378.8M vs. 497.0M in 1929.

German unemployed were 3.116M, up 112,000 in the first half of Oct.

F.W. Dodge reports new construction contracts in New York State in Sept. were $83.6M vs. $82.5M in August and $62.0M in Sept. 1929.

A&P has grown from 4,638 stores in 1921 to 15,418 in 1930.

Companies reporting decent earnings: New England Power Assoc., Briggs Mfg.


  1. "Glass Senate subcommitte" -- is this a reference to Carter Glass, the Virginia Democrat?

    How is it that a Democrat could have a subcommittee in a Republican-controlled Senate?

  2. Bruce -
    Yes, I believe it's him. Good question, but there it is in black and white. I'll try and track down more information on that.

  3. This comment has been removed by the author.

  4. Bruce -
    Upon further investigation, it appears this was a special subcommittee set up around June 24, 1930 (you can see mention of it in the summary from that day). I can only conjecture that Glass was appointed to head the committee due to expertise, or that perhaps he was acceptable to the Republican majority since he was relatively conservative - but those are just guesses - any other information would be welcome.