December 6, 2009

Saturday, December 6, 1930: Dow 181.11 +0.12 (0.1%)

Assorted historical stuff:

Washington report: Projected $180M deficit not considered alarming, may even be beneficial in restraining Congressional spending. Proposed cotton investigation and Muscle Shoals legislation continue as longtime regular features of Congressional sessions. Project to combine Army and Navy air services likely to be opposed by both branches of the military. Anti-Prohibitionists to keep agitating to lay groundwork for next session.

[Strangely unfamiliar dept.] Treasury Under-Sec. Mills defends national debt reduction program of past decade as benefitting current generation; notes interest on nat'l. debt declined from $1.024B in FY 1921 to $603M in FY 1931.

M. Woll, AFL VP, presented Labor's solution for unemployment. Purchasing power of the masses should be increased in proportion to savings provided by automation and improved organization; may be done through higher wages, shorter hours, or lower prices. “Industry ... may work it out within itself”; however, if industry remains paralyzed by current conditions, “then the masses in their desperation may be expected to turn to a Congress made responsive by the ballots of enraged people, demanding abdication of private interests in favor of the state.”

[It's a shame we don't get these deep philosophical discussions on newspaper front pages anymore. New York Post excepted, of course.] Editorial by T. Woodlock: In his 1918 book “The Downfall of the Western World,” Spengler suggests our civilization may be near its end, with a new “Kultur” to arise; some see Soviet Russia as a likely candidate. Soviet challenge to the West has two aspects, economic and “ethical.” Strength of the economic challenge is uncertain; “nothing in human experience to date warrants the belief that a 'collectivist' form ... is likely to prove the most efficient competitor in business and industry.” A more interesting question may be whether the Soviet philosophy succeeds - one that is “amoral,” materialistic, determinist, and completely dismissive of religion. It's interesting that this determinism is more in tune with 19th century science, whereas modern science embraces nondeterminism and possibly even free will.

German Pres. Von Hindenburg issues decree making Breuning financial reforms effective. Financial authorities approve; balanced budget seen assured despite high unemployment. Berlin stocks maintain better tone; Germany joins France in drawing gold from England.

Editorial: Farm mortgage burden is too heavy. Total mortgages are about $9.5B, up from $7.9B in 1920. This is only about 22% of the total value of all farms, but current low earning power makes 6% mortgage interest take about half of net income. Farmers unwisely went deeper into debt during a period of rising prices. It's essential they get out from under this load; if they ever do, it will be by more efficient production.

Calif. Supreme Court decides unreasonable waste of oil and gas resources may be prohibited, though application of the law is expected to be complex.

New smaller US currency bills expected to save $2M annually, $400,000 in paper alone.

Telephones were first installed at the White House in 1879, at the end of Rutherford B. Hayes' term. Records show Hayes rarely used the phone, then regarded as a “new toy.” Hoover is the first President to have a telephone at the desk in his executive office.

Pan American starts bi-weekly air service between Miami and Panama via Jamaica and Cuba; route involves longest regularly scheduled water “hop” of about 700 miles between Kingston and Cristobal. Pan-American is also operating an 8,000 mile airmail route between New York and Rio de Janeiro.

[This is pretty cool.] Alaska's vast distances can be appreciated by overlaying it on the continental US. If it were placed with the Northern tip touching the US-Canada border west of Lake of the Woods (about halfway across the US), part would reach the East Coast between Georgia and S. Carolina, while another part would cross over Southwest New Mexico into Mexico, and the Westernmost part would enter the Pacific in Southern Calif.

Experts predict a “supergas” system is possible linking all US gas mains for long-distance transportation of natural gas.

Cuban newspaper El Siboney reports Professor G. Claude, French scientist, will construct $4M thermodynamic plant at Santiago capable of generating 25MW of electric power from the sea.

NY Emergency Employment Committee has put over 15,000 unemployed heads of families to work, of whom over 1,000 were women with dependents. Due to unexpected demand for jobs, goal for the committee has been raised from $6M to $8M.

Market commentary:

Market wrap: Stocks weak in morning, particularly rails, but rallied in late afternoon; uptrend strengthened in final dealings. Bond market more active; US govts. slightly lower; foreign mostly steady; corp. highly irregular with many new lows. Commodities somewhat weaker.

[Ay Chihuahua! dept.] E. Herr, Westinghouse VP, points to strong position of financial institutions, large gold supply, low inventories, and efficient credit and transportation; “no one can doubt that the present depression in business will soon be over and that still greater progress is before us.” Attributes 1920's prosperity to war's destruction in Europe; depression is due to readjustment to their recovery. Calls for govt. and business to speed up planned work in periods of unemployment; while depressions occur regularly, they're becoming less severe and shorter over time.

Market seen likely to remain largely under professional control and trade in a narrow range until “some incentive develops for more aggressive operations.”

Short interest reportedly smaller due to recent covering; borrowing demand for stocks has been lower.

Brokers continue to report little new outside buying, though there has been considerable switching between stocks.

Recent efforts to stabilize various commodities considered encouraging development in the long term.

Farm Board annual report says stabilization hasn't worked as hoped in spite of extensive efforts, opposed to further operations except in emergencies. Sees main future solution in production control and cooperative marketing organizations.

Outlook for coffee growers considered poor due to free-trade policy of Brazil Pres. Vargas; current world consumption is less than 25M bags annually, while Brazil currently has 27.2M surplus bags due to previous withholding policy, and forthcoming worldwide crop is estimated at 32M bags.

Traders discounted relatively good car production figures in Nov., attributing them to early production of new models; further production decline seen in Dec.

Edsel Ford says promiscuous price-cutting on well-established articles is dangerous, but retail prices as a whole must adjust themselves to recover from depression.

F. Carlisle, Niagara Hudson Power chair., points out gas and electric cos. will spend over $1B for expansion in 1931, and pay $400M annually in taxes; this revenue would be lost under public ownership.

Economic news and individual company reports:

[Interesting information - another indication there's still quite a bit of leverage in security positions.] Comprehensive total of all loans on securities is available once a quarter; peak was $16.974B on Oct. 4, 1929; this declined to $11.521B on Sept. 24, 1930, and is estimated at $10.5B now. This includes loans by banks to non-brokers and loans to brokers by non-banks. Total bank loans on securities are currently $7.761B, which is actually higher than on Aug. 30, 1929 when the market was close to its peak.

Security loans by NY City banks to non-broker customers (considered “strong hands”), after rising since mid-Sept., have declined slightly in the past 2 weeks.

Currency in circulation has increased $189M since Oct. 29; this is partly a normal seasonal move though this year it may also be due to the recent bank failures, which in many cases were preceded by heavy withdrawals. Fed. Reserve has been buying bankers acceptances and govt. bonds to keep money rates low.

Bradstreet's and Dun's weekly reports note moderate improvement in retail trade, stimulated by colder weather, approaching holidays, and “sales”; however, industrial activity is slower and retail remains below previous years, especially in Midwestern and Southern areas affected by bank failures.

New bond offerings in Nov. were $203.0M vs. $416.6M in Oct. and $105.2M in Nov. 1929; first 11 months were $5.045B vs. $2.957B.

Rail report: Class 1 rail employees in mid-Sept. were 1.486M, down 1.8% from Aug. and 14.9% from 1929; total pay was $208.7M, down 3.2% and 15.8%. Total freight car loadings for 1930 estimated at 45.7M cars; would be below 50 million for first time since 1924 and lowest total since 1922. ICC agrees to postponement of lower Western grain rates to April 1, but probably not beyond.

Engineering News-Record reports Nov. construction and engineering contracts were $189.3M vs. $242.9M in 5 weeks of Oct. and $237.7M in 4 weeks of Nov. 1929.

Cleveland employment index Nov. 30 was 87.4%, down 4.6% in Nov., and vs. 108.8% in 1929. Detroit industrial employment index Nov. 30 was 75.8% vs. 79% Oct. 30 and 93% in 1929.

Sales of radios reported lower than expected; Radio Corp. has cut production severely, and leading stores have already announced discount sales.

Egg and butter prices continue to drop, with December egg futures dropping to the lowest level in 50 years.

Company reports since Oct. 1: 245 companies reported higher earnings vs. 1929 and 409 lower; 695 dividends unchanged, 67 increased, 108 cut.

Companies reporting decent earnings: General Mills, Adolf Gobel, Inc. (sausages, deli products).


“First Salesman - Any business? Second Salesman - Well, yes. The wife gave me some orders this morning.”

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