November 22, 2009

Saturday, November 22, 1930: Dow 190.30 +3.21 (1.7%)

Assorted historical stuff:

Editorial: Proposal for NY State sales tax is absurd for several reasons. Advocates want it in order to provide relief for real estate taxes of $250M/year, but since total retail sales are about $6B, this would require a 4% rate; “a 4% retail tax is unthinkable.” Even a tax of 1% would “inevitably drive trade to the nearest border” state, or to mail-order houses. Retailers' expenses in collecting the tax would have to be added to price of goods. Finally, “to make every purchase of the necessaries of life a constant reminder of taxes” would have a psychological effect that “would obviously result in a dimunition of spending.”

Extremely high cost of illness, medical and hospital care throughout the US” has led to formation in many Western cities of associations to reduce these costs. A hospital and medical staff is hired by the association to serve members exclusively; members then pay fees less than 50% of those charged by doctors in private practice. Service is not for poor or wealthy but for “that large middle class which is able and willing to pay reasonable fees.”

Att'y General Mitchell reveals US govt. energetically fighting racketeers and gangsters in larger cities, especially Chicago. 40 New York leaders to meet with DA Crain on program to combat “public enemies.” Nat'l Crime Commission to send secret survey to big-city merchants asking details of experiences with racketeers.

Sen. Norris (R., Neb.) says extra session of Congress will be needed if progressive program not acted on by upcoming session.

C. Warburton, Nat'l. Drought Relief Committee chair., says most severe test for drought relief is to come in winter months.

Col. W. Starrett says skyscrapers twice as high as current record quite possible from engineering viewpoint, but maximum economic height likely already reached.

205-foot dirigible mooring mast completed at top of Empire State Building; can withstand dirigible pull of 100,000 pounds.

US govt. has successfully created large reindeer industry in Alaska, starting from a herd of 16 imported from Siberia in 1891, there are now about 1M.

Market commentary:

Market wrap: Stocks continued technical correction early; yesterday's late reaction was extended, with bearish pressure renewed and good-sized sales of leaders including US Steel, Westinghouse, and GE at the opening. However, selling was absorbed easily and dried up within first hour; bear efforts were “hastily abandoned”; considerable buying came into standard stocks, with many hitting new rally highs; buying broadened with many daily highs hit in late afternoon. Particularly strong features included rails on talk of rate increase proposal, Montgomery Ward, Sears, and various specialties. Bond market mixed; US govts. strong, with many at new yearly highs; foreign govts. irregular, South American particularly weak; corp. mixed, convertibles rally after early losses.

I. Patterson, of Incorporated Investors: “Prices of sound stocks are at very real bargain levels.” Not calling bottom; “The intelligent investor has learned from past experience the impossibility of picking the low point ... But we do say that the sound policy of buying the best near the bottom will prove highly profitable.”

Security loans by banks to non-brokers continued their recent steady increase, believed to indicate better-quality buyers (good credit and ample resources).

One broker's opinion - “Don't become discouraged by the pessimistic talk you hear. It is no different from the talk I have heard in six depressions I have gone through. ... Go against your own feelings. I am blue myself, but have been buying stocks. And believe me, when you buy stocks feeling as blue as indigo, it hurts.”

Some are beginning to think it will be a more cheerful Christmas than was thought possible” two weeks ago when stocks were hitting new lows; hopeful signs include more cheerful auto industry, commodity price stabilization, and that “public seems to be regaining its courage slowly but surely.”

R. Grant, GM VP, says statistics show automotive industry quickest to recover; looks to 1931 to level out sales curve and 1932 to be very good.

F. Hobbs of Central Trust of Ill. sees recent evidence of uptrend in commodity prices; “A rising trend is now as certain as was a declining trend sure 11 years ago ... I have real sympathy for the man who has been sitting back awaiting a lower bottom, and who has not yet protected his needs in cotton or copper or rubber.”

Under-Treasury Sec. Mills says Fed. tax reduction of $1.541B over past 7 years was offset by local rises; urges curb on “alarming rate” of local spending.

Economic news and individual company reports:

Total value of NYSE-listed stocks Nov. 1 was $55.0B vs. $89.7B Sept. 1, 1929; total value of listed bonds $48.4B vs. $46.7B.

BLS reports building permits in 286 cities in Oct. were $125.2M, down 14.6% from Sept. and down 39% from Oct. 1929.

US life insurance sales in Oct. were down 13% from 1929; first 10 months down 2%.

Western rails reportedly preparing application to the ICC for broad-based increase in rates.

Pres. Hoover says against reducing “sinking fund” for retirement of national debt; would be unsound financing. Fund has reduced debt about $400M annually.

Withdrawals, caused in some instances by unfounded rumors,” forced closing of 16 more small banks in South and Midwest, bringing past 5 day total to 114.

Company reports since Oct. 1: 201 companies reported higher earnings vs. 1929 and 336 lower; 506 dividends unchanged, 50 increased, 72 cut.


“Stage Hand - You received a tremendous ovation; they're still clapping. What did you say? Actor - I told them I would not go on with my act until they quieted down.”

“Mistress (to new maid) - And when you leave, I want plenty of warning. Maid (haughtily) - It's me custom, ma'am, just to give three toots on me auto horn.”

+ The Boring Stuff:

Editorial: In its recent meeting, the Assoc. of Railway Executives revealed that rails spent $699M on plant improvements in the first 9 months of 1930, or $125M more than last year, and promised to continue improvements and employ the greatest possible number of workers over the winter. There were also a couple of plaintive statements recommending that carriers be given a respite from orders reducing their earnings, and expressing “faith in the fairness of the American public.” However, there were also some signs the rails may have had enough - VP Lee of the Penn. RR declared that “we have taken too many evilly meant blows on the chin with a smile,” and that the rails would henceforth attempt to give blow for blow. This may be necessary; faith in the fairness of all of us is admirable, but Heaven helps those who help themselves.

In spite of persistent rumors that beer may be legalized soon, modification of Prohibition believed unlikely in near future. Current [lame duck] Congress solidly dry, next one will still have dry majority; report of Wickersham Commission (studying the issue for Pres. Hoover), even if it recommends modification, not binding on Congress. Likely test of the issue in 1932.

Conference of railway unions fails to reach agreement on alleviating unemployment; adopts resolutions opposed to unregulated operation of bus, truck, and pipe lines, and to govt. inland waterway plans.

G. Roberts, US member of League of Nations Gold Commission, says disagrees with statements of British economists that large US and France accumulation of gold would cause worldwide economic crisis; believes remedy is foreign investment, “world benefits from the free flow of capital.”

Sen. Kapper (R., Kansas) calls for alleviating wheat surplus by diverting 15M bushels to feed the unemployed.

NY Emergency Employment Committee reports $1.943M has been raised out of $6M goal.

Sir Josiah Stamp, noted economist, estimates net British wealth at $90.2B vs. $71.6B in 1914.

British govt. grants $87,500 annually for next 5 years to promote grand opera in Britain.

Electrically welded steel pipes able to withstand high-pressure have increased pipeline market; until 1927, pipelines over 250 miles were rare, but now lines up to 1,200 miles are being constructed.

Continued odd-lot buying reported in recent sessions. Many brokers are catering to small investors by lowering minimum commissions, typically from $5 to $3.

Some investors are reportedly considering taking their profits from bonds and switching into common stocks at these levels.

Recent market action “has created a better feeling in many quarters”; stock standing out on advances have been leading issues, while “character of the buying during reactions has been of the best.” Observers now recommend scale buying for the long pull on technical setbacks.

Market reaction to expected bad Q4 earnings reports is uncertain. In past recoveries, bad news has been ignored; however, this happens only when people are convinced business has definitely turned up, just as good news is ignored only when people believe business has turned down. “Past and present events have little to do with the market's trend when people are able to look into the future.”

Municipal bond market dull, prices comparatively soft; bond men expect more activity and firmer prices in Dec. in line with usual seasonal pattern.

M. Ayres, speaking to Nat'l Assoc. of Finance Cos., predicts more cars will be produced and sold in 1931 than in 1930, but fewer than in 1929; recommends financing cos. specializing in cars diversify into other goods.

C. Hix, Virginian Rwy. pres., says in his opinion worst of the business depression over, outlook “clearing up.”

Commodities mixed. Grains up substantially. Cotton off moderately. Copper buying small; producers holding price at 12 cents, some smaller sales at 10 1/4 cents; most consumers said to be covered far ahead on requirements.

Bradstreet's weekly review sees slower wholesale and retail sales due to warm weather, but colder weather possibly coming. Dun's sees more hopeful but uneven picture, seasonal influences stimulating some lines but retarding others; little change in business expected for rest of year, but longer term aspects more reassuring.

NY City bank weekly report showed deposits at new yearly high, but reserve balances drawn down to invest in acceptance and bond markets.

Contracts awarded for new construction in 37 states east of the Rockies during Nov. 1-14 was at the rate of $11.7M per business day vs. $13.0M in Oct. and $15.6M in Nov. 1929. Year to date was $4.151B vs. $5.211B.

Freight traffic handled by class 1 rails in Sept. was 36.2B net ton miles, down 18.1% from 1929 and 17.3% from 1928.

Farm Board declines to comment on reports it's now holding over 110M bushels of wheat.

German political prospects said better on support of state govts. for Breuning program. Spain reportededly preparing currency stabilization and return to gold standard; however, uneasiness caused by reports King Alfonso will declare military dictatorship. London and Berlin stocks down in past week.

Cuban Senate votes to extend Pres. Machado's power to suspend constitutional rights throughout Cuba following student riots and other disturbances.

Standard Oil NJ reduces price of gasoline to dealers 1 cent/gallon.

Addressograph-Multigraph merger to unite two leading business machine cos.; Addressograph is largest maker of addressing and name-and-data record-keeping machines, while Multigraph is one of leading makers of duplication and folding machines.

Decline in lumber prices that started in May 1929 seems to be nearing an end, as Oct. prices were only slightly under Sept.

Carolinas textile industry, which was doing badly even before the general depression hit about a year ago, is reportedly reviving, with mills that had been working 2 and 3 days a week back to full time and no surplus stocks on hand.

The humble bean - an important supplement to many a menu, as well as a source of countless jokes” has become a substantial source of income for farmers. In 1929, total crop of about 20M bushels of dry beans was produced on 1.9M acres, with value of $73M.

NYSE seat sold for $231,000, up $5,000 from previous sale.

Companies reporting decent earnings: Chesapeake & Ohio Rwy (against industry trend), Kansas City Power & Light.

Montgomery Ward says Oct. earnings strong, now likely to break even for first 11 months and Dec. earnings may cover class A dividends.

Three major tobacco companies (American Tobacco, Reynolds, Ligget & Myers) are selling at an average of 12.3 times estimated 1930 earnings. All three have a remarkably consistent record of increasing earnings over the past 10 years; only twice in the past 10 years has any of them shown reduced earnings year-to-year. Amer. Tobacco in 1930 is expected to earn $42.5M, highest earnings ever for a US tobacco co.

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