October 4, 2009

Saturday, October 4, 1930: Dow 214.18 +3.14 (1.5%)

Assorted historical stuff:

Editorial on Pres. Hoover's speech at the ABA convention: “Without minimizing the severity of the depression or setting any dates for recovery, he sees nothing to fear. ... There was no attempt to belittle the situation or to convince his audience that prosperity was just around the corner. A bad business situation can never be talked away ...” Instead we must face the facts, find the causes, and tackle them with all our strength. “The man who will not be whipped cannot be whipped.” This depression, like most, is the aftermath of an inflationary boom. But it's “not a permanent situation; it is more like the headache that is supposed to come the morning after a night of dissipation.” The recovery comes when consumption and production balance again; this process has been underway for over a year and won't stop. It may, however, have been slowed down by unnecessary pessimism and fear; this should be tackled both by bankers and by the general public.

In past 20 years, average steel prices have gone up 26% while average wages have gone up 133%.

German Chancellor Breuning seen likely to pursue dictatorship to enact program; several provisions would require 2/3 majority in Reichstag since they infringe Constitution, and this is unlikely to be attainable. Stock market again declines, possibly due to foreign market declines and fear of impending strikes.

French govt. takes steps to halt “flood” of Russian imports, including licenses requiring equal amount of French exports to Russia.

Competent observers” doubt that Russia is attempting to rattle world business or is in a desparate state; more reasonable explanation is that it is trying to reduce its current sizeable trade deficit by increasing exports.

Chicago payroll funds again exhausted after paying salary checks to firemen and police; Tribune reports no more money available until State Supreme Court rules on validity of emergency $12M bond issue.

Air mail terminals are becoming popular night attractions; crowds attracted by roar of motors, flames shooting from huge exhaust pipes, sudden blaze of light as plane takes off. Pilots often cater to public by buzzing the fields after takeoff.

Last year US made 842.8M pencils, 23.1M mechanical pencils, 248.3M pen points, 13.9M fountain pens, and 588,768 typewriters.

Teterboro, New Jersey has 11 officials, including mayor and 5 council members; voting population is 12, and total population 26.

Market commentary:

Market wrap: Leading stocks worked gradually higher on low volume; grain markets also strong. Positive tone attributed to lower brokers' loans and constructive speechs by Pres. Hoover and Farm Bd. Chair Legge; “powerful bankers” also reported more optimistic on market. Some isolated weakness at midday in rails, Montgomery Ward, and Fox, but leading stocks resisted any pressure and worked upward into the last hour. Merchandising shares strong, led by Woolworth. Bond market increasingly active as day progressed; corp. generally strong with isolated weak spots; foreign issues stronger; US govt. narrowly mixed.

Bulls encouraged by rallying tendencies late Thursday, indicating support that came in at Tuesday's lows was still effective. Based on precedent in June, July, and August, a technical rally at least to a Dow of 225 was expected. Many prominent brokers also believe this is a good point to buy for long-term investment.

Large reduction in brokers' loans was taken as an indication of stocks passing to strong hands.

Recent increase in foreign buying reported, possibly due to instability abroad; some investment demand also expected from Oct. interest and dividend payments.

Salmon O. Levinson urges temporary suspension of “organized short selling” on NYSE as means to end business pessimism.

Economic news and individual company reports:

Pres. Hoover announces govt. expenditures for current fiscal year (June 30, 1930-31) estimated at $4.135B, down $67.9M from June 30 estimate.

Bradstreet's and Dun's weekly trade reviews: cooler weather over much of US enlarged retail and wholesale buying; however, seasonal gains remain irregular and short of vigorous revival. Sharp market fluctuation in week may be confusing the picture. Many lines of business showing more week to week irregularity than usual.

Youngstown District steel operations expected at 54% next week, unchanged; steel manufacturers less optimistic on continued price uptrend due to continued weakness in steel consuming industries.

Gasoline in Chicago wholesale market is 5 3/4 - 6 1/4 cents vs. 5 7/8 - 6 1/4 previously.

Company reports since July 1: 277 companies reported higher earnings vs. 1929 and 557 lower; 1297 dividends unchanged, 68 increased, 136 cut.


“Nervous Suitor - Mr. Jackson, er - I would like to - er - that is, I have been going out with your daughter for five years.
Parent - Well, what do you want - a pension?”

+ The Boring Stuff:

Editorial: Like Prohibition and the tariff, the electric industry is in line to become a major political football. It has grown with unequaled speed, with plant investment now almost half that in the rail industry; the problem of setting rates is not solved and involves “intricacies of detail” hard for the public to understand; and companies in the field have so far been “notably successful,” with a tendency to consolidate. “Thus the industry as a whole presets a shining mark for the political agitator's guns and a promising hunting ground for 'progressives' of all kinds and colors. Much tumult and shouting is ahead of us.” We can't hope to solve every issue at once, but for starters one interesting claim to settle would be the one by Mr. Carlisle, Niagara Hudson Power Chair., that they sell power to consumers 33% cheaper than the government-run Hydro of Ontario while also paying taxes. This seems like a clear question of fact that might start shedding light on the issue.

League of Nations to adopt plan guaranteeing loans of up to $140M for nations that are victims of aggression.

NY Gov. Roosevelt says industrial employment down 19% from a year ago, says crisis will be averted if all who can, offer work.

Detroit Mayor Murphy meets with industrial leaders to discuss ways of finding work for 150,000 unemployed; almost all Detroit industrial CEO's attend. Some small scale programs agreed on including employment agency and public works; large scale relief probably depends on increase in auto production.

Chinatown, San Francisco now has its own post office, brokerage, bank, and phone exchange, all operated by Chinese-Americans.

G. Houston, Pres. Baldwin Locomotive Works, says most of US motive power is obsolete; as of Dec. 31, only 21% of locomotives in use had been built in the past 10 years. Says equipment could be modernized, saving money with little new financing, by switching funds from maintaining old equipment to buying new.

Decline in the Dow in Sept. 1929 (start of the bear market) was 37.72 points; decline from Sept. 10-30, 1930 was 35.52.

Recent break in stock prices may have been discounting poor Q3 earnings; however, Q4 earnings comparisons will be more favorable since they'll compare with a period last year when business was already significantly depressed.

Conservative observers still advise staying on sidelines, reducing long positions on rallies.

Some feel rails may be attractive at current prices; should be first to feel business improvement, and some now have high yields on current dividends.

F.J. Lisman & Co. see possibility of “old-fashioned bull market in bonds” in Nov. and Dec.; see bargains in bonds a notch below highest-rated.

Commodities mixed. Grains again up strongly; wheat up sharply in spite of bearish crop news. Cotton off moderately. Copper buying continues strong at 10 cents; considerable indication that bottom has been reached, since this price is hurting all producers.

Increasing attention being given to possible cuts in capital gains tax, with administration apparently in favor. Current tax is 12.5% on assets held more than 2 years; possibilities include lower rate or graduated tax reducing rate as asset is held longer, up to no tax for 15 year holding period.

Fed. Reserve open market operations have been reduced recently; holdings of banker's acceptances and govt. securities have only increased slightly in the past several weeks, against usual seasonal pattern.

Unitization becoming more popular in oil industry as remedy for waste and overproduction; defined as “progressive, cooperative development of oil pools,” rather than uncontrolled development with curtailment later imposed.

US has been a large importer of gold through 1930; for first 9 months, imports were $264.4M and exports $112.2M. Sept. import balance was $3.2M.

Bond Buyer reports state and local borrowings in Sept. were $72.6M vs. $95.4M in Aug. and $100.3 in Sept. 1929; first 9 months were $1.037B vs. $967.5M.

Voters decide on about $400M of municipal bond issues in near future, mostly in Nov. elections; several huge proposals including Gov. Huey Long's $135M public works program in Louisiana, a $100M New Jersey issue mostly for highways, and a $31M issue for Golden Gate bridge construction.

Canadian bond sales in Sept. were $31.7M vs. $47.8M in Aug. and $21.8M in Sept. 1929; first 9 months were $494.0M vs. $407.3M.

European production of feed grains (corn, barley, and oats) estimated at 43.9M short tons, down over 19% from last year.

NYSE seat sells for $258,000, down $2,000 from last sale.

US Steel reduces tin plate prices for first half 1931 delivery by $0.25 to $5.00 - $5.10; expected to benefit can makers.

Dodge Bros., a division of Chrysler, reduces prices $100 on its 6 and 8 cylinder car lines, to $755 - $1,095, say sales are ahead of expectations.

Companies reporting decent earnings: Western Maryland Dairy.

Loose-Wiles Biscuit stock about 55, dividend $2.60, earnings in 1929 $4.58/share, earnings in 1930 expected higher.

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