July 9, 2009

Thursday, July 10, 1930: Dow 222.04 +2.96 (1.4%)

Assorted historical stuff:

P.K. Schuyler, pres. Federal Bridge Co., says automotive demand for roads and bridges has far exceeded capacity of government construction. "Traffic moves along the existing highways at a good speed for some five or 10 miles, then when the highway enters a congested area there is a considerable delay encountered, particularly on Sundays and holidays." Cars are now dependably capable of 60 to 80 miles per hour, "yet these speeds can be used only at infrequent intervals." Calls for more private construction, particularly of toll bridges.

Farm Board declares wheat price can't be stabilized without cuts in acreage planted; Gov. Reed of Kansas bitterly denounces administration policies, saying they "subordinate agriculture to industry." Farmers in Texas reported dumping millions of bushels of quality wheat in fields to avoid more losses on storage charges. Prices in Texas down to $.65 a bushel, well below production cost. Even large growers with cost about $.50 a bushel are not selling; everyone waiting for Grain Stabilization Corp. to support prices.

Port of New York Authority calls for proposals for construction of Manhattan approach to the Hudson River Bridge [later G.W. Bridge].

Cecille B. DeMille to make his first comedy with music, Madam Satan. Production features “a masked ball aboard a Zeppelin, and the breakup in mid-air of the giant airship, with the descent to earth of the passengers via parachutes.”

Man found guilty of “selling” liquor in exchange for stock tips - although no cash exchanged, defendant gained “measurable benefit.”

Florida population about 1.5M vs. 968,470 in 1920.

Market commentary:

Major stocks hit new highs for the current rally; attributed to optimism on business conditions. Current seasonal slowdown hoped to be low point of the depression; market also considered technically stronger due to recent liquidation. Also some news of increasing construction activity in June and higher freight traffic for week ended June 28. Strength in major industrials, rails and utilities.

Action during day was not heavy but notable for lack of bear operations. Conservative observers still consider the market range bound and advise avoiding positions until it breaks out on either side.

Manufacturers said to be very cautious about preparing for fall and winter demand due to business uncertainty and unemployment.

PaineWebber says low interest rates are a strong force for business revival. Anticipates rally first in bond prices, than in investment stocks, then secondary stocks. Bond price rally is therefore the first signal of the general recovery.

National City Co. says Bond market outlook is good - fewer new issues and wide spread between rates on short-term paper and high-grade bonds.

Increased Italian import duties on cars not seen having a major effect on American companies; total market is $1.25M/year.

Economic news and individual company reports:

June auto production in US and Canada was about 343,000 cars and trucks vs. 441,826 in May and 567,424 in 1929. Auto executives believe conservative policy is bringing production in line with demand; dealer stocks are now about one month's sales.

Total class 1 railroads operating income for the first five months of 1930 was $307.7M vs. $457M in 1929.

Total electric production in the week ended June 28 by companies representing 70% of the industry was down 1.8% from 1929.

G.B. Everitt, pres. Montgomery Ward, announces general price cuts to "practically a prewar basis." Also new easy payment plan on orders of $25 or more.

United Fruit said to be helped by banana demand "larger than even the most optimistic projections", offsetting weakness in sugar.


“'Do you always look under your bed before you say your prayers?' asked the flapper's niece. 'No, darling ... first I say my prayers.'”

+ The Boring Stuff:

US Bureau of Mines studies shale oil as a possible substitute for petroleum in wartime. US is known to contain enormous reserves of shale from which oil can be extracted. Oil was found undesirable because it doesn't meet current requirements for oil products. However, when need for substitute becomes greater shale oil may become more viable. "With a greater demand, requirements can be dropped or modified and refining methods can be developed ... the world is now using fuels that not many years ago were considered impossible or impracticable."

Editorial: Farm Board appeal to cotton farmers to reduce acreage has failed. Desired reduction was at least 10%; actual acreage planted down only 2.7%. Cotton price has already declined from $.20 a pound last July to $.13 a pound currently. Surplus in storage is larger than last year, anticipated cotton crop is larger, and world demand is down almost 15%. Farm Board owes us an explanation of just how it plans to market all that cotton.

Book Publishers' Research Inst. reports average of 3,720 copies sold per book. Average publisher profit on $2.50 book 6.75 cents, author royalty 32 cents.

Commodities generally firmer; wheat and corn up sharply. Foreign currency irregular; France said to be accumulating gold foreign far in excess of needs; French bankers fear inflation as a result. Bonds generally higher, continuing past week's strength. Some strength also seen in convertible issues.

Rail revenues expected down this year, but may be able to maintain earnings by safely reducing maintenance expenditures. Recent series of prosperous years have allowed rails to make many improvements and modernizations that should decrease required maintenance in the future. Possible problem in declining passenger revenue - $29M decline in first four months of 1930 was equal to the decline for all of 1929 vs. 1928; rails must maintain schedules even when traffic declines.

Rail shares helped by anticipated gains in freight traffic in future weeks for crop transport, and rate increase allowed by Interstate Commerce Commission.

Steel demand hasn't yet recovered from summer slowdown; industry unsure how long it will take. Automotive, railroad car, and farm equipment business very slow; pipe, and tinplate strong; structural has been stronger but weak recently. July average production expected around 60%.

Tire companies are suffering. Competition very strong for new car business; retail replacement market first estimated at 50M for 1930, may not reach 45M. Price cut on June 5 has not stimulated sales. Best showings by General Tire & Rubber (makes high-end retail tire) and Goodyear.

US Steel unfilled orders to be announced today may decline below 4M tons; only two of the past 18 months have had unfilled orders below that total.

AT&T net income for the first half expected about $5.80/share vs. $6.17 in 1929.

Gen. Amer. Tank Car (refrigerated tank cars) expects earnings for first half well above 1929 level.

Walgreen June sales $4.3M, up 10 percent over 1929; six month sales $25.9M, up 23.5%. First National Stores sales for five weeks to June 28 $10.7M, up 10.1% over 1929; 26 week sales $55.6M, up 22%. Hahn Department Stores sales for February through May down 2.78% from 1929.

Nash Motors net income for quarter ended May 31 was $0.71/share vs. $2.42 in 1929.

Consolidated Laundries profit for 24 weeks ended June 14 was $0.90/share vs. $0.75 in 1929.


  1. WSJ this week:

    Highways: Pay More, Drive Less, Save the Planet: To fight climate change, Washington wants you to take a bus: "Most travel is not for its own sake. So reducing the total miles traveled -- whether the length or number of trips -- means people would have to reduce the activities they want and need to do. People would be "coerced," in effect, to live in less desirable places or work in less desirable jobs; shop in fewer and closer stores; see their doctor less frequently; visit fewer family members and friends."

    Agriculture: White House Aims to Toughen Food Safety
    "But details for many of the initiatives remain unclear. That leaves food-company executives struggling to calculate the cost of compliance. The USDA, for example, hasn't signaled to industry executives by how much it wants to reduce salmonella in chicken and turkey. Nor has the USDA told meatpacking officials what to expect as it increases sampling for E. coli."

    G-8 Pledges on Food Aid Expected "Volatile food prices stoked global tension last year, sparking riots in some countries, sometimes as production and prices both remained high. Though many crop prices have since fallen back, the unrest helped make the complex issue of food security a major focus for G-8 political leaders, who are concerned about social and political consequences."

    G-8 Stumbles Anew, Comes Up Short on Food Aid "G-8 officials had been promoting a three-year, $15 billion initiative to launch what they are calling a "green revolution" focused on improving agricultural productivity and the livelihoods of the rural poor. Advocates of development aid have noted that $15 billion is at best what developed nations already provide in food assistance. At worst, it may represent a decline."

    Stock Market: Fear Takes a Toll as Stocks Tumble "After more than three months of greed, fear is returning to global financial markets... Amid growing nervousness about the economy's prospects, the Dow Jones Industrial Average fell 161.27 points, or 1.94%, on Tuesday, to 8163.60, its lowest close since April 28. It still is up almost 25% since beginning a sharp rebound from a 12-year low on March 9, but it had been up as much as 34% a month ago."

  2. Excellent explanation of why the "Recovery Plan" is not working to revive the real economy and will not work to do anything but expand the bloated bureaucracy:

    When Stimulus Does Not Stimulate by Shawn Ritenour, Mises.org.

    "Certainly we can expect that when the government spends a trillion dollars this will provide a positive statistical boost to GDP, if for no other reason that government spending makes up a significant portion of GDP. Where, however, does the state get the money to spend? Ah, as Hamlet might say, there's the rub. There are only three ways the government can obtain funds to throw at all their shovel-ready projects and all three leave in their wake negative economic consequences..."