October 31, 2009

Friday, October 31, 1930: Dow 188.07 -2.66 (1.4%)

Assorted historical stuff:

W. Green, AFL Pres., says 20M will be “threatened with acute need” this winter, and number of unemployed will rise from 3.5M to well over 5M.

Many industries have adopted “staggered” plan to distribute available work while avoiding layoffs as in past recessions; this reduces weekly income of workers but helps greatest number of people and “alleviates suffering and need”

Dr. R. Senese, pres. of Sene, Inc. of NY (cosmetics), visits White House, proposes $5B loan to mature in 5 years, to be used in national construction program to restore prosperity; to be funded by 1% income tax surcharge on those earning over $25/week.

Germany reportedly feeling out US govt. on reparations and Allied war debts, but hasn't yet declared a moratorium on reparations payments due to US attitude and need to reconstruct economy. Allied nations said to want renegotiation of war debts in case of German moratorium; US reportedly believes war debts and reparations are independent, and there's no need at present to adjust debt payments; points out that annual payments are only a few percent of total budgets.

Australian govt. expected to present balanced budget to House of Representatives at end of Oct.; will include spending cuts, tax increases; “The old alternative of borrowing with the accompaniment of lavish spending of public funds is no longer open.”

10 years ago, 5 farms remained on Manhattan Island. Now only one does, occupying a block at Broadway and 213th St., growing vegetables and some chickens.

American Rolling Mill Co. research developed continuous steel rolling process over 15 years, by which a hot steel ingot weighing 12,000 pounds moves 800 feet in a straight line through a series of mills and furnaces, being converted to sheets at the end of the line.

Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.

Market commentary:

Market wrap: Market less active; substantial liquidation was attributed to tax loss selling, particularly in AT&T, Consolidated Gas, and Radio; US Steel was also weak. There were also bad breaks in specialties including Eastman Kodak and Air Reduction, and heavy selling in soft drink companies including Coca-Cola, Canada Dry, and White Rock on fears of beer legalization. Bulls, however, were encouraged by general market resistance to these unfavorable factors and to recent bad business news; bears did not make much headway and volume dried up on declines. Market tone improved in afternoon. Bond market mixed; foreign govts. rallied; US govts. moderately active, firm; corp. mixed on weaker stock market, but rails steady and investment-grade little changed.

While some stocks have higher earnings in 1930 vs. 1929, there have been few new stock price highs. Stocks that have acted relatively well this year include Amer. Chicle, Amer. Tobacco B, Coca-Cola, Cream of Wheat, Cudahy Packing, General Foods, National Biscuit, Reo Motor, White Rock, Woolworth.

Many still talk about last November's panic, but the current market “has been what some might term a creeping panic, with the prices of many stocks edging off week after week until they now make the Nov. 1929 lows look high in comparison.”

H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.

Investment authorities point out that many stocks are selling below value of net current assets, ignoring value of plants and earning power.

Amusement shares (movies) have been working lower recently, possibly due to disappointment they haven't been as depression-proof as previously thought.

Economic news and individual company reports:

Bethlehem Steel Q3 net was $.63 a share vs. $1.86 in Q2 and $4.01 in Q3 1929. E. Grace, pres., says prices are more stable than a few weeks ago and inventories low, but “business is not picking up a bit” and “there is nothing in sight to indicate improvement in Nov.”

Fed. Reserve reports money in circulation Oct. 29 down $24M to $4.426B, total Reserve Bank credit outstanding down $5M to $985M. Member banks in NY City report brokers' loans down $101M to $2.512B vs. $5.538B in 1929 and lowest since June 1926, “all other” (commercial) loans up $120M to $2.616B.

Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.

Amer. Bureau of Metal Statistics estimates Q3 consumption of copper for electrical manufacture was 53,000 short tons vs. 68,000 in 1929; by auto industry was 18,000 vs. 35,000, for building was 11,000 vs. 16,500, and for use in exports was 18,600 vs. 17,800.

Companies reporting decent earnings: Autostrop Safety Razor, Grand Union (9 month net up 29.6%, did not increase store count).


“Mrs. Gee - William, how do you suppose those dozens and dozens of empty bottles got into our cellar? Mr. Gee - I'm sure I don't know, love. I never bought an empty bottle in my life.”

“'Is this beef or is it mutton, waiter?' 'Can't you tell by the taste?' 'No.' 'Then what difference does it make?'”

+ The Boring Stuff:

France allocates $480M for national defense in 1931 budget.

I. Laughlin, US Ambassador to Spain, tells Pres. Hoover conditions in Spain don't warrant recent fall in currency; says unemployment low, economic conditions relatively good, some disturbances but not of serious nature.

Situation in Brazil uncertain; banks in Rio reported closed; Dr. G. Vargas, head of revolution, reported en route to Rio to take control of govt.

Canadian fur farming industry was founded 52 years ago when three farmers near Prince Edward Island captured 15 wild silver foxes. There were 100,000 silver fox cubs born this year on Canadian fox farms, all descended from the original wild stock. Prices for this type of fur have held up better than any other kind.

Western Electric says has shortened hours at some plants to keep maximum number of trained workers employed; at end of Sept., 1/4 of workforce was working 40 hour weeks, 1/4 working 44 1/4 hours, and 1/2 working full-time 48 hour weeks.

Editorial: Fundamentals for cotton prices are improving; mills are holding production down to work off excess inventories. While futures were down Tuesday following a sharp rally since Oct. 18, those who wait to buy “may find that procrastination is the thief of profits.”

Short interest reportedly has been decreasing recently. Wall Street still discussing the recent steps to discourage short selling. Advocates say steps were not directed against short selling in general but against “concerted action on the part of the bears.” Jackson Bros., Boesel & Co. say “obstacles in the way of extensive short selling have not been removed ... We are seeing less and less of the old tactics whereby resistance points on the downside were riddled with heavy concentrated offerings”; the more prominent bear crowd “is disintegrating. Vicious bear tactics, it is assumed, would meet with criticism.”

Some market observers are wary, noting recent renewed selling and expected bad earnings news. Investment buying is favoring stocks selling at low earnings multiples, that cover dividends comfortably, are in a strong financial position, and that should participate in general business recovery.

Broad Street Gossip: “The safest kind of an asset in these days of deflation is a good gold mine.” Newmont Mining has succesfully developed one out West.

Canadian trade circles estimate govt. wheat pool liability may be 50 to 80% greater than official $10M estimate.

Commodities weak. Grains down moderately. Cotton down. Copper buying still heavy, some producers refusing to fill all orders; talks on curtailment continue.

Dow average of eight finished iron and steel products was $44.56/ton vs $44.70 prev. week, new low for 1930. Scrap prices generally lower. Youngstown district steel operations likely to be reduced next week from current 54%.

US Steel's success in earning Q3 dividend in spite of low prices and production at 60%-65% attributed to production modernized by $1.6B spent on improvements since 1901, and to diversification into rail, steamship and other lines of business.

J. Farrell, US Steel pres., optimistic on future of structural steel industry; points out shipments in first 8 months were ahead of 1929's record pace; says use of steel in construction expanding, including “residences of all steel frame, with steel floor construction.” Criticizes unfair and irrational competition, including quoting of unprofitable prices; “no satisfactory substitute has been found for the Golden Rule, whether in the field of economics or any other phase of existence.”

NYSE expels G. Forman and M. Orr, directors of Prince & Whitely Trading Corp., charging them with failure to properly segregate assets of the Trading Corp. from the sponsoring Prince & Whitely brokerage house, which recently failed; also charged improper inflation of Prince & Whitely's financial condition.

Two Toronto brokers fined total of $250,000 for “gaming in stocks.”

Tariff Commission to hold hearings concerning pig iron and crude oil.

Champlin Refining files another suit against Oklahoma oil proration in Federal District Court, charging antitrust violation and favoring of major operators.

Middle West Utilities reports first 8 months residential sales of electricity were 294.6 GWHr, up 22.5% from 1929; rural sales were 41.9 GWHr, up 46.6%; large power sales were up 6.2%.

Some Gillette stockholders sue company and directors regarding some terms of the proposed Autostrop merger.

Chesapeake & Ohio Rwy. stock about 43, year's range 40 - 51 3/8, yield 5.8%, first 9 months earnings $3.27/share vs. $3.46 in 1929.

New York Central railroad asks 40% increase in commuter fares into and out of Grand Central; points out fares have only had one 10% increase since 1910.

October 30, 2009

Thursday, October 30, 1930: Dow 190.73 -4.22 (2.2%)

Assorted historical stuff:

Treasury Sec. Mellon gives first radio address of election campaign. Says current depression mainly caused not by stock speculation but by worldwide overproduction of commodities. Uncertain how long readjustment will take, but can be certain US will be among the first to recover. Govt. has kept its house in order and held itself ready for unexpected emergencies, including the depression; “The scope of governmental activities was necessarily limited, but within those limits the President acted with decision and courage.”

British PM MacDonald states if US used same system as English in figuring unemployment, they would show unemployed of 10M-12M.

Editorial: An analysis by Banker's Monthly finds that of the many small bank failures in the past 9 years, a large portion happened due to the communities themselves “melting away” rather than bad banking. Nonetheless, speculation in real estate and other unsound practices were also large factors. It's a good thing this dead wood was cleared away before the current depression; “one of the reassuring aspects of the situation today is the stable banking position.”

R. Kelley attempts to resign from Interior Dept., but is instead fired by Interior Sec. Wilbur.

Western rail execs submit statement to ICC saying revenue situation is now “sufficiently serious to menace the maintenance of adequate transportation facilities.”

Calif. State Dept. of Public Works announces will use no mechanical devices at four construction camps in order to provide work for more men.

Federal Tariff Commission begins new streamlined process of tariff review set up by Smoot-Hawley law by considering protest of high duty on straw hats.

Russians are exhibiting weapons captured from the Chinese in fighting on the Manchuria-Siberia border last fall; these include many weapons of medieval type including “arquebuses, culverines, lances, falchions, and missile throwers.”

Inventor has created fireproof paper money that will not tear or wear out; produced by spraying paper pulp with minute particles of tin, copper, and aluminum.

Tonawanda, NY merchants agree to sell their goods at costs from Nov. 6 - Nov. 8 as their contribution to drive against business depression.

Market commentary:

Market wrap: Market showed some steadiness in the face of multiple pieces of bad business news, including declines in steel operations and rail freight, and failure of US Steel to declare rumored extra dividend. US Steel opened sharply lower and continued to decline, while substantial liquidation came into rest of the market. However, volume declined as prices were lower and trading settled into a very narrow range in midday. Volume continued low in afternoon, but tone improved. Some further weakness in the final hour as Bethlehem Steel broke on prospect of poor earnings report after the close. Bond market moderately active; investment grade corp. firm, rails strong; South American govts. rally, other foreign govts. firm; US govts. dull, up slightly and near year's highs.

In spite of recently declining operating income, US Steel is still expected to earn about $10/share in 1930 (first 9 months was $8.44), comfortably above dividend.

Some rumors of recent market support by “interests that desire to see the market display a firm tone” until after the election Tuesday.

As in the past, some tax-loss selling in the year's final two months is expected.

Continued sizeable short covering reported during the session.

Economic news and individual company reports:

Car makers seen likely to lower prices for 1931 models, with one of the largest low-price manufacturers already having decided on a lower price list. In the past year, lower-priced manufacturers including Ford and Chevrolet have done better.

US Steel ingot production for week ended last Monday was at 55% vs. 58% previous week and 82% in 1929; independents were at 47% vs. 49% and 77%.

Weekly reviews for iron and steel industry find unpromising picture: cautious sentiment, slight drops in finished steel prices, and significant weakness in scrap prices. There was some hope ingot production was at the low point for the year.

Electric output by US light and power industry for week ended Oct. 25 was 1,725 GWHr vs. 1,710 in prev. week and 1,799 in 1929.

US new car registrations in Sept. were 175,286 vs. 203,737 in Aug. and 304,452 in Sept. 1929; first 9 months were 2.287M vs. 3.269M.

Previously reported drop of 21.4% in freight loadings for week ended Oct. 18 was largest percentage drop this year, contrary to expected improved trend.

Bethlehem - Youngstown merger trial continues; F. Wood, attorney for Bethlehem, currently in fifth day of his closing argument. Since several other attorneys for either side have yet to present arguments it's considered unlikely arguments will conclude before Nov. 6.

Eastman Kodak was weak on reports of wage cuts and layoffs; co. stated that while hours had been cut back for some workers due to curtailed output in some lines, co. was carrying out an extensive construction program and employing 25,000 workers, 1,000 more than last year.


“Dr. Bottle - How is your patient doing since his operation? Dr. Knife - Fine; I think he can afford another before the year is out.”

“'Why is he so sad?' 'Didn't you know he had gone bankrupt?' 'Yes, but I didn't know he had lost money over it.'”


The Noble Experiment - “Almost the entire array of racketeers is present, including bootleggers, gamblers, gangsters, dope-peddlers, hijackers, prostitutes, and corrupt sheriffs and judges, yet they are all unbelievable and at best only laughable caricatures.” Protagonists final words: “When you see my people in Europe, tell them I died in a country where the people have bathtubs for their bodies but none for their souls!”

+ The Boring Stuff:

Editorial: British Empire conference fortunately appears to be failing at creating a new tariff system for the Empire. Last spring, the Smoot-Hawley tariff advocated as improving US business instead coincided with a worsening of depression; while the tariff “could not fairly be called more than a minor factor in causing the present situation,” it does show “economic restoration does not lie in that direction.”

L. Horowitz, Thompson Starrett (builder) chair., invited by Pres. Hoover to review govt. building program, says doing everything reasonably possible to advance work while properly safeguarding public funds. Commerce Sec. Lamont says Boulder [later Hoover] Dam construction accelerated 6 months to aid unemployment.

Bond issues to be decided in Tuesday's election include $100M each in Louisiana and New Jersey, $75M in California (including $35M for proposed Golden Gate Bridge), $50M in New York, and $25M in Illinois.

Brazil revolutionary govt. says will pay all national debts except those incurred after outbreak of the revolution on Oct. 3.

NY City Emergency Employment Committee will take 43rd floor of 40 Wall St.; Space donated by Col. W. Starrett.

New Orleans and Chicago announce plans to register unemployed as first step toward relief.

L. Rogers of Columbia Univ. reports to Mayor Walker's committee on taxation; says city can't finance cost of new subways using short-term (4 year) bonds while maintaining the 5 cent fare; says depressed conditions in real state market will reduce taxes collected below early estimates.

Largest poultry plant in the world is at Reseda, Calif.; sells over 150,000 hens a year, maintaining a flock of at least 500,000.

GM main research lab located in Detroit; budget $1.5M/year; highlights of research include developments in fields of engine design, metal alloys, chromium plating, and lacquer finishes.

J. Gerard, former ambassador to Germany, proposes Stock Exchange rule preventing broker from lending the stock on margin without written consent of the owner for each particular loan. Recommends corporations issue more understandable reports to investors, citing US Steel as model.

Some technical market watchers expect a rally recapturing at least 25% of the ground lost since Sept. 10 before any further liquidation.

Experienced observers” now watching for ability to hold recent support levels, including 148 3/8 for US Steel, 51 1/2 for GE, and 35 1/4 for GM; if these levels are effectively supported, “chances of early resumption of the recovery would be materially strengthened.” Recent market performance has aroused hope the market is preparing for a more sustained rally than seen since early Sept.

Bulls encouraged by appearance of strength in some specialties in the midst of market irregularity, particularly in coppers on curtailment prospects.

The frequent remark that Wall Street business is now carried on by a “new generation” of traders is verified by the fact that 934 of the current 1,346 NYSE memberships were acquired after Jan. 1, 1920.

More conservative market students have recently been recommending stocks with well-maintained earnings this year rather than those that will only make high returns when business has recovered.

Commodities weak. Grain markets mostly quiet; corn down substantially, other grains down moderately. Cotton down substantially. Copper buying continues good at 9 1/2 cents, but long-range situation remains doubtful as production still exceeds consumption.

W. Wood, Amer. Inst. of Meat Packers pres., says total production of meat for the year will be about equal to 1929; prices have strengthened somewhat since the summer but are off substantially (13%-35%) from a year ago; stocks of meat in cold storage relatively low.

Lloyd's Register of Shipping notes drop of over 50% in orders for new ships over past 3 months, increase in number of idle ships. Number of ships approved in year ended June 30 was 601 for 2.082M tons, largest since record year of 1920.

Strike of Berlin metal workers ends; seen as initial success in campaign to cut wages; dispute will be settled by arbitration, expected to lower cut to 3%-5%.

Italian unemployed were 394,630 at end of Sept., up slightly over Aug. but less than last Jan.

Registered British unemployment Oct. 20 was 2.199M vs. 2.189M on Oct. 13 and about 1.225M on Oct. 21, 1929.

Recent persistent decline in Spanish currency (peseta) reportedly increasing public support for stabilization, possible shipment of gold from Spain.

Manitoba Premier J. Bracken says unless price of wheat improves Canadian govts. may lose $10M on wheat pool.

Rail freight shipments from Chicago had a 95% on-time delivery rate for the 6th month in a row; 95.39% were on time, 3.74% one day late, and 0.86% more than 24 hours late.

Tire makers to advance prices 2.5% - 5% Nov. 1, with all of the increase going to dealers.

Over 2,000 new businesses opened in Chicago in the first half, almost 10% higher than 1929.

Delaware Gov. Buck requests indictments against all oil companies selling gasoline in state, charging price-fixing.

NY State reportedly set to relax requirement on interest rate coverage for rail bonds that savings banks may invest in.

PG&E conducting large, long term, and complex campaign to expand use of natural gas in its territory (Northern California) in competition with fuel oil.

Four-bank merger reportedly under discussion between Manufacturers Trust, Bank of United States, Public National, and International Trust.

Companies reporting decent earnings: Arundel Corp. (sand and gravel), Interlake Iron (lower profit margin but expanded production).

October 29, 2009

Wednesday, October 30, 1929: Dow 230.07 -30.57 (11.7%)

One year ago today:

[Note: Ending the recap of the 1929 Great Crash - the summary below describes Oct. 29, subsequently known as Black Tuesday.
Epilog: The market fluctuated violently for the next two weeks. For example, on Wednesday John D. Rockefeller, Sr. announced he was actively buying stocks; the Dow on Wed. and Thurs. was up 28.40 and up 15.04. After this the market was closed for two days to allow the overwhelmed Exchange facilities to catch up. When it reopened Monday, the plunge resumed with drops of 15.83 and 25.55 in the next two sessions. The 1929 low was hit on Nov. 13, at 198.69 on the Dow; this held almost a year until October, 1930, as covered in the blog. The fall panic was followed by a very strong rally into the following spring, now known as the sucker's rally - the high for the rally was reached on April 17, at 294.07, and the blog starts as this rally is wearing off in June.
The Sept. 3, 1929 Dow peak of 381.17 wasn't passed until Nov. 1954.
Black Tuesday's record volume of 16.410M shares traded stood until 1968.]

Market wrap: “Necessitous liquidation” resulted in further bad breaks in “the main body of stocks.” Wholesale margin calls were sent out overnight due to the extraordinary decline in Monday's session; this caused heavy early liquidation for those accounts “unable or unwilling” to add funds. The market ignored positive morning announcements on lower call rates and margin requirements. An avalanche of selling proceeded through the morning, leaving no stocks untouched, though the decline was again orderly; bankers were said placing bids to prevent “demoralization from overwhelming the market.” Ticker quotations again fell far behind. Bankers were reportedly urging affliliated interests to buy stocks at current levels. In addition to banking support, substantial buying was reported from investment trusts, utility operators, large individual investors, and odd-lot (small) investors. This support finally checked the urgent selling in early afternoon, and some good recoveries from the day's lows were scored by leading issues.

Volume Tuesday was 16.410M shares, breaking the record just set Thursday of 12.895M. Largest individual stock volume was GM at 971,300 shares. There were no new yearly highs and 551 new lows.

The bankers' group met early in the day and after the close. After the second meeting a spokesman announced the group had been and would continue to support the market; however, the group would not bid stocks up but step in to prevent “hysteria.” The spokesman also expressed optimism, saying public seemed to be coming back to its senses, and a considerable amount of “first class investment buying” was in the market Tuesday. R. Whitney, NYSE VP, said the Exchanges board of governors had met but decided no action was necessary.

Broad Street Gossip: Many stocks are down 50% or more. “All of which means that bargain days are near ... look over the list and you will find many good common stocks that are yielding 6% to 8% or more. ... And some of these stocks are earning 50% to 100% or more above dividend requirements.”

Baar, Cohen & Co.: “There is no question but that a preponderance of stocks are now quoted many, many points below even a conservative market valuation. We believe the time is not far distant when we will look back upon these prices as a golden opportunity to buy something for less than its true worth.”

A. Conway, State Superintendent of Insurance, recommended leading insurance cos. put a substantial amount of assets into leading stocks at current levels.

Many brokers report a good increase in odd-lot (small) buying for cash; seen as “bargain hunters” taking “long pull” positions.

The break in stocks over the past two months will probably go down as the “shortest and most drastic major bear movement on record.” Decline was 39%, about the same as in 1920 and 1907, but those took about a year. This slump differs from past ones in that many more individuals were ruined, though there “has been no institutional difficulty as yet.” There's no inflation in commodities or inventories, and industry is on a “sound basis with no real indications of a depression in prospect.” Slump was apparently caused by over-issuance of stocks, a moderate letdown in business starting several weeks ago, and bear operations; these caused a panic among the speculative public; no one can now guess if “liquidation will be completed in a matter of hours or days.” While industry is sound, the market slump may worsen the letdown. However, in the long run the decline should be beneficial by releasing funds from speculation to industry and foreign borrowers.

Heard on the street: “It was blue Monday with a vengeance. And then some.” “We are now convinced that some things were selling too high.”

It is impossible to get a prediction on the market. All observers admit that one guess is as good as another under the prevailing circumstances.”

Economic news:

The Stock Exchange announced before the open that call rates had been cut from 6% to 5%.

The bankers' group issued a statement in the morning reassuring the financial community that “There is plenty of money and it will be loaned freely.” They also announced that leading New York banks would reduce margin requirements on loans to customers to 25% of closing quotations from the previous practice of 40%, and would only enforce the margin at the close, not during a session.

Rail freight loadings for the week ended Oct. 19 were 1.186M cars, up 6,503 from last week and up 22,375 from 1928.

US Steel and American Can each declared an extra $1 dividend, with American Can also raising the regular rate from $3 annually to $4.

US Steel Q3 earnings were $5.57 vs. $6.68 in Q2 and $3.31 in Q3 1928; first 9 months were $15.82 vs. $8.17 in 1928.

Allis-Chalmers expects 1929 earnings substantially ahead of 1928, though recent business is slightly behind that in the first half.

E. Reeser, Amer. Petroleum Inst. Pres., says believes Calif. producers who slashed crude prices 40%-50% two weeks ago will restore old schedule at once, and other producers won't cut prices to avoid disrupting the general industry price structure.

K. Kingsbury, Standard Oil of Calif. Pres., says knows nothing to account for extraordinary break in oil stock prices; on contrary, believes prospects for effective conservation (cutting production to match demand) are better now than ever.

Cotton exports for first 9 months were $546.3M vs $619.8M in 1928.

Other stuff:

Editorial: Recent news from Russia is disturbing. Until recently it was barely possible to excuse use of “officially organized terrorism for political reform” due to dire necessity, and as characteristic of major revolutions. But the revolution is now 10 years old and almost as bloody as ever. Opposition is coming largely from peasants previously successful at providing for themselves. Summary trials and executions on a large scale, as many as 50 a day, are being used to impose political and economic ideas that millions of Russians abhor; these actions are “almost cheerfully” reported by official communique. This kind of government offers nothing on which friendly relations with Washington can be built.

NY Gov. Roosevelt says next great political issue will be regulation of public utilities; says Democrats would have been blamed for stock market panic if in power, but Republicans have received little blame.

Movie: Harold Lloyd in his first talking film, Welcome Danger, plays the son of a famous detective investing an opium den in San Francisco's Chinatown.

Amusing observations:
“'Never sell America short,' remarked one trader. 'All of which is true and a good thing to remember,' remarked another trader. 'But some traders are now so bearish they would sell America, the Treasury, Bank of England, Europe, Brooklyn Bridge, and the Federal Reserve Board short if they could borrow them.'”
Comment from London, Berlin, and Paris called the market break “inevitable” or “as expected”; based on this, “great fortunes must have been made by foreigners on the short side.”
Tobacco companies considered promising - it was noted that many Wall Streeters who prefer not to smoke during business hours “have abandoned their policy and are consuming cigarettes rapidly.”

The Trader's Lament:
[Note: This actually appeared a couple of days later, but what the heck ...]
They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”

Wednesday, October 29, 1930: Dow 194.95 -0.14 (0.1%)

Assorted historical stuff:

Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”

Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.

NY Gov. Roosevelt addresses Advertising Club: “We have had our financial fun following false prophets. We know once and for all that prosperity is not the handmaid or creature of any political party ... Continued optimistic statements by individuals ... or by politicians do little real good.” Says necessary to find the cause of depression, whether foreign markets or overproduction, and then to employ every means to restore business to a stable basis.

GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.

Art collecting news: Knoedler Galleries exhibiting a collection of French masterpieces from 19th Cent. - present, including paintings by Corot, Degas, Cezanne, Gauguin, Van Gogh, de Chavannes, Seurat, and Delacroix. John Ringling [circus impresario] has purchased an important picture by Peter Paul Rubens.

College football games, though the main season is only 7 weeks long, attract a total attendance of 7M, with a total gate of $20M and total spending at least $50M.

Market commentary:

Market wrap: Recent rally was “maintained in good style,” with leaders again showing “recently acquired resistance” to isolated weak spots; only a brief reaction followed poor Bethlehem earnings announcement. Leaders including US Steel, American Can, and Union Carbide hit new rally highs in the morning and were well supported in the afternoon. “Rallying tendencies” then spread through the list, with some trading favorites including J.I. Case, United Aircraft, and Vanadium up briskly. High grade rails strong on expected better traffic comparisons vs. 1929. Coppers strong on prospects for curtailment. Some late weakness, particularly in US Steel and Eastman Kodak. Bond market irregular but mostly trending up; convertibles, rails, and Peru govts. strong; US govts. dull, firm.

One of the largest industrials reports a recent revival of construction in New England; “it is an absolute fact that the ending of all past depressions has always begun with an improvement in New England” construction; attributed to New Englander's shrewdness, “saving his money until he can buy a lot for it."

Many large industries are now operating at 50% of capacity; in past depressions, things have been much worse, with steel at times down to 30%. However, these depressed levels don't remain very long; “The United States is not a 50% country.”

Several quarters” report a more confident feeling based on improvement in commodities, lower brokers' loans, thorough deflation of many security prices, and recently expressed confidence by economists and business leaders.

Central Trust of Ill. says current pessimism unjustified based on actual reduction in total incomes of only 5%. Sees hopeful sign in inventory declines, indicating consumption has exceeded production for some time; buying has decreased more than buying power; readjustment of retail prices will restore sales.

Economic news and individual company reports:

US income tax collections for first 9 months were $1.779B, down $148.3M from 1929; individual collections were down $133.0M and corporate $15.3M.

Rail freight loadings for week ended Oct. 18 were 931,085 cars, down 23,789 from prev. week and down 254,479 or 21.4% from 1929 week.

Dominick & Dominick point out greatly improved labor relations vs. previous depressions; in first half, there were no major strikes and 399 “minor disagreements” vs. 2,385 disputes in 1921. Wage scale has been maintained in “unprecedented manner,” though hours worked have been shortened.

Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.

First 70 rails report Sept. operating income $91.6M, up 10.1% from Aug. but down 21.2% from 1929.

US Steel Q3 net was $2.06/share vs. $5.57 in 1929; first 9 months was $8.44 vs. $15.82; regular quarterly $1.75 dividend was declared, but no extra.

Assorted Q3 earnings: IBM $2.85/share vs. $2.91 in Q2 and $2.80 in Q3 1929; Studebaker $0.20 vs. $0.41 and $1.24; Conde Nast $0.73 vs. $1.04 and $1.11.


The Virtuous Sin - Walter Huston plays a ruthless Russian general, Kay Francis a woman interceding on behalf of her husband, a scientist who was drafted just as he was on the verge of a scientific discovery that would save thousands of lives, and has been sentenced to die for attacking the military system. She is forced to use her feminine wiles to persuade the general; in the end, her husband's life is spared but she falls in love with the general.

Stock market joke:

A strong man, as part of his show, held a lemon up and crushed it in his enormous hand. He then pinned a $100 bill to the backdrop. “Whoever can extract another single drop from that lemon is entitled to the $100,” he announced. A wizened old man made his way to the stage. The strongman roared with laughter and handed him the lemon. The old man squeezed the lemon firmly, and three drops fell into the cup. “Who are you?” gasped the strongman. “I'm a margin clerk in a brokerage house,” replied the old man mildly.

+ The Boring Stuff:

NY City police census shows 15,164 heads of families jobless in city; Commissioner expects figure to go higher. Police to donate $35,176/month from salaries.

Essex County movie theater employees join strike by Newark musicians against cut in size of orchestras.

Market over the past week has been allowing bull traders to do some “profitable in-and-out trading” since it's rallied more following breaks.

One broker reports most short selling is now by small traders.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Some of buying attributed to short “squeezing”; a large short interest remains, and some have had trouble borrowing shares; frequent calls have been made for return of shares, “necessitating strenuous efforts to replace them” or in some cases forcing shorts to cover.

Bond men report expected yield on high-grade municipals is about 4%, 2nd grade 4.20%, 3rd grade 4.50%, slow-moving issues 5%.

Curb Exchange report: (later the Amex; small companies) Auto shares selling at “nominal prices” discounting no improvement in the industry (Stutz at 1, American Austin at 2). Very thin market in many specialties. Wide differences in valuation; highest grade oils yielding over 6% while some utilities at 20 or more times earnings.

R. Hose, Anglo South Amer. Bank chair., says South and Central American countries in active stage of development, large producers of commodities. Encouraged by recent stabilization in commodities; expects quicker economic recovery than in “older countries already having fully exploited resources.”

H. MacLean, US rep. to Int'l. Chamber of Commerce, notes European companies face difficulties including heavy short term debts, large inventories, and lower sales; sees severe trouble for the “less efficient and less fortunate” but notes heroic efforts to reduce costs, says readjustment period will be shortened by speed at which “hitherto unreachable cost levels have been arrived at.”

Increasing rumors Spain will attempt to stabilize currency on gold standard.

Editorial: Conditions in the wheat market favor a higher price before end of season, “providing business conditions will permit.”

Commodities strong. Wheat up strongly; other grains somewhat higher. Cotton up sharply on govt. stabilization efforts. Copper buying improved at 9 1/2 cents.

Total cars financed by 485 cos. in Aug. were 246,539 for $102.9M vs. 285,234 for $118.4M in July and 347,565 for $163.8M in Aug. 1929.

Gasoline stocks at refineries Oct. 18 were 36.655M barrels, up 379,000 in week; refineries operated at 65.7% vs. 66.2% prev. week; oil production was 2.378M barrels/day, up 7,450 from prev. week and down 491,500 from 1929.

Several companies cut crude oil prices in various sections of the US other than Calif.; typical cuts were $0.25/barrel.

Auto parts and equipment manufacturers report improved shipments to wholesalers in Sept. and Oct.; wholesalers also report improved business. Mfr. shipments of service parts in Sept. were 139% of Jan. 1925 level. vs. 132% in Aug. and 173% in Sept. 1929; accessory shipments were 76% vs. 60% and 84%.

Aug. operating income for 103 telephone companies was $21.536M vs. $22.545M in 1929.

American Machinist reports machine tool market remains static, no major improvement expected until start of next year.

Fed. Reserve Midwest (7th) District reports Sept. 15 industrial payrolls down 1.6% from Aug. 15, total earnings down 1.3%.

Canadian construction permits in 61 cities in Sept. were $11.1M, down 19.8% from Aug. and 35.3% from Sept. 1929.

European steel cartel prolonged until Dec. 31 with 12% reduction in output.

Bethlehem Steel Q3 net expected about $0.60 vs. $4.01 in 1929; first 9 months about $5.05 vs. $13.30; will maintain $1.50 quarterly dividend.

Edsel Ford, Ford Motor pres., says will keep making Model A indefinitely without major change; company “in the midst of the greatest expansion program in our history,” building plants throughout world; these will produce model A cars and AA trucks.

National Biscuit record earnings attributed to lower commodity prices and less spending on plant expansion; successful acquisition strategy focuses on buying cos. with products popular in local markets, then selling them through National's countrywide merchandising system; rumors it may acquire Wheatsworth.

Companies reporting decent earnings: American Ice, Davison Chemical (began selling fertilizer direct to farmers), Continental Can, Texas Pacific Land Trust.

New book:

They Told Barron, an edited collection of the recently deceased C.W. Barron's “Conversations and Revelations.” Considered “the father of modern financial journalism,” he assumed management of the Wall St. Journal around 1900 and developed it to its current position. People talked to him not only because of his powerful position, but his appearance and personality: “Short of stature but impressive in breadth and girth, his sparkling blue eyes, ruddy cheeks, and whitening beard completed a Santa Claus picture which did not belie its owner, for his heart was as benevolent as his appearance.” Covers development of industries including rails, steel, autos, oil, chain stores, etc.; with conversations and comments on many pioneers and contemporary leaders in those fields.

October 28, 2009

Tuesday, October 29, 1929: Dow 260.64 -38.33 (12.8%)

One year ago today:

[Note: Continuing the recap of the 1929 Great Crash - the following describes Oct. 28, subsequently known as Black Monday.]

Market wrap: Monday's session repeated Thursday's drastic declines “on a slightly more orderly scale.” Selling orders had flooded in from every section of the country over the weekend; large blocks of the leading stocks were thrown on the market early and liquidation proceeded steadily through the morning, with the whole market severely pressured. Traders were rattled when one after another of the leaders broke through Thursday's resistance levels. A major battle was waged around US Steel's Thursday low of 193 1/2, with the bears finally forcing it through; this was followed by further sharp declines across the list. Some hope came from another conference of bankers at the Morgan offices around midday; no statement was made but some rallying developed and it appeared support might have been decided on. However, the rally quickly disappeared in a flood of afternoon selling, and the market was “acutely weak during the last hour.”

While declines were generally larger than Thursday's break, trading was less panicky; a continuous market was available in major stocks, there were few 5-10 point drops between sales as happened Thursday, and volume was 9.213M shares compared to Thursday's record 12.895M. There was one new yearly high and 286 new lows.

Some buying came into the market “on a scale” down, but was much smaller than the offerings and had no appreciable effect.

Some dispute over whether banks were supporting the market. Some couldn't discern any support, and one wit suggested “the bankers' pool forgot to put in its buying orders.” On the other hand, a spokesman for the bankers' group talked to reporters late Monday and implied the bankers' pool continued to operate. It was emphasized that the bankers' intervention on Thursday was to stabilize a market that had gotten out of hand; Monday's market, by contrast, was “far more orderly.” It was also clearly indicated that bankers had heard from numerous sources that the market had reached a point where investment trusts (similar to mutual funds) and others with large resources were ready to buy stocks on a sizeable scale.

Sentiment is highly unsettled again. ... In fact, quite a few market interests favor disposing of all stocks at the moment, and then remaining on the side lines until there has been material improvement in the whole situation.”

Some liquidation remains to be done judging by the nervousness demonstrated yesterday; after this, “it will be essential for the market to have a period of quiet.”

Public expected to be more wary of stocks for some time after many were badly hurt recently; when they do return, more consideration will be given to fundamentals such as earnings and future prospects, and less to “the so-called 'information' which caused over-buying in the past.”

Investment trusts have gone from the height of popularity a short time ago to being avoided entirely by the public now.

A. Sloan, GM pres., says stock market break was healthy, although a little drastic.

S. Strawn, Montgomery Ward chair.: “I believe the severe check (in the stock market) will have good results for the whole country”; expects funds to be turned from speculation into trade and industry.

Editorial: While “speculators whose margins have been devastated” may be hard to console, there are some comforting aspects to the current situation. “Business in general shows no signs of disintegration”; it has slowed somewhat from a midsummer peak, but this preceded the market break. With a few exceptions such as the car industry, we don't have the high inventories that have caused previous recessions; together with lower prices, this indicates part of the needed readjustment has already been accomplished. Finally, a pause in the recent flood of security issues should be beneficial.

Economic news:

US Steel directors meet this afternoon; rumor mill active on what might be announced, especially in light of official promise last week that “something encouraging” would be released.

American Railway Assoc. reports railroads on Oct. 1 had 29,481 freight cars on order, up 21,959 over 1928 and up 14,648 over 1927.

Recent lower money rates are expected to stimulate construction.

Federal Farm Board puts $100M at disposal of Farmer's Nat'l. Grain Corp. for stabilizing wheat prices, which the Board considers unjustifiably low and “chiefly due to the rapid or disorderly movement which is putting a large part of the year's supply of wheat on the market within a short time.”

Merchants Assoc. denies AFL charge that 233 US firms are manufacturing abroad under US trademark to use cheap labor.

Other stuff:

Amusing anecdote: A New York businessman hadn't been feeling well for some time and finally went for a physical. After a thorough exam, his doctor told him he had diabetes. 'What!' he exclaimed. 'Diabetes at 37?' 'Yes, you have it,' declared the doctor. Very upset, he went to his office. 'Hello, Jim,' said a friend. 'Your face is longer than a board. What's eating you?' 'I have diabetes at 37,' was the sad reply. 'That's nothing!' said the friend. 'I have Chrysler at 135.'

New York Edison installs world's largest single-unit electric generator - at 161.2 MWatt, this brings total system capacity to 1.643 GWatt.

American Red Cross, in fiscal year ending June 30, donated $8.096M for relief work in 117 catastrophes in US, 11 in foreign countries.

Movie: Showing at the Roxy theater is Frozen Justice, the talking film debut of Lenore Ulric, in which she “enacts the part of a halfbreed who is torn emotionally between her love for her Eskimo husband [played by Robert Frazer] and her desire to get away from the dullness of igloo life to the land of her white father.” Also on the bill at the Roxy are a condensed version of Faust in eight scenes, a violin solo by F. Fradkin playing Sarasate's Gypsy Airs, and a delightful ballet representation of Hallowe'en by the Roxyettes.

Tuesday, October 28, 1930: Dow 195.09 +1.75 (0.9%)

Assorted historical stuff:

J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”

Civil Service Clerical Assoc. of London votes overwhelmingly in favor of compulsory resignation for women after marriage.

G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.

Illinois Supreme Court finds margin trading in grains to be gambling and debts not legally enforceable.

Rumors persist that Congress will legalize beer, and possibly light wines.

Mustaches have come back into fashion in London so suddenly that wig makers are supplying artificial ones in all styles for men who can't wait to grow one.

NY City papers (Times, World, and Herald Tribune) raise Sunday edition from 5 cents to 10 cents.

Market commentary:

Market wrap: Substantial selling came into the market early, with bears interpreting Saturday's late decline as indicating market was in a vulnerable position. Majors including US Steel, GM, and Westinghouse were forced to substantial setbacks from Saturday's highs, and J.I. Case had a further bad break to a yearly low. However, the decline steadily lost momentum as volume dried up, the general list showed resistance to isolated weak spots, and leading stocks traded in a narrow range at midday. “Bears obviously were intimidated” by this steadiness, and a rally starting in the afternoon brought urgent short covering; rally was attributed to possible declaration of extra dividend by US Steel today. Bond market dull, generally steady; rallies in Brazil govts. and some convertibles. And if

F. Patterson, Nat'l. Cash Register pres., meets with Pres. Hoover, says sees nothing discouraging ahead, believes we've hit bottom; points out cash register business a good barometer of general business conditions.

J. Rosenwald, Sears Roebuck chair., says recovery from current depression will be slower than 1920-21 postwar slump due to currently restricted immigration, lower auto production and roadbuilding.

The weekend brought no news of business improvement in steel or autos, and continued uncertainty in the general price structure was indicated by in crude oil price. However, recent stock price action has created growing opinion that unsatisfactory business conditions have largely been discounted.

Some more assorted 1929 high stock prices compared to now: US Steel 261 3/4 to 146 3/4; Beth. Steel 112 3/4 to 73; Radio 114 3/4 to 22; Westinghouse 292 5/8 to 103 3/4; Montgomery Ward 137 7/8 to 23 7/8; Sears 181 to 51 5/8; Glidden 64 1/8 to 10 3/8; GM 91 3/4 to 34 3/4; Hupp Motor 82 to 8.

Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.

Economic news and individual company reports:

Prince & Whitely, the NYSE broker that recently failed, ran a [theoretically separate] investment trust (Prince & Whitely Trading Corp). The value of this trust is now hard to determine because of its tangled finances, including claims by the trust against the broker, and holdings of unlisted securities.

First 51 rails report Sept. net operating income of $77.5M, up 10.2% from Aug. but down 17.8% from 1929 and down 19.4% from 1928. Sept. gross revenue was $335.6M, up 0.1% from Aug. but down 17.1% from 1929 and down 15.3% from 1928.

Fed. Reserve member banks weekly report for Oct. 22: loans on securities down $116M to $8.142B, “all other” (commercial) loans down $33M to $8.573B.

L. Crandall of US Realty & Improvement Co. reports heaviest volume of construction projects since the spring of 1929 has come to eastern office of large builders for estimates in past three weeks; seen as sign “business is emerging from the doldrums.”

US Steel to report earnings at directors' meeting after the close of business today.

Companies reporting decent earnings: Beech-Nut Packing, Mead Johnson (baby food), Standard Cap & Seal, McCall Corp (magazines), Telautograph (machines transmitting diagrams by wire).


“Judge - You admit you drove over this man with a loaded truck? Driver - Yes, Your Honor. Judge - And what have you to say in your defense? Driver - I didn't know it was loaded.”


The Big Trail - romantic US pioneer drama, “handsomely photographed on Grandeur Film, which is distinctly superior to the screen of ordinary dimensions for a spectacular picture of this character. ... John Wayne, who has the principal role in the story in this, his first film, acts rather amateurishly.” On the other hand, “Marguerite Churchill makes a charming heroine” and “Tyrone Power is a capital chief-villain.”

+ The Boring Stuff:

Editorial: Kelley's sensational charges that the Interior Dept. was handing oil shale lands over to big oil companies appear to have broken down under closer examination. Of the estimated 8.258M acres of Western oil shale lands, the claims in dispute cover only 7,278, indicating the land grab in fact hasn't gotten very far yet. The dispute over rights seems like a doubtful technical one, and charges that Asst. Sec. Finney wanted to destroy evidence are very doubtful. “Does this mean that the 'Forty-billion-dollar-grab' is dead? Perish the thought! A slogan like that can never die!”

Col. Woods, chair of the President's Emergency Committee for Unemployment reports 15 large cities have started projects for dealing with unemployment; looks to public works that can be carried on in the winter as best solution to provide needed work for the unemployed. Says “staggering” method of distributing available work evenly among existing workers has accomplished much but doesn't believe using a 5-day week with 5-hour days would help this winter. Calls on property owners to have repair work done now.

Editorial by T. Woodlock: We now face a question “whether or not this country will ... 'industrialize' a large part of its food production so that it will look to large corporate units operating with a minimum of men-hours and a maximum of machinery for the greater part ... of its necessary food supplies ... From time immemorial, the land-folk have been regarded as the mainstay of the nation, and rightly so.” Two generations ago, most of the US lived by farming and no significant change in methods had occured in the previous 2,000 years; since then, “a complete revolution” has become possible, ultimately replacing man by machine. “It is at bottom a sound instinct that causes us to listen with concern to cries of distress from our land-folk;” to recall Oswald Spengler's warning, when a civilization reaches the point where the cities have swallowed up the land-folk, the end of that civilization is near.

F. Blair, United Guardian Trust chair., joins the consensus disagreeing with T. Macaulay's plan for the Fed to buy bonds to reverse deflation: “It is specious to argue that additional credit would immediately relieve the present situation. Relief from this source can come only after such credit found its way in in the hands of ultimate purchasers of goods. ... We believe that a normal working out of fundamental laws will be more helpful than attempts to apply artificial stimuli, which might cause a relapse at a later date.”

US branch factories operating in Canada estimated about 1,500, making up a large part of the $3.5B total US investment in Canada; US manufacturers have shown increasing interest in manufacturing in Canada, partly due to tariff changes.

Forestry efforts in Hawaii include Army plane dropping 1,689 pounds of tree seeds, foresters planting 298,650 trees in the territory's forest reserves, and 623,800 trees distributed for planting on private land.

Stock in California's San Francisco Bank is selling at about $13,500 a share; has assets over $125M and deposits over $120M.

Short covering has reportedly been heavy in recent sessions, and is responsible for some of the advances.

Demand by short-sellers borrowing stocks in the loan market was light at the close yesterday.

Support that ended the recent severe declines in the general list seen as “mostly outright purchases by interests taking long-pull positions.” While there was some disappointment among traders that Saturday's session didn't continue the recent rally, “the check on Saturday appeared due mostly to temporary impairment of technical conditions. ... the market seemed to be consolidating itself in preparation for more sustained improvement.”

Present business conditions are not encouraging particularly in steel, copper, and oil. However, past turns in the market have usually come when the outlook was dark, since stocks have tended to discount a change before it happened.

Average duration of past bear markets has been about 13 months; present decline is in its 13th month, since it began in Sept. of last year.

Many investment trusts (similar mutual funds) continue to sell at big discounts from liquidating value; this is opposite of the situation a year ago when many sold at substantial premiums “because of the presumed miracle-working possibilities of their management.” One example: United Securities Trust Associates - selling at $29/share, has $15/share cash, management fee capped at 1/4% per quarter, and remaining securities valued at $27.50, largely made up of leading stocks.

Savings banks call for revising law to allow holding bonds falling below legal requirements because of “temporary conditions.”

Commodities mixed. Wheat down moderately after early rally; other grains mixed. Cotton up moderately after early setback. Copper domestic buying small at 9.5 cents; future price trend seen based on how quickly and drastically production cuts are made.

Agriculture Dept. reports world production of feed grains is 156.2M short tons, down 11% from last year, and also down from 1927 and 1928. US imports of agricultural products, including forest products, for fiscal year ended June 30, were valued at $2.101B, down 11% from prev. year and down 15% from the 5-year average 1925-29. Most of the decline was due to deflation rather than decline in volume.

T. O'Connor, US Shipping Bd. chair., says US shipyards will do $75M of work annually for next 5 years; dismisses foreign criticism of US for enlarging merchant marine when world shipping is slumping; believes depression temporary, shouldn't derail long-awaited project important to national welfare.

FTC continues investigation of pricing in chain and independent stores, comparing pricing on several hundred commodities.

Gasoline in Chicago wholesale market is 4 3/4 - 5 1/2 cents vs. 4 7/8 - 5 1/2 previously.

Soft coal production for weekend ended Oct. 18 was 9.232M net tons, down 263,000 from prev. week and down 2.122M from 1929; Production so far this year totals 364.9M vs. 419.8M in 1929 and 388.6M in 1928.

US tire shipments in 1929 were $682.8M, down 12.4% from 1927.

Magnolia Petroleum cuts Oklahoma and Kansas crude oil prices 17-38 cents/barrel to match Standard Oil of Indiana cuts.

US cigarette production in first 9 months was 92.0B, up 1.5B from 1929.

US exports of leaf tobacco in first 9 months were 381.3M pounds, up 33.6M from 1929; value was $96M vs. $100M in 1929.

Bangor & Aroostook is a rare exception among the rails, earning double its annual dividend requirements in the first nine months, with $7.27/share, equal to 1929 earnings. Stock is about 61, dividend $3.50 for a yield of 5.74%.

October 27, 2009

Monday, October 28, 1929: Dow 298.97 -2.25 (0.7%)

One year ago today:

[Note: Continuing the recap of the 1929 Great Crash - the following describes the Saturday Oct. 26 short session, two days after Black Thursday.]

Market wrap: Friday's session considered very reassuring, as a large volume of distressed sales were absorbed with impressively steady prices (total volume was almost 6M shares). Floor reports Friday indicated brokers were steady sellers due to margin calls. Some buying was by “powerful banking interests,” while there was heavy buying by “moneyed people” picking up stocks they considered undervalued; some buying of this type also came from investment trusts (similar to mutual funds).Volume was much lower in Saturday's short session; price moves were typical of “cleaning up processes” after a drastic market break; these caused weak tendencies in many sections of the list. However, leading shares retained “powerful support,” and attempts to force a renewed downward movement were checked.

It was natural that traces of nervousness should linger in trading circles, but the best opinion was that the worst of the selling had been seen, and that the market would settle down into a narrow range, allowing time for recuperation from the recent demoralized breaks.”

Bears seen as not inclined to try for a new reaction, fearing banking support for key stocks.

Public morale seen as damaged; many outside longs were forced to sell out [by margin calls] and in some cases are indebted to their brokers due to low sale prices realized during the sharp declines; “it will be some time before outsiders again enter the market with any degree of confidence.”

Broad Street Gossip: This panic, unlike those of the past, was brought about not by “something fundamentally wrong with finance or business,” - inventories are low, corporations flush with cash, etc. Instead, it was caused by “the position of the market itself.” Because of this, “the storm has left no wreckage except marginal traders forced to sell at a loss ... Mr. Mellon, Mr. Rockefeller and others who hold stocks outright stand just where they were ... They have lost a few tail feathers, but in time they will grow in again, longer and more luxurious than the old ones that were lost in what financial writers like to call the debacle.”

E.F. Hutton: Many leading stocks including US Steel, AT&T, National Biscuit, GE, etc. are now “cheap by any statistical measurement ... It should have been very obvious that many stocks sold at entirely ridiculous levels on Thursday's break.”

Editorial: Everyone in a responsible position is now saying conditions are sound. “From the President on down, what else could he or would he say?” Conditions are sound, but showing some weakness: stocks have been declining for almost 7 weeks, commodity prices are sagging, and rail traffic, while large, is declining when it should be reaching a peak. In this situation, the Senate, whose basis is “not infrequently sound and fury, signifying nothing,” shows signs of doing some mischief: it has kept the import trade “uncertain and exasperated” by lengthy consideration of an “indefensible” tariff increase, and it looks set to launch another of those Wall Street investigations that “return their findings first and hear the evidence afterwards. ... If conditions are 'sound' the US Senate can cooperate in so preserving them by keeping its hands off.”

Economic news:

Leaders of both parties now predict Senate passage of Smoot-Hawley tariff by Thanksgiving. However, chances of agreement any time soon between House and Senate to pass the tariff into law have become slim; House majority leader J. Tilson said possibility of tariff passage “completely vanished” when the Senate adopted the export debenture provision (designed to benefit farmers). It's already been demonstrated twice that the House will adhere to Pres. Hoover's wishes in rejecting the debenture.

Irving Fisher's index of 200 commodities for last week was at 94.6% of the 1926 level, a new low for 1929; the high was 99.2 on July 2.

First 27 rails report Sept. net operating income $53.9M, down 2.8% from 1928.

US Steel earnings for first 9 months est. $15-$16/share; earnings for all of 1928 were $12.50. Q3 estimated at $5-$5.50 vs. $6.68 in Q2 and $3.31 in Q3 1928.

Crude oil in storage in Texas, Louisiana, and Arkansas on Oct. 1 was 133.3M barrels, up 1.040M from Sept. 1 and up 8.274M from Oct. 1, 1929.

US exports of agricultural products (excluding forest products) in the year ended June 30 were $1.848B, up 2% from previous year.

Other stuff:

Amusing anecdote: A customer at one broker entered an order Thursday to sell 105 shares of a certain stock. The 5 shares were sold immediately at an odd-lot house for $108, but the 100-share lot was sent to the specialist and had to take its place in line with the many other sales; these shares were sold at $87. The customer complained bitterly, but was told this was the best execution available. “Execution,” he replied, “why I call that both execution and crucifixion.”

Amusing anecdote: Charles M. Schwab began his speech at the banquet of the Amer. Iron & Steel Institute: “After what has happened in Wall Street, it would probably be quite correct for me to start my remarks to you with the words: 'Friends and former millionaires ...'”

NY City long-term traffic plan recommends decking over of Park Ave. above 96th St. to create new highway at maximum height of 4 stories over street level.

The Irish Theatre, Inc. (formerly Greenwich Village Theatre) presents The Silver Tassie, Sean O'Casey's play about a champion Irish football player paralyzed by an injury in the war.

Lobsters have crossed the Suez Canal; an investigation finds a species previously confined to the Red Sea is now abundant near the Syrian coast. It's estimated it took 30 years for the lobsters to make their way through the Canal.

Monday, October 27, 1930: Dow 193.34 -1.75 (0.9%)

[Note: The recap of the 1929 Great Crash will be back tomorrow - Oct. 27, 1929 was a Sunday with no Journal published.]

Assorted historical stuff:

Col. A. Woods, emergency unemployment committee chair., says time is right for construction, with rates and material costs low; to visit NY City today. Williamsburg Chamber of Commerce announces probable $5M project to “start the rehabilitation of Williamsburg.”

Dept. of Justice exonerates Interior Dept. on R. Kelley's charges of handing over rights to Western oil shale lands to large oil companies.

Historical oil stats: World production has increased from about 800,000 barrels/day in 1910 to over 4M currently, of which 64.5% is US. Currently shut-in production estimated at 2.383M barrels/day, of which 1.310M is in the US.

Dr. C. Warburton, Fed. drought relief sec., praises continuation of reduced rail rates on feed and livestock, says food situation may become serious in some states.

US birthrate in 1929 is lowest since 1915, at 18.9 per 1,000 population.

NY Gov. Roosevelt offers state armories as quarters for homeless during winter; Mayor Walker forms committee of 37 to aid jobless.

John David, NY clothing merchant, emphasizes importance of keeping well dressed as an aid to morale.

California has both highest and lowest points of dry land in the US, separated by only 86 miles: Mt Whitney, elevation 14,496 feet, and Death Valley, 276 below sea level. Until 25 years ago, the Salton Basin, near the Mexican border, was the lowest US point, but a 1905 flood turned it into the Salton Sea.

Curtiss Wright Corp. bans use of commercial planes for races due to fatal accident to airport operations manager.

Russian scientists announce methods of making leather from fish, govt. plans to open tanneries. Skin of white grampus said to make excellent shoe leather.

Market commentary:

Market wrap: Market action seen as generally positive, with profit-taking on Friday's extensive gains absorbed in good style; volume lower. Early dealings showed substantial gains in major industrials and rails; while the rally wore off as the session progressed and the final direction was down, the market as a whole impressively resisted isolated weak spots including Montgomery Ward and J.I. Case. Bond market rallied sharply on heavy trading; South American strong, particularly Brazil; European and US govts. firm; investment-grade corp. strong, convertibles sharply higher.

Week in review: Stocks showed some rallying tendencies to end the week after the Dow slumped to close at 184.98 on Wed.; at least a technical recovery is now expected. Most commodities were firmer, even early in the week when stocks were down. Bonds were down sharply most of the week, with many hitting new yearly lows; a sharp recovery toward end of the week made up some ground. Money market continued dull and easy; brokers loans continued to plunge, while commercial loans and money in circulation were down; NY City bank investments were up $84M to a new yearly high of $2.227B. German and Spanish situations considered improved; Brazil rebels victorious. Steel production down, as were steel and gasoline prices.

Stocks showing good resistance to recent selling include AT&T, American Radiator, American Tobacco, Woolworth, and dairy shares.

Recent confident statements by several business leaders including J. Raskob “carried greater weight than similar expressions in recent months,” with the market rallying vigorously in response. With commodities showing signs of stability, merchandising stimulated by cooler weather, and generally low production, chances of further declines in business were seen as lessening.

Union Trust of Cleveland says fresh wave of business pessimism in Oct. was unwarranted; notes definite evidence of improvement in merchandising and residential building, and very low inventories. Says business may be disappointed at slow pace of improvement, but believes fourth quarter will be looked back on at start of business recovery. Criticizes attempts at the “false stimulation” of trade.

Conf. of Statisticians in Industry says Sept. and first half of Oct. show a few encouraging details but no positive indication that a general upturn in business is here.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Oct. 25 was 82.7, unchanged from previous week and vs. 94.1 in Oct. 1929.

Recent demand for municipal bond offerings is down, particularly from banks, which “appear desirous of keeping their funds in liquid condition.”

Sept. rail earnings have so far been much better than expected, with first 12 rails reporting a 13.8% decline vs. 1929, compared to a 32.5% decline for all rails in Aug.; improvement is attributed to expense cuts in response to lower revenues.

Standard Oil of Indiana reduces crude oil prices in Oklahoma and Kansas by $0.07 to $.38 a barrel.

W. O'Neil, Gen. Tire & Rubber Pres.: tire inventories down 2M from this time last year; only 1 1/2 tires per car in use sold this year, drivers wearing tires out; expects higher demand, tire shortage in spring.

Companies reporting decent earnings: Lambert (Pro-Phy-Lac-Tic toothbrush, toiletries and medicinals), Diamond Match, Anchor Cap (glass, food containers).


Ambassador Theatre presents play loosely based on the Marcus Garvey movement, starring Frank Wilson as Marius Harvey. Play begins with fraudulent stock promotion enterprise, resulting in a sincere back-to-Africa movement that ends bitterly in abandonment by the colonists.

Stock market joke:

“Broker: 'There are some very cheap stocks on the list ... that you might buy.' Trader: 'But I think something is overhanging the market.' Broker: 'You're right. The market keeps going lower because it has overhanging it thousands of traders who think something is overhanging it.'”


“'Mary has just married Bill Hendricks.' 'Bill Hendricks? Impossible! Why, he's the man she was engaged to.”

“Satan (to new arrival) - Hey, you act as though you owned this place. Newcomer - I do. My wife gave it to me.”

+ The Boring Stuff:

Editorial: Now that business has “sunk to levels unthought of” last fall or spring, there's a clamor of advice on how to restore prosperity. In particular, many say a simple increase in spending of 5 cents a day, a dollar a week, or some other per-capita amount, would do the trick. This is too simplistic, and reflects our weakness “for economic salvation by formula.” However, it might stand a chance of working if retailers reduced their prices to reflect lower costs and disposable income; there are some signs they're now overcoming their initial reluctance and doing this.

Col. A. Woods points to figures indicating strong financial position of most state governments. For 1928, $584.5M was spent on permanent improvements while net debt only increased $76M, indicating 87% of outlays were met from current revenues.

Editorial: Pres. Hoover, speaking at a recent AFL convention, suggested reconsidering the antitrust laws in light of modern conditions. There are two industries particularly in need of this: coal and oil. The coal industry, with twice as much capacity as needed, is “a running sore” in need of surgery, but the law won't permit the use of the knife. The oil industry is only slightly better off. The world has fundamentally changed in the 40 years since the Sherman antitrust act; the US alone “worships a fetish” in seeing things the same way; “inflexible prohibitions” should be modified to relieve an impossible situation.

Present wealth of former German Kaiser estimated at $103M, about half consisting of landed property.

Breuning cabinet approves balanced budget for fiscal year starting April 1, 1931 with spending of $2.481B, $270M under budget previously decreed in July.

Prussian govt. proposes combating unemployment by adding a year to compulsory schooling, and prohibiting layoffs in factories not adopting a 40-hour week.

Editorial by T. Woodlock: While rails have been affected by some factors out of their control, including lower rates, higher taxes, and competition from other transport, they also have their own destructive competition to blame; they should act together, intelligently and aggressively, to end this problem.

Farm Board says can't loan to Kansas Livestock Assoc. because it won't join the national livestock setup and eliminate commission men from its organization.

Westinghouse X-Ray Co. receives order from Bronx Hospital for equipment for the hospital's new x-ray department.

Foreign markets: London and Paris stronger through the week; German market up sharply on govt. parliamentary victory but lost gains toward end of week.

M. Taylor, US Steel finance committee chair, see steel industry near bottom, improvement very soon. Says US must adjust to new inventions and systems of production that increased output above consumption by equal redivision of labor.

Guaranty Trust of NY sees mixed picture; definite recovery not evident, but pronounced recession of spring and summer has given way to “irregularity, with positive improvement in some branches of trade and industry.” A full recovery probably will have to wait until spring due to the holiday lull.

Market seen as technically stronger after resisting recent isolated bad news on Montgomery Ward and the Van Sweringen rails. Since the market has declined about 25% in the past 6 weeks with no significant rallies, a more sustained improvement is expected, though possibly “accompanied by considerable irregularity.”
Demand by short-sellers
borrowing stocks in the loan market was still fair, but lighter than earlier in the week.

Conservative observers inclined to wait for the market to encounter another test from liquidation, and demonstrate whether support levels can be held.

Commodities mixed. Grains weak; wheat and corn down substantially. Cotton continues rally, up substantially.

Mexican tariffs seen as emergency measure to correct trade deficit and declining peso; object will be to reduce imports by $25M; about 2/3 of Mexico's imports are currently from the US; in first 8 months, they totalled $82.7M vs. $83.8M in 1929, while US imports from Mexico were $61.5M vs. $84.1M.

Foreign financing by public US offering of securities in Q3 was about $153M vs. $466.3M in Q2 and $338.4M in Q1.

Standard Oil of NJ says has kept number of employees almost the same since start of year. Lily-Tulip cup says will start building inventory Nov. 1 instead of next year to help unemployment situation.

Youngstown District steel operations expected to advance 1% to 54% this week. Buyers said still minimizing orders and keeping supplies on hand down. Most producers in the district reportedly close to unprofitability.

Census Bureau reports cotton harvest running somewhat better than expected and slightly ahead of 1929; weather fair over the entire cotton belt.

US exports of wheat July 1 - Oct. 18 were 68.2M bushels vs. 58.6M in 1929. Exports of cotton Aug. 1 - Oct. 24 were 2.002M bales vs. 1.856M.

Cuban legislature delays action on Chadbourne sugar plan until after Nov. 1 election.

870 lumber mills reported orders for the week ended Oct. 18 were 2% above production of 265.0M feet; production is over a third below 1929 levels.

Montgomery Ward difficulties attributed to large number of new stores opened in the past two years.

Sinclair Oil has $7.86 a share in cash, $6.97 a share in crude oil and inventories, and plants valued at $32.21 a share; the stock is about 14.

Assorted Q3 earnings: Union Carbide $0.80/share vs. $0.70 in Q2 and $1.14 in Q3 1929; Maytag $0.08 vs. $0.40 in Q2 and $0.80 in Q3 1929; New Haven Rwy. $1.83 vs. $3.46 in Q3 1929, first 9 months $4.89 vs. $7.24.

October 26, 2009

Favorites of the week Oct. 20-Oct. 25, 1930

No Journal was published Sunday, Oct. 26, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

Oct. 25:

[Note: Federal Reserve funds used for speculation – that's crazy talk!] Glass Senate subcommittee to meet about Nov. 15 to investigate financial matters, particularly use of Federal Reserve funds to help finance speculative operations.

[Note: Tell-tale sign? dept.] London insurers raise rates to insure property in US against civil disturbances.

[Note: I love the smell of metaphor in the morning.] Amer. Iron and Steel Institute meets at the Commodore Hotel; prominent steel executives speak, including C. Schwab, E. Grace, etc. Price cutting seen as main problem facing the industry; over-expansion also cited. Industry praised for maintaining salaries and staff as far as possible. Long-term optimism expressed; C. Schwab calls for looking beyond “immediate but transient gloom,” says business in general has weathered the recession in a most assuring way. “Apply the heat treatment of an intelligent glowing optimism to the current warped point of view and most of the stresses and strains will disappear.”

[Note: Ay Chihuahua! Dept.] J. Raskob, GM finance committee dir. and Democratic Nat'l. Committee Chair., optimistic on auto industry: “There have been indications during the past six to eight weeks showing that the depressed conditions in the automobile industry have reached bottom and are slowly turning into more normal channels. ... Sharp revival in the motor industry may be expected to begin with the automobile shows in early January. It will stimulate all other lines of business activity. ... There can be no doubt that the motor industry will show substantial improvement in 1931. ... Optimism should now be the order of the day.”

[Note: Ay Chihuahua! Dept.] Recent increase in bank loans on securities to non-brokers seen as indicating buying by stronger and more experienced investors.

[Note: Never trust a guy with two first names dept.] Federal investigation started into Charles V. Bob, promoter of a long string of mining stocks who recently went missing; two of his firms put into receivership.

Oct. 24:

[Note: Fundamentals, earnings, and dividends – that's crazy talk!] Several brokers report clients buying stocks for cash are now paying careful attention to fundamentals such as position of the company in its industry, prospects of the industry, management, earnings, and dividends. This contrasts with “fancies which appeared to rule when stocks were being carried to abnormally high levels.”

[Note: Ay Chihuahua! Dept.] Broad Street Gossip: “If history repeats itself, you can expect to see the following ... Oct. 24, 1930: 'If I had only sold out in Sept. 1930! Just see where they are now.' Oct. 22, 1931: ' If I had only bought some stocks in Oct. 1930! Look where they are now.'”

Oct. 23:

[Note: Strangely familiar dept.] A. Reynolds, Continental Ill. Bank & Trust Chair., sees “signs in a good many different directions that business is picking up somewhat”; gains are uneven, not general; “improvement ... will probably come in this spotted way and gradually work into a more general betterment,” probably starting with small businesses and moving to large. Commodity prices relatively stable since July, seem to have bottomed.

[Note: Interesting.] W. Edge, US Ambassador, says France “like an oasis surrounded by depression on all sides,” with unemployment practically nil; acknowledges differences with US on tariff, but “is this not always the case when two nations maintaining high protection barriers try to agree?”; says gold accumulation by France an internal matter.

[Note: Sheer Genius dept.] New type airplane, claimed to be safest yet constructed, tested in Berlin. Plane resembles duck in appearance and seems to be flying backwards when in motion.”

Oct. 22:

[Note: Sheer Geometric Logic dept.] 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.

[Note: Danger of using historical precedents dept.] 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.

[Note: Strangely familiar dept.] Many of the Q3 earnings reports so far have been “fair reading,” especially in light of the pessimism going into earnings season.

[Note: Always keep your eye on the freight loadings dept.] 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.

[Note: Sheer Genius dept.] 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.

[Note: Attention Jay Leno - feel free to use this joke - you can make it about the Smart car.] 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.'”

Oct. 21.

[Note: Strangely familiar dept.] NY City businessmen's committee to relieve unemployment will make special appeal to Wall Street, since many currently unemployed were laid off from there.

[Note: Danger of contrarianism dept.] Broad Street Gossip: “The other extreme from last year's peak prices has been reached ... many stocks ... in October, last year, may have been entirely too high. Many stocks are now entirely too low. Some are selling ex-bad earnings, ex- ... passed dividends, and everything else.”

[Note: Sheer Genius dept.] New German railroad car driven by 400 hp airplane engine attains speed over 100 mph.

[Note: Things got ugly when flight attendants ran out of liquor at 5 days, 7 hours.] New record for flight between England and Australia set by C. Kingsford-Smith - time of 9 days, 23 1/2 hours beats old record by 5 days, 2 1/2 hours.

[Note: Whatever happened to those suitcase labels?] “'Has Harry traveled much?' 'Has he! He's been to half the places on his suitcase labels.'”

Oct. 20:

[Note: Danger of contrarianism dept.] Experienced market observers see the current universal bearishness as very favorable; market psychology is exactly the opposite from that a year ago when bullish enthusiasm obscured unmistakable signs of a rapid decline in business. Many who were observant enough to sell in the final stages of the bull market are now taking advantage of deflated values and good yields to replace their holdings.

[Note: I can't believe that didn't happen dept.] R. Updegraff, writing in the current issue of Tomorrow's Business, sees bright future for gas stations: “May it not be that new villages and towns and, ultimately, cities, will grow up around some of the best located of our roadside filling stations?”