Assorted historical stuff:
[Strangely unfamiliar dept.] Editorial: Some are suggesting raiding the “sinking fund” (used to reduce the national debt by about $440M annually) to close the deficit this year and continue the 1% income tax reduction. “But every consideration of sound finance,” in both short and long term, is powerfully against “such mere convenience. ... Public sinking funds, once raided for the convenience of statesmen, are almost impossible to restore.”
[Interesting how estimates of the number of unemployed are all over the place.] W. Green, AFL pres., estimates unemployed, not including farm and office workers, now number 4.860M vs. 4.500M at end of Oct.
[For the sake of uncounted future investors, stop before it's too late!] Postmaster Gen. Brown grilled by Congress on airmail spending, pleads for continuation of subsidies for airlines for two years to help develop the passenger air industry. Also proposes starting a “de luxe” overnight air mail service between NY and Washington for 25 cents an ounce.
[Banks ... good will ... does not compute ... ] G. McGarrah, Bank for Int'l Settlements pres., asks US banks to make careful study of loans abroad to avoid loss of good will by sudden withdrawals of money.
French Premier Tardieu resigns after govt. loses 147-139 vote following heated debate in Senate; entire Left Wing of Senate united in bitter attack on Cabinet.
Editorial: Sugar conference will at best be a stopgap to prevent producer bankruptcies. Long-term problem is tariff barriers and subsidies creating increased production by less efficient producers including Puerto Rico and Philippines, and leading to “an economic death grip on Cuba.”
Wild horses have become such a nuisance in parts of Oregon, Montana, and Colorado, that authorities are considering bombing the big herds from airplanes. The herds are suspected of spreading diseases to domestic horses. Slow demand for horses has all but stopped catching of the wild ones.
[Birth of a legend dept.] General Foods introduced new lime flavor of Jell-O nationally in past year, to great success. Also doing well is Minute Tapioca.
A Parisian seller of radio equipment was so irritated by the recent disappearance of his wife, an employee, and $5,000 of his money, that he broadcast the story on the radio, along with a threat of legal action. The guilty couple heard the message and returned panic-stricken to Paris; the employee has been sentenced to 3 months imprisonment and ordered to pay the husband damages of one franc.
Eddie Cantor's financial advisor says he was just joking in his widely quoted remarks about getting cleaned out in the market crash.
Market commentary:
Market wrap: Stocks continued lower on sluggish trading; merchandising and utility shares weak. Bond market dull; US and foreign govts. generally steady; corp. generally weak with many sharp declines and new yearly lows. Commodities firm.
Market observers “somewhat less confident,” though they continue to advise accumulating on reactions, and to advise against going short.
Weakness in bond market in recent weeks has been disappointing. “One authority” believes it may be due to problems of “some of the smaller banks” around the country, “although it is well known that banking conditions generally are unusually strong.” [To repeat: the first major banking crisis of the Depression is in the process of erupting.]
[Why don't they use these cool words on CNBC? ] Observers encouraged by continued market dullness, indicating “recrudescence of the heavy selling accompanying the Sept.-Nov. break was not likely”; believe “necessitous liquidation” largely complete, strong foundation under the market in buying from banks, insurance cos., investment trusts, and individuals. Period of dullness considered similar to windup of previous bear market in 1921.
Yields of 5% on “seasoned stocks” such as AT&T and US Steel, together with year-end reinvestment demand considered favorable for market.
Many less-active Curb Exchange [later Amex; small cos.] stocks now have huge bid-ask spreads; for example, Franklin Mfg. Pfd. was 28 1/4 bid, 50 ask.
Prospects for steel price increase seen better than for other commodities; there's no large surplus to work off, and independent producers are cooperating.
Price stability seen as important in all lines of industry; price uncertainty causes hesitation in placing orders; “experience indicates that price concessions, instead of increasing buying by attracting consumers, actually cause orders to be withheld.”
H. de La Chapelle of E.F. Hutton reports on study of market movements since 1884; finds market cycles average 3 1/4 years both peak-to-peak and bottom-to-bottom over that time, giving roughly 3 complete market cycles every major 10-year cycle.
M. Wolff of Hammerschlag, Borg notes striking reversal in investment trust fashions; managed trusts (similar to actively managed mutual funds), after selling at large premiums when issued, are now selling at 20%-50% discounts from liquidation value; meanwhile fixed trusts (similar to ETF's) are now at 7%-12% premiums.
Economic news and individual company reports:
Customs receipts in fiscal year 1931 estimated at $500M vs. $587M in 1930, but recovery to $625M expected in 1932. Receipts surged 113% in the 10 days following passage of the tariff, then slumped to a maximum decline of 54%, then gradually recovered until the decline for Nov. 5-14 was only 15% vs. 1929.
Rail report: ICC recommends abolishing recapture of “excessive” profits from previous years; notes economic difficulties of rails but says “country still needs its railways and can support them”; recommends regulation of rail holding cos. Treasury Sec. Mellon urges reduction of interest rate on some rail obligations to US. Operating income for class 1 rails in first 10 months estimated at $772M vs. $1.116B in 1929 and $986.2M in 1928; Southwest and West rails had best showings.
Steel report: More steel cos. join price advance. Sen. Norris (R., Neb.) and Sen Walsh (D., Mass) denounce rise as possible price fixing, call for investigation. Dow average of eight finished iron and steel products remained at $44.42/ton, low for 1930. Scrap markets continued dull, prices weaker.
Stock market history: Short selling has been prohibited in the past, including in Britain in 1733 and New York in 1812. These prohibitions have generally been defied and eventually whittled away and repealed.
Total corp. bonds in default Nov. 1 were $621.9M vs. $458.5M on Nov. 1, 1929 and record high of $758.6M in 1920. Most common type in default was real estate corp. Industrial bonds in default Nov. 1 were $241.0M.
Nov. car production in US and Canada was 146,185 vs. 154,585 in Oct. and 226,997 in Nov. 1929; decline was less than usual seasonal pattern. Ford output declined about 26,000. US passenger car registrations in first 10 months were 2.437M vs. 3.559M in 1929. Ford registrations were 992,370 vs. 1.189M.
Electric output by US light and power industry for week ended Nov. 29 was 1,680 GWHr vs. 1,722 in prev. week and down 3.8% from 1929.
Fed. Reserve reports money in circulation Dec. 3 up $50M to $4.615B, total Reserve Bank credit outstanding up $80M to $1.108B. Member banks in NY City report brokers' loans down $11M to $2.111B vs. $3.392B in 1929; loans on securities to non-brokers down $9M to $2.045B .
Britain continues to suffer heavy gold drain to France. Need seen for remedy to stop French influx. Bank of France reportedly buying sterling to attempt support.
Nov. merchandising sales were disappointing, generally falling well below 1929 figures, though some of the decline was due to Nov. 1929 having an extra business day. Woolworth Nov. sales were $24.1M, down 7.9%; S.S. Kresge $12.5M, down 10.8%; Montgomery Ward $22.4M, down 24.9%.
Companies reporting decent earnings: General Foods, National Power & Light.
Joke:
“She - I don't want to go riding with you. Your car is an old one. He - Say, listen, lady; you're no 1930 model yourself.”
Editorial: The Federal Power Commission, in its final report, has given Congress a useful warning. The report comes out against Federal development of water power, and notes that even in areas with abundant water power resources, fuel-generated electricity is becoming competitive with hydro. The proposed govt. owned hydro plant at Muscle Shoals is argued for as a yardstick to measure the utility industry, but what if after the expected $30M-$50M cost it can only compete at a loss with private fuel-burning plants? It would then be “one more drain upon the national treasury,” while unsettling the private Southern power industry.
L. Taber, National Grange master (farmers' organization) says hasn't agreed to inaction on the farm debenture at the upcoming short Congressional session; Sen. Borah (R., Idaho) says will fight for the measure.
Agriculture Dept. sees better demand for Southern farm products next year, though credit outlook will be worse due to serious decline in 1930 income.
US per capita consumption of most dairy products hit records last year: milk 58 gallons annually; ice cream 3 gallons; cheese 4.62 pounds; butter 17.61 pounds.
Dr. H. Luther, Reichsbank pres., says Germany's ability to meet Young plan (reparations) agreements depends on export markets and ability to borrow foreign funds at cheap rates; however, says regardless of outcome of demand for reparations revision, Germany will meet obligations promptly and unequivocably.
British coal and rail unions may strike over proposed cuts in wages or hours worked.
Cuban newspapers will reportedly resume publication Nov. 28 with censorship lifted.
Australia to subsidize production of gold by $5/ounce for gold in excess of last year's total production.
Prof. Junkers of Germany wins second phase of patent suit against Henry Ford for patent infringement of airplane parts.
US Army planes flew about 32.5M miles in year ending June 30; 52 people were killed in accidents, about 55% of which were caused by human error.
When the old Standard Oil was broken up it had a market cap of about $400M; this year, the various Standard Oil cos. will pay $287M in dividends and have a total market cap of about $4B.
Conservative observers advise postponing buying until market again shows resistance to declines; at the same time, most brokers advise against going short.
This week's action considered ominous to technical market students; “a double supply top, after being established definitely, usually proves extremely difficult to negotiate on subsequent rallies.”
Professional traders said to have been bearish the past week on failure of market to follow rallies up.
Opinion of “important financial authorities” about 2 weeks ago that forced liquidation had ended for now, though met with skepticism at the time, has been largely confirmed since.
One broker is “greatly encouraged by the large number of open orders” on their books to buy stocks somewhat below market.
Oct. rail operating income report considered disappointing; percentage declines in gross and operating income vs. 1929 were larger than in Sept. However, year over year comparisons in Nov. are expected to be better based on recent loadings reports.
G. Atkins, VP Missouri-Kansas-Texas RR, says Nov. was best month for the M-K-T in Texas in past 14 months; “Texas will lead on the uptrend of business just as it led on the downtrend. ... Next year will be nothing big, but the country will recover itself.”
Commodities weak. Grains and cotton down substantially. Copper still offered at 10 1/2 cents by smelters, with large producers asking 12 cents; buying has picked up somewhat, and less copper is available at the low price. Future prices uncertain; recent production curtailment of 20,000 tons/month will be enough only if industrial business has bottomed.
Fed. Reserve reports money in circulation Nov. 26 up $83M to $4.565B, total Reserve Bank credit outstanding up $25M to $1.028B. Member banks in NY City report brokers' loans down $63M to $2.122B vs. $3.430B in 1929, new low since April 1925; loans on securities to non-brokers down $6M to $2.054B.
Dow average of eight finished iron and steel products was $44.42/ton, unchanged from prev. week and low for 1930; 1929 range was $49.88 - $51.25. Scrap market show no improvement, with most markets weaker.
Dun's reports readjustment due to lower farm prices and unemployment is still proceeding, but “transition to a sounder basic status ... has been proceeding steadily, and ... a more confident view of the prospects appears to be warranted.”
Class 1 rails in first 10 months placed 73,887 new freight cars in service vs. 68,073 in 1929, and 694 new locomotives vs. 612 in 1929.
First 58 rails report Oct. operating income up 7.6% from Sept. but down 26.9% from Oct. 1929; gross was up 3.2% from Sept. but down 20.5% from 1929.
Production of oil is now lowest since end of 1926; consumption has gained tremendously since then. Oil industry said meeting its problems in determined manner, though curtailment efforts must be maintained through winter for definite improvement.
Bond issuance in Nov. so far has been $203M, only slightly above the year's low in Aug. While demand for bonds has been down in the past two months, authorities are now more optimistic; see improved tone in the bond market, though this hasn't yet translated into higher prices.
Several more small banks close in Mo., Ill., Ky., and Miss.
New Orleans Cotton Exchange directors call for end to govt. (Farm Board) interference and competition against private business men in the cotton trade.
Employment by 2,319 reporting firms in Midwest in week of Oct. 15 was 515,003, down 2.3% from Sept. 15 week; wages were $13.968M, down 1.8%.
Fed. Reserve reports Oct. sales of dept. stores in NY district were 5.4% below 1929 vs. 8% decline in Sept.; chain stores were about 5% below 1929, similar to Sept.; Oct. sales reported by wholesale chains were about 22% below 1929, similar to Sept.
Cuban-American committee of sugar producers headed by T. Chadbourne to meet with world sugar producers in Amsterdam on restricting production. Dec. sugar futures were up 7 points to 1.32 cents; this, however, is still well below the 2 - 2.25 cents that would be required for profitable Cuban production.
Production of soap products in US in 1929 was 25 pounds per capita, for a total of 3.056B pounds, total value $303.4M.
Inventories of large tire makers are down far enough that full production should resume in Jan.
Kreuger & Toll-controlled Swedish Pulp Co. currently makes over 25% of Swedish output of sulphite pulp, and 19% of Swedish wood exports; owns over 4M acres of wood land and 12 hydroelectric plants.
New Era Motors Co. files for voluntary bankruptcy.