December 23, 2009

Tuesday, December 23, 1930: Dow 162.42 -7.00 (4.1%)

Assorted historical stuff:

[Still no banking crisis here .... ] Bankers Trust of Philadelphia closed after heavy withdrawals; had 135,000 depositors, total deposits $42.5M; Penn. Sec. of Banking says financial situation in Philadelphia sound, no reason for depositors in other banks to be alarmed. City National Bank in Miami closes after heavy withdrawals; had deposits of $5.9M; E. Black, Fed. Reserve Bk. of Atlanta Gov., says other Miami banks sound. Four of five banks in Greenwood, Miss. closed, also banks in N.C., Mo., Ind., Ga.

[Strangely familiar.] Fed. Reserve policy will make banking funds more plentiful in early 1931 than any time in the current depression. This should eventually extend easy short-term money rates in financial centers to the long term money market and throughout the country; should stimulate bond and mortgage markets. Fed plans to keep close to the current $700M in govt. securities and over $1B credit outstanding even after holidays when demand for credit slackens.

In spite of “bickerings and demagogy,” Congress is making fair progress. It has already passed bills for $116M emergency construction, $45M drought relief, and $150M Farm Board appropriation. Muscle Shoals agreement seems near; World Court issue was postponed. Regular appropriations to be acted on when holiday recess ends Jan. 5.

US population continues moving to cities; 56.2% of the 122.8M population in the 1930 census live in urban communities vs. 51.4% in 1920.

Farm Board chair. Legge says if world wheat prices continue decline, some may be imported to US [in spite of tariff].

Editorial: Rails should be set free to compete with rival forms of transport. A natural monopoly is regulated as the only possible substitute for free competition; once the monopoly character of the business disappears, so does the basis for regulation. Rails should be allowed to operate trucks, cut rates to meet competition, and discontinue service on branches that highways have made unprofitable.

Int'l Labor Office statistics show 7.197M unemployed in 32 countries between June-Oct. 1930 vs. 4.873M in 1929; however, the Office estimates a “vastly greater” number of jobless because some countries only report registered unemployed or unemployed union members.

Mexico passes new agrarian law prohibiting land expropriation unless cash payment is made.

[Strangely unfamiliar.] On grounds that necessity knows no rules, Italian govt. orders sweeping cuts in govt. salaries, ranging from 12% (on salaries up to 40,000 lire) to 35% (on salaries over 60,000). Ministers of state are also subject to the program. Govt. also ordered 8% cut in industrial wages, and is negotiating cut in agricultural wages.

C. Dewey returns from 3 years as economic advisor to Poland; says country has balanced budget, sound conditions, only 200,000 unemployed in 30M pop. Believes depression not as severe as in neighbors because Poland is mostly agricultural.

Scattered bartering has broken out for wheat. Sparta, Mich. barbers offer a haircut plus 27 cents cash for a bushel; Rural Canadian hockey teams offer a first class ticket for a bushel.

Norman Thomas, Socialist leader, asks Gov. Roosevelt for investigation of NY State Banking Dept. in connection with Bank of U.S. with object of recommending needed changes in banking law. NY Bureau of Securities presents draft of Martin act amendments to make it harder for fraudulent brokers to operate in NY.

[Probably worked better than video ... seriously.] Golf champion Bobby Jones to give series of 26 weekly radio lessons on golf.

Market commentary:

Market wrap: Stocks declined for most of the session, gathering momentum in final hour, but scale support was evident and declines within normal technical bounds after the sharp rally. Bank shares broke sharply near the close. Bond market mixed; US govts. dull, steady; foreign mostly higher; corp. mixed, with speculative and convertibles particularly weak. Commodities mixed; grains down sharply to new lows but copper producers raised prices 1/4 cent to 10 1/4.

Examination of bear markets for the past 30 years shows that in a declining period, prices always rallied substantially from Dec. lows before end of the year.

Considerable belated tax selling said still going on based on appearance on tape of “numerous oddly sized blocks of various stocks.”

Specialties that had rallied sharply for the past few days suffered the greatest losses.

Broad Street Gossip: “Overproduction and stock market inflation are cited by economists as the chief causes of the present depression. Therefore, under-production and deflation should be the cures.” Stocks and commodities have been deflated, possibly overly so. “In many lines, production is running below actual demand, with inventories just large enough to keep business going. If that condition continues, it will be the master cure for business ills.”

[It's that 1% that kills you.] Broad Street Gossip: “I go on the theory that 99% of the things you hear when we are in a bear market are not going to happen.”

Winthrop, Mitchell & Co. point to banking leadership in the past week as having “definitely pulled the market out of a difficult situation,” also as having “ironed out many troubles and perplexities which had been upsetting people and their calculations.”

Leading bankers commended for cooperation after Bank of U.S. closing; “such a development in the past often upset conditions for a long period.”

Harvard Economic Society: Business decline “far advanced in extent and duration”; many recent developments discouraging. However, first-grade rails have held above 1929 lows and building has shown signs of stability; these usually lead recovery. Expect general business to bottom “during first half - probably first quarter - and show gradual revival the rest of the year.”

W. Farish, Humble Oil pres., says believes depression will end within 6 months, co. will try to keep all employees.

[Rare realistic commentary.] S. Strawn, Montgomery Ward chair., sees nothing to indicate upturn in business for “some months to come.” Depression “pretty bad all over”; all European countries with possible exception of France suffering about equally to US; early recovery requires world cooperation; won't hazard guess about next year, best one can do is hope for a turn for the better.

The usual strength hasn't been evident in stocks benefitting from holiday trade, including chain stores, Bulova, and Hiram Walker.

Economic news and individual company reports:

US citizens spent about two-thirds of the $7.5B world travel bill for 1930.

Wholesale gasoline price cut in NY and New England; Standard Oil NJ cuts diesel fuel oil.

Nov. US cigarette production was 7.952B vs. 9.041B in 1929.

Australian wheat harvest expected to be a record by far; some difficulty expected in financing marketing due to crop size, various plans being considered.

British loss of gold to France continues in spite of rising money rates in London over past few days (3 month bills at 2 7/16%).

Bank of Montreal Nov. report sees little change in Canadian business conditions aside from holiday retail activity; attributes business dullness to decline in farm product prices.

World tin situation seen difficult, production cuts needed, some producers reluctant; very long term outlook promising due to limited reserves.

G. Sloan, Cotton Textile Institute pres., says the industry made tremendous strides this year and is in excellent statistical condition.

11 Brooklyn and Manhattan savings banks show $25.4M gain in deposits for first 2 weeks of Dec., very unusual for holiday period.

Companies reporting decent earnings: Kansas City Pwr. & Light, McGraw-Hill, Rath Packing, Wesson Oil, De Beers Consol. Mines.

Montgomery-Ward making strenuous effort to stimulate winder sales; midwinter “Flyer” catalog will have 248 pages vs. 168 last year, about 4,000 items with price cuts of 10%-25% from fall and winter catalogs; continues easy payment plan.


Tony Sarg's Marionettes will begin 13th annual Christmas show on Broadway at the Belmont; show will be Alice in Wonderland; said to be more elaborate than previous shows including Treasure Island, Don Quixote, and Rip Van Winkle.

Poem by E.R. Hoyt:

“Who's to blame for China's woes, Her famine, misery and strife - ... Why - Hoover.
Who's to blame for Europe's plight, Love replaced by bitter hate.
Doles for hordes of hungry men, Who deserve a better fate? Why - Hoover. ...
Who's to blame for every ill, From chillblains to sore throat?
We cannot face our foolishness, Where can we find a handy goat? Why - Hoover.
When men wake up and face the facts, Admit their greediness and sin
That each and all have been at fault, Appreciation will begin - For Hoover.”

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