July 30, 2009

Thursday, July 31, 1930: Dow 231.08 -7.32 (3.1%)

Assorted historical stuff:

Some interesting observations on concentration of wealth by L.M. Shaw, Treasury Sec. under Pres. T. Roosevelt: “Whether fortunes of a hundred millions or more are good or bad matters not. It is as idle to rage at them, as to rave over them. ... As I read history each civilization has been self-destroying, and he who does not discern the larvae of destruction in this fails to see the obvious. ... instead of Huns and Vandals, our destroyers will be those of our own people who have had no breakfast and do not expect dinner.”

16 years ago today (July 31, 1914) the New York Stock Exchange closed due to outbreak of World War. NYSE President Noble rang opening gong at 10 AM, rang it again immediately for closing. Reopened for bond trading on Nov. 28, for stock trading Dec. 12; trading restrictions completely removed April 1, 1915.

Editorial: Some have seen the sweeping upset Conservative victory in Canada as response to the US tariff. But in fact, both sides advocated tariffs, the difference being that the Conservatives campaigned for one protecting Canada, whereas Liberals favored Beaverbrook's proposal for a tariff wall around the British Empire and free trade within it. Conservatives probably won because they put Canada first; Canadian public wanted “a party more dependably Canadian than imperial.”

Chicago police official tells congressional committee investigating Communist activities that US has a total of 51,685 members of Communist organizations and 79,325 in sympathetic groups. On the other side are 1,089,107 in organizations actively opposed to Soviet system.

Persistent reports in Canadian wheat circles of heavy rains ruining Russian and Baltic states wheat crop, threatening starvation. Reports can't be confirmed due to Soviet censorship of weather reports. These reports have not as yet been reflected in local wheat markets.

Better Business Bureau distributes booklet "What An Investor Should Know," primer for inexperienced investors to help detect fraud before money is lost.

Primo Carnera [boxer, 6'6", 280 pounds] currently traveling in US, having difficulty finding suitably large beds. Several hotels have procured special beds for him.

Market commentary:

US Steel Q2 earnings were about the $3 expected, but finance committee issued optimistic statement expecting increased business through rest of year. Some disappointment extra dividend wasn't declared, though this had been predicted last week; the extra is considered likely later in year if business picks up.

Market opened firm; US Steel advanced early but was unable to hold gains; this discouraged bulls and was followed by profit-taking and aggressive bear pressure on leading industrials. Large declines followed in major industrials and trading favorites. Selling picked up in early afternoon on an unconfirmed report Ford might extend shutdown by another week. Some large buying by bullish interests in final hour; finish irregular. Banks, trusts sharply lower. First time in recent weeks that volume increased on decline.

Studebaker President A.R. Esrkine on the depression: Notes general pessimism, but buying power is still there; spending has gone down much more than incomes; “there are individuals in your territory who can and should buy a new or used car but have not done so. They have been hold outs, hoarding instead of spending normally and sensibly.” Recommends redoubled marketing efforts by businesses; Studebaker has done this through depressions for past 78 years.

Conservative observers more cautious, note profit-taking on rallies, difficulty getting prices to move up. Once again advise buying on reactions and selling rallies.

Editor: "I saw your paragraphs about Mr. Grace's salary in this morning's issue. Perhaps the world would be safe for democracy if it could be shown that a 'bonus system' of salaries for big executives would mean little or no bonus in a year when little or no earnings accrued to the common or garden variety of stockholders."

Currently, good stocks have dividend yields double the call money rate, reverse of the situation last year when call money rate was double dividend rate. This year's situation is unlikely to last, just as last year's didn't.

Economic news and individual company reports:

US electric output for past week was 1.660 GWHr, down 2% from 1929, an improvement over previous week's 3.3% decline.

Safeway Stores expects first half earnings about $2/share vs. $4.31 in 1929; sales are up 8.6%, but profit margins are down; consumers buying in bulk instead of "the higher grade commodity sold under trade names". Decline in purchase of "so-called luxury foodstuffs."

Axton Fisher, manufacturer of mentholated cigarettes under "Spud" brand, reports first half sales up 25%, earnings up 60%; stock yielding over 7%.


"He (bragging about ancestry) - Yes, my father sprang from a line of peers.
Bored Listener - Did he drown?"
[Get it? Peers ... piers ... ahh, never mind ... ]

+ The Boring Stuff:

Editorial in favor of Hoover's declaration that US won't discriminate against Russian goods. On particular question of Russian lumber possibly produced by forced labor, should be excluded until an investigation is done, but as for other goods, “It is not quite enough to say that under Communism all workers are conscripted; such a declaration would at once plunge a large part of our foreign commerce into the uncertainties of political and economic theory.”

Public Service Commission calls for lower electric rates in New York City; Chairman M.R. Maltbie points out that "a number of other cities have lower rates than New York City, and with the exception of areas having cheap hydroelectric power, New York companies ought to be in a position to serve their consumers at as low rates as any metropolitan area."

Turkish government orders foreigners residing in Turkey to spend or invest at least half their earnings within Turkish borders. Order affects several thousand German, Scandinavian and Hungarian workers employed in railroad construction.

Commodities sharply lower, widespread liquidation seen; new season lows in wheat ($0.835/bushel), cotton (12.67 cents/pound), sugar (1.11 cents/pound).

Bonds irregular; investment grade fairly steady, convertibles lower, US govt. dull and slightly lower.

Iron Age notes increased steel orders from railroads, sees no other definite clue on future trend; operations are now steady. Industry still optimistic, but based on current suspensions recovery may not happen until mid-August. Activity weakest in consumer lines; construction steel and pipelines remain strong.

Central Trust of Illinois reports business for first half of 1930 overall very little behind 1928. "When the 1930 figures are digested ... they cannot be made to spell 'business depression,' but show merely a receding of business volume from the highest point ever attained." Say business has to some extent been damaged by uncertainty over terror and naval treaty; with these out of the way, "there is more reason to expect the continuous, if somewhat unsteady, climb back to a position above the normal line."

Countries manufacturing synthetic nitrates holding conference to agree on production restrictions.

Bears apparently encouraged by repeated failure over past two weeks to rise above 240 level; hoping for repeat of break when the May rally faltered at 275. Gillette advanced against market trend on renewed merger rumors.

Almost all utilities reported improved sales and earnings so far this year; this probably accounts for their higher price/earnings multiples compared to other stocks.

Oil industry curtailment still holding; production down slightly in the week ended July 26. Gasoline storage also declined 1.186M barrels; total decline since June 28 is 4.949M barrels, to current total of 44.8M barrels.

Auto parts shipments in June: original equipment 119% of Jan. 1925 level vs. 153 in May, 175 in April, and 231 in June 1929; service parts 131% vs. 137, 150, and 150; accessories 71% vs. 78, 74, and 90.

Loose-Wiles Biscuit (second-largest cracker manufacturer) net for year ended June 30 was $2.553M vs. $2.334M in 1929.

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