December 19, 2009

Friday, December 19, 1930: Dow 166.71 +1.11 (0.7%)

Assorted historical stuff:

[That'll never get off the ground dept.] J. Thomas, Committee on Petroleum Economics chair., impressed by “cartel” system applied to various European industries, regrets that similar international undertaking hasn't been attempted by the oil industry to stabilize prices; calls for economic survey of worldwide petroleum supply and demand.

[Two days = trend dept.] Editorial: Without growing too confident over the sharp stock market upturn in the past two days, the market action seems to indicate stocks had been “sold to a standstill,” likely more than reflecting the admittedly bad business news since Nov. Market action for the rest of the month will be highly significant; even moderate but sustained strength would likely indicate that the banking situations causing pressure on stocks and bonds for past months have “now been completely adjusted,” and that stock prices now fully reflect reduced corporate profits and dividends.

Washington report: House quickly passes $150M Farm Board appropriation for asked by Pres. Hoover to enable Board to carry on operations. Congress near agreement on emergency drought relief and unemployment bills and Muscle Shoals. Action on World Court postponed to next Congressional session. Increasing need seen for complete overhaul of rail regulation, but this won't be started until next session at earliest. Census Bureau unemployment figures questioned; new count to be started Jan. 15 in 20 cities.

Farm Board chair. Legge says believes cotton, unlike wheat, will return as export crop due to similar production cost worldwide.

[Strangely familiar.] Dept. of Justice conducting bankruptcy inquiry; Solicitor General Thatcher says losses in bankruptcy cases have skyrocketed in past 10 years; liabilities increased from $200M in 1920 to $806M in 1926 and almost $1B in 1929.

[I believe heated debate was the second-largest French export at the time.] Newly formed French govt. of Premier T. Steeg wins vote of confidence 291-284 after heated debate.

[Tragically misguided tax policy dept.] Two State Commissioners take charge of Berlin finances as a result of large deficits and refusal of municipal govt. to raise taxes on anything but beer.

Mexican Congress reportedly confers special powers on President to take necessary steps to improve position of Mexican silver currency; effort will be made to increase use of silver coins.

Editorial: Decline in farm income in 1930 isn't as bad as the reported crop value of $6.275B vs. $8.675B; when including meat and dairy, it's $9.950B vs. $11.850B. Cause of decline isn't entirely overproduction; for example, corn value declined to $1.379B from $2.043B although crop was 30% below average.

America's first speed limit law was enacted in Boston in 1757; restricted traffic to walking pace on Sundays.

Market commentary:

Market wrap: Stocks continued very strong through the noon hour; overextended shorts “subjected to additional embarrassment” and “given severe punishment” in some specialties. Market turned in the afternoon; specialties and copper retreated sharply but majors were well supported on moderate recessions. Bond market very strong, with sharp rallies all over the list; US govts. firm; foreign mixed, with many sharply higher; corp. very strong. Commodities firm early but ended lower.

Bank, trust, and insurance co. stocks enjoyed good gains on the day. Investment trusts were weak, remaining new yearly lows. Reports that some banks are preparing to buy more bonds.

Conservative observers caution against following rally up, see another test of recent bottom, advise waiting for it then buying gradually and protecting holdings with stop-loss orders.

Market observers sharply divided on how much of Wednesday's violent rally was due to short covering vs. investment buying.

[Downside was about another 75%.] Broad Street Gossip: From Sept. 10 to Tuesday's close was “about the most severe break in such a short period of time in the history of the Stock Exchange.” The Dow industrial average lost 87.58, the rail average 41.08, and utilities 33.63; even the Dow 40-bond average declined 4.82 from Oct. 1. “More startling still” is the decline from last year's peak; industrials dropped from 381.17 to 157.51; rails from 189.11 to 91.65; utilities from 144.61 to 55.14.

Many managed investment trusts (similar to mutual funds) holding “bluest of the blue chip stocks” are now available at 60 - 70 cents on the dollar. Sponsors feel this discount will eventually be closed and a management premium reestablished. Meanwhile, managed trusts must “go through the agony of preparing annual reports to the public” while the fixed trusts (similar to ETF's) currently in fashion “face no such painful problem.” Prominent firms are now said weakening in their opposition to sponsoring fixed trusts.

Broad Street Gossip: “Plenty of cash is available for stock and bond purchases, but it will not be used freely until definite proof is given of a turn for the better in either business or the stock market. Either would help to bolster the other.”

Many bears are now predicting steel production will decline to 20%-25%.

Rumors of banks pressuring borrowers to reduce loans on securities are contradicted by recent figures showing only modest decline from two months ago.

Silver price hits new low of 31 1/4 cents/ounce. Zinc plunges to record low below 3 cents/pound.

Trading favorites experiencing wild fluctuations included Auburn Automobile, J.I. Case, and Coca-Cola.

Many investors have been buying automotive shares in the belief they will lead on the upside as they did on the down (auto shares turned down in spring 1929).

Economic news and individual company reports:

BLS reports Nov. wholesale price index 80.4 vs. 82.6 in Oct. and 94.4 in Nov. 1929; retail food prices were down about 2% in month ended Nov. 15 and about 11.5% vs. 1929.

28 leading rails as a group are selling 11.1 times estimated 1930 earnings and yielding 7.5%. All but one should fulfill legal requirement for savings banks to buy their bonds (earned 1 1/2 times interest charges), but 10 appear unlikely to earn their common stock dividend.

Bank of U.S. deposits at closing Dec. 11 were $161M, or $42M below total on Sept. 24.

Fed. Reserve reports money in circulation Dec. 17 up $181M to $4.837B, total Reserve Bank credit outstanding up $163M to $1.297B. Member banks in NY City report brokers' loans down $91M to $2.008B vs. $3.386B in 1929; loans on securities to non-brokers up $23M to $2.064B .

Electric output by US light and power industry for week ended Dec. 13 was 1,748 GWHr vs. 1,729 in prev. week and down 5.3% from 1929.

Dow average of 8 iron and steel products remained at 1930 low of $44.42/ton. Scrap prices held but with little buying.

Some nervousness over continued drain of British gold to France; Bank of England's holdings are 151.316M pounds, down 1.132M in week and approaching “Cunliffe minimum” of 150M. British bankers confident “embarrassment” temporary, free working of gold standard will automatically end the movement.

French exports in first 11 months were $1.560B vs. $1.800B in 1929; imports $1.920B vs. $2.120B.

Leading Canadian banks and financial houses reportedly make semi-official announcement of formation of pool for supporting Canadian stocks.

Worldwide Nov. copper production was 139,914 short tons vs. 152,544 in Oct. and 170,585 in Nov. 1929.

Leather industry, like textiles, has been suffering difficulties for several years; some long-standing firms are liquidating, including Pfister & Vogel, formed in 1847.

Companies reporting decent earnings: American Can, Hudson & Manhattan RR.

GM cuts light duty truck prices $50-$150, to $645-$745.

Grand-Silver Stores stock about $16, dividend $1, earnings $3.97/share in 1929, 1930 earnings expected higher.


[They should have hired James Cameron.] Danger Lights, an RKO film produced with “Natural Vision”; wide-film, wide-screen process “aims to produce third-dimensional effects”; does give illusion of greater depth in panoramic shots, but in closeups produces blurred picture and sound. Since most of film is closeup dialogue scenes, result is very unsatisfactory.

Poem by William T. White:

Humpty Dumpty sat on the wall, Humpty Dumpty got a great fall; All Morgan's money and Henry Ford's men Can't put Humpty Dumpty together again. What made Humpty Dumpty fall? Nobody knows for certain at all.
Some say the cause was the stock market crash, And the call which the brokers sent out for more cash. ...
Some think Humpty was filled up with gas, And thus it was that it came to pass, Inflated with credit, high prices and rent, And call loan interest at 20 percent. ...
Some say that Humpty had lived far too high On Good Times cake and Prosperity pie. Had too much to spend and to much to eat, Causing surplus production of cotton and wheat. ... Of things to see and hear and drive - Radios and motorcars, sakes alive!
'Twas little wonder he ... fell from the wall; But nobody knows for certain at all.
Can Humpty be put together again? So far all efforts have been in vain; ... they'll succeed without a doubt;
But when they'll get him back on the wall, Nobody knows for certain at all.

1 comment:

  1. Can you post gold prices at the time?
    Curious to know if gold held up during the collapse.
    Silver does not appear to be a hedge.