December 31, 2009

Wednesday, December 31, 1930: Dow 163.09 +2.93 (1.8%)

Assorted historical stuff:

Editorial: While the past year was painful, the pain won't necessarily end with the year. However, there's good reason to believe the country is in a better position than it was a year ago. The past year has rid the country of illusions, including the theory shortly after the crash that the US had invented the “harmless panic.” It has produced a new realism, where business projects must be sound to proceed. The year has also provided an “incalculable amount of ultimate benefit” in eliminating the many “weak spots” that an economic boom always produces. Institutions that “withstood the extraordinary strains of 1930” should be well positioned for the tests of 1931; common sense and experience suggests these will be less severe. Consumption has outpaced production for months; “effective demand for expanded mill and factory production cannot logically lag far behind.”

Pres. Hoover announces Eastern rail consolidation plan successfully negotiated; seen likely to get ICC approval; Congress may be more difficult - in particular Sen. Couzens is skeptical of claimed economies, may be supported by insurgent Republican element. However, Congress must pass new law to block proposal; by current law, ICC has authority over consolidations.

Editorial by T. Woodlock: Utilities have to this point developed in more harmony with the public than rails. However, lately two factors have impaired public relations: consolidation of widely scattered utility units into big corporations, and obscure and sometimes unsound financing of those corporations. Utilities must address these issues, taking more care to handle relations both with customers and investors so as to be open and above suspicion, and maintain good will.

Farm Board economist J. Favis says Board must learn by experience; “mistakes, even costly ones, may be made.”

Agriculture Dept. notes soil erosion on over 75% of cultivated land in US, some of it serious; in some major farming areas, over 90% of land is losing topsoil.

Agriculture Dept. to issue weekly news releases designed to help people of limited means make healthful selection of food.

Editorial: The Untermeyer plan for NY transit unification deals vigorously with an almost impossible situation. However, it's unrealistic to expect, as Mr. Untermeyer writes, that the management contract would place the the system beyond use for political purposes; “To which pious intention every district leader from the Upper Bronx to the furthest reaches of Queens or Staten Island will smilingly respond 'O.K.'”

[Later known as the Empty State Building.]Alfred E. Smith reports leasing and construction of Empire State building proceeding rapidly; building should be ready for occupancy well before May 1.

[Sheer Genius dept.]
Internal combustion engine demonstrated at Holly Motors combining usual carburation with air injection as in diesel engine; expected to enable small car to run 50 miles on gallon of gasoline.
M.D. Hart, British scientist, proposes silencing airplanes by arranging noises caused by engines and propellers to cancel each other.
Lt. H. Connor, transatlantic flyer, plans 3-day transatlantic mail service. Mail plane would overtake ship 600 miles from coast, land on it, then take off from ship when it was close enough to destination.

World's highest gas prices: Nairobi, 69.2 cents/gallon; La Paz, 64.8 cents; Ethiopia 36.5 cents.

Trained animals are paid more than almost all actors in Hollywood; daily rates listed by M.G.M. include alligators $12 to $25; ostriches $25; monkeys $25 to $35; horses, $25 to $50; bears $50; camels $75; tigers $100; leopards $100; elephants $150; trick mules $150.

[I'm not sure about the Canadians getting spared part.]For the past 8 years William Greenwood of Olympia, Wash. has been building the “Second Ark” based on his vision of a 1932 flood that will deluge the whole West coast south of Canada as retribution for the wickedness of the great cities on the coast.

Justice Holmes, 89 years of age, gives elegant description of the concept of a corporation in a recent decision: “If it is a fiction, it is a fiction by law with intent that it should be acted upon as if true.”

Market commentary:

Market wrap: Stock market featured vigorous rise in rail shares, particularly in the Eastern roads involved in consolidation; industrials and utilities also showed greatly improved tone; after some early hesitancy upswing spread to the general list by noon. Bonds mixed; US govts. firm; foreign weak; corp. mixed but with good rally in rail bonds. Commodities generally firm, but silver hit new low of 30 3/4 cents.

Broad Street Gossip: Market has been going down monotonously for so long, traders now come in expecting new lows each day. Traders using the strategy of buying on breaks and selling on rallies have lost a lot of money due to the lack of rallies on which to sell.

Broad Street Gossip: In spite of all the talk about hard times, Broadway theaters, Madison Square Garden, and local big movie theaters continue to be packed; on one recent evening it took an hour to get from 14th St. to 116th in a taxi.

Substantial buying seen by traders expecting a rally in the short term based on historical year-end precedent and impressive support of leading shares during recent tax selling.

Bull traders reported ready to resume work for higher prices “as soon as an incentive appears for such operations.”

Past year's depression has been much worse than predicted a year ago. Commodity prices, industrial activity, and earnings all declined much more than expected. “The deflation has been most complete.” Companies able to weather the storm should be in good position to benefit immediately from any upturn. Most industrial leaders expect considerable improvement in 1931, though possibly not until the second half.

Hornblower & Weeks: “The closing price levels of 1930, taken by and large, offer investment opportunities which will probably be considered the bargain prices of the coming decade.” At previous short-lived bottoms in Nov. 1929, June 1930, and Nov. 1930, dividend yields on high-grade stocks were still relatively low; now, out of a total of 853 common stocks listed on the NYSE, only 42 yield less than 5% [Pretty amazing!].

[Business leaders' forecasts dept.]
W. Chrysler estimates 1931 auto production at 4M cars vs. 3.5M in 1930; estimates inventories 35%-40% below a year ago; increased consumption of gasoline shows people have been using up cars and postponing normal replacements; “year just ending has been one of intense preparation for a business revival” that will demand larger volume of production and reward those developing new ideas and better values.
G. Swope, GE pres., says expects electrical mfg. industry in 1931 should be somewhat better than 1930.
N. Carlton, Western Union pres., says 1931 may be “very disappointing business year” based on usually accurate barometer of Western Union business, currently 15% below 1929. “ The headache following the late financial spree is far from over ... many inefficient and over expanded businesses which grew like mushrooms in the boom times remain to be liquidated.” The very form of the US govt. is endangered if we put too much of the burden on those least able to withstand the effects of reduced income and unemployment.
L. Wakefield, First National Bank pres., sees country working itself out of depression; “I am sure we can look forward to steady business improvement ... The greatest danger ... is that we may be drawn to unsound economics schemes” or cure-alls. P. Weld, NY Cotton Exchange pres., notes past year's oversupply and drastic price decline, but strongly believes this will be corrected by lower production and increased consumption, leading to price recovery.

Economic news and individual company reports:

Rail freight loadings for week ended Dec. 20 were 713,810 cars, down 30,633 from prev. week and down 128,965 or 15.3% from 1929 week. Nov. net operating income for all class 1 rails estimated at $63.8M, down 26.4% from 1929 and 43.8% from 1928.

Steel ingot production in week ended Monday was at 24% due to holiday shutdowns; this was better than the predicted 20%. There was a sharp comeback at the start of this week. Iron Age reports 1930 year of drastic adjustment for steel, total production of 40M tons down 27% from 1929. However, confidence has been steadily gaining through Dec., along with contracts for first quarter. American Machinist reports strong machine tool inquiries, prosperous new year predicted.

Census Bureau reports total value of all products manufactured in 1929 was $69.4B vs. $62.7B in 1927.

Germany's foreign debt estimated to exceed foreign investments by $4B; in 1913, the latter exceeded the former by $5B.

Canadian Premier Bennett says govt. will guarantee banks against Wheat Pool losses, provide direct assistance to farmers.

Ivy Lee, sugar conference negotiator, says all sugar producing nations must make severe sacrifices; 'Laissez-Faire' and survival of the fittest will bring ruin to large numbers with no benefits to anyone. Results will affect billions of invested capital and millions of workers and farmers, have far-reaching social and political consequences. Cites $750M US investment in Cuban sugar production, now valued at $35M.

Call money eased to 3 1/2%.

NYSE seat sold for $192,000, down $8,000 from previous sale and lowest price since 1927. The high price in 1930 was $480,000.

City Ice & Fuel reports ice industry had its best year in 1930, with tonnage sales up 3% vs. 1929 to over 64M tons.

Tire companies expected to cut prices to meet cuts by mail order houses; this would reverse last Nov. 1's price hike.

Companies reporting decent earnings: American Can, Northern Paper Mills.


“'Really, gentlemen,' said the election candidate, 'with all this uproar I can hardly hear myself speak.' 'Well, cheer up,' shouted a man, 'you aren't missing much.'”

“Old Lady (to Tommy) - Surely your mother could find pieces of material more like your trousers when she patches them. Tommy - That ain't a patch; that's me.”

“Wifey - There's an old clothes man at the door. Hubby - Tell him I've got all I need.”

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