July 31, 2009

Friday, August 1, 1930: Dow 233.99 +2.91 (1.3%)

Assorted historical stuff:

Romance is replacing "realism and matter-of-factness" in both fashion and theater. "The post-war years of bobbed tresses and short skirts" were ones of "rude materialism." In theater, "the measured rhythms of poetic drama were muted in the hurdy-gurdy tunes of a quick-stepping generation." Now, theater managers travelling to Europe find fashion returning to "laces and ribbons and sweet old-fashioned flowers," and in theater a revival of "old-fashioned love stories or flaming medieval romances." Of course, romance never went out of style some places: "It is axiomatic among American showmen that, west of the Hudson, American audiences have always been frankly sentimental."

Editorial: Good terms obtained by Mexico in debt settlement "shows what a debtor can accomplish if his nerve and ability to procrastinate are sufficiently lasting." Also noted is Germany's success in cutting reparations to a fourth of original demands. However, Mexico is now in the penalty box; "Only after demonstrating her ability and disposition to meet obligations beyond question and quibble will it be worth her while to attempt further outside borrowing."

Met Life 1930 figures based on 19M policy holders in US and Canada show sharp drop in disease death rates among wage-earning population to record lows.

Romanian King Carol refuses to accept resignation of cabinet following antisemitic disturbances.

NY State Bureau of Securities summarizes reports turned in by 270 investment trusts [similar to mutual funds]. While investigations of those suspected of fraud and misrepresentation continue, “it is gratifying [that] ... no such practices have been found in any of the larger and more responsible companies.”

Atchison, Tokepa & Santa Fe Railroad exhibits "air-cooled by refrigeration" dining car to be placed on "crack train" between Chicago-Los Angeles.

For first time in history, a lighter than air craft landed on a ship's deck and boarded a passenger (blimp took Goodyear Pres. P.W. Litchfield off the Bremen).

Twelve leaders of industrials (incl. Studebaker, American Rolling Mill, Pillsbury, etc.) oppose wage cuts as aggravating business recession.

Market commentary:

Bears attack early, target Consolidated Gas (on possible lower NY City electric rates), and majors including GE, US Steel, GM, AT&T. After brief recover around 11AM, bears renewed attack. Resistance developed, as stocks were not sold on setbacks. Tuesday's positive report from Steel finance committee seen as (delayed?) factor in support. Broad rally then developed in active stocks.

Henry Ford says present depression is "of minor moment in onward sweep of industry," also defends modern civilization against charge it cramps the individual. Thomas Edison says the depression is largely psychological.

Walker Brothers point out strong similarities of current business and market conditions with 1921. Market pattern of break last fall, followed by recovery and second break in spring, almost identical to 1921 in both timing and percentage. Other indicators including commodity prices, freight loadings, and dividend yields also similar. First indicator improving in 1921 was construction, two months before stocks hit lows [followed by 8-year bull market]. Therefore encouraging that construction turned up in June.

Conservative observers still advise remaining mostly on sidelines until market breaks out of range, taking profits on rallies, and waiting for reactions to buy.

US Steel earnings report seen as encouraging; able to earn almost full years dividend requirement of $7 in first half, whereas in past depressions was unable to cover dividends. Improvement due to greater diversification and operating efficiency. Management optimism is significant considering their usual caution.

Economic news and individual company reports:

NYSE transactions in July totalled 47.745M shares vs. 93.372M in 1929; smallest monthly total since July 1928 (39.994M).

William Green, AFL Pres., reports trade unionist unemployment in 24 cities was 21% in July vs. 20% in June.

Almost all car manufacturers to restart production by August 4, including Ford, Packard, Oakland-Pontiac, Graham-Paige.

New construction contracts for 37 states east of Rockies July 1-25 was at rate of $14.146M/day vs. $25.094 in 1929.

Companies reporting good earnings: American Water Works, Corn Products, National Dairy Products, National Supply.

Shangai Telephone Co. of Brooklyn incorporated in Delaware.

Strangely modern Hollywood joke:

"'How do you like your new publicity agent?' asked the film star's friend.
'Oh, he's wonderful,' she cried, beaming with enthusiasm. 'We've been robbed twice, our house has been burned, our car has been wrecked, and I have had my life threatened by an anonymous enemy since we employed him.'"

+ The Boring Stuff:

New Canadian Conservative PM Bennet says expected Canadian tariff on US goods is not intended as hostile to US, but as recognition of tariff effectiveness. Canadian stocks higher after clear Conservative victory; big factor was a landslide in Quebec, where farm communities were affected by the US tariff.

Editorial against Commerce Commission's decision to benefit farmers by lowering rates on rail transport of grains. True that farmer is in distress, but “Should the railroads be assessed for his imagined benefit because supplies of wheat are almost as redundant as the Commission's verbiage?”

President Machado of Cuba considering decree to restrict immigration from Jamaica, Haiti, Poland, and China.

International Paper says it's been assured convict labor not used to produce pulpwood it's importing from Russia, says paying same price as for Canadian wood.

Cotton closed unchanged after touching new lows; wheat rallied from yesterday's season lows. Bonds irregular, particularly speculative and preferreds.

Bear success Wednesday discouraged traders, with a repeat feared of the June break that occured after similar failure to extend the rally past 50% of the previous decline. However, market fundamentals are stronger now; business in May was still declining vs. now seen flat to rising; stronger bond market also a good sign.

Resistance to bears attributed to stocks being in strong hands; public participation in July rally probably small as seen in low level of brokers' loans.

One copper selling agency's slogan: "Buy your copper while you can get it below cost of production."

National City Bank NY monthly bulletin says production in many industries below consumption, sees fall upturn in industrial activity. Also reports on installment credit extended by 4 large auto finance companies; percent past due 30 days is now 0.31% vs. 0.20% in 1929; 60 days is 0.19% vs. 0.12%.

Government officials unconcerned about 50% decline in customs receipts so far in July; attributed to pre-tariff import surge; cause for alarm if decline continues.

Agriculture Dept. estimates 1930-31 wheat season production about equal to 1929-30, considerably less than previously predicted (due to unfavorable weather).

Iowa's population increased 2.7% from 1920 to 2,647,900; Idaho increased 1.3% to 437,440.

Oil and oil products in storage were 690.9M barrels at end of June vs. 694.3M end of May and 661.0M end of June 1929. Decrease of 3.4M in June contrasts with increase of 5.5M in June 1929. Texas oil producers expected to cut production to 737,000 barrels/day from current 830,000.

US airports and landing strips numbered 1,657 as of July 15, up from 1,561 on Jan. 1. States with most were Calif. (164), Texas (115).

June wholesale confectionary sales were $19.774M vs. $20.049M in 1929.

Studebaker cuts quarterly dividend to $0.75 from $1.00 last quarter and $1.25 before that. Earnings in Q2 were only $0.41/share vs. $0.62 in Q1 and $3.02 in Q2 1929, but company is using large accumulated surplus to maintain the dividend this year.

Bethlehem Steel Q2 earnings $1.86/share vs. $2.60 in Q1 and $4.17 in Q2 1929.

Boston Edison ordered to cut general electric rates to maximum of 7.5 cents/KWHr.

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