August 24, 2009

Monday, August 25, 1930: Dow 234.42 +1.79 (0.8%)

Assorted historical stuff:

US Dept. of Agriculture has extensive department producing educational films, including T.B or not T.B., Insect Allies, That Brush Fire, and Persimmon Harvesting and Storage in China.

Editorial: Administration is justified in waiting until December to decide on continuing 1% income tax rate reduction from last year, considering it was only enacted late last year as a temporary measure to encourage business shaken by the market crash. There are some possible measures that may allow the tax cut to be preserved. Even if a lean period forces an end to the cut, Treasury can look with pride to the past 9 years, in which a period of prosperity was used to improve national credit; in the year ended June 30, national debt was reduced $746M to $16.185B, bringing total reduction since 1919 to about $10B.

Editorial: Some have suggested banning short-selling as aid to business recovery. But recent market swings have not been due to short-selling but to public recognition of reduced earning power; similarly, farmland in corn belt has gone down by 2/3 from wartime level, though noone has been selling it short.

Alarmed by shrinking population, France budgets $45M to encourage large families; parents to receive $20 for second child, $30 for each additional.

German State Railways place $83.4M of contracts in cooperation with govt. in order to create 300,000 jobs.

Quebec Premier Taschereau dismisses threat of Soviet softwood, says small amount being sold below cost for propaganda purposes. Also notes imports of wood should be beneficial to US and Canada since fast disappearance of forests is causing concern to govts. and lumber and paper companies.

Illinois Republicans agree to abide by result of Prohibition referendum; Democrats have already voted for repeal.

Aircraft carrier to be built for Navy; capacity of 75-80 planes, to be ready in 3 years.

Market commentary:

Bulls encouraged by Pres. Hoover's statement tax cut may be continued, by some favorable business reviews, and by market action on Friday. Some unsettlement in oil group caused by decline in gasoline prices and high inventories in spite of recent reduction; however, weakness was moderate and didn't spread to other sectors. Major industrials and trading favorites strong, some reaching best levels since July peak. Tobaccos, banks and trusts, utilities strong. Bond market in Saturday session quiet but continued higher; most activity was in a few rails and industrials; Dow 40-bond avg. up to new 1930 high of 96.87.

Encouraging characteristic of rally has been ability of leading stocks to overcome isolated bad news and new lows in individual stocks and sectors.

Evidence of stocks passing to strong hands seen in decline of brokers' loans by $288M since June lows even as stocks have appreciated about 10%; also in the large increases in shareholder lists of many major stocks.

Former NY Stock Exchange Pres. S. Cromwell: “Investment has reached the proportions of a national habit ... Compared with the few hundred thousand who formerly constituted our investing class, there are today over 15M who own securities. ... Thus, the assumption that the corporate wealth of the country represents the entrenched power of a small class is a fallacy. Small investors in many cases are the principal owners of our industrial enterprises.”

Rep. S. Bloom (Dem. NY) returns from Europe, dismisses talk of tariff retaliation; says Europeans will buy wanted items in cheapest possible way. Says current business depression caused by fear or “bugaboo of hard times”; suggests increasing advertising to counter this.

Anticipated improvements in rail freight, steel operations, and commodity prices haven't come yet; figures for second half of August are awaited with interest.

Many companies in the recent boom diversified outside their main business; most didn't find success and some are now reversing the process.

Economic news and individual company reports:

Guaranty Trust seasonally adjusted index of business activity was 76.0 in July vs. 82.6 in June and 109.3 in July 1929; index hit new low for current depression, but still well above low points of 1921 depression. Improvement not yet seen in August; next few weeks will be examined with interest; recovery in near future likely to be weak; seasonal improvement expected Sept. and Oct. but full recovery may be delayed some months.

New car registrations in 23 states reporting for July were 75,386 vs. 74,253 in June and 126,815 in July 1929.

Companies reporting decent earnings: American Tobacco (Lucky Strike cigarettes), New England Power Assoc, Standard Gas & Electric.

Upcoming movie news:

Second Greta Garbo sound film released, Romance - her “deep sonorous voice” is no longer surprising, but another interesting facet of her screen presence. No actress in Hollywood photographs better; melodrama with fine cast stars her as Italian opera singer Rita Cavallini in ill-fated romance with Tom Armstrong.

Political joke:

“'Politics is very uncertain.'
'Very,' agreed Senator Sorghum. 'Even after a man succeeds in being elected, he doesn't know whether he's going to take credit for what happens or whether he's going to get the blame.'”

+ The Boring Stuff:

Post Office is revamping air mail contracts to help aviation industry [currently unprofitable]. Companies bidding for air mail contracts will be expected to have “sound and conservative financing” and refrain from “promiscuous sale of stock”; bidders must post $250,000 bond; Postmaster General may require adoption of any standard equipment considered necessary for safety or reliability; current requirements include 2-way radio and planes with avg. speed of at least 100 mph; carriers will be allowed to carry passengers on mail routes.

Indian boycott reportedly extended to British-owned banks in India.

Paris Metro has 72 miles of operating lines, carried 850M passengers last year.

Japanese liner Chichibu Maru has one of world's most powerful radio sets, with night range of 9,000 miles.

Commodities up. Cotton up slightly. Wheat, other grains up.

Market technical position considered best since April peak; downward swings have been progressively smaller, and August support came in at higher level than June; also, rallies in May and July only recovered 50% of previous decline, while August recovery has recovered about 66% of previous decline. This suggests current rally isn't just short-covering or rebound from oversold position, but accumulation based on anticipated fundamental improvement.

Irving Fisher's index of 200 commodities for week ended Aug. 22 was 82.8 vs. 83.8 in previous week.

Gasoline price in Chicago resale market down to 5 5/8 - 6 cents/gallon from 5 3/4 - 6 3/8 a week ago.

Youngstown district steel operations to advance to 57% of capacity this week from 56.5% avg. past week.

Heavy melting scrap steel up 50 cents/ton to $12.50-$13.00 in Chicago.

Uruguay first half exports $64.6M, up $11M over 1929; imports $44.0M, down $3M.

Mexico 1931 budget about 280M pesos vs. 293M in 1930; amount allocated to reducing public debt about 40M vs. 26M.

Class 1 rails installed 55,660 new freight cars in first 7 months of 1930 vs. 42,552 in 1929. Cars on order Aug. 1 were 19,627 vs. 36,335.

Lumber production in past 7 weeks has been about 290M feet, 30% below 1929 levels; production is about 6% above shipments and 10% above orders.

Commerce Dept. reports auto industry has wisely cut production in order to bring dealer inventories down into line with demand, both in US and abroad.

GE selling about 70, yield 2.3%, earnings in 1929 were $2.24.

Chicago Great Western Pres. V. Boatner says rail is continuing aggressive improvements in spite of lower revenues; says must prepare for business upturn.

American Tobacco reports Lucky Strike sales in first 7 months gained 3.539B, while total cigarette sales gained 2.031B. Expected net for 1930 is about $42.5M, vs. previous record of $30.6M in 1911 before trust was broken up.

Ford sells four 5-AT tri-motor all-metal planes to Army.

Drug, Inc. proprietary products include Bayers Aspirin, Sal Hepatica, Ipana Tooth Paste, Castoria, Cascarets, Life Savers, Vicks Vaporub.

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