October 16, 2009

Thursday, October 16, 1930: Dow 200.26 +3.56 (1.8%)

Assorted historical stuff:

Editorial by T. Woodlock: Farm problem is not one of traditional farms that work year-round and raise most of their own food, but of the modern “money-croppers” who put all their land into single crops they must sell in markets they have no control over.

AFL Pres. Green predicts serious winter, economic distress in all big cities; calls on city authorities, business and labor groups to prepare to relieve distress.

Dr. M. Winkler of Bertron, Griscom, & Co. calls for US to use its “still enormous reservoir of credit” to help South America recover, pointing to “fountain of credit” that was extended for 8 years, only to “suddenly and without warning” dry up due to the depression.

White House is maintained by staff of 77, at cost of about $135,000 last year; cost of furniture was $5,000, coal $3,575, electricity $215.

Pres. Hoover reported in excellent heath by his doctor; weight stable at 188 pounds, contrary to rumors of recent 15 pound loss.

Dr. Y. Henderson, Prof. of Applied Physiology at Yale, says beer and ale with 4% alcohol content not intoxicating from scientific standpoint.

Device for muffling airplane engine noise invented by Miss Eldorado Jones successfully tested at Roosevelt Field.

Telephone operators in Paris start using new innovation: callers are switched to “phonograph-like disc” repeating appropriate messages such as “that line is busy.”

Market commentary:

Market wrap: Stocks opened strong; bulls encouraged by large short position and increases in imports and rail freight loadings. Rally paused at the end of first hour on bad steel news, but was resumed in “vigorous style” about noon. Short covering grew more urgent as rally progressed; recently oversold stocks including Westinghouse and rails were up sharply. Bears made some afternoon efforts, but volume slackened on declines and market maintained good tone. Bond market higher; sharp rally in foreign govts., led by Brazil; US govt. very quiet, steady; corp. bonds rallied, including convertibles and second grade.

Broad Street Gossip: “A real bullish development is the ability of people to forget. The hardest thing to forget was the 1929 smash. More talk about the recent drop is now heard than about the November, 1929 decline.”

T. Callaway, Invest. Bankers Assoc. Pres. gives keynote address at convention: business doesn't need artificial respiration; wealth producing power of country hasn't been essentially hurt; industrial management and equipment have never been more efficient; credit structure is sound and savings increasing. Sees end to “orgy of speculation,” return to old fashioned value standards.

Some observers talking of return of old-time value standard of 10 times earnings and 5% yield.

F. Purnell, Youngstown Sheet & Tube Pres.: “There are plenty of evidences that the steel industry is looking up. We have passed through many months of depression but that is all behind us. ... Industries consuming steel are increasing activities.”

Commerce Dept. foreign news report assembled from its foreign representatives: trend to economic improvement in many European and Far East countries.

Concerns that recent stock declines have weakened banks with high levels of loans on securities called absurd by “responsible New York banking circles”; most country banks reportedly more concerned with employing surplus funds than with their liquidity. While it's true security loans are close to record level, liquid assets are so enormous that freezing even a large number of security loans wouldn't imperil banks positions; banks also have large capacity to borrow from Fed.

Economic news and individual company reports:

BLS reports Sept. employment in 13 industrial groups was up 1% over Aug., with payrolls up 1.4%; first increase this year.

Commerce Dept. reports Sept. merchandise exports were $318M vs. $300M in Aug. and $437.7M in 1929; imports were $227M vs. $217M and $351.4M; second consecutive monthly gain for exports, and first increase in imports from Aug. to Sept. since 1926.

S.W. Straus reports Sept. building permits in 577 cities were $168.3M, up 4% from Aug. but down 23% from 1929; reverse of usual seasonal decline.

Steel ingot production for week ended last Monday was at 55% vs.56.5% prev.week and 60% two weeks ago; US Steel was at 60% vs. 61% and 62%. Iron Age reports iron and steel buyers again very cautious, reducing inventories and doing less forward buying.

US cotton mills consumed 394,321 bales in Sept. vs. 352,335 in Aug. and 545,634 in Sept. 1929.

Supreme Court to consider whether West Palm Beach should be forced to levy taxes sufficient to meet its bond obligations; bondholders are calling for this, while city officials say they are doing everything in their power to meet obligations and collecting new tax would be “physically impossible.”

Companies reporting decent earnings: International Shoe (expense cuts produce better earnings on lower sales), Wm. Wrigley, Federal Water Service.


“' I want to get my advertisement into the hands of every farmer in the county,' a patent medicine spieler in a small town told the crowd around his stand preparatory to selling them his medicine at 'a special advertising price.' 'I'll tell ye a good way to do that,' announced a farmer in the crowd. 'Jest have it printed on the backs of mortgage blanks.'”

Appearing at the Palace (vaudeville):

The Marx Brothers present “bits of nonsense” from their recent picture Animal Crackers; also featured are Cab Calloway's orchestra and magic by Cardini.

+ The Boring Stuff:

Editorial: Many conferences are now being held on unemployment; this means there will be many proposals this winter “to legislate this outstanding economic problem out of existence.” Most will involve “some degree of compulsion of employers and employes,” together with use of Federal funds. It's noteworthy that the AFL has so far come out against these schemes, identifying them with the dole; this is somewhat unfair in theory, but accurate in practice. While voluntary insurance between workers and employers against irregularity of work may be worthwhile, it can't come close to solving unemployment; “the crying need is for the opportunity to work for a good wage, not the right to draw a pittance in lieu of making a living”; this may explain “the attitude of enlightened labor toward happy-thought inventions of politicians or scholastics ... The times can and will be righted. The less that task is assigned to legislative bodies the sooner will it be accomplished.”

Editorial: The Supreme Court will rule this session on 6 cases involving the ICC (regulator for rails); over 30 ICC-related cases are probably on their way there. The ICC “batting average” with the Court has historically been good, though it has suffered a couple of important reversals recently. Some think the Court is reluctant to upset orders of the ICC except in clear cases; if so, this places a high responsibility on the ICC considering their “tremendous powers.”

US farms counted in 1930 Census were 6.298M, down 150,466 from 1920.

Brazil govt. takes control of coffee exports, sends naval and military units against rebels.

Federal Prohibition enforcement div. sends 3,000 inquiries to editors seeking data on attitudes of newspapers to dry laws.

Radio Corp. transmitted 58M paid words over its worldwide system in 1929.

Scarcity of stocks for short sellers to borrow continued Wed., particularly in US Steel and several other majors; some houses reported to have stopped loaning.

Bears may have grown nervous due to recent “agitation against short selling” and evidence of overcrowded short side.

White House officials say NYSE heads' Sunday meeting with Hoover was on short selling; Washington said concerned “raiding” tactics are “unduly and artificially” depressing prices, and that if bear tactics aren't kept within legitimate bounds “hasty and perhaps radical” laws may result. Direct action possible is limited.

While some short covering was evident, it was believed much of the basis for the recent rally was buying by long-term investors and “for the accounts of interest sponsoring their markets.” A rally of several weeks duration was seen as likely, “unless last week's lows are violated in the near future.”

Industrials trading on the Curb Exchange (later became the Amex; smaller companies) haven't taken much part in the sharp decline over the past month, although the low volume of trading can result in big moves; for example Dow Chemical was down 6 points to 50 on Tuesday on 700 share volume.

BMT and IRT (NY mass transit) shares were strong on prospects for unification with city; seen as desirable for city since it would allow replacing high interest bonds of the two companies with low-interest city securities, would also allow the unified company to operate the new 8th Ave subway.

Conservative observers still on sidelines; advise waiting until it's clear recent lows will be support levels on declines.

A. Corey Jr., Vanadium Pres.: “As near as we can determine business is turning for the better, as reflected in inquiries.”

G. Woodruff, Nat'l. Bank of the Republic Chair.: “This depression is the first one I have experienced during which banks that I know of have had no losses.”

Commodities mixed. Cotton up slightly. Corn down substantially, wheat and other grains mixed, little changed. Copper buying still quiet at 10 cents; some concern over increased production by one large foreign producer. Zinc down to 4 cents/pound, lowest price for many years.

NY State Att'y General took 157 actions against 526 individuals and companies for security fraud in first 9 months vs. 104 against 342 in all of 1929; total loss to customers was about $39.3M.

Farm Board Chair. Legge refuses to release specific information on loans to co-op marketing organizations; willing to release total of loans outstanding, but says co-ops don't want specific loans divulged for competitive reasons. Co-ops get low interest loans from Farm Board and relend to members. Rep. Cellar (D., NY) had demanded to know if co-ops were overcharging members on interest rates.

Natural gas sales by 80% of utilities in first 8 months were almost 340B cubic feet, down 0.5% from 1929; revenues were $171M vs. $172M.

Iron Age reports seasonal improvement in machine tool business since Sept. 1 has been very small.

Independent Petroleum Assoc. of Texas will resume agitation “with vigor” for oil tariff.

German report: Breuning financial program sees large spending cuts, increase in tobacco tax and unemployment insurance levy. Reichsbank says will again raise discount rate if capital flight continues. Many German cities are in difficult financial position due to large spending on unemployment relief; large cities have raised taxes and taken out short-term loans at 8%-9% rates. 120,000 workers have gone on strike; companies stopping production include Siemens & Halske and German GE subsidiary. Trade surplus for first nine months was over 1B marks. Stocks hold yesterday's rally.

Lloyd's Register reports ships under construction worldwide in Q3 were 2.569M gross tons vs. 3.057M in 1929.

Canada to suspend Soviet coal imports for fall and winter.

Cuban Pres. Machado says sugar industry in crisis, urges cooperation with Chadbourne plan to withdraw 1.5M tons from existing 2.2M tons sugar in storage.

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

Portland cement production in Sept. was 16.1M barrels vs. 17.8M in Aug. and 17.2M in 1929. First 9 months was 126.9M vs. 128.2M.

US manufacturers consumed 25,288 tons of rubber in Sept. vs. 30,575 in Aug. and 34,363 in Sept. 1929.

Tire shipments by US makers in Aug. were 5.520M vs. 5.810M in July and 7.845M in 1929; Production was 4.443M vs. 4.257M and 5.806M.

Goodyear places factory workers on 24 hour work week; hopes to resume full-time schedule in Dec.

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