August 14, 2009

Friday, August 15, 1930: Dow 221.08 +0.73 (0.3%)

Assorted historical stuff:

Exterior of 50-story Irving Trust building at 1 Wall Street completed; required 288 rail cars of Indiana limestone. Vault extends 70 feet below building, protected by 6-foot building walls, outer layer of steel, thick layer of infusite (copper-iron alloy with “high torch-resisting qualities”), and layer of solid chemical “which, under the heat of a cracksman's torch, would give off paralyzing fumes.”

Dr. H. Schacht, former Reichsbank Pres., says world recovery will happen “only when business men instead of politicians guide its destinies.”

Mexican Pres. Rubio signs decree distributing state-owned haciendas (estates) to small holders. Considered step in providing land for all workers, expected that future expropriation of foreign-owned land will be reduced.

Detroit population April 1 was 1,573,985, increase of 580,307 since 1920.

Captain F. Hawks crosses US from Los Angeles to Valley Stream in 12 hrs. 25 min. 3 sec., 2 hrs. 20 min. under Lindbergh's old record.

CBS and NBC seek licenses to build plants for television experiments.

Curtiss-Wright air shuttle to Saratoga races a great success. Flight leaves NY City at noon, returning after the last race in time for dinner. Business men “state this is the most ideal way to take in the races without losing an entire day's work.”

Market commentary:

Yesterday's rally continued to some extent, but volume dried up as prices increased. Some signs of overcrowded short trades; sharp rallies in favorite short targets including J.I. Case and American Can. Gradual upturn in majors including US Steel, Westinghouse, Consolidated Gas, other issues under recent pressure. Some weak spots including coppers, Republic Steel. Prices irregular in afternoon with many stocks declining from highs, but majors maintained “good undertone.” Bond market dull but generally firm; corp. higher, particularly high-grade and rails; Dow 40 bond avg. at new 1930 high; govts. dull, steady.

Col. L. Ayres of Cleveland Trust sees almost certain economic improvement from July to August and September; based on historical patterns and comparisons to earlier depressions (1907-08, 1920-21). However, recovery does “not promise to be emphatic,” and some possibility of “attack of gloom” in business sentiment before the improvement becomes apparent.

Conservative observers still advise reducing positions on rallies and not buying except “on a scale” (gradually) on pronounced weakness. Bears expected to mount another test when recently attracted “weak short interest,” including outsiders selling short, has been eliminated.

Bulls encouraged by bears' inability to break down to Nov. low of 198.69 in June break, and to break down to June low of 211.84 in past week. “Powerful interests” seen willing to buy in 210-220 range, as reflected in support there.

Editorial: J. Mooney, Pres. GM Export Co., predicts increase in automotive exports. This seems likely; an increase would be dictated by two conditions, the cost of production and foreign purchasing power. The first is clearly favorable; US has lower cost of production than any other country. Cars are both a desire and a real need, furnishing cheap and fast transportation. Purchasing power is temporarily down, but “the most bilious of pessimists” admits this will eventually turn around.

Prominent trader notes that where in 1929 he was eagerly buying stocks at 20-40 times earnings, he now is reluctant to buy stocks at under 10 times earnings.

Economic news and individual company reports:

Brokers' loans down $59M to $3.155B vs. $5.952B in 1929; lowest point since July 1927. Peak was $6.804B on Oct. 2, 1929.

US electricity output for week ended Aug. 9 was 1.698GWHr vs. 1.705GWHr in 1929.

Many investment trusts (similar to mutual funds) selling at large discounts (as high as 55%) to liquidating or net asset values. To rebuild confidence, many investment trusts have begun to publish more information on holdings and activities.

Companies reporting decent earnings: American Safety Razor, International Paper & Power, Hackensack Water Co.

Vanadium Corp. to open new plant for large body of nelsonite ore. Nelsonite is combination of ilmenite (base for titanium products) and apatite (base for phosphate salts). Authorities in paint field maintain titanium dioxide superior to white lead in many ways; Vanadium should be able to sell it at competitive price.

World War I play:

Suspense, a war play by Patrick MacGill. A group of British soldiers are stationed in a quiet dugout on Western Front. Reason for quiet becomes apparent as they hear German soldiers laying a mine that may go off at any moment. Next two acts are “consumed with waiting, relieved only by a young private becoming hysterical, a seasoned soldier indulging in uncontrollable profanity, ... and the whole group now and then breaking into song. The most ludicrous moment comes when the men sing 'Sweet and Low.'” Men are relieved by another company in third act, hear the mine go off, then are ordered back to the front.

+ The Boring Stuff:

Pres. Hoover asked governors of drought-affected states attending conference at White House for reports and suggestions for relief measures. Governors mostly ask for credit to be provided for buying feed and moving it to affected areas. Railroads to implement half-normal rates on drought relief traffic. Ohio suggests federal cooperation to provide work for farmers idled by drought.

Editorial: Changing China to gold standard from silver may be impractical for a long time due to chaotic political conditions and practical considerations.

Model child labor act recommended to state legislatures for approval - forbids employment under 14, requires permit for 14-18 year olds.

NY City Board of Education adopts record 1931 budget of $141.3M, up $4.9M over 1930.

World's deepest 5 oil wells are in Big Lake field in Texas, range from 8,220 to 8,816 feet.

Commodities mixed. Grains generally up after wide fluctuation. Cotton again down to new season lows, Oct. contract at 11.77 cents, down .16. Some producers sell copper below 11 cents/pound.

Break below 230-240 trading range last week seen as indicating downtrend of “indeterminate proportions.” Optimists say downturn just represented a delay of business improvement caused by drought, and uptrend may resume in next few weeks. Support at the 210 level still considered encouraging. Also, market is showing typical pattern of bear-market end, including narrower swings and declining volume.

Market in a stalemate; high short interest but has gone through considerable liquidation; “prices extremely vulnerable to any further trend business may show.”

Leading automobile executive” sees numerous recent auto price cuts as temporary; not likely to last due to low profit margins and inventories. Price cuts seen as being used to maintain low inventories in face of disappointing sales in recent weeks, also to clear out old models before new introductions.

Packers concerned about possible rush of “unfinished” hogs and cattle to market due to feed and water shortage caused by drought.

Preliminary estimate of unemployment based on census: a little over 2.5M unemployed, out of total population of 122.7M and working population about 48M.

Largest banks by deposits in US: Chase Nat'l. $2.065B; Natl. City Bank $1.560B; Guaranty Trust $1.379B; Continental Ill. $908M.

July rubber consumption by US manufacturers was 29,894 long tons vs. 41,526 in 1929.

July portland cement shipped was 20.147M barrels, down 0.8% from 1929.

Dow average price of 8 important iron and steel products was down 28 cents/gross ton in past week to $45.80. Low for 1929 was $49.88, high $51.25.

July construction contracts awarded in New England were $31.242M vs. $38.089M in June and $42.623M in July 1929.

Chrysler Corp. Q2 net $0.73/share vs. $0.04 in Q1 and $2.07 in Q2 1929.

Mead-Johnson (baby food) selling about 80, annual dividend $3, first half earnings over $5 vs. $7.03 in full year 1929.

General Foods selling about 52, annual dividend $3, first half earnings $2.01/share vs. $1.89 in 1929.

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