Unemployment special:
Pres. Hoover appoints Colonel A. Woods. to develop organization to handle unemployment problem; former NY City police commissioner, organized employment agencies for placing veterans after the war. Cabinet Committee on unemployment work with Woods to coordinate cooperation of government agencies. Committee also to develop cooperative measures with industry and local bodies. Congress to be asked to remove some restrictions to permit expanding public works to the utmost this winter. Where possible, government departments and industries will be encouraged to “stagger work” by distributing available hours to more workers.
NY City businessmen's committee to relieve unemployment gets favorable reception from many financiers and industrialists.
NY Gov. Roosevelt says state will spend $22M on public works by end of the year.
C. Hanch, Natl. Assoc. of Finance Cos. GM, estimates employment has fallen at most 10% below normal, with factory workers (about 20% of all workers) worst, other sectors much less affected by depression. Says this indicates why no large rates of default have appeared in installment sales.
White House estimates number of unemployed at 3.5M based on April 1 Census report; says not trying to minimize situation but rather to afford a correct appreciation of actual conditions.
Agriculture Dept. reports index of farm wages on Oct. 1 was 150, down 10 from July 1, down 24 from Oct. 1, 1929, and lowest in 7 years; supply of farm labor exceeded demand by over 40%. Daily wage of farm workers ranges from $1.10 in South to $3.50 in Northeast.
Class 1 rail employees in July were 1.532M, down 2.08% from June and 12.22% from July 1929; wages were down less than 1% and 14.52%.
British registered unemployed Oct. 13 were 2.189M vs. 2.176M prev. week and 1.215M in 1929.
Assorted historical stuff:
Editorial: Senator Glass apparently means to start another “money trust” investigation like the one in 1913 [investigating control of bankers and the NYSE over the economy; followed by Federal Reserve Act and 16th Amendment]. The NYSE can be expected to mount a better defense this time. One item requires clarification: the subject of “gambling in stocks” is likely to come up now as it did in 1913, but it was never defined. The main distinction is in the person, not the act: if reasonable judgement is used, then it's not gambling. Therefore, since reasonable judgement is always possible when trading stocks, the act per se is not gambling; Q.E.D.
Dr. H. Schacht, former Reichsbank pres., says Germany will have to stop reparations payments unless other countries help her grow foreign trade; believes “some German government” will defy disarmament provisions of Versailles treaty unless allied countries disarm as specified in the treaty.
US govt. sources say no countries have yet asked for moratorium on debt payments, not even for the allowed 2-year postponement of principal payments.
Rep. E. Celler (Dem., NY) asks investigation of Navy aircraft carrier award to Newport News Shipbuilding over Brooklyn Navy Yard, charges secret bid leaked.
“Buy-a-bale” movement proposed by Texas Gov. Moody to remove 5M bales of cotton from the market draws many responses. A couple of the more interesting ones: One Arkansas enthusiast proposed “burn a bale” movement, himself buying a bale and setting fire to it on a main street; movement ran out of steam when he was summarily thrown in jail for arson. W. Parker, economist for Fenner & Beane, has started using cotton cloth for everything possible, including writing paper.
US estimated to spend over $200M/year on industrial research in 1,500 labs. AT&T through Bell Labs spends about $20M, with main lab in NY City; research mainly concerns communications, but byproducts include “electrical stethoscope” used to diagnose heart disease, “artificial larynx” enabling those whose without vocal cords to speak, and spectacular experiment bombarding nickel crystal with high-speed electrons to demonstrate electrons are particles, not waves.
Plane being built secretly at Junkers factory in Germany reportedly designed to attain altitude of 35,000-40,000 feet, fly over 500 mph; trials at end of year.
Hong Kong aviators try to relieve drought by dropping over 100 lbs of “chemical called deolin” into storm clouds; material is “supposed to induce refrigerating action when it penetrates the clouds, causing condensation and eventual rainfall”; attempt was unsuccessful.
Notable art for sale includes Rembrandt's “Rabbi in a Wide Cap,” Turner's “A Dream of Venice,” and the finest collection of Gothic stained glass ever offered for sale in the US. The Metropolitan Museum is showing ancient and contemporary Mexican art; the MOMA is showing Corot and Daumier.
Market commentary:
Market wrap: Stocks succumbed to renewed pressure after Monday's rally; “fresh unsettlement” attributed to worries on price declines in various sectors. Oils particularly weak on gasoline price decline; coppers down on uneasiness over continued inventory buildup; Westinghouse plunged on bad earnings. Bears, encouraged by early success in isolated sectors, resumed aggressive operations throughout the list; declines gradually picked up momentum; GE and Goodyear hit new 1930 lows while majors including US Steel and American Can were under persistent pressure and specialties including Auburn, J.I. Case, and Foster-Wheeler plunged. Some irregular rallying toward market close. Bonds mixed: foreign govts. mostly higher; US govts. steady; corp. highly irregular, especially convertibles.
Hayden, Stone & Co. point out that in the 33 year history of the Dow Jones average there have been 5 major bear markets, with 4 severe enough to be called panics; in none of these cases did the market break substantially below the panic low in the following year. This is no guarantee, but there's a logical reason for it: in the throes of panic, prices tend to be driven lower then they'll be when investors are calmer and more rational.
Many of the Q3 earnings reports so far have been “fair reading,” especially in light of the pessimism going into earnings season.
Reports of heavy odd-lot (small) buying continue, as do reports of “support from important interests.”
Some point out stock prices are still high compared to previous depressed periods, but interest rates are lower today than in the past so a lower return is inevitable.
Some of the “best investment circles” are recommending high-grade bonds, anticipating money rates will stay low for a long time.
Construction related companies expected to have brighter prospects as “the nation's huge credit supply is gradually easing interest rates on mortgage money.”
Analysis of 14 leading fixed investment trusts shows 6 industrials held by all 14: du Pont, Eastman Kodak, GE, Natl. Biscuit, US Steel, Westinghouse.
Economic news and individual company reports:
Rail freight loadings for week ended Oct. 11 were 954,874 cars, down 17,618 from prev. week and down 224,666 or 19% from 1929 week.
Gasoline price declines have been widespread east of the Rockies; expected to translate to lower crude oil prices.
Irving Trust Co. mid-month report sees mixed picture, with unmistakable improvement in retail and wholesale sales, in the textile industries, and in employment in some areas. However, department store and higher-priced goods sales are down, heavy industries remain weak, and business failures are up.
F. Tilton, Asst. Postmaster General, says will ask Congress to raise first-class postage 1/2 cent to cut operating deficit; will hold off on layoffs due to depression.
Companies reporting decent earnings: IBM, Chesapeake & Ohio Rwy. (against industry trend), BMT (NY subway), Wilson & Co. (meat products).
Movie:
A Devil with Women: Victor McLaglen in his usual role as a soldier of fortune, this time heading the army of a South American country. His “opponent in arguments over women” is a young man there to protect his uncle's silver mines. “This part, acted naturally by Humphry Bogart, is the high spot of the picture.”
Joke:
Eddie Cantor joke about midget cars: “A chap riding in one said to the driver, 'It's dark; we must be going through a tunnel.' 'Tunnel hell,' replied the other, 'we're under a truck.'”
+ The Boring Stuff:
Editorial: Increasing trial balloons have been seen regarding a moratorium in German reparations and revision of Allied war debts. These are premature and probably politically motivated. In particular, German complaints that creditor nations have disarmed them while neglecting their treaty obligations to promote general disarmament probably won't go over well with Allies who are having enough problems amongst themselves with disarmament. “Nor are they unaware that Germany's aspiration toward revision of national frontiers may be found lurking just behind the reparations question.” Further deflation in prices would probably make debt revision inevitable, but “revision compelled by world economic forces is one thing. A political demand ... is another.”
Mexico plans to restrict imports to $25M/year to stabilize its silver-based currency.
Navy General Board Recommends 10-15 year, $750M-$1B building program to bring US Navy to full strength allowed under London Naval Treaty.
J. Eastman, ICC member, criticizes setting of rail and utility rates based on “fair value” of property, says should be based on ability to attract needed capital. R. Taylor, former ICC member, criticizes Transportation Act as vague on rate-setting (using “just” 48 times and “reasonable” 66 times without defining either); suggests asking rail officials for proposals on rates, says restoring confidence in rails would relieve depression generally.
C. Morris of Western railways committee criticizes govt. payment for waterway development and maintenance, allowing unfair competition with rail transport.
Wets are making much of the fact that the Keeley Institute for treating alcoholics now has 500 patients, more than ever before. However, this is deceptive; an investigation by the Women's Christian Temperance Union shows that of 148 institutes of this kind operating before Prohibition, 105 have closed their doors for lack of business and the remaining 43 have been converted into general hospitals admitting occasional alcoholics.
Size of short interest now a matter of debate; main indication is in the market for loaning stocks to short sellers, but some say supply of stocks for loaning is being artificially restricted.
Brokerage houses seen studying possibilities of fixed investment trusts (similar to ETF's) due to their increased popularity since the fall panic, as the managed trusts (similar to mutual funds) that they normally sponsor have fallen out of favor. Meanwhile, failure of some brokers is causing problems for trusts they sponsored due to intertwined dealings; this is causing talk of new regulation.
Prof. S. Livermore of the Univ. of Buffalo finds that investment trusts largely confine their holdings to a small group of the largest US stocks. In a wide sample of trusts, only 4% of stocks were foreign. For managed trusts, 45% of holdings were in 100 leading US stocks; for 10 leading fixed trusts, 40% of holdings were in 15 stocks, including AT&T, American Tobacco, GE, US Steel, etc.
Many NYSE brokers urging clients “to keep their respective unclouded and not succumb to the prevailing pessimism.” Current forced liquidation “has resulted in a mental state diametrically opposed to ... the final stages of the bull market, when traders inflamed with profits could see nothing but ... continuation of the upswing.”
Some commentators who were advising caution at the market peaks last year are now advising bears against overstaying their position.
Bulls traders complain the market since Sept. 10 has been the worst for making money since last Oct. since there have been so few tradable rallies; many are now stuck with stocks bought many points above current prices.
Conservative observers say technical rally was anticipated, but note resistance, continue to advise staying on sidelines.
Substantial amount of selling to establish tax losses still seen in the market.
Commodity and stock prices have diverged since Oct. 10, with the Dow plunging from 198.50 while most commodities up or at least steady above yearly lows.
Commodities mixed. Wheat up slightly, falling back after sharp early rally; other grains down. Cotton up sharply. Copper being offered by some small producers at 9 1/2 cents/pound while most still hold at 10 cents (record low was 9 cents in the 1890's).
Dow average of eight finished iron and steel products was $44.70/ton vs $44.70 prev. week, low for 1930. Scrap down in Midwest markets, steady in East.
US Steel Q3 net expected about $2/share vs. $3.02/share in Q2 and $5.57 in Q3 1929; will cover dividend requirement, but a hoped-for extra dividend is seen as unlikely for some time. Other steel companies expected to do relatively worse, with a number expected not to cover dividends in Q3.
Bank of France gold holdings now over $2B, up $40M in week ended Oct. 17; “will someday be used as a powerful weapon to restore Europe to prosperity,” when France begins lending its tremendous reserves out.
Cuban govt. and sugar growers begin to implement plan to buy 1.5M tons of the sugar surplus currently in storage, and sell it gradually over the next 5 years.
Antwerp diamond cutting industry Sept. figures show 3,820 out of 14,279 cutters unemployed; number of working days has been cut from 15/month to 3/week.
Deere (farm equipment) stock about 5 1/2 times estimated 1930 earnings.
Consolidated Film preferred stock about 18, pays $2 annual div., callable at 35, earned $7.96/preferred share in 1929 and $3.10 in first half.
Colgate-Palmolive-Peet says foreign units all profitable in 1930, combined net will be above 1929; co. is largest seller of toilet soap in 48 countries.