November 20, 2009

Thursday, November 20, 1930: Dow 187.57 +4.15 (2.3%)

Assorted historical stuff:

Leaders of both parties seen against extra session of Congress between Mar. 4 and end of 1931; neither party has effective control, and long period of legislative uncertainty is thought undesirable. However, “insurgents” may be able to force extra session by blocking essential appropriations bills using filibuster.

Editorial by T. Woodlock: Stance of Gov. Roosevelt and Progressives on utility regulation is inconsistent; on one hand, utilities have been strictly regulated because they're “natural monopolies,” but on the other Roosevelt seems to favor publicly owned competition for utilities whenever possible. This seems to “run counter to elementary principles of fair dealing”; if there's to be competition, “neither competitor should be strait-jacketed. Further, there should be a fair ring and referee.”

Editorial: Chinese people have first real opportunity for effective national govt.; “except for still troublesome communistic disorders in the South, two decades of civil war” have resulted in ascendancy of Nanking govt. under Chiang Kai-shek; Washington should extend all possible cooperation on a basis of mutual respect.

Marquis of Winchester estate insolvent; was “premier marquis of England,” chairman of 14 cos. in 1929; estate liabilities about $2.3M, assets $2,500 and car.

Ford plant at Dearborn, Mich. expected to become world's largest consumer of water when new water intake system with capacity of 914M gallons/day is completed - this is more than used by cities of Detroit, Philadelphia, Cinncinnati, and Washington combined.

Newspapermen assigned to Gov. Roosevelt's reelection campaign put together a pool of money to be won by the best guess at the Gov.'s margin of victory. Winner was Roosevelt himself, with the high guess of 437,000, which was still about 300,000 short of his actual margin.

A British tourist agency is running a cruise including the Antarctic, stopping at the Bay of Whales about 700 miles from the South Pole, where Byrd spent 14 months on the ice in 1929-30. Route of the cruise: England, New York, Havana, Panama Canal, Galapagos, Antarctic, Australia, Java, Suez Canal.

Karsten Statistical Laboratory describes machine they're working on to predict “economic tides”; machine has 50 dials, each representing an economic statistic such as call money rates, gold movements, bank clearings, etc.

Market commentary:

Market wrap: “Powerful support” by “important interests” for high-grade shares gradually broadened into advances in “a long list of representative shares.” Market showed resistance to bad news for second day; yesterday to wheat news, and today to failure of an Exchange firm. Bear attempt to start reaction around noon fizzled. Major industrials, auto shares, and utilities showed sustained strength; rails, entertainment shares, and some industrial specialties were up sharply. Bond market mixed; US govts. firm; corp. high grade and convertibles strong, second grade weaker; foreign govts. irregular, mostly down.

Advertisement from Saturday Evening Post: “The whole history of Business is golden testimony to the truth that in times like these the seeds of future growth and greatness are ... most enduringly sown. Even now ... the business that are heeding this lesson by working instead of wishing are depression-proof and flourishing ...”

Broad Street Gossip: Some traders are less inclined to buy stocks now than when they were hitting record highs last year. This is human nature, but “the big fortunes have been made by people who accumulated and held standard securities after a prolonged decline, such as we have had over the past 12 months.”

Broad Street Gossip: For the past year, “public men have been giving long speeches” on causes of the depression, blaming “overproduction, silver depreciation, excess speculation, mal-distribution of gold, etc.” If these same people could tell us how to fix the situation, we'd be grateful.

B. Fairless, Republic Steel VP, reports many signs start of a buying movement in steel is not far off.

Economic news and individual company reports:

Maintenance of steel production level considered encouraging, as was pricing firmness on large order from Penn. RR; Iron Age reported demand from auto makers increased slightly, while prospects were seen for better auto and rail buying early in 1931.

NYSE firm Bauer, Pogue, Pond & Vivian suspended for insolvency, causing sharp breaks in sponsored stocks including Bulova Watch.

Executives of Lord & Taylor, Bloomingdale, B. Altman's, Gimbel Bros., and many others, unanimously warn NY State tax revision commission that “in their opinion a retail sales tax was perhaps the worst method of tax revision that could be devised.”

Total state bond issues now over $2B, or about $17 per capita, vs. $1.4B in 1923; “burden of taxation may be spread over a long period by issuance of bonds and thereby passing a part of the obligations to future generations, yet it does mean heavy taxes and is a problem ...”; heavy spending on roads, schools, hospitals.

Northern Trust bond review says long term result of gold inflows to US and France will be their assumption of responsibility for providing long term loans to other countries; notes transition of US from borrower to lender since war; says foreign bonds one of safest investments regardless of temporary difficulties.


Smiles - Comedy presented by Florenz Ziegfield, starring Marilyn Miller and Fred and Adele Astaire. “The story brings the Astaires and Miss Miller to the stage with satisfactory frequency ... since these three, together or alone, dance while they sing, perhaps there need not have been all that concern about the lyrics.”


“Rural Doctor (meeting patient) - I've - er - taken the liberty of sending in my little account [bill] again. Patient - Is that so? Well, acting on your advice I'm avoiding business worries for the present.”

+ The Boring Stuff:

Editorial: Recent local epidemic of bank failures caused by collapse of an investment bank that had controlling interests in many of them gives some general lessons for group or chain banking. While most of these systems have “greatly improved and strengthened local banking conditions,” the controlling concern should “conform to the essentials of sound banking.” Also, since it essentially acts as a central bank to its group, it must always stay in liquid condition with easily realizable assets.

Justice and Treasury Depts. requested appropriations for Prohibition enforcement in 1931 total a record $17.4M. Vote among members of the American Bar Assoc. is in favor of repealing Prohibition, 13,779 to 6,304.

French govt. preparing plan for development of colonies while reviving French industry; calls for granting 4.650B francs in credits to colonies to be spent in France; believe this would provide work for one million workers for a year.

Macy's now erecting large addition to its New York store taking up almost the entire remainder of the block; to be completed early in 1931. Current New York store does volume of almost $100M/year.

Canadian Nat'l. Rwys. has opened a new booking office in New York “finished in the character of a drawing room in a private English manor house.”

Chicago Yellow Cabs are installing rotating mechanism switching between up to 23 different advertising cards.

Copper companies seen likely to maintain dividends if they can hold prices at 11-12 cents.

Conservative observers more cheerful; recent market action seen indicating good support, at least for the time being; advise picking up stocks on any technical reaction and adding to positions if resistance develops above last week's lows.

Substantial European buying reported in US stock markets since end of last week, first significant buying in some time; mostly from Switzerland and Holland.

Short sellers continue to fight the market, though some “desertions from the ranks of the pessimists have taken place recently” due to greater resistance on reactions. Scale support in leading stocks has increased impressively this week, particularly in US Steel; this has been a favorite bear target because of its influence on the general list. Buying was said to be coming from “the strongest banking and industrial interests.”

M. Ayres of Nat'l. Assoc. of Finance Cos. expects loan companies to provide 10%-15% more funds for car purchases in 1931; looks for business improvement in spring and normal conditions by end of 1931.

Corporations have a record amount of idle cash due to slack business and low inventories; a number have been investing cash in good common stocks.

Commodities firm. Grains up moderately on Farm Board support. Cotton slightly higher. Copper remains quoted at 12 cents but with small buying.

ICC reportedly considering sweeping revision of the recapture clause of the Transportation Act (this provides for recapture of “excessive” profits over the legally defined fair return of 5 3/4% on investment). This clause has lead to much protracted litigation.

US Steel ingot production for week ended last Monday was at 47%-48%, unchanged from prev. week and vs. 73% in 1929; independents were at 41%, unchanged and vs. 70%; industry total was 43%, unchanged and vs. 71%.

Chicago wheat market distorted by Farm Board support, with May prices almost the same as Dec. instead of the usual 7-9 cent premium. This is expected to push large amounts of Dec. wheat onto the market.

Increasing imports of foreign feedstuffs reportedly weakening US corn and other feed markets and reducing use of wheat for feed.

Decline in car loadings of 53,239 for week ended Nov. 8 attributed to Election Day holiday; market interests will watch future loadings closely.

US cigarette production in Oct. was 10.947B vs. 11.202B in 1929; large cigars were 624M vs. 702M.

Hide prices are down near 10-year lows, with sales small due to lower shoe production.

Fed. Reserve Nov. bulletin notes trend this year of gold movement from “outlying” countries producing raw materials to “commercial” countries (US, France, etc).

German business conditions unimproved; total unemployed Oct. 15 were 3.184M vs. 1.489M in 1929; index of production ending Aug. was 81 vs. 103 in 1929. Govt. aiming at reducing production costs; raw materials are down 12% in past year but wages are unchanged this year.

London Financial Times survey of wheat situation says it's worst in history, with world supply so large new crops are unlikely to find buyers for 20 months; calls for immediate aid from US and Canadian govts.

British registered unemployed on Nov. 10 totaled 2.262M vs. 2.263M previous week and 1.259M in 1929.

Dec. sugar futures down 4 points to 1.26 cents/pound on reported dissension among Javan producers on curtailment.

Fall River, Mass. loan defaults said due to depression in cotton textile industry.

Autostrop shareholders approve Gillette buyout. Gillette stock down, attributed to past earnings restatement. However, company prospects considered improved by merger thanks to ending of patent litigation and consolidation of operations.

Childs Co. (restaurants) points to effectiveness of newspaper advertising; after starting to advertise its dollar dinner Oct. 15, Nov. sales are expected to double.

Companies reporting decent earnings: Household Finance.

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