Assorted historical stuff:
Editorial: R.Young has resigned as Governor of Fed. Reserve Board to become head of Boston Reserve Bank for financial reasons (raise in salary from $12,000 to $30,000). This is example of “America's extravagant wastage of brains through underpayment of public officials.” Gov. Young was moderating influence on otherwise misguided Reserve Board who refused to follow some of the Reserve Bank's recommendations to raise rates last year until it was too late to help. Fed. Reserve act has “created a banking system of marvellous strength and stability,” but split structure between Board and 12 local Reserve banks is a weakness. Since the Reserve Board holds tremendous power, it's in the public interest to ensure it's staffed by the “best in brains and experience.”
Revolution in Peru apparently concluded with installation of new military junta headed by S. Cerro.
Rumors of “uprising or outbreak of some sort” in Argentina; govt. offices and presidential home under heavy guard; “Buenos Aires has always been filled with a number of belligerent political factions” so uprising does seem possible, but not full scale revolution as just happened in Peru.
State Dept. says Mexican immigration into US has been drastically reduced.
Farmers being encouraged to settle in Alaska; experimental farms have been operating successfully for several years.
Richard Whitney, NYSE Pres., to give opening address at NYSE Educational Institute on subject “Trade Depressions and Stock Panics.”
NY City has thriving trade in shops renting complete outfits for weddings, including bridal gowns, tuxedoes for groom and best man, gowns for bridesmaids, and outfits for family members. Larger shops have up to 300 gown selection; bridal outfits rent for $15-$25, grooms for $5 including stovepipe hat.
Market commentary:
Volume lower as many traders stayed away in advance of Monday Labor Day holiday. Most trading in narrow range, though some weakness in individual stocks including Goodyear (10% salary cut), Houston Oil (Texas oil curtailment), IT&T (reports of another revolution in Argentina). Bear attempts to spread selling across market were frustrated as market anticipated more activity, higher prices next week when major operators return from summer vacations. Banks and trusts gained. Bond market generally steady on lower volume.
Central Trust of Illinois says business now “marking time,” but sentiment improving and seasonal upturn is assured. Says current gold exports not a concern unless much higher, in fact may be stimulative to foreign economies. Market sentiment in July emphasized bad news and ignored the positive, but has recently become more favorable. Decrease in rail freight not a cause for concern, but due to drastic drawdown of inventories.
W. Storey, Pres. Atchison, Topeka rail, expects normal fall seasonal pickup in traffic, though loadings curve may remain under those for past few years.
First Natl. Bank of Boston reports on New England business: slump has been severe and long; industrial production in first 7 months 19% below 1929 level; index of activity in July at 81.7 vs. 109.4 in July 1929; decline for all of US has been similar. While depression may be lifting, recovery is likely to be slow and irregular. Crux of problem is general overproduction and lack of purchasing power; decline may be self-reinforcing. While depression has the benefit of forcing greater efficiency and removing waste, “something more than efficiency ... is necessary for good business. There must be effective demand, which in turn rests upon an equitable distribution of purchasing power.” One bright spot is “irresistable urge of the American people for continuance of the high standards of living.”
Economic news and individual company reports:
Brokers' loans by Fed. Reserve member banks decrease $26M in past week to $3.102B, lowest level since July 1927.
Dividends distributed in July turned down vs. previous year for first time in 92 months; decline was 3%.
Canada increases tariffs on fresh fruit and vegetables 50%-100%; US imports are most affected.
Companies reporting decent earnings: Woolworth, American Home Products, Engineers Public Service, Burns Bros. (coal and oil distribution).
Operating income of 101 telephone companies in June was $22.7M vs. $22.2M in 1929; first half was $136.9M vs. $138.2M.
Ongoing trial of lawsuit to block Bethlehem Steel - Youngstown Sheet & Tube merger seems to be wandering a bit - mothers of some executives to be called as witnesses, “though what light the maternal parents can shed on the merger is problematical.”
Theater:
Main attraction at the Palace this week is radio star Floyd Gibbons, former war correspondent and current “headline hunter of the air.” During performance, “he sits at a desk in the middle of a darkened stage and rapidly relays to the audience, through a loudspeaker, information gleaned from a hurried perusal of the front pages of the latest editions of four local newspapers.” Afterwards, he chats with audience and relates anecdotes from his reporter days; however a weak aspect of this part is “his failure to select from his rich background anything really exciting to talk about.”
+ The Boring Stuff:
British govt. to assist Cunard Line to build second huge ocean liner (about 70,000 tons, 1,000 feet long, cost $30M).
Census reports NY State had 160,120 farms at start of year, down 33,075 from 1920.
Strikes affecting local children's dressmakers (3,700 strikers) and raincoat industries (1,200 strikers).
Large shipments of gold to France attributed to old fashioned French central banking system; only way French banks can get cash out of the central bank is by depositing gold there, as opposed to rediscounting system in US and Britain; also illegal for French central bank to regulate rates by buying or selling investments in the open market.
C. Ellsworth suggests a new approach for investment trusts (similar to mutual funds) to enter “that virgin field which exists between the fixed type of investment trust [holding a fixed set of investments, similar to ETF], and the general management type [actively managed].” This should help address public loss of enthusiasm for inv. trusts following the crash. Approach would conservatively calculate value for stocks based on liquidating value plus reasonable expected earnings, buy when market price is below value, and sell if it rises significantly above value.
Commodities mostly dull, steady. Grains up slightly. Cotton almost unchanged. Copper continues very low volume sales, fluctuating between 10 3/4 and 11 cents with most sales at 10 3/4. Cocoa hits new record low at 6.40 cents/pound.
Market considered technically stronger after having recaptured practically all of most recent decline from peak of 240.81 on July 28; another good indication was the support in June holding above November panic lows, and then support in August holding above June lows.
Reduction in short interest in some stocks seen as reflected in reduced demand for stocks for loaning, but total short interest still seen large.
Farm Board chair A. Legge says believes overall farm income won't be reduced by drought; income reduced in most affected sections will be offset by increased prices obtained by other sections.
Farm Board says will no longer loan on cotton based on fixed price but based on percentage of market value. Board members feel cotton close to bottom.
Total of corp. bonds called for payment in Sept. in advance of maturity were $49.2M vs. $23.6M in Aug. and $30.2M in Sept. 1929; however, total for first 9 months was $308.8M, lowest since 1924, and compares with $637.3M in 1929, $1.616B in 1928, and $1.129B in 1927.
US electricity output for week ended Aug. 23 was 1,676 GWHr, up about 4.4 GWHr from previous week but down 2.8% from 1929.
Dow average of 8 iron and steel products at $45.52 vs. $45.80 previous week; new low for 1930. However, scrap steel prices have been advancing, and at least one producer plans to advance finished product prices in the middle of next month.
R. Campbell, Pres. Calumet & Arizona Mining Co., calls for tariff to protect US copper industry; notes US mines operating at 60%-70% and losing money, while foreign producers still expanding.
Sears selling about 65, annual dividend $2.50, stock dividend of 1%/quarter, 1929 net $6.62/share, but expected substantially lower this year.
Warner Bros. expects sharply lower earnings for 6 months ended Aug. 31, operated at loss in quarter ended Aug. 31 and has had to raise money in new stock offering. Disappointing earnings mainly attributed to poor film performance, particularly 5 “musical operetta-type films in color.” Optimistic on next year's films.
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