November 14, 2009

Friday, November 14, 1930: Dow 180.38 +3.05 (1.7%)

An interesting piece of economics history:

Letter from T. Macauley, Sun Life of Canada pres., defending his proposal for Fed. Reserve to halt depression by buying $500M of bonds, increasing bank lending power by over $5B. Currently, dollar has no fixed purchasing power but varies with amount of currency credits outstanding as controlled by the Fed. “If we permit commodity price levels to go up and down with good and bad times, we are asking for trouble ... we shall automatically transform moderate depressions into severe ones and severe ... into disasters.” Suggests boom-bust cycle can be moderated by stabilizing value of dollar relative to broad price index of industrial and farm products, rents, real estate and security prices. Praises Fed actions in preventing inflation by selling bonds to absorb excessive gold imports in past years, and in already buying $450M of bonds to reduce effects of current depression; believes it may be hindered in acting more agressively by current criticism and opposition.

Assorted historical stuff:

Growing sentiment seen on both sides of the political aisle for modification of the Sherman antitrust laws, though form this would take is uncertain. Pres. Hoover is expected to mention the Sherman Law in his next message to Congress, while Dem. Nat'l Committee chair. Raskob outlined a specific proposal before the election.

Editorial: “China, with its great population and low standard of living, offers a great potential market ... so too does all Asia.” China trade already has grown dramatically; from 1900-20, imports grew from $155M to $940M and exports from $120M to $670M; since then wars and depression have somewhat reduced trade. China needs both physical infrastructure for business and political stability, but latter will follow former. Rehabilitation should be a business benefit, not burden.

British imperial conference apparently fails to reach definite solution of empire economic problems; another conference seen likely in Ottawa next spring.

Last Mountain Progressive Assoc. urges secession of Western Canada, saying Eastern financial interests working against best interests of the section.

Sir Percival Dewhurst Perry, chair. of Ford Motor Cos. in Europe, makes bold call on Russia: “The Russians have seen the writing on the wall. With the collapse of their five-year plan there is no doubt that they will revert to capitalism. It is the only way in which they can avoid a revolution.”

Use of airmail said to save costs in a number of fields, including: bankers sending checks for quicker deposit, vaccines, “style garments,” and urgent advertising.

Rate of admissions to NY State “Craig colony for epileptics” - one every 29 hours; “state hospital for criminal insane” - one every 38 hours.

One-room rural schools have been vanishing at the rate of 4,000 a year since 1920; however, 153,306 still remain.

Lunch service to New York high school students, begun by Dept. of Education on small scale 29 years ago, is now business of $2M annually.

Market commentary:

Market wrap: Rally continued for a third day in a row; considered noteworthy since this was the first three day positive streak since mid-August; seen as evidence “forced liquidation was burning out.” Sharp rebounds in majors including GM, du Pont, and Woolworth, and specialties including Fox Film and J.I. Case; coppers continued strong while major industrials including US steel and American Can pushed gradually upward, reaching best levels in the final hour; banks and trusts also strong. Some irregularity in final dealings but day's highs fairly well maintained. Bond market more active, generally higher, particularly corp. with rallies in many recently weak issues; convertibles rally; US govts. remained firm, hitting high prices for the year.

V. Lersner, Bowery Savings Bank pres. (largest US savings bank), says savings can be overdone at times like these; “one should save, but not at the expense of the other fellow.” However, emphasizes that dollars in savings banks are not hoarded but loaned out, helping to increase wealth of the nation.

Rumors that E. Meyer, Fed. Reserve Gov., would issue “constructive statement regarding credit conditions” were denied by authorities.

Steel industry update: Immediate outlook gloomy, with production expected to dip to 35%-40% or lower over rest of year. Q3 earnings showed very few companies earning dividends, and many showing losses; Q4 will undoubtedly be worse. Growing belief that improvement will set in sometime between Jan. 15 - Feb. 15. Optimism on price stabilization. Peak of 60%-70% seen for spring upturn, followed by moderate lull and possible improved summer and fall.

J. Simpson, Marshall Field chair.: “We have scraped the bottom of the slump. That means things henceforth will be on the upward trend.”

Many brokers that have kept clients have the market for several months have changed views in the past few days. While expecting renewed irregularity after current rally, believe forced liquidation has brought standard stocks down to attractive prices for long-term investment.

Economic news and individual company reports:

Fed. Reserve reports money in circulation Nov. 12 down $14M to $4.477B, total Reserve Bank credit outstanding up $25M to $1.035B. Member banks in NY City report brokers' loans down $219M to $2.235B vs. $4.172B in 1929, new record low; “all other” (commercial) up $40M to $2.644B.

Companies producing over 90% of world's copper agree to reduce production by 20,000 short tons a month.

Labor Dept. says analysis of Oct. reports it received shows little change in employment situation, though large numbers remain unemployed; considered hopeful since Oct. usually shows seasonal increase in unemployment.

Agriculture Dept. reports demand for farm labor Nov. 1 was 73.6% of normal vs. 87.5% in 1929; supply was 107.2% of normal, highest in 10 years or more.

Big corporations seem to be accumulating more cash than ever, largely due to reduced inventories; in first 9 months, GM's cash was up $44.5M to $145.6M.

Companies reporting decent earnings: National Dairy Products, White Rock.


Paramount-Publix new releases include Harold Lloyd in Feet First, Maurice Chevalier in Playboy of Paris, and Jackie Coogan in Tom Sawyer.


“Ma Talltimber - I'm afraid Bud's learned to gamble at college. Pa - Well, I hope he's finally mastered the study. His expenses while he's been learning it have been too much for me.”

“'The spirit of your departed wife wishes to speak to you. Do you want to say anything to her?' 'It wouldn't do any good if I did. She always did all the talking.'”

+ The Boring Stuff:

Editorial: Protest of French metal-working industry on copper marketing policy is premature; reluctance of producers to contract for large future sales at today's prices isn't objectionable if based on individual producer's self interest rather than binding agreement. Copper buyers do have example of Stevenson crude rubber scheme which quadrupled rubber prices in a few months, but copper situation differs; producers can be expected to know by now that “any impediment to the free movement of commodities into consumers hands is evil.” Situation calls instead for production cuts, which arise naturally from low prices.

King Alfonso of Spain approves Cabinet's plans for ending dictatorship and returning to constitutional government; elections to be held March 1.

Over 31M vehicles passed through the Holland Tunnel since it was opened 3 years ago; income of over $6M this year to be divided between states of NY, NJ.

Large increase in cars seen parked along highways repairing flats probably results from decrease in tire sales in past year; older tires are much more susceptible to punctures and blowouts. Car owners should soon get tired of wasting time and effort on old tires, and at first sign of business improvement will buy new ones.

Broad Street Gossip: Market value of NYSE listed stocks Nov. 1 was $55.0B. Earning power of the country is about $70B even allowing for unemployment. “This buying power is what eventually will help stocks back to what they are worth.”

Short covering said important influence in rally; stocks that were heavily attacked recently rose sharply. Optimism on copper and steel also credited.

Demand by short sellers for stocks in the loan market lower than past several days.

Stock markets abroad generally higher following Wednesday's US rally.

Amer. Petroleum Inst. report: P. Clarke, Central Trust of Ill. pres., recommends oil companies keep cash reserves as high as possible to provide for period of lower earnings and any required expansion; says fortunate 1928-29 security inflation allowed many cos. to strengthen balance sheets. C. Ames, Texas Corp. VP, criticizes large waste of natural gas in Texas, Okla., and Calif.; says conservation of gas would relieve overproduction and insure maximum ultimate oil and gas recovery. Action on tariff postponed.

Broad Street Gossip: “The law says that there can be no concerted movement to regulate prices of any commodity, even though reckless competition forces prices down to below cost of production, thus threatening wage cuts. If the government withdrew its objection to price regulation ... permitting a reasonable return to the investor we should get our prosperity back in short order.”

W. Persons, former Prof. of Statistics at Harvard, analyzes current depression compared to previous ones and finds recovery should begin in next month or two, with normal conditions by end of next year. Similarity closest to 1884-85, though layman seems to think more of 1873, 1893 and 1907. Pattern of all seven depressions in past 55 years is much the same. Some novel factors now including international debt situation, installment buying, large bank loans on securities, and attempts at commodity price controls. However all previous depressions lasting more than 25 months were due to war or trouble involving gold standard; current sound credit conditions and financial status of most corporations could offset retarding influences.

Commodities mixed. Grains up substantially though off day's highs. Cotton down substantially on late break. Copper price has been advanced to 10 cents/pound; French and other foreign producers complaining of inability to buy large amounts far ahead into 1931; outlook for gradual advance in price seen.

Copper producers say curtailment will be done by orderly reductions across units. Believe plan is lawful since production is above requirements, curtailment is voluntary, and there is no price-fixing agreement. US copper industry hasn't yet presented plan to Justice Dept.; Att'y. Gen. Mitchell says no official or unofficial opinion will be expressed until program has been set in motion.

Chair. Wood of House Appropriation Committee predicts 1% income tax reduction started in 1929 will be continued this year, while Sen. Reed (R, Pa.) believes reduction can't be continued since budget will be in deficit; Administration believed in favor of continuing reduction.

Electric output by US light and power industry for week ended Nov. 8 was 1,731 GWHr vs. 1,748 in prev. week and down 4.4% from 1929; decline from previous week attributed to Election Day holiday.

P. Neff of Missouri Pacific Railroad reports bus companies handled about 1B passengers in 1929 vs. 800M for rails; estimates this year's passenger revenues for rails at $900M vs. $315M-$320M for bus companies.

Oct. life insurance sales were down 13.1% from 1929, bringing cumulative 1930 total below 1929 for the first time this year.

High grade municipal bonds are in strong demand around a 4% basis; those maturing in 1-5 years can be bought to yield 2.5% - 4%.

Dow average of eight finished iron and steel products was $44.56/ton, unchanged from prev. week and low for 1930; 1929 range was $49.88 - $51.25.

US Shipping Board reports 23,238 employed in 10 shipyards as of Nov. 1 vs. 22,608 on May 1; ships under construction to cost $121.5M, of which 3/4 will be advanced by the Board. Work expected to expand based on pending contracts.

Commerce Dept. review of conditions abroad finds mixed picture with some improvement in Argentina, Canada, and Japan, none seen in Brazil, Germany, and China, and some worsening in France.

France plans $80M public works construction program to start early in 1931.

Tire prices to car manufacturers to be reduced 5%-10% Dec. 1.

Sept. production of leather boots and shoes was 28.9M pairs vs. 28.4M in August and 34.8M in 1929.

Some railroads testing 3-fare plan (standard sleeper, tourist car, and coach).

Sears expects net about $3.15/share for 1930 vs. $6.62 in 1929; first decline since 1921.

White Rock stock about 35, yield almost 13%, 1929 earnings $4.42/share, 1930 expected earnings $4.75-$5.00/share.

Further weakness in scrap steel prices continues in several markets.

November 13, 2009

Thursday, November 13, 1930: Dow 177.33 +4.03 (2.3%)

Assorted historical stuff:

Editorial: Pres. Hoover's Armistice Day speech makes his concept of the US role in world politics clearer; he favors building up the “moral obligation” to avoid hostilities through agreements such as the London Naval Treaty and agreements to use “arbitration and conciliation” to resolve disputes, but believes US role in promoting cooperation must stop “short of any implication of the use of force.” This is advisable; an obligation to “preserve peace by making war,” in the current state of world politics, “would merely throw the nations back upon the ancient European system of competitive alliances.”

Rep. Eaton (R, NJ), following meeting with Pres. Hoover, criticizes banks for not taking more active part in relieving depression: “Idle money is lying in the banks, piled up, yet the banks refuse to give loans to those who need them, with some exceptions.”

NY Gov. Roosevelt says public utilities supplying “daily needs of a people have long been recognized as” differing from ordinary trade; “must not be made the instrument of unreasonable profit of private individuals” who are much smaller in number than users of the service.

Chinese flappers” said responsible for increased popularity of coffee; while girls aren't carrying coffee in hip flasks, younger generation of Chinese is reportedly taking to foreign style food and drink including coffee, in spite of immemorial reign of tea drinking there.

NY City basic tax rate for 1931 estimated at $2.69 per $100, 16 cents over 1930 rate.

A pawnshop on Second Ave specializes in war medals. It has scores on display in its show window, all left in the past 10 years by World War veterans who had to raise a little money. “The question is, to whom does this pawnshop sell these badges of bravery that others risked so much for?”

US Circuit Court of Appeals sustains Irving Langmuir's vacuum tube patent in suit by GE against De Forest Radio; if decision stands in Supreme Court will give GE exclusive control of production of vacuum tubes used in radios, etc. Litigation has lasted over 10 years in patent office and nearly 5 years in court.

Market commentary:

Market wrap: Yesterday gave “some relief from the monotonous picture of a market harassed by unremitting liquidation.” There was early pressure on US Steel on lower current and anticipated production; “widely advertised drives” were also launched on GE and AT&T, driving them to new bear market lows; however, volume dried up on the reaction. News that copper had been marked up to 10 cents sparked sharp advance in producers including Kennecott and Anaconda; this was followed by a broad rally in the general list; “market as a whole was on its best behavior in nearly two weeks”; active short covering seen, and stocks closed at day's highs. Bond market moderately active and irregular; US govts. firm; foreign issues slightly lower; corp. irregular - high-grade rails steady, others irregularly lower but closed with strong tone.

During recent market declines, reports have resurfaced that bank are liquidating security loans, partly prompted by the Fed. Reserve; these continue to be denied.

View in “speculative quarters” was very optimistic on turn in copper, seeing it possibly presaging improvement in general conditions; conservative interests maintain recovery should “prove its ability to hold.” Stocks had clearly become “heavily oversold,” and short covering was said an important influence in rally.

Economists note yield on representative dividend paying stocks now averages almost 6%, almost double commercial paper rate of 3% - widest gap since 1924. By contrast, in Aug. 1929 commercial paper rate was 47% higher. More aggressive investment buying is anticipated, particularly of stocks with safe dividends.

P. Mazur of Lehman Bros. sees business recovery by last half of 1931; blames depression on overproduction, says construction now in gradual recovery.

R. Stephenson, Amer. Bankers Assoc. pres., sees business still considerably curtailed, but confidence beginning to return, and “no one other element is so forceful to stimulating recovery”; sees current caution as presaging a more dependable advance.

Economic news and individual company reports:

Several car makers report sharp increase in dealer buying since Nov. 1; attributed to new models and low inventories.

Justice Dept. “has resisted all efforts to elicit any indication as to what its attitude might be in case the copper companies went ahead with some cooperative plan.”

Western rails face “revenue dilemma” after ICC refusal to reconsider lower grain rates; may resort to the courts, claiming failure of the ICC to provide legally guaranteed 5 3/4% return on property.

Youngstown steel producers said cooperating with Carnegie Steel in efforts to stabilize prices.

Texas Railroad Commission says will continue to enforce oil proration (production control) order in spite of 4 current Texas lawsuits against it.

Several cos. cut Pennsylvania grade crude oil 15 cents to $2.15/barrel. Gasoline in Chicago wholesale market is 4 1/2 - 5 1/4 cents vs. 4 5/8 - 5 1/4 previously.

Companies reporting decent earnings: Amer. Ice, Amer. Safety Razor, Amer. Water Works & Electric.


“You would not knock the jokes we use, could you but see those we refuse.”

“Angry Widow (after learning her husband left her nothing) - I want you to take 'Rest in Peace' off that tombstone I ordered yesterday. Stonecutter - I can't do that, but I can put something underneath. Widow - All right, put on 'Till I Come.'”

+ The Boring Stuff:

Editorial by T. Woodlock on Socialism: Marx's doctrine of “economic determinism” (which he of course “borrowed” from Feuerbach, much as Spengler borrowed his central idea from Goethe) has only partially come true; he was to some extent right in predicting concentration of capital and cooperative effort into large industrial units, but, “at least so far as this country is concerned,” wrong that this would condemn the workers to hopeless slavery; instead, living standards have increased, and the predicted workers' revolution doesn't seem much nearer than 60 years ago. Modern Socialists have turned to the goal of “egalitarianism,” condemning relative inequality. Their main target seems to be a group Marx didn't even consider, but which now might be more important than his Capital and Labor, to wit: Management; the Socialist objective, which also seems to be turning into the major issue separating Democrats and Republicans, is increased public control of economic power now exercised by business leaders. The merits of this objective are doubtful; the gift of excellent “management,” like “violin playing, ... mathematics, metaphysics, etc.” may be concentrated in a select few.

Youngstown district steel producers taking measures for relief of unemployed steel workers; most are using system of distributing available work to minimize number of unemployed, while some including Carnegie Steel and Youngstown Sheet & Tube provide food and necessities for employees in extreme need.

NY City Emergency Employment Committee expands campaign to include investment and commercial banks, trusts, and brokers; target is now $6M for unemployment relief. Initial efforts encouraging; committee has already assigned 3,000 men and women to work in city parks and other nonprofit institutions; and jobs pay enough to “maintain their families and to regain their independence.”

Figures from 36 of 57 New York non-municipal hospitals show 10% increase in demand for free treatment.

Rail worker unions gathering in Chicago say will ask Congress to favor six hour day as one means of relieving unemployment.

Imperial Conference in London reportedly will end without satisfactory results; however, Canada, Australia and New Zealand rumored considering formation of economic union, giving each other tariff preferences denied rest of the empire, including Britain.

Cuban Pres. appoints military supervisors for six provinces due to recent disturbances caused by “students and other elements.”

US manganese producers file another petition for embargo on Russian manganese, claim Russian dumping at 50% of cost to break down the US industry; deny testimony from steel producers that US manganese is unsuitable for use in steel industry. Sen. T. Oddie says will introduce bill completely prohibiting Soviet imports.

Sec. of Agriculture announces lifting of all restrictions on Florida fruit and veg. exports due to Mediterranean fruit fly; govt. has spent $6.4M in exterminating it.

Twenty radio stations report average cost of $12,500 a month for talent, total monthly operating costs of $22,000; income of $23,500, of which $21,000 is from advertising; 30% of programs were paid.

A well-known bear says stocks haven't been sold short in big blocks lately; while recent market has been a liquidating one, it has also been an accumulating one, with stocks passing from weak to strong hands; “At this stage of the game, the bear is more in need of caution than the bull.”

Some previous tax sellers now reportedly rebuying after 30 days at generally lower prices.

Stop-loss orders reportedly still popular among traders buying for a technical recovery.

Demand by short sellers for stocks in the loan market remains fairly high, though more stock was available, with few issues loaning at a premium.

Most brokerage houses now in very strong position, with total brokers' loans at 4.65% of total market value of NYSE-listed stocks vs. the peak of 9.82% in 1929; however, traders are timid about buying due to the continued declines, with those that have bought so far “hung up” with stocks bought much higher.

Recent gain in US Steel unfilled orders considered possible turning point. Steel operators are expecting an upturn in the first quarter of next year; scrap prices and steel operations will likely decrease seasonally for rest of the year, but this is thought to be already discounted. Inventories at year-end expected to be lowest in many years; price announcement by Carnegie seen aimed at stiffening prices for next quarter's contracts.

Statement by W. Donovan, former Asst. Att'y General, that oil industry could restrict production within antitrust laws, was considered timely for other industries.

Commodities strong. Wheat was weak most of the day but closed up sharply on a late rally; other grains closed up moderately. Cotton also closed up substantially after early weakness; heavy short covering reported. Copper up 1/2 cent to 10 cents/pound; some good buying at that price, but little more seems available from producers now.

Firms most active in bond offerings in first 9 months were National City, $1.253B; Harris, Forbes $1.214B; Halsey, Stuart $1.102B; Guaranty $1.086B.

Administration remains opposed to farm debenture plan in spite of election results. Plan would give farmers a percentage of the value of exported products as certificates usable to pay import duties; administration believes this is equivalent to dumping surplus abroad.

Revised Sept. exports $311.9M vs. $437.7M in 1929, imports $226.3M vs. $351.4M; 9 months exports $2.952B vs. $3.844B, imports $2.401B vs. $3.360B.

US electric output decline of 4% Sept. vs. 1929 was improved from 6% decline vs. 1929 in Aug.

Stocks of refined copper Nov. 1 were 364,930 tons vs. 360,650 on Oct. 1 and 88,401 in 1929; Oct. production was 118,229 vs. 116,004 and 152,840.

Farm Board reports loan repayments so far “running quite satisfactorily.”

Newsprint produced by Canadian mills in Oct. was 213,817 tons vs. 195,490 in Sept. and 251,914 in 1929; US produced 105,450 vs. 95,261 and 122,009.

Tire casing shipments in Sept. were 4.405M vs. 5.175M in Aug. and 5.623M in 1929; inventories Sept. 30 were 9.812M vs. 10.848M and 12.875M.

FTC resumes investigation into public utilities after recess of six weeks.

British trade figures for Oct.: imports 90.9M pounds vs. 78.7M in Sept. and 110.3M in 1929; exports 46.9M vs. 42.7M and 64.6M.

British registered unemployed on Nov. 3 totaled 2.263M vs. 2.238M previous week and 1.252M in 1929.

R. Benson & Co.: “So far as London is concerned, the money market situation is as bright as the industrial position is gloomy.” Bank of England's reserve position much stronger than a year ago, gold holding also considerably higher.

Private Paris bank Bernard, Freres fails, submits to judicial liquidation.

Cuban House of Representatives approves Chadbourne plan for stabilizating sugar prices.

World production of Ford cars and trucks in Oct. was 78,347 vs. 97,885 in Sept. and 177,483 in Oct. 1929.

Some stocks currently yielding 5%-6%: Eastman Kodak, Otis Elevator, Westinghouse, Union Pacific; yielding 6%-8%: Liggett & Myers, New York Central, Standard Oil NY; yielding over 8%: GM, American Ice, Allis Chalmers, Hudson & Manhattan.

November 12, 2009

Wednesday, November 12, 1930: Dow 173.30 +1.70 (1.0%)

Assorted historical stuff:

Pres. Hoover says US should play a part in World Court; in Armistice Day speech, declares belief world will within a few years become firmly interlocked with arbitration and conciliation agreements, and disputes not resolvable through diplomacy will be arbitrated; sees important role for Court: “In the development of methods of pacific settlement ... a great hope lies in ever extending the body and principles of international law ... Our duty is to seek ever new and widening opportunities to insure the world against the horror and irretrievable wastages of war.”

Col. Woods of emergency unemployment committee says pleased at better cooperation from big employers than in 1921. Reports that auto and construction industries, which has sales of $4B each a year ago, have fallen off by about $1.5B each; estimates this has led to 900,000 unemployed in these industries alone.

Republican Nat'l Committee chair. Fess says Prohibition will be a chief issue in 1932 Presidential campaign, deviation from dry law enforcement will mean defeat.

Art exhibitions now at galleries include Rembrandt etchings at Knoedler's, a “Currier & Ives epidemic” at the print shops, and Lucille Douglass series of pastels and etchings, mostly of the ancient temple at Angkor. Offered at auction are the entire contents of Mrs. Charles V. Bob, wife of the promoter who recently vanished.

Medical dept. of NY Edison Co. develops treatment for pneumonia by inhaling mixture of oxygen and carbon dioxide; said to cure all but most hopeless cases.

First US-controlled aircraft factory in foreign country opened by Curtiss-Wright in Santiago, Chile.

One of world's largest rubber-covered conveyor belts manufactured in a single length: 891 feet long by 67 inches wide, one inch thick, weight 28,565 pounds.

Market commentary:

Market wrap: Stock price movements indicated relentless declines had finally produced an oversold condition. Heavy morning pressure on AT&T and Nat'l Biscuit normally “would have been extremely disturbing,” but only had a temporary unsettling effect. Strong rallying tendencies developed in the afternoon; short covering seen; specialties including Case and Auburn rose sharply, and US Steel led recovery in the major industrials, rebounding 5 points from recent low; upturn was checked in late afternoon by news of further slump in steel production, but efforts to renew decline were stubbornly opposed. Bond market moderately active, irregular; corp. up after sharp late rally, speculative and convertibles strong; foreign govts. weak, particularly South. Amer.; US govts. active, mostly higher.

Recent trend of odd-lot investing may have found its ultimate example in one broker's customer who in the last year bought 192 shares of 192 different companies.

Poor business sentiment partly attributed to market decline, since there are over 10M shareholders of record in the US; “the experience of having what they hold shrink day after day is not a stimulant to optimism by any means.”

Middle West Utilities Oct. survey of business and crops in territories they serve finds conditions still uneven but some general improvement over Sept.

Experienced observers see market approaching selling climax and turnaround; “another day or so of selling in the heavy volume seen on Monday might well bring the end of the present phase of the market, and be followed by a recovery that could run for several weeks.”

Curb Exchange report: (later the Amex; small companies) Goldman Sachs Trading Corp. [investment trust started by Goldman Sachs in Dec. 1928, peak in 1929 was over 100] hits new low ground under 8. Great Atlantic & Pacific among last chain store stocks to fall below 1929 panic low at 162, about 15 times earnings.

Economic news and individual company reports:

Rail freight loadings for week ended Nov. 1 were 934,640 cars, down 24,695 from prev. week and down 137,594 or 12.8% from 1929 week.

ICC denies petition of rails for reconsideration of lowered Western grain rates.

US Steel ingot production for week ended last Monday was at 47%-48% vs. 52% previous week and 75% in 1929; independents were at 41% vs. 44% and 72%; industry total was 43% vs. 47% and 73%.

Copper producers agree worldwide production cut of 20,000 tons/month desirable, to about 130,000 tons/month; producers seek permission from Washington to allow agreement in spite of antitrust law.

Barnett Nat'l. Bank of Jacksonville warns Florida bondholders against adjustment committees formed for profit attempting “to scare holders of Florida bonds into 'dumping' them at sacrifice prices”; urges holders to get information from dealers who sold the bonds or other reliable sources.

Suez Canal shipping traffic in first half was 12.212M net tons, down 4.642M from 1929.

Halsey, Stuart study reports newspaper circulation up 39% in past decade, advertising revenue up 60%.

Companies reporting decent earnings: Fox Film, Equitable Office Bldg., Pet Milk Co.


“'You mean to say you were not at your own daughter's wedding? Where were you?' ... 'I was looking for a job for the groom.'”

Financial etymology:

[Note: This is the first time I've seen “blue chip” defined as a particular price. Still not sure about the origin, but would guess it might be from poker.]The White Chip Club now has a big waiting list and has taken over most of the floor space of the Blue Chip Club.” At end of trading Monday, only one stock was traded at a “blue chip” price (over 200), though there were 8 more quoted over 200 that didn't trade. Total number of stocks that traded over 200 sometime in 1929 was 94. First stock to trade over 200 was Pennsylvania Coal, at $275, in Feb. 1876. Average price of all listed shares Nov. 1 was $42.43.

+ The Boring Stuff:

Pres. Hoover addresses Assoc. of Nat'l. Advertisers; praises advertising as having “stirred the old lethargy of supply and demand” and raised living standards; credits it with speeding up the application of new discoveries and inventions; purpose is “to create desire, and from the torments of desire there at once emerges additional demand.” At one time advertising was resented as intrusion and “clamor to the credulous. But your subtlety and beguiling methods have long since overcome this resentment.” Stresses need for probity in advertising, praises self-regulation by industry as “curing abuse without the interference of government.”

Editorial: Steel producers' decision “stoutly to resist further price demoralization” is a very important development. A year ago, during Pres. Hoover's conferences for industrial stabilization, steel men “heartily accepted” proposition that wage levels should be maintained. If prices continue declining, this would become very difficult; some smaller producers are already operating at a loss. “In the steel trade it is widely believed that a firm refusal of further price concessions will bring in a substantial amount of new business.” Outcome will prove “whether the industry's maintenance of the long existing scale is or is not sound practice.”

Congress to convene Dec. 1; this session will still have large Republican majority in House and coalition control in Senate. Glass subcommittee to inquire into banking, Fed. Reserve and its relation to stock market, and other issues. Some radical stock market proposals including banning short selling and margin buying considered very unlikely to pass. Some measures regarding power regulation and formation of Federal Communications Commission. Doubtful how much legislation can be passed, though new spirit of cooperation may allow progress on some items.

Pittman Senate subcommittee reportedly will recommend US loan of 1B ounces silver to China; Administration opposed; opinion was espressed that use of the loan for public works in China would help break up the warring forces, many of whom are said to have joined up to avoid starving.

Rio de Janeiro population has been growing steadily and is now over 2M; many large apartment buildings went up a few years ago when, like many other cities, they were experiencing severe housing shorrtages. Now, there are over 10,000 empty dwellings in the city that landlords won't rent for what tenants will pay.

Outright buying of stocks [for cash] in the past 6 weeks was estimated at $600M-$1B or more based on brokers' loans figures.

Banks apparently not forcing liquidation of security loans; reports of member banks as of Nov. 5 show no important declines in any major cities.

Recent declines attributed mostly to forced liquidation and tax selling rather than aggressive short selling; “the lower stocks have gone, the heavier has been the liquidation”; continued downtrend has impaired many margin accounts that were in strong shape two months ago. However, demand by short sellers for stocks in the loan market remains high, with several large issues including US Steel at a premium.

P.F. Cusick, Kent, & Co.: “It is our opinion that we are rapidly approaching, if we have not yet reached, the actual bottom of the bear market.” Point out that every bear market since 1897 has hit bottom above the preceding bear market low, but below the second-preceding bull market high; Dow is now between these two points (162.31 and 173.90).

The Chronic Optimist notes stocks are less risky to own now: “Many stocks ... could drop to zero now and the loss per share held would not be as great as the same stocks suffered in the October-November breaks of last year.”

Bond dealers less optimistic on outlook for bond market, a marked contrast with Sept. when most saw a good market imminent; increasing opinion that market won't show sustained improvement until business conditions do.

Many utility companies now selling below 15 times earnings, lowest ratio for past few years.

A. Sloan, Jr., GM pres., says GM able to stay profitable by starting adjustment a year ago when co. realized conditions were changing; sacrificing some current profits to keep production and inventories low; hasn't reduced wages, believing “prosperity of the US is founded on a high wage scale.”

Commodities dull. Grain markets closed in observance of Armistice Day. Cotton up moderately. Copper situation unchanged; good foreign buying, domestic producers reluctant to sell at 9 1/2 cents, awaiting rumored curtailment agreement among world copper producers.

Volume of bond trading on NYSE in Oct. was $272.1M vs. $231.0M in Sept. and $353.2M in 1929; heavy activity in foreign loans due to political unrest.

Gasoline stocks at refineries Nov. 8 were 37.012M barrels, down 203,000 in week; refineries operated at 63.8% vs. 64% prev. week; oil production was 2.297M barrels/day, down 65,800 from prev. week and down 333,950 from 1929.

W. Donovan, former Asst. US Attorney General, says oil industry should try to regulate itself to solve overproduction, warns that public wouldn't consent to modification of antitrust law without a price that “may well be the surrender to government of a greater participation and control than now exists.” E. Reeser, Amer. Petroleum Inst. pres., calls for permanent solution to overproduction, says immediate outlook depends on business improvement, but increased demand certain in long term due to fundamental role of petroleum in present-day industrial life.

Interior Dept. says prospects good for adoption of unit (cooperative) development for oil and gas at Kettleman Hills; called test case in oil and gas conservation.

Most rail equipment companies will cover dividends in spite of almost negligible buying since early in 1930, due to good buying in late 1929 and early 1930. Prospects for early 1931 look unfavorable, though strong financial positions should protect dividends unless slump is prolonged.

Editorial: Anticipated short corn crop suggests price will rise enough to result in other grains being substituted.

Assoc. of Cotton Textile Merchants reports Oct. sales were 335.8M yards, 146.7% of production; shipments were 118.1% of production; stocks on hand declined over 41M yards or 10.6% to lowest level in 12 months, while unfilled orders increased 22.9%.

Public is reportedly so eager in its search for exceptional values that stores offering genuine bargains sell out without advertising. One large drug store chain has sent buyers across the country looking for “job lots” of bargain merchandise; efforts have been successful beyond expectations.

Amer. Machinist reports machine tool demand slightly improved, but industry sees no tangible improvement until start of 1931.

Directors of European Ford subsidiaries report business ahead of 1929 everywhere but Italy; attributed to Ford offering best value.

Beneficial Industrial Loan Corp., largest firm specializing in small loans, reports new loans in first 9 month were $46.0M, up 14.7% from 1929. Reports only 68 “surrenders” in first 9 months out of 400,000 non-selected accounts vs. 146 in last year.

November 11, 2009

Tuesday, November 11, 1930: Dow 171.60 -1.54 (0.9%)

Assorted historical stuff:

Editorial: Offer by 7 Democratic leaders of cooperation for the common good and positive response by the Administration are hopeful signs. While some partisanship could be detected even in this exchange, there are still real reasons for hope. Newly elected Dem. Sen. Bankhead has rejected idea of allying his party with insurgent Republicans to organize the Congress “on the basis of a division of the spoils.” Likewise, Sen. Walsh of Montana has called for end to partisan attacks. Public has right to insist both Republicans and Democrats stick to the agreement in good faith.

Pres. Hoover to ask Congress for special emergency appropriation to expedite public works for unemployment relief.

Chair. Woods of Emergency Committee on Employment says will attempt to get more accurate figures on number and distribution of unemployed in US; charts prepared by the Committee based on Labor Dept. statistics show uniform decrease in unemployment in recent months, with increasing part time work.

Movie industry execs move to throw power of “talkies” behind “buy now” campaign using nationwide showing of trailers, newsreels, and other advertising.

F Sargent, Chicago & North Western Rwy. pres., attacks Agricultural Marketing Act as unconstitutional; “I strongly criticize the establishment of government agencies to compete with private business as constituting unlawful confiscation of property.”

British Conservative leader S. Baldwin predicts even with tariffs, England will have “thundering hard job” over next decade to return prosperity.

A banker returning from New Mexico, Arizona, and Mexico reports that messengers there carry bags of gold and silver without gun or bodyguard, whereas here in New York, transfer of a bag of coins requires armed escort.

Anne Nichols, author of “Abie's Irish Rose,” loses appeal in lawsuit for plagiarism against producers of “The Cohens and the Kellys.”

C. Fritsche, Detroit Aircraft pres., asks Pres. Hoover for help in getting $4.5M authorization to construct all-metal airship 550 feet long, 120 feet in diameter, with 100 gross ton lift capacity and 100 mph speed. Ship would use oil-burning engines and helium for lift.

Market commentary:

Market wrap: Stocks briefly rallied during first hour (attributed to pledges of Democratic-Republican cooperation on economy), but a flood of selling quickly reappeared, spreading throughout the list. Several stocks which had previously resisted the selloff dropped sharply, including Amer. Tobacco, Nat'l Biscuit, and United Drug. US Steel hit new low since 1928; new bear market lows in Amer. Can, GE, Westinghouse, GM. Utilities, oils, and investment trusts also weak. Commodities also broke sharply. Bond market continued active; corp. generally lower, especially convertibles and rails; US govts. firm, foreign down mildly.

Many stocks are depression-proof based on increasing earnings, but in the recent decline no stocks have been bear-proof.

Broad Street Gossip: Many traders believe the recent fast and severe decline in stocks will be balanced by a sharp rally when the bottom is hit. However, picking the bottom of this downtrend can be tricky - one trader reports he's picked 6 bottoms and counting.

Experienced observers believe recent increase in short-selling by small traders is hopeful: “Just as a rapid expansion in brokers' loans heralds the culmination of a bull swing, general switching from long to short positions by inexperienced speculators is a familiar feature of the final stages of a prolonged decline.

Dow made new post-panic low. There was one new yearly high and 376 new lows.

Economic news and individual company reports:

Total value of all NYSE listed stocks Nov. 1 was $55.026B vs. $60.143B on Oct. 1; borrowings by NYSE members were down $925.3M in the month to $2.556B, declining from 5.79% of total value to 4.65%, vs. 8.51% on Nov. 1, 1929.

Fed. Reserve member banks weekly report for Nov. 5: loans on securities up $24M to $8.081B, “all other” loans up $8M to $8.715B.

Some encouraging steel news seen in increase of 57,425 tons in US Steel unfilled orders during Oct. to 3.482M, and in announcement by Carnegie Steel (US Steel subsidiary) that they would maintain a $1.60/hundred pound minimum price on steel bars, shapes, and plates - seen as first step toward stabilizing steel prices.

Sentiment in France said better, but “still nervous despite reassuring statements by the Premier, the Finance Minister, and the Governor of the Bank of France to which wide publicity was given.” Rumors persist about some banks, may result in mergers.

NY State Industrial Commissioner F. Perkins reports NY index of factory employment down 2% in Oct. vs. 84.6 in Sept; first Oct. decline since 1920.

Companies reporting decent earnings: Amer. Gas & Elec., Charles E. Hires (drinks, syrup, extracts).

Stock market joke:

The Room Wit speculates that if this decline keeps up, we may start quoting earnings-price multiples instead of price-earnings.


“'There is nothing so satisfactory as a clear conscience.' 'No,' answered Senator Sorghum; 'and the next best thing is a good lawyer.'”

“'I went West in '89,' said the New Yorker. 'How fur did ye git?' queried the miner. 'Buffalo,' said the New Yorker. 'I went East the same year,' replied the miner. 'Went as fur's Butte, Montana. Nearly ran into each other, didn't we?'”

“'Now that I'm going to marry Mary, there's one thing I'd like to get off my chest.' 'What?' 'A tattooed heart with Jessie's name in it.'”

Financial etymology:

Modern banks date back to Italy in 808; word comes from “banco,” or bench, which was set up in a market for sale and exchange of money. British merchants originally deposited funds in Royal Mint, until Charles I seized it and gave them IOU's, after which they started depositing at goldsmiths in Lombard St. Oldest bank now in existence is Bank of Barcelona, founded 1401; one of earliest banks in London was founded by Francis Child, a goldsmith, in 1663.

Origin of the term bear dates back at least to Exchange Alley in London as early as 1719, when phrase “sell the bearskin” was used, from proverb “to sell the bear's skin before one has caught the bear.”

+ The Boring Stuff:

Post-election comments: Washington officials now free to be more realistic on economic picture: “It is to be hoped that 'Washington optimism' is a thing of the past, and there are indications that this is the case”; current best Washington opinion, contrary to popular impression, “not one of wild optimism”; however, some signs noted of more solid foundation for stock market. World conditions aren't good, but US believed able to lead recovery; more emphasis on domestic market likely; spread in prices between manufacturer and consumer must be reduced. Less “friendly intervention” by govt. in business likely; “advice to let business alone is becoming louder.” Govt. not disposed to join in any of ideas for economic “panacea,” most of which boil down to currency inflation to stop falling prices and stimulate spending; while “perfectly possible,” after-effects likely worse than the disease; memory of wartime inflation still fresh and little desire to repeat it.

S. Insull, Commonwealth Edison chair., says depression has caused a lack of perspective. “I know of no way to judge the future except by experience of the past. ... In the thirty-seven years since 1893, we have had more than one business depression; we have had some that I thought were worse than the one we are passing through. These depressions have not stopped the growth of our city or our country. ... On the contrary, business depressions have induced economies in many directions. ... In 1893, some people were fearful that we would never get over the effects of the panic of that time. Yet, investors have put 48 times as much money into the electricity business as was invested in it in 1893, and we have 214 times as many customers as we had then.”

Editorial by T. Woodlock: Rails face difficult future traffic trends; traffic in raw materials best handled on rails is flattening out, with pressure on rates, while for manufactured items, other tranport is more competitive. Situation calls for “thorough overhauling of rate structures, together with a tightening up of executive control over traffic policies.” Preferably, in each region one “group-rate-commissioner” should be empowered to control rates, acting for all rails in the region.

Both miners and operators blamed for chaotic conditions in coal industry; ACLU dir. R. Baldwin urges unionizing as remedy for mining trouble.

Deadlock” reported on NY City negotiations for unification of rapid transit lines (including BMT and IRT); related stocks decline, though there's still hope of a change in the situation.

Many NYSE brokers continue to report large increase in odd-lot buying by investors across US either having stock transferred to their name or delivered to their banks; the buying has been selective, favoring well-established cos. with long earnings records, and showing a “bargaining tendency”, picking up on market dips.

Short interest said to have increased substantially since election; much of it in small (100-1000 share) and odd lots.

President of a large industrial co. says main worry isn't production levels but prices: “If we can maintain even 65% operations we can make a little money and hold wages ... But when prices go down with production, it is difficult to keep wages at peak ...”; notes difficulty maintaining prices due to antitrust laws.

Royal Dutch Shell board of directors says sees continued difficult conditions in oil industry, with only largest and most conservative firms producing profitably.

H. Thornton, Canadian Nat'l. Rwys. pres., returns from talks with Michigan auto execs, sees definite signs of moderate improvement in auto trade.

Commodities very weak. Wheat plunged to new lows on bearish crop news, with Dec. futures at 69 3/8, off 4 1/8 and low for Dec. future since 1902; other grains also weak, with corn showing best resistance. Cotton down sharply, reversing Saturday gains. Copper still at 9 1/2 cents, producers awaiting results of negotiations for curtailment.

Total financing (bonds, notes, and stocks) by domestic and foreign corporations in Oct. was $208.0M, vs. $328.2M in Sept. and second-all-time high of $1.357B in Oct. 1929; lowest monthly total since Sept. 1923. First 10 months total was $5.6B vs. record high of $10.3B in 1929 and $6.6B in 1928.

Agriculture Dept. Nov. 1 corn crop estimate was 2.094B bushels, up 2.3% from Oct. 1 est. but down 20% vs. 1929 crop and 22.4% vs. 5 yr. average crop.

Standard Oil NJ reduces tank car price of gasoline 3/4 cent to 7 cents/gallon at the refinery.

Fed. Reserve reports Sept. department store sales up 34% over Aug., somewhat less than the usual seasonal gain; Sept. sales were about 12% under 1929.

British budget running into deficit; planned expenditures were 787.2M pounds, and deficit of up to 20M pounds is now expected.

Canadian stats: index of employment in Oct. was 116.2 vs. 116.6 in Sept. and 125.6 in 1929; Sept. car loadings 302,890 vs. 281,150 in Aug. and 335,340 in 1929; Sept. imports $87.9M vs. $77.9M in Aug. and $99.3M in 1929; exports $82.1M vs. $70.6M and $89.4M.

Chrysler increases prices of three high-end “imperial eight” models $250 each to $2745 - $2945.

Fire at Crown, Cork, and Seal plant in Baltimore; over 3,000 tons of raw cork lost, valued at about $300,000.

November 10, 2009

Monday, November 10, 1930: Dow 173.14 -1.24 (0.7%)

Assorted historical stuff:

Seven Democratic leaders make conciliatory statements; pledge cooperation with administration in promoting business revival; promise to abstain from “rash policies” and say business “should not be frightened”; say will limit tariff changes to those recommended by economic experts; praise Fed. Reserve Board.

Editorial: Gesture by Dems. is sincere, but may be passing: “Before an election politics is at its height. The men in the heat of the fight honestly regard the opposition as either fools, criminals, or both ... Once the ballots are counted ... the pendulum swings to the other extreme ... even the politicians are eager for a rest from politics for a time.” Statement is still encouraging since it suggests Dem. leaders will curb the wilder schemes and more radical proposals of some of their party members.

Col. A. Woods summarizes reports on unemployment from governors: main problem is in Great Lakes and US industrial centers; almost all states reported they're “stimulating public works and pushing ahead work which had been planned for a later date”; general feeling is to provide work for unemployed rather than relief.

W. Melville, Pres. of Melville Shoe, sends telegrams to 508 store managers saying positions are secure, urging them to buy for future needs.

Editorial: People may disagree on the meaning of Tuesday's elections, but one result is absolutely clear: public sentiment against Prohibition is rapidly increasing. People are starting to understand “morality can never be accomplished by law.” Instead, the effects of the “noble experiment” have been seen in “an increase in crime, the placing of almost unlimited wealth in a criminal class, and the spread of drinking among young men and women. ... People have been revolting against our prohibition laws; the elections show the revolt is changing to revolution before which this legislative tyranny must fall.”

Dr. L. Wilson, Mayo Foundation dir., calls for establishment of $200M endowment for cancer research, diagnosis, and treatment in 20 large US universities.

Law against importing rabbits into Australia has been revoked, and fancy fur-bearing varieties of the Angora and Chinchilla type are being imported in great numbers in hope of establishing a new industry; “some of the bucks are valued at $1,000 each.” It's hoped the common rabbit can be exterminated or “crossed with his aristocratic fur bearing relative and thus changed from a pest to an asset.”

New Brunswick provincial officials warn motorists to drive more carefully after several accidents involving moose fatalities.

Gov. H. Caulfield of Miss. orders investigation of lengths of trucks and trailers after his car is forced off highway; rigs said to often reach 60 feet in length.

Market commentary:

Market wrap: Rails came under continued selling pressure; leading industrials were firmer in early trading but selling became general in second hour; Southern Pacific, New York Central, and US Steel hit multiyear lows while GM, Radio, du Pont and Bethlehem hit new bear market lows on heavy volume; utilities also came under continued pressure. Bond market active and irregular; US govts. firm, foreign generally steady, corp. of all grades continue downtrend.

Week in review: Further drastic declines following Election Day holiday; all Dow averages well below fall panic levels; active banks stocks generally at lowest levels since 1928; considerable investment buying seen but overwhelmed by large scale forced selling in impaired margin accounts. Bonds generally down on moderate volume; only govts. and highest grade rails resisted pressure, and many corps. were down sharply. Money slightly tighter but rates little changed. Grains break to new season lows; wheat only 1 1/4 cent above record 1906 low. Cotton sagged in midweek but recovered later and stayed above season lows. Steel output continued lower; prices slightly weaker. Oil production down, price cutting continues. Rail traffic seasonally higher.

The past two months' bear market has been one “of the most severe, as well as one of the most aggravating, declines in the history of the Exchange.” The Dow has declined from 245.09 to 174.38, with almost no interim rallies in which traders who bought on breaks could sell at a profit. Causes seem to have been tax selling and liquidation due to poor earnings and dividend cuts; however, if trade reviews are accurate business is not much worse than is was on Sept. 10. Some investment buying is seen, but selling has outweighed it; consensus is the decline can't last much longer, “but the Street has been thinking that way for the last several weeks.”

Broad Street Gossip: Patient investors will, in the long run, make a lot of money buying good stocks at current prices. Some people are in fact doing this, as seen in record numbers of shareholders in US Steel, AT&T, GM, and others; “The little fellow has been getting in on the ground floor while the big fellow with the big income has been busy seeking ways and means to cut down his 1930 tax payments.”

Executives in wide variety of industries agree future earnings will depend mostly on sales volume, since costs have been cut as far as possible.

Dow made new post-panic low. There were no new yearly highs and 261 new lows.

Economic news and individual company reports:

Irving Fisher's index of 200 commodities for week ended Nov. 7 was 82.2 vs. 82.4 in previous week and 93.3 a year ago.

Report of Committee on Petroleum Economics to the Fed. Oil Conservation Board recommends additional 7% cut in oil industry operations; also suggests industry measures beyond production curtailment, including restriction of drilling and plant expansions, and unit (cooperative) operation in new development areas.

Reports from Paris state Oustric banking crisis has passed and the banks and brokers involved are of minor significance. However, heavy withdrawal of balances from New York and London to France has continued for the past few days as French banks attempt to increase confidence and prepare for any emergency.

Rail freight cars ordered in Oct. were 3,291 vs. 565 in Sept. and 17,207 in Oct. 1929; first 10 months were 36,428 vs. 83,397.


“A teacher in a Lagrande (Oregon) school asked for pupils to tell who the world's smartest man is, and give the reasons. One urchin suggested Thomas Edison, 'because he invented the phonograph and the radio so people could stay up all night and use his electric light bulbs.'”

+ The Boring Stuff:

Editorial: All three Dow averages are now below last fall's panic lows; the rails were first, followed by the industrials during the violent selloff since Sept. 10, and finally the utilities. The six bear markets this century (aside from the 1912-14 one caused by war) averaged about 12 months; this one is now 14 months old; prices will be closely watched over the next few weeks to see if the “business situation as a whole has completed its liquidation. ... Though it has not yet been indicated in prices, all reasoning from experience tells us that the completion of the market decline cannot be far away in time, whatever prices may do in the short interval.”

Editorial by T. Woodlock: The late J.P. Morgan on two occasions turned grave US economic crises around through bold action- in 1896 when the Treasury was being drained of gold, and on Oct. 24, 1907 when Exchange brokers desparately needed money for deliveries (on this occasion, “Mr. Morgan is said to have asked whether the banks had not still 'reserves' and what bank reserves were for”). Similar bold action is called for now; “a riot of unreason ... is loose in men's minds” but fundamental such as inventories and production/consumption balance are improving; “all that the stock market needs now to produce a swift change of mood is evidence that somebody has some reason and some 'confidence' left - and it need not be a great deal.”

Closely divided Congress seen making it difficult to pass many bills.

Dr. C. Warburton, Fed. Drought Relief Committee chair., reports many firms buying a year's supply of lumber ahead to help drought areas; warns farmers in distress that they would probably be worse off if they moved to cities this winter.

US recognizes new Brazil govt. headed by Getulio Vargas.

J. Scullin, Australia PM, says country suffering from decline in commodity prices, sudden cutoff of loan availability; has had to take drastic measures to correct exchange position by reducing imports and stimulating exports; however, says nation is solvent, denies “irresponsible talk” that country may repudiate debts. Australian bonds decline several points after govt. fails to adopt Niemeyer [austerity] recommendations.

J. Baum of Amer. Bankers' Assoc. reports US bank theft losses have exceeded $12M/year in past 5 years and are steadily increasing.

Broker R.H. Gibson to open South Bend office Nov. 10; Knute Rockne will be in charge, assisted by former Notre Dame teammate Al Feeney.

Hardest subject in New York high schools last year was mathematics, with 26.9% failing; only 13% failed English and 5% failed music and “domestic science.”

Record-setting phone call recently made between Sedalia, Mo. and Sydney, Australia; total transmission distance was 15,000 miles. Call started at a Sydney telephone, went to local radio station, was amplified and sent to London, received there and switched to regular transatlantic circuit to AT&T's receiving station at Houlton Me., forwarded to New York, and then over regular land lines to Sedalia.

Market ups and downs in 1930 have tended to parallel those of the steel industry; the Street is therefore looking closely at future steel prospects. Sentiment in the trade is hopeful “the bottom is being scraped,” and steel operations generally rise significantly in Jan. and Feb.; this “might mark a turn for the better in general business,” and, after the recent extensive liquidation in stocks, “furnish the groundwork for a sustained rally.”

Broad Street Gossip: Dominant issue in the 1930 elections will probably be people's desire to see business back to normal. “Therefore, the opinion of old and experienced traders is that no party will attempt to enact legislation detrimental to business.”

Brokers continue to report increasing buying on market declines by odd-lot (small) investors “who have taken the shares out of the Street. ... Eventually, the accumulation of stocks for the accounts of the smaller investors must have a beneficial effect on the market structure.”

Heavy selling throughout the list was seen as indicating large scale forced liquidation of impaired margin accounts; this was expected to strengthen market internal conditions, and “shrewd interests” were picking shares up on expectation of a sharp technical rally.

There's still some surplus money left for investment, as seen in bond offerings for the first 10 months of $4.842B vs. $2.852B in 1929.

Curb Exchange report: (later the Amex; small companies) One of the largest Curb stocks, Cities Services (oils and utilities) plunged about 3 points to 17 1/4; with almost 30M shares outstanding, the decline from the 1929 peak of 65 has reduced the market cap by $1.440B. Lily Tulip Cup is now yielding about 8%, and earned its dividend for the first 9 months twice over.

F.J. Lisman says coal burned with up-to-date equipment remains cheapest fuel, calls heating with oil and gas a luxury; notes coal trade in very bad shape.

Commodities mixed. Wheat closed down moderately after failing to hold early gains; corn also down moderately. Cotton up sharply after slightly lowered USDA crop forecast (to 14.438M bushels from 14.486M Oct. 1 estimate).

Electric output by public utilities in Sept. was 7,763 GWHr vs. 7,878 in Aug. and down 4% from 1929; of Sept. production, 5,506 GWHr was generated by fuels and 2,257 by water power.

F.W. Dodge reports construction started in 37 states east of Rockies in Oct. was $337.3 M vs. $331.9M in Sept. and $445.6M in 1929; first 10 months $4.022B vs. $5.047B.

Railroad labor leaders to meet next Wednesday in Chicago to consider problem of railroad employment.

Rail executives announce emergency freight rate reductions in drought areas won't be further extended beyond Nov. 30.

Youngstown District steel operations at 50% this week, down 2% from last week.

Dealer stocks of new cars Oct. 1 were down for seventh month in a row, and are now 37% under 1929 level.

Survey of Chicago chain and independent groceries finds chains offer prices about 10% lower on average.

Reports from Paris that Russia plans to dump 400,000 tons of sugar on European market; French beet sugar growers ask govt. protection.

Final argument in Bethlehem-Youngstown merger trial presented by plaintiff representing Eaton-Otis interests trying to block the merger. A decision from Judge D. Jenkins isn't expected for 6 - 10 weeks, since the Court must examine extensive arguments, testimony, and briefs, as well as over 900 exhibits.

Companies reporting decent earnings: Diamond Match, Pennsylvania Water Co.

Patent and proprietary medicine shipments by mfrs. engaged primarily in that line were $263.0M in 1929, up 12.4% from 1927.

Civil aircraft on scheduled air transport in first half flew 16.903M miles with 6 fatal accidents; on other flights 51.767M miles with 144 fatal accidents.

November 9, 2009

Favorites of the week Nov. 3-Nov. 8, 1930

No Journal was published Sunday, Nov. 9, 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.

Nov. 8:

[Note: Strangely reversed Dept.] Heard in the customers' rooms of brokerage houses: “The way stocks decline without any substantial support is beyond belief.” “Is there something we know nothing about overhanging the market?” “Why don't the 'big interests' do something to end the decline?” “Stocks are cheap, many selling far below respective book values. Why don't people buy?” “Will they ever stop going down?”

[Note: Strangely familiar Dept., except for the delinquency part.] Consumer finance companies are reportedly reducing their bank credit lines due to materially lower business this year, attributed to drop in radio and auto sales. Delinquencies said to be “far below expectations” and customers have paid down much of their debt, but renewed buying is not yet evident.

[Note: They'll get to that one of these days Dept.] Johns Hopkins researchers establish fact that common cold is infection transmitted by “non-filterable viruses, minute disease producing agents so small as to defy most powerful microscope; if virus can be made to grow in laboratory tube, vaccine may be developed.”

[Note: Sheer Genius Dept.] French Nat'l Economic Council adopts resolution for calendar reform, with majority preferring the 13 month plan.

Nov. 7:

[Note: Ay Chihuahua! Dept.] A number of market observers who have advised waiting to buy stocks until a definite turn for the better, are now saying current opportunities are too attractive to be overlooked; It's argued that with patience and good judgment there is little chance of suffering losses on standard stocks. “It is evident that liquidation has been extensive enough to suggest that it is fairly well completed”; the Dow has declined over 200 points from its peak, while brokers' loans are at a record low.

[Note: Ay Chihuahua! Dept.] B. Anderson, Chase Nat'l. Bank economist, sees fundamentals much better than in 1921, including both “general world picture” and domestic commercial credit situation (particularly corporate inventory and debt levels). Points out that in 1921, unlike today, “many businesses could not do even the business that was in sight” because of urgent demands from creditors. Estimates consumption and retail buying has for about 4 months outrun wholesale buying and factory production. Sees “makings of an upturn in business” that can become “long period of prosperity” if fundamentals are right, but should in any case be “good while it lasts.”

[Note: Edgar Allan Poe Dept.] Dr. Dervieux of the Medico-Legal Institute of Paris asserts that in most advanced countries in Europe, 2 per 1,000 are buried alive, with percentage probably much higher in certain other countries. Group of 35 deputies, mostly physicians, proposes law requiring verification of death by physician before burial.

[Note: In an ironic twist, I understand Jackie Chan is going to play Edward G. Robinson next year.] East is West - Melodramatic Chinese-American love story starring Lewis Ayres as Billy Benson, Lupe Velez as Ming Toy, and Edward G. Robinson as Charlie Yong. Cast is generally mediocre with outstanding exception of Mr. Robinson. Following much discussion “to the effect that the souls of all people are the same no matter what color their skin,” story ends with discovery that girl was the daughter of white missionaries who died in China when she was a child.

Nov. 6:

[Note: Strangely reversed Dept.] Editorial: This year's swing away from the Presidential party is apparently “more pronounced than the traditional mid-term reaction,” but to call all of Tuesday's results a repudiation of Hoover's leadership, “as the Times does,” is exaggeration; there are many other issues involved. Most importantly there's the depression; rightly or wrongly, “voters who have half a job or none visit their resentment upon the party in office.” Tariffs always cause a reaction at the polls, and Prohibition influenced many votes. We must wait for completed Congressional returns to see how much of a “national overturn” has taken place. A Democratic Congress, by historical precedent, might foreshadow a Democratic President in 1932, “but much water is to go over the dam in the intervening two years.”

[Note: Stimulus Dept.] Bulk of the local public works bond issues on the ballot were approved, for total of about $300M.

[Note: Would be an interesting investing case history - of course, color films did work out eventually but it took quite a while.] Technicolor hit new low under 11 but found support; traders said attracted by long-range possibilities of color films.

[Note: Sheer Genius Dept.] Westinghouse creates automatic fire extinguisher able to operate without human attention. An electric eye is rotated by a motor. When it detects a fire, it stops the motor and directs a stream of water toward the source of the flame; After extinguishing the fire, it begins to rotate again. In a recent demonstration, the eye found and extinguished 5 separate fires in various parts of a room in that many minutes.

[Note: Historical Joke Dept. ] “'What are you standing over there throwing rocks at that little boy for?' 'I dasn't go closer, ma'am. He's got the whooping cough.'”

No Journal published Nov. 5:

Nov. 4:

[Note: Strangely familiar Dept.] Dr. D. Friday, economist, predicts recovery this winter but warns that “fat days coming will be far leaner than those of preceding cycle.”

[Note: Strangely reversed Dept.] Main cause of Republican trouble seen as depression; absent this, even with issue of Prohibition and troublesome claims of ineptness, only normal off year election losses would be expected. Results of the election will probably be used to forecast Democratic presidential victory in 1932; if it really “ain't goin' rain no mo,” this may be the case, but things may change if economic conditions improve “as they almost surely will”; Democrats must also tend to “lack of any one outstanding candidate on whom various factions of the party can agree” and to lack of other issues or constructive program to campaign on. Republicans have been in power so long they have grown “careless and fat”; also, “without desiring to pun, it may be said that too many nuts are loose within it.” Results of election may in fact put “a good fright” into the Republican party and make it “train down and do a little fighting with its broad back to the well-known wall.”

[Note: Stimulus Dept.] J. Raskob advocates construction of “coast-to-coast super highways” and reduction of 5 1/2 day workweek to 5 days at same wages to restore prosperity. Various US communities will aid unemployment situation by immediately starting public works that normally wouldn't be undertaken for 2 to 3 years; many related bond issues will be voted on today. E.I. du Pont de Nemours announces will advance work on plant repairs and replacements. Hudson Motor adopts 5-day week.

[Note: Strangely familiar Dept.] Glass Senate subcommittee won't begin meeting until Dec. 1; will inquire into activities of Federal Reserve system and banking and finance generally; believed changed economic conditions necessitate study of banking laws to determine what modifications necessary.

[Note: Ay Chihuahua! Dept.] Editorial by T. Woodlock: Vast majority of investment trust funds (similar to mutual funds) were invested after start of 1928, at “final stage in the greatest speculative orgy that this country - or any country ever experienced.” Ironically, conditions today are now ideal for starting an investment trust; we're in a period of “maximum depression” with many bargains to be had, but past mistakes seem to prevent grasping the opportunity.

[Note: Strangely unfamiliar Dept.] C. Hanch, Nat'l Assoc. of Finance Cos. GM, reports average car loan in 1929 was paid off in a little over 9 months (standard terms are 1/3 down, a year to pay the balance). Urges more installment buying as stimulus to business today.

Nov. 3:

[Note: Ay Chihuahua! Dept.] National City Bank Nov. circular says there's little doubt depression is now scraping bottom; sees several signs of improvement; while timing of general recovery is impossible to predict, believes “next important movement will be upward.” Positive factors include impressive gains in industrial efficiency, recent stability in commodity prices, and improvement in textile and lumber industries.

[Note: Rather amazing increase.] BLS reports cigarette production in year ended June 30 was 119.9B, up 150% from 1920 and 3,600% from 1900. Avg. hourly earnings for workers in the industry were 37.8 cents for males and 26.8 cents for females.

[Note: Sheer Genius Dept.] An interesting new use for old rail cars and locomotives has been discovered by an enterprising Midwestern showman: taking the old equipment and staging sensational train wrecks, to which he charges $1 a head admission. The first show netted over $16,000.