June 12, 2009

Friday, June 13, 1930: Dow 247.18 -1.90 (0.8%)

Assorted historical stuff:

Offering of German annuity bonds a success. Until March of this year “the task of adjusting herself to the consequences of the Versailles Treaty had been continuously postponed in favor of temporary expedients to bridge recurring political crises.” Now that the extent of their obligations has been settled, they'll have to buckle down and get to it. A Paris correspondent is optimistic that this will lead to “a great revival of industry and prosperity.” This may or may not be the case. In particular, if they try to devalue their currency to increase exports this may upset the United States and England.

Passage of the Smoot-Hawley tariff seems likely. With Senator David Reed, declaring his support, the bill is likely to pass in the Senate by two votes, and then to be adopted by the House. President Hoover is likely to sign in order to end “business uncertainty surrounding tariff consideration”; it's feared that a narrow defeat or veto would simply lead to the reintroduction of the issue at the next session of Congress. Senator Reed says the bill has been improved more than generally appreciated; his action followed meetings with Secretary Mellon and President Hoover.

Manhattan population has declined 18% since the 1920 census. It's the only borough to show a decline.

Long-distance telephone service inaugurated between Mexico and the US, jointly operated by Ericsson and AT&T.

It's getting harder to get away from it all with “telephone, telegraph, cable, and radio in every conceivable place.”

Market commentary:

Stocks “developed a steadier tone”. Two encouraging developments were the success of the German loan offering, and easier money conditions with the demand rate declining from 3% to 2.5%. Stocks continued lower in the morning, with new lows in major stocks. A rally developed in the afternoon with sharp rebounds in many shares that were recently under pressure.

Business is not improving as predicted, which is lowering market sentiment. Business volume is holding fairly steady week-to-week, but prices are lower, which should lead to lower earnings. Wages aren't going down as fast as earnings, but fewer people are employed.

Market has confounded observers by slumping when two weeks ago at least 75% of the Street was predicting a rally.

Market observers now predict range-bound trading within a 5-10 point range until the economic signs are clearer.

Rumors of bankers forming a pool to buy stocks similar to the one that stopped the November crash, but bankers say the market doesn't need it.

Thursday had 1 stock making a new yearly high and 169 making new yearly lows.

Leading economists and market observers are looking for clues on how long the current trade depression will continue. Since 1873 there have been thirteen periods of business depression. Ten of these had an average length of 15 months. The remaining three were much longer, but there were exceptional circumstances in each case that it is clear don't apply here. Credit is easy, inventories are not high, and the banking system was never sounder. Therefore the current depression should not last longer than 15 months. Since it began in July of 1929 in improvement is to be expected at the start of the fourth quarter.

A considerable number of market observers” predict that once the Smoot-Hawley tariff is finally settled market sentiment should improve, whether it's passed or defeated.

Economic news and individual company reports:

I. T. & T. reported first-quarter earnings of $.57 a share, compared to $.83 a share in Q1 1929.

The Department of Agriculture's farm export index is 65 in April compared to 82 in March and 86 in April 1929. This is an index of 44 important agricultural commodities begun in 1915. April's level is the lowest ever recorded except for the one month of July 1928.

Canada Dry reports sales and profits in April and May higher than those in 1929; June so far is slightly lower.

R.J. Reynolds tobacco Co. has started using radio advertising to support the Camel brand after Lucky strikes has been taking some market share. Strategy has been successful and earnings per share of over $4.00 are expected this year compared to $3.32 last year.

Technicolor Corp. (color film processing for movies) has been forced to stop accepting new contracts since printing labs in Boston and Hollywood are already working at 24-hour capacity. They now employ 1100 technicians and have already increased capacity 700% in the past year.

Consolidated cigar reports earnings for the first quarter of 1930 of $497,473, down $171,451 from 1929. Part of the decline blamed on a delay in changing over to newfangled cellophane wrappers that have become very popular in a short time.


“Guest (to head waiter) - That roast is certainly a long time coming.

Head Waiter - Can you recognize the man who's serving you?

Guest - no, but here's his fingerprint on the soup plate.”

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