October 28, 2009

Tuesday, October 28, 1930: Dow 195.09 +1.75 (0.9%)

Assorted historical stuff:

J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”

Civil Service Clerical Assoc. of London votes overwhelmingly in favor of compulsory resignation for women after marriage.

G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.

Illinois Supreme Court finds margin trading in grains to be gambling and debts not legally enforceable.

Rumors persist that Congress will legalize beer, and possibly light wines.

Mustaches have come back into fashion in London so suddenly that wig makers are supplying artificial ones in all styles for men who can't wait to grow one.

NY City papers (Times, World, and Herald Tribune) raise Sunday edition from 5 cents to 10 cents.

Market commentary:

Market wrap: Substantial selling came into the market early, with bears interpreting Saturday's late decline as indicating market was in a vulnerable position. Majors including US Steel, GM, and Westinghouse were forced to substantial setbacks from Saturday's highs, and J.I. Case had a further bad break to a yearly low. However, the decline steadily lost momentum as volume dried up, the general list showed resistance to isolated weak spots, and leading stocks traded in a narrow range at midday. “Bears obviously were intimidated” by this steadiness, and a rally starting in the afternoon brought urgent short covering; rally was attributed to possible declaration of extra dividend by US Steel today. Bond market dull, generally steady; rallies in Brazil govts. and some convertibles. And if

F. Patterson, Nat'l. Cash Register pres., meets with Pres. Hoover, says sees nothing discouraging ahead, believes we've hit bottom; points out cash register business a good barometer of general business conditions.

J. Rosenwald, Sears Roebuck chair., says recovery from current depression will be slower than 1920-21 postwar slump due to currently restricted immigration, lower auto production and roadbuilding.

The weekend brought no news of business improvement in steel or autos, and continued uncertainty in the general price structure was indicated by in crude oil price. However, recent stock price action has created growing opinion that unsatisfactory business conditions have largely been discounted.

Some more assorted 1929 high stock prices compared to now: US Steel 261 3/4 to 146 3/4; Beth. Steel 112 3/4 to 73; Radio 114 3/4 to 22; Westinghouse 292 5/8 to 103 3/4; Montgomery Ward 137 7/8 to 23 7/8; Sears 181 to 51 5/8; Glidden 64 1/8 to 10 3/8; GM 91 3/4 to 34 3/4; Hupp Motor 82 to 8.

Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.

Economic news and individual company reports:

Prince & Whitely, the NYSE broker that recently failed, ran a [theoretically separate] investment trust (Prince & Whitely Trading Corp). The value of this trust is now hard to determine because of its tangled finances, including claims by the trust against the broker, and holdings of unlisted securities.

First 51 rails report Sept. net operating income of $77.5M, up 10.2% from Aug. but down 17.8% from 1929 and down 19.4% from 1928. Sept. gross revenue was $335.6M, up 0.1% from Aug. but down 17.1% from 1929 and down 15.3% from 1928.

Fed. Reserve member banks weekly report for Oct. 22: loans on securities down $116M to $8.142B, “all other” (commercial) loans down $33M to $8.573B.

L. Crandall of US Realty & Improvement Co. reports heaviest volume of construction projects since the spring of 1929 has come to eastern office of large builders for estimates in past three weeks; seen as sign “business is emerging from the doldrums.”

US Steel to report earnings at directors' meeting after the close of business today.

Companies reporting decent earnings: Beech-Nut Packing, Mead Johnson (baby food), Standard Cap & Seal, McCall Corp (magazines), Telautograph (machines transmitting diagrams by wire).


“Judge - You admit you drove over this man with a loaded truck? Driver - Yes, Your Honor. Judge - And what have you to say in your defense? Driver - I didn't know it was loaded.”


The Big Trail - romantic US pioneer drama, “handsomely photographed on Grandeur Film, which is distinctly superior to the screen of ordinary dimensions for a spectacular picture of this character. ... John Wayne, who has the principal role in the story in this, his first film, acts rather amateurishly.” On the other hand, “Marguerite Churchill makes a charming heroine” and “Tyrone Power is a capital chief-villain.”

+ The Boring Stuff:

Editorial: Kelley's sensational charges that the Interior Dept. was handing oil shale lands over to big oil companies appear to have broken down under closer examination. Of the estimated 8.258M acres of Western oil shale lands, the claims in dispute cover only 7,278, indicating the land grab in fact hasn't gotten very far yet. The dispute over rights seems like a doubtful technical one, and charges that Asst. Sec. Finney wanted to destroy evidence are very doubtful. “Does this mean that the 'Forty-billion-dollar-grab' is dead? Perish the thought! A slogan like that can never die!”

Col. Woods, chair of the President's Emergency Committee for Unemployment reports 15 large cities have started projects for dealing with unemployment; looks to public works that can be carried on in the winter as best solution to provide needed work for the unemployed. Says “staggering” method of distributing available work evenly among existing workers has accomplished much but doesn't believe using a 5-day week with 5-hour days would help this winter. Calls on property owners to have repair work done now.

Editorial by T. Woodlock: We now face a question “whether or not this country will ... 'industrialize' a large part of its food production so that it will look to large corporate units operating with a minimum of men-hours and a maximum of machinery for the greater part ... of its necessary food supplies ... From time immemorial, the land-folk have been regarded as the mainstay of the nation, and rightly so.” Two generations ago, most of the US lived by farming and no significant change in methods had occured in the previous 2,000 years; since then, “a complete revolution” has become possible, ultimately replacing man by machine. “It is at bottom a sound instinct that causes us to listen with concern to cries of distress from our land-folk;” to recall Oswald Spengler's warning, when a civilization reaches the point where the cities have swallowed up the land-folk, the end of that civilization is near.

F. Blair, United Guardian Trust chair., joins the consensus disagreeing with T. Macaulay's plan for the Fed to buy bonds to reverse deflation: “It is specious to argue that additional credit would immediately relieve the present situation. Relief from this source can come only after such credit found its way in in the hands of ultimate purchasers of goods. ... We believe that a normal working out of fundamental laws will be more helpful than attempts to apply artificial stimuli, which might cause a relapse at a later date.”

US branch factories operating in Canada estimated about 1,500, making up a large part of the $3.5B total US investment in Canada; US manufacturers have shown increasing interest in manufacturing in Canada, partly due to tariff changes.

Forestry efforts in Hawaii include Army plane dropping 1,689 pounds of tree seeds, foresters planting 298,650 trees in the territory's forest reserves, and 623,800 trees distributed for planting on private land.

Stock in California's San Francisco Bank is selling at about $13,500 a share; has assets over $125M and deposits over $120M.

Short covering has reportedly been heavy in recent sessions, and is responsible for some of the advances.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Support that ended the recent severe declines in the general list seen as “mostly outright purchases by interests taking long-pull positions.” While there was some disappointment among traders that Saturday's session didn't continue the recent rally, “the check on Saturday appeared due mostly to temporary impairment of technical conditions. ... the market seemed to be consolidating itself in preparation for more sustained improvement.”

Present business conditions are not encouraging particularly in steel, copper, and oil. However, past turns in the market have usually come when the outlook was dark, since stocks have tended to discount a change before it happened.

Average duration of past bear markets has been about 13 months; present decline is in its 13th month, since it began in Sept. of last year.

Many investment trusts (similar mutual funds) continue to sell at big discounts from liquidating value; this is opposite of the situation a year ago when many sold at substantial premiums “because of the presumed miracle-working possibilities of their management.” One example: United Securities Trust Associates - selling at $29/share, has $15/share cash, management fee capped at 1/4% per quarter, and remaining securities valued at $27.50, largely made up of leading stocks.

Savings banks call for revising law to allow holding bonds falling below legal requirements because of “temporary conditions.”

Commodities mixed. Wheat down moderately after early rally; other grains mixed. Cotton up moderately after early setback. Copper domestic buying small at 9.5 cents; future price trend seen based on how quickly and drastically production cuts are made.

Agriculture Dept. reports world production of feed grains is 156.2M short tons, down 11% from last year, and also down from 1927 and 1928. US imports of agricultural products, including forest products, for fiscal year ended June 30, were valued at $2.101B, down 11% from prev. year and down 15% from the 5-year average 1925-29. Most of the decline was due to deflation rather than decline in volume.

T. O'Connor, US Shipping Bd. chair., says US shipyards will do $75M of work annually for next 5 years; dismisses foreign criticism of US for enlarging merchant marine when world shipping is slumping; believes depression temporary, shouldn't derail long-awaited project important to national welfare.

FTC continues investigation of pricing in chain and independent stores, comparing pricing on several hundred commodities.

Gasoline in Chicago wholesale market is 4 3/4 - 5 1/2 cents vs. 4 7/8 - 5 1/2 previously.

Soft coal production for weekend ended Oct. 18 was 9.232M net tons, down 263,000 from prev. week and down 2.122M from 1929; Production so far this year totals 364.9M vs. 419.8M in 1929 and 388.6M in 1928.

US tire shipments in 1929 were $682.8M, down 12.4% from 1927.

Magnolia Petroleum cuts Oklahoma and Kansas crude oil prices 17-38 cents/barrel to match Standard Oil of Indiana cuts.

US cigarette production in first 9 months was 92.0B, up 1.5B from 1929.

US exports of leaf tobacco in first 9 months were 381.3M pounds, up 33.6M from 1929; value was $96M vs. $100M in 1929.

Bangor & Aroostook is a rare exception among the rails, earning double its annual dividend requirements in the first nine months, with $7.27/share, equal to 1929 earnings. Stock is about 61, dividend $3.50 for a yield of 5.74%.

No comments:

Post a Comment