July 22, 2009

Wednesday, July 23, 1930: Dow 234.30. +5.01 (2.2%)

Assorted historical stuff:

After strong resistance, Bethlehem Steel forced to reveal executive bonus amounts (in trial concerning suit by Eaton-Otis interests to block proposed merger of Bethlehem with Youngstown Sheet & Tube). 1929 bonus for E.G. Grace, president, was $1.624M; 1929 bonuses for six vice presidents totalled $1.432M. 1929 bonuses for remaining executives totalled about $370,000. Total bonuses for Grace since 1925 were $5.432M.

Western Electric reaches agreement with Tobis-Klangfilm on sound film patents. Should expand European exhibition market for American films (currently Warner Bros. is the only US company allowed to exhibit in Germany). Territories for sound equipment divided between the companies. American companies now face a problem with language barrier. When talkies started this wasn't important since "audiences were attracted by the novelty of sound regardless of language." Now that novelty has worn off, current plan is to produce foreign versions abroad; "a copy of the original film is sent this over to act as a guide."

Editorial: War Sec. Hurley broadcasts speech on waterway development advocating it “wherever economic justification can be shown.” This phrase is an alibi “invariably written into official programs for spending the people's money and promptly forgotten.” If honestly applied to these projects, “would reveal nine-tenths of them as what they are, plans to subsidize a little transportation out of the national treasury for the advantage of particular localities.”

Hoover signs London Naval Treaty; now awaiting ratification by Britain and Japan. Under conditions of treaty US will reach naval parity with Britain by 1936; Japan naval building will almost stop.

Chilean government cuts salaries of all public employees by 15%, also suspends "certain gratifications and rent money."

Montgomery-Ward issues 730 page fall/winter catalog; theme is "savings and thrift."

Weekly food cost for family of 4 estimated at $13.72; many staples 20%-40% below 1929.

Market commentary:

Market opened at about the previous low levels with some further decline; increasing resistance to bear efforts as the morning progressed; rallies developed in recent trading favorites. Good news on steel encouraged bulls, as well as rumors of important operators "lining up their forces for another bullish demonstration;" rally broadened in the afternoon. Good rebounds from Monday lows in many majors. Banks and trusts higher.

Administration members reported telling Wall Street that business has turned corner, and should curve slowly upward until winter, becoming clearest in October. No forecast beyond that ventured. However, administration strenuously denies rumors of using "its influence to bring about organized support for the stock market."

Irving Trust July review says we may be entering "ultimate pit of the depression;" sees mostly bad news in June, including declines in most lines of business, lower commodity prices, stock market declines, and possible tariff reprisals. Nevertheless, advises remembering that "It is always darkest before dawn."

Sentiment improved by market support yesterday. Conservative observers still advise buying on dips and selling rallies, but if market can get above previous resistance, would be considered confirmation of uptrend and convert many observers to the bull side.

Economic news and individual company reports:

Banks reported deposit increase by $257M in past week, to $21.317B; most of money not employed; increase of $37M in loans and $82M investments.

Rail freight loadings for week ended July 12 were 915,985 cars, down 150,429 from 1929 and 108,940 from 1928, but up 123,844 from July 4 holiday week.

US Steel production in past week was almost 64% vs. 63% prev. week and 55% holiday week; industry was 57.5% vs. 57% and 48%.

Drastic curtailment cut oil production in June down to 2.506M barrels/day, lowest level since Nov. 1928. Average last Feb was 2.699M, last August 2.975M.

US/Canada June truck production was 48,667, down 15.4% from May and 50.4% from June 1929. First half 337,345, down 30.9% from 1929 but up 31.6% from 1928.

Frigidaire subsidiary of GM introduces new low-priced refrigerator for $157.50; previous lowest priced model was $182.50.

Prestone coming out with improved antifreeze for next winter; will be green for easy identification. Promises to be very profitable.


Old-Timer's Week at the Palace; a group of vaudeville favorites of the old days appearing, ranging in age from 64 to 86. Tom Harris, the oldest, is a tap dancer, shows he is up on the newest steps, “concludes by executing a few rapid steps in the old style;” “Lizzie Wilson sings the well-known German drinking song 'Das Ist Ein Schnitzelbaum,' with the aid of a chart and baton. Josephine Sabel gives an animated rendition of 'There'll Be a Hot Time in the Old Town Tonight.'” Show is being very well received.

+ The Boring Stuff:

Patent office issues 49,599 patents in the year ended June 30 [number in 2008 was 157,772].

Chicago metro area population 4.657M, up 1.135M from 1920.

Commodities little changed; wheat, cotton slightly higher, corn up on drought. Copper remained at $0.11/pound. Bonds irregular; foreign govt's up, US steady.

Developing consensus among brokers is that market is in general uptrend with occasional downward reactions. Advise gradually buying high-grade stocks for investment, advise traders to buy on dips and sell on rallies. Enough bears still around "to make trouble when the market begins to show signs of wavering."

Technical analysis: Next week is crucial to determining whether the current rally was due to fundamental factors or just technical. As of last Friday market had recovered about 50% of the June break. Bear test on Saturday and Monday then wiped out about a third of the rally gains. New support yesterday was encouraging; if market continues up, this indicates rally is due to fundamental reasons (increased business confidence).

Current month is the anniversary of the business slowdown; October will be anniversary of the stock decline. "Every succeeding day means we are just that much nearer a definite turn for the better." Meanwhile a Canadian broker points out: In the 1907 panic March 14 was the low, and the nearest low afterwords was 224 days later. Likewise in the 1929 panic, Nov. 13 was the low and the nearest low afterwords was 224 days later (on June 25)!

Meatpacking industry sales first 5 months sales $5.083B, almost as large as last year. Packing stocks in a rut thanks to low profit margins.

Machine tool market still dull, but thought to be at bottom; sentiment improved.

Gas sales in May down from 1929; decline is 1% for manufactured gas and 11% for natural gas. Attributed to decline in commercial and industrial use.

American Gas & Elec. net for 5 months ended May 31 was $2.62/share vs. $2.54 in 1929.

American Ice June profit of $914,382 vs. $906,799 in 1929. Profit for first half $1.968M vs. $2.108M.

McKeesport (tin plate for canning) first half net $5.05/share vs. $3.61 in 1929.

Jones & Laughlin Steel first half net $8.50/share vs. $16.05 in 1929. Magma Copper first half net $611,413 vs. $1,805,774 in 1929.

Pacific Western Oil first half net $1.22/share vs. $1.06 in 1929.

E.I. du Pont de Nemours first half net $2.84/share vs. $3.84 in 1929.

Yellow Truck & Coach Mfg. first half net $1,437,863 vs. $859,659 in 1929.

Allis-Chalmers (farm and industrial equipment) first half net $1.87/share vs. $1.73 in 1929. Bookings and unfilled orders up slightly from 1929.

Mapes Consol. Mfg. (egg cartons) first half net $4.66/share vs. $3.62 in 1929.

Congoleum-Nairn (floor coverings) first half net $0.40/share vs. $0.54 in 1929.

F&W Grand-Silver Stores first half net $1.71/share vs. $1.47 in 1929. Grand Union store sales for 28 weeks to July 12 were $19.5M vs. $17.1M in 1929.

Pierce-Arrow (cars) Q2 net $569,277 vs. $461,401 in Q1 and $1,288,643 in 1929. Hupp Motor Car Q2 net $0.29/share vs. $0.04 in Q1 and $0.95 in 1929.


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