June 23, 2009

Tuesday, June 24, 1930: Dow 219.58 +4.28 (2.0%)

Assorted historical stuff:

J. Westerfield of the NY Stock Exchange lectures civics clubs of Yonkers on the causes of the current business recession. Says the effort to attribute it to any single cause is superficial; criticizes sanguine statements of “new era” economists that “the vast amount of reliable statistical information had practically abolished the old-time evils of large inventories and overproduction.” Concludes that an illusion grew popular that “paper profits in ... quoted values for real estate, commodities, securities, and other forms of property increased fortunes and thereby spending power.”

Senator Glass is heading a subcommittee considering extensive changes to banking regulations. Among the changes considered are restricting speculative loans by banks to brokers and stock exchange members, removing the Secretary of the Treasury as a member of the Federal Reserve Board because of undue influence, making it easier for banks to expand nationwide, etc. Anticipated the committee will have meetings all of next year's session and submit recommendations December 1931.

Congressman Fiorello La Guardia (Republican, NY) objects strongly to revisions of the Wagner bill to relieve unemployment by planned public works. Urges passage of the bill in its original form and the establishment of a national employment agency.

Navy Department asks for bids for construction of aircraft carrier number 4, a 13,800 ton ship. Total cost not to exceed $19M; $4.05M appropriated to start construction.

The new Price Brothers skyscraper, tallest building in Quebec, now in full use - all 17 floors occupied.

French scientist to test device for converting warmth of Gulf Stream into electricity.

Census indicates New York City contains “300,000 unemployed and 100,000 drifters.”

New York State had 156 dead from industrial accidents in May, down from a 5-year average of 169.

Market commentary:

Morning trading began with some margin liquidation following Saturday's sharp decline. Bears sensed opportunity to drive stock prices close to panic lows of last November, and launched aggressive attacks against major industrials, particularly US Steel. After two attacks failed to force Steel below its November panic low of 150, a rally began that spread to the rest of the market, including major industrials and utilities.

Some of the recent weakness in commodities may be due to operators who are holding positions in commodities and stocks together, particularly popular speculative commodities like wheat and cotton. When forced to raise funds to cover margin calls, they may be liquidating commodity positions.

Current speculative sentiment is bearish, but the conditions are there for a strong bull market in the future. While commodity price decline is serious, many are selling for record lows or below cost of production, which can't continue forever. Inventories are low. Wages have not gone down with deflation, leaving workers with more buying power. Businesses generally have good balance sheets and are operating efficiently; those that need to borrow can do so cheaply.

Warning against following rallies until the market demonstrates the ability to hold gains.

France denies any possible immediate reprisals for Smoot-Hawley tariff.

Economic news and individual company reports:

US income tax receipts for June 1-20 total $470.7M, down from $499.5M in 1929.

Ford plans major expansions in US, Paris, and Stockholm factories; planning to order Dutch boats to use as transports on the Mississippi and Amazon.

Paramount (movies) is selling at $55 a share, with a dividend of $4 for a 7% yield. Expected to earn $2.75-$3 in first half of 1930, and seasonally higher in second half.


“'Lost Sheep.' An English parson and his family unknowingly take up residence in a former house of prostitution, with farcical complications and a few awkward innuendos; well acted although scarcely worth the effort.”

+ The Boring Stuff:

President Hoover expected to veto
proposed $180M World War veterans pension bill, uncertain if Congress will override. If passed then to maintain a budget surplus, the 1% income tax cut for 1929 will have to be reversed and other taxes may need to be raised. Secretary Mellon would strongly like to avoid raising taxes in the current business depression.

Market sentiment was helped by some strength in commodities (wheat, cotton) which also rallied after early weakness, and by a more positive feeling about the economic outlook. Sugar, however, hit 1.26 cents, a new low dating back to the Civil War.

Increasing amount of short interest, particularly on the part of “small outsiders” who may be new to the short side. May cause a scramble for cover when the market turns. Not much buying interest by the general public.

Canadian stocks have declined below last November panic lows; many leading companies yielding 5% or more. Business conditions are being hurt by declines in exports, particularly wheat, and decline in construction. Some improvement in mineral exports.

New York State construction contracts awarded in May $109.6M vs. $78.8M in April and $95.9M in 1929.

Census Bureau reports 4.36% of Chicago's total population unemployed; translates to about a 9.5% unemployment rate.

Swedish Aero-transport has compiled a remarkable safety record since starting operations in 1924. It has carried 61,200 passengers, 35,800 tons of freight, and 100 tons of mail with no injury to passengers or damage to goods.

Record volume of air mail this year - total of 2.4 million pounds for the first four months of 1930, up 21.6% over 1929. Largest carrier is United Aircraft & Transport [this included what later became Boeing, United Technologies, and United Airlines]. Payment of air mail rates at a loss by government acts as a subsidy to passenger air traffic which is generally operating at a loss.

B&O Railroad has maintained its shop work force at close to 100% so far in 1930, resulting in a large surplus of working cars and locomotives. Plans to close the shops for three weeks as an alternative to laying off large numbers of workers for indefinite period.

McKeesport Tin Plate (tin cans) estimated to earn between $9 and $10 a share this year compared to $8 in 1929.


  1. Quick question (and I apologize if you have addressed this somewhere else on the blog): Do you intend to carry on this experiment only through June or can your faithful readers expect July, August and September editions as well? Also, thank you very much.. this has made for some very interesting reading.

  2. freakie....bush's 'wealth effect' and then that bill that glass eventually got passed...?

  3. Hi Siddharth - You're welcome! I don't want to make a long-term commitment here, but will probably keep doing it as long as I'm coming across interesting stuff, and barring family emergency.

  4. Great blog - I enjoy it very much! Thanks for all your trouble.