November 4, 2009

Tuesday, November 4, 1930: Dow 185.39 +0.50 (0.3%)

Election special:

Republican control of Congress now expected to be “pared to a shadow if not obliterated” in today's election. Democrats claim majority in House but don't expect to win control of Senate; Republicans anticipate “victory” but expect to lose some strength and fear loss of effective control in House as has occurred in Senate; independent observers don't expect Democrats to gain control.

Main cause of Republican trouble seen as depression; absent this, even with issue of Prohibition and troublesome claims of ineptness, only normal off year election losses would be expected. Results of the election will probably be used to forecast Democratic presidential victory in 1932; if it really “ain't goin' rain no mo,” this may be the case, but things may change if economic conditions improve “as they almost surely will”; Democrats must also tend to “lack of any one outstanding candidate on whom various factions of the party can agree” and to lack of other issues or constructive program to campaign on. Republicans have been in power so long they have grown “careless and fat”; also, “without desiring to pun, it may be said that too many nuts are loose within it.” Results of election may in fact put “a good fright” into the Republican party and make it “train down and do a little fighting with its broad back to the well-known wall.”

Editorial: An increasing number of votes for third-party candidates seems driven by protest. Those who vote this way should consider if they're doing more harm than good; “the decline of parliamentarism which has driven more than one of the nations of Europe to dictatorship was caused in the main by too-fine division of the electorate into many warring factions ... ”

Business fears as to election results seem exaggerated; the new Congress won't meet until Dec. 31, 1931 and will probably be too closely divided to do anything controversial; In fact, since the new Congress will meet shortly before a presidential election, it's an almost unbroken rule that it won't do much of anything.

Anti-Prohibition forces expected to gain from election, but drys expected to retain control; repeal or modification not expected for at least two years.

Assorted historical stuff:

J. Raskob advocates construction of “coast-to-coast super highways” and reduction of 5 1/2 day workweek to 5 days at same wages to restore prosperity. Various US communities will aid unemployment situation by immediately starting public works that normally wouldn't be undertaken for 2 to 3 years; many related bond issues will be voted on today. E.I. du Pont de Nemours announces will advance work on plant repairs and replacements. Hudson Motor adopts 5-day week.

Glass Senate subcommittee won't begin meeting until Dec. 1; will inquire into activities of Federal Reserve system and banking and finance generally; believed changed economic conditions necessitate study of banking laws to determine what modifications necessary.

W.R. Hearst calls for substitution of Canadian or Swedish system for national Prohibition in US.

The position of railways on smoking in dining cars has become complicated due to the recent increase in smoking by women; “It is more difficult for the head steward to say 'No smoking, please,' to a charming lady ... If she declines to listen to his objurgations, the head steward's position is practically untenable.” The Boston & Maine Railroad has now resolved to settle the question by a customer ballot.

Notable new developments in business machines: IBM - automatic billing machine, new time clock equipment, “safe electric” food slicer; N.C.R. - check writing and signing machine; Burroughs - cash registers in colors, savings bank entry machines; Royal - pastel and duo-tone typewriters, 44 inch carriage for statistical work; Addressograph - bill printing and addressing machine. Earnings generally down moderately from 1929 except for IBM.

Market commentary:

Market wrap: Trading extremely light due to tomorrow's election day holiday; many traders “seizing the opportunity for a three-day vacation,” and others were reluctant to commit before election results were known. Leading shares opened slightly lower and staged a moderate recovery about 11 o'clock, then traded in a narrow range the rest of the session. Amid general dullness, some individual weak spots stood out including Simmons, Coca Cola, International Nickel, Chrysler, and Westinghouse late; however, attempts to spread weakness to the general list made no headway. Bond market also dull, little changed; foreign and US govts. and high grade rails showed firm tone.

Editorial by T. Woodlock: Vast majority of investment trust funds (similar to mutual funds) were invested after start of 1928, at “final stage in the greatest speculative orgy that this country - or any country ever experienced.” Ironically, conditions today are now ideal for starting an investment trust; we're in a period of “maximum depression” with many bargains to be had, but past mistakes seem to prevent grasping the opportunity.

T. Girdler, Republic Steel Pres.: “Operations for the industry are around 50% of capacity and there are many signs that this will be maintained or improved upon during the last two months of the year. I expect a national and sound recovery in prices and operations to get under way in the steel industry early next year.”

Neisner Bros. Pres. A. Neisner sees noticeable improvement in fall buying, expects co. business for Q4 as good or better than 1929.

Movie companies adjusting to novelty of sound films wearing off; box office again dependent on film quality; some companies now offering widescreen as new novelty; stage shows at high-end theaters being restored; more children's films planned.

Dr. D. Friday, economist, predicts recovery this winter but warns that “fat days coming will be far leaner than those of preceding cycle.”

Economic news and individual company reports:

Longest US dividend records: Penn. Railroad 75 years; New York Central 61 yrs; Western Union 57 yrs; AT&T 48 yrs; United Gas Improvement 45 years.

NYSE reports brokers' loans at end of Oct. were $2.556B, down $925.3M in month and lowest total ever recorded (figures have been recorded since Jan. 1926; value of NYSE-listed shares has since increased from $34.5B to $60.1B as of Oct. 1).

Standard Oil of NJ cuts retail gasoline 1 cent/gallon throughout its territory. Std. Oil of Indiana lowers prices on midcontinent crude oil by 12 cents/barrel.

US gasoline consumption in first half was 6.810B gallons vs. 6.292B in 1929; taxes collected $230.6M vs. $175.1M; avg. tax per gallon 3.39 cents vs. 3.07 cents.

C. Hanch, Nat'l Assoc. of Finance Cos. GM, reports average car loan in 1929 was paid off in a little over 9 months (standard terms are 1/3 down, a year to pay the balance). Urges more installment buying as stimulus to business today.

Companies reporting decent earnings: Pullman (passenger rail cars), Canadian Wire & Cable (benefited from power development), Distillers Corp. - Seagrams (Canadian whiskey, able to increase sales in spite of Canadian govt. efforts to end exports to US).


“'So you took that pippin home from the movie last night.' 'Yeh.' 'How far does she live from the theatre?' 'Oh, three soda fountains and a candy store.'”

+ The Boring Stuff:

Editorial: Rails are suffering because of scheduled freight trains that must be run with whatever loads are available. They should consider cutting back; “Is the element of time so supremely important in the case of most of this ... freight?”

K. Druisberg, Nat'l. Assoc. of German Industries Pres., says Young (reparations) Plan “cannot be carried out,” leads to “the severest damage, not only to German economy, but also to the economic life of the creditor states.”

Dr. G. Vargas, Brazil provisional Pres., promises to dissolve Congress, reorganize courts, and investigate Banco de Brasil for criminal misuse of public funds; says will not take vengeance on members of deposed govt.

Yonkers Mayor Fogarty joins Gov. Roosevelt and Westchester officials in denouncing New York Central's proposed 40% commuter fare hike.

German air officials plan to use helium in new Zeppelin if negotiations with US succesful. R-100 airship plant at Yorkshire, England shut due to lack of orders [the R-101 recently crashed and burned, as reported on Oct. 7].

While Eskimos have previously been considered uninterested in the outside world or worldly riches, some families are now earning up to $40,000 a year in the fur trade “with a resultant disregard for expense that is startling.” Extravagances include chartering airplanes for travel, paying $300/ton for coal, and radios that “bring American jazz to the igloo.”

Major US govt. research labs include the 4,600 acre Wright Field site outside Dayton Ohio where main aeronautic research is carried out; 7 types of aircraft are now being developed including “attack, bombardment, ... transport, and photographic”; work now being done on engine design, high altitude flying, fog penetration by light rays, etc. Also important is Nat'l Bureau of Standards on 43 acres Northwest of White House, with 70 specialized groups in 11 major buildings.

F.J. Lisman & Co. lists 10 cash-rich industry leaders that may become blue chips of the next bull market: American Radiator, Commonwealth & Southern, Commercial Solvents, Chrysler, Phillips Petroleum, Remington-Rand, Standard Brands, Kroger Grocery, Lorillard, International Nickel. 100 shares of each can be bought for a total of $18,000.

O. Kahn tells Suffolk County Republican Committee that US financial and economic foundations are perfectly sound, no cause for alarm in present depression.

R. Pressprich suggests banks employ excess funds to buy NY City bonds, pointing out they are most liquid next to US govts. and, at about 4%, yield 3/4% more than highest-yielding US govts.

Recent market has moved down on low volume, indicating discouraging lack of support; this “has smashed the theory of 'don't sell a dull market.'”

The new Bank for International Settlements is off to a slow start in fulfilling its founders' ambitions, particularly that of equalizing credit conditions among member countries; rates can be 1% in one country and 15% in another though both are on the gold standard; while currencies are stabilized, “there is no atmosphere of mutual confidence permitting capital to circulate freely from one currency to another in the certainty of being able to make the reverse journey without injury.”

Commodities mixed. Grains down sharply, with wheat at season's lows. Cotton up moderately after easing off earlier gains. Copper buying continues active at 9 1/2 cents, with producers unwilling to fill all orders; prospects for curtailment still uncertain.

US Post Office to employ 228,490 for Christmas mail rush; will as far as possible give preference to “competent men with families to support.”

Transit Commission announces employment for 10,000 in 1931 will be provided by crossing and other transit improvements involving cost of $173M.

Commerce Dept. reports public works construction costs down 9%-20% below 1929; avg. municipal bond rates were 3.97% vs. 4.38%.

Fed. Reserve member banks weekly report for Oct. 29: loans on securities down $85M to $8.057B, “all other” loans up $134M to $8.707B.

New NYSE listings in Sept. were $346.3M ($79.6M stocks and $266.7M bonds) vs. $2.089B in 1929; may account for gains in shareholders of existing cos.

Pennsylvania crude oil, after recent 15 cent cut to $2/barrel, is at lowest price since 1915.

US coal output for week ended Oct. 25 was 10.438M tons, up a more than seasonal 13.1% from prev. week but down 10% from 1929.

More efficient rail transport has stimulated large increases in fruit and vegetable production; domestic fruits and vegetables unloaded in 66 markets in 1929 were 615,387 carloads, up 3.2% over 1928 and 5.3% over 1927. Largest market was New York with 21% of total, second was Chicago with 10%.

USDA estimates 1930 wheat production in 32 countries at 3.231B bushels, up 4.5% from 1929.

Average corn crop forecast by 5 experts was 2.040B bushels, up slightly from last month's 2.003B; final crop in 1929 was 2.614B, and this would be smallest crop since 1901.

Cudahy Packing Pres. E. Cudahy testifies in court hearing on allowing meat packers to sell at retail: depression has had serious effect, with people demanding cheaper cuts of meat and refusing to buy better grades; says monopoly impossible in packing industry due to perishability and widespread production of livestock.

French tax receipts in Sept. were 3.414B francs, up 45M from Sept. 1929; 6 months ended Sept. 30 were 22.007B francs vs. 23.606B in 1929.

French Banque Adam fails as result of Oustric troubles; govt. recruits 5 largest French banks to liquidate 200M francs in assets; stock market remains nervous.

Canadian employment at 7,384 firms Oct.1 was 1.021M vs. 1.025M Sept. 1, usual seasonal decline; index was 116.2 vs. 116.6 Sept. 1 and 125.6 in 1929.

F.W. Dodge reports NY metro. area new construction contracts in Oct. were $80.0M vs. $81.6M in Sept. and $80.4M in Oct. 1929.

Montgomery Ward Oct. sales were $30.1M, down 6.4% from 1929 and improved from Sept. decline of 18.3%; first 10 months were down 2.0%.

Assorted Q3 earnings: Coca Cola $4.899M vs. $4.333M in Q2 and $4.661M in Q3 1929; Timken Roller Bearing $.48/share vs. $1.25 and $1.55; Pullman $1.75/share vs. $1.37 and $1.87.

International Nickel has production capacity of 180M pounds/year, roughly 1/3 more than world consumption in 1929, and probably enough ore for 75 years.

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