June 27, 2009

Saturday, June 28, 1930: Dow 218.78 -1.80 (0.8%)

Assorted historical stuff:

President Hoover agrees to formation of Commission with Congress and Cabinet members to examine war profiteering; also signs universal draft resolution to insure equal sacrifice for all in wartime.

Antitrust laws including the Sherman act criticized by Martin Woll, VP of the American Federation of Labor (AFL). Says they prevent stabilization of industries such as textiles with too much capacity, resulting in severe overproduction. “Competition is what the Sherman law was meant to secure, and here we have it. But it is ruinous competition with attending wage difficulties and depression.”

German Chancellor Bruening appoints new Finance Minister Dietrich, anticipated to have difficult job. Rumored that Bruening may ask President Von Hindenburg for dictatorial powers, perhaps after making one more try to get the Reichstag to pass financial reforms.

E.D. Sullivan says racketeering is “national industry” with $3B of revenue from bootlegging alone, “furnishing easy living to 6,000,000 Americans”; calls liaison between politician and gangster “greatest menace of century.”

96% of the population of Manhattan, and 80% of Chicago, live in apartments.

Scaffolding has been removed from the tower of the Chysler building, allowing unobstructed view of the world's tallest structure.

Market commentary:

Aggressive selling of rails on recent bad earnings news; selling spread to industrials, leading to substantial declines in Steel, American Can, and other majors. However, volume was low and most stocks resisted pressure. In late afternoon, short-covering and odd-lot buying became apparent and many stocks had good rebounds from earlier lows. Banks and insurance companies gained.

Survey of Illinois Manufacturers Association finds slow but sure recovery in business, expects improvement in second half of 1930 with profits for year as large as 1928, and further improvement in 1931. Many survey responders expect tariff to improve business conditions.

Brokerage letters have taken to quoting poetry, particularly Kipling's “If” [If you can keep your head ...]

Winthorp, Mitchell says easy money is starting to improve bond market, should spread to corporate bonds, preferreds, and then common stocks. Over $1B of new savings accumulated every month by insurance companies, banks, etc; this balance must be invested somewhere.

Drop in margin loans should be positive for market; investors are less vulnerable than in November panic.

Economic news and individual company reports:

Gasoline stocks have been declining seasonally in May and June, but still are too high at 50.5M barrels. Refineries are now operating between 65% and 85% of capacity; if they don't cut operations, inventories at the end of 1930 will be even higher than the huge level at the start of 1930, resulting in lower prices.

Childs (restaurant chain) earnings for first half 1930 up approx. 100% over 1929. Sales had suffered over the past 6 years when management eliminated most meats, printed calorie counts for menu items, and changed slogan from “The Nation's Host from Coast to Coast” to “Watch Your Step - Get Vegetable Wise.” Present management took over in March 1929 and reversed these policies.

American Tobacco (makers of Lucky Strike) earnings so far this year have more than doubled over 1929. Earnings for 1930 are expected to exceed the $30.6M level it showed in 1911, when it was broken up by Supreme Court decision, and forced to divest subsidiaries including R.J. Reynolds, Ligget & Myers, Lorillard, British American, MacAndrews & Forbes, American Snuff, etc.

Technicolor is target of bear attacks amid rumors of lost contracts and competitive color film processes. Stock has declined from $70 to $25 over a period of weeks. Company denies rumors, says full capacity is sold out well into 1931, current year earnings estimated at $5.

George V. MacKinnon, president of Stetson Co., elected president of the Hat Institute for the coming year.


“A nearsighted man lost his hat in a strong wind. He gave chase. A woman screamed from a nearby farmhouse: 'What are you doing there?' 'Getting my hat,' he replied. 'Your hat,' exclaimed the woman. 'That's our little black hen you're chasing.'”

+ The Boring Stuff:

Scientists have come up with two new tools for finding underground mineral deposits: using the torsion balance to detect small variations in gravity, and using the seismograph to measure the shock in response to a blast of dynamite.

Indications of increasing short interest in the market as it has declined. Shorting has spread to rails, which are usually left alone by bears. Some industrials said to be so heavily shorted a corner may be possible.

US textile making areas including New England generally pleased with the tariff.

Silver brokers say price seems to be stabilizing, though still close to record low at 34 1/8 cents/ounce. Should help China, which has been suffering since currency is silver-backed.

Rubber producers try to agree on a 25% reduction of output through the industry.

Tin producers starting agreed 2-month halt of mining, to be followed by 20% reduction from 1929 rate.

Zinc down to 4.2 cents/pound, new yearly low.

Pines Winterfront (auto parts) earnings for year ended April 30 were $768,458, up 38% over previous year. Selling detachable radiator front to low-priced car owners, expects this to offset decline in business from auto makers. Successful new Finger Tip Control product - combines starter, light, and horn control in center of steering wheel, adopted by Willys-Knight, Marmon, and other auto makers.

Southern Cal. Edison May earnings $1.64M vs. $1.70M in 1929.

Allied Chemical expects first 6 months 1930 earnings equal to 1929.

Abbot Labs earnings for first 5 months 1930 a little above 1929 in spite of January 1929 being unusually good because of flu epidemic.

May sales of New York city department stores up 5% over 1929. Chain store sales also slightly higher. Wholesale sales down 14%.

Sears-Roebuck now says 1930 net income won't reach 1929 levels.

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