Monday, August 4, 1930: Dow 234.50 +0.93 (0.4%)

Assorted historical stuff:

President Hoover calls for White House conference and commission to study ways of improving credit situation for homebuilding and financing.

Army creates three-dimensional version of chess to teach air tactics. Bottom is conventional chessboard, representing ground forces; top board is transparent and holds pieces representing air forces.

German Labor Min. Stegerwald announces government contracts won't be awarded to companies which show "unsocial attitude in relations with employees."

Report of bearish speculators in Ericsson (Swedish telephone co.) being squeezed by “unnamed group” rumored to be associated with Ivar Kreuger of Kreuger & Toll; several of Kreuger's close associates subsequently elected to Ericsson's board.

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Editorial: plans for possible European auto quotas "need not cause immediate alarm." US car exports were only about 5% of last year's production; France, Germany, and Italy took only 6% or 7% of exports. Other export markets could easily absorb cars that Europe refuses. Also, as a practical matter European factories are not up to producing that number of cars, and European countries would lose a substantial number of sales, service, and assembly jobs.

New theft-deterrant luggage grip invented containing an alarm triggered when the grip is “involuntarily released by the rightful owner.” Manufacturer offers $200 reward for arrest and conviction of anyone “molesting the person carrying such a grip.”

Captain C. Barnard sets new record for flying time between Malta and England; covers 2700 miles in 26 hours.

Otis Elevator gets contract for 31 elevators in Waldorf Astoria; include 9 regular passenger, 4 suite, 3 large ballroom, 14 service, and one with18'x6' 8,000 lb capacity coming up from the private New York Central rail siding underneath the hotel.

Market commentary:

Saturday market very dull but positive. Two-hour session volume of 366,000 shares lowest since May 8, 1926. After a slight decline in open, upturn developed toward end of first hour; majors including US Steel, American Can, GE, duPont approached best levels of current rally. "Creeping improvement" continued for rest of session, stocks mostly closed at day highs. Utilities weak; very little trading in rails and oils. Bond trading volume moderate, prices generally higher.

Weekend business reviews positive, report gains in retail distribution; also positive was W.P. Chrysler statement that auto business, general trade improving.

Dr. L. Edie, economist for Investment Research Corp. of Detroit, disagrees with consensus among economists, predicts only mild recovery in fall followed by renewed slump in winter and full recovery not until Spring 1931. Cautions against “wish thinking.” Predicts long-term uptrend in market although interrupted by “radical and sharp” fluctuations. Anticipates reduction in P/E's; stocks selling for 20 times earnings may be reduced to 16-17, “and possibly lower.”

With brokers' loans at such a low level (down $1B over past month and $100M below November bottom), it's difficult to see a return of the "convulsive liquidation" seen in June. Weak holdings have been reduced so much that recent bear efforts have resulted in the lowest volumes in years.

Wide fluctuations recently in Gillette and Vanadium, both targets of considerable short selling.

Economic news and individual company reports:

NY Fed monthly review: number of workers employed in representative factories in US was down 2.4% mid-May to mid-June, more than usual slight decline.

Mutual savings banks (hold over 30% of total savings in US banks) report first half gain of $273.8M in deposits to $9.146B, vs. decrease of $82.7M in second half 1929. Seen as evidence of sound position, considering savings banks were source of funds for many losing jobs or money in the market declines.

Total US govt. gross debt was $16.176B on July 31 vs. $16.832B in 1929.

Livestock prices declining sharply; lamb around $8.50 per 100 lb. vs. $14.50 a year ago; cattle also down sharply, selling at 50% of raising cost in some cases.

Companies aggressively spending on advertising include American Tobacco, R.J. Reynolds, Coca Cola, National Biscuit, Procter & Gamble, Wrigley.

Companies predicting decent-to-good yearly earnings: Columbia Pictures (+147%), Caterpillar (roughly steady), Clorox (-14%).

Market humor:

The Room Wit observes “that a number of bears who are short of Gillette enter the customers' rooms in the morning with gashes where their whiskers once grew.”

+ The Boring Stuff:

French Foreign Minister Briand's plan for European unification comes under criticism from press and ex-premier Poincare, fearing that revision of the Versailles treaty may be only result of the initiative.

European automakers meeting in Paris having difficulty agreeing on quotas for American cars; curtailments of sales seen "less imminent."

Editorial doubtful on Farm Board's plan for cuts in wheat acreage; probably would require 25% cut to be effective, and this is unlikely; also, Farm Board owes an explanation of what to do with the idle land; "It is not easily imaginable that the wheat farmer could better his condition in the long run by leaving so much of his plant idle."

Commodities mixed with small changes; cotton up, wheat down, corn up. Over past week, wheat down sharply, cotton flat, corn up sharply. Irving Fisher's index of 200 commodities for week ended Aug. 1 was 82.9 vs. 83.3 previous week and 93.3 in January.

Week's markets in review: recent zigzag trading between 230 and 240 level seen as "period of recuperation" or technical consolidation; sentiment more positive, encouraged by failure to break through support and to force liquidation on declines. Many observers now predicting resumed uptrend in coming weeks. Some positives seen in earnings reports by Bethlehem and US Steel, and by continued success of oil production curtailment.

Utilities generally not concerned over electricity rate cuts; they stand to benefit from lower commodity prices and higher usage.

Some indication of surplus funds looking for investment seen in rise in bonds and highly rated preferred shares.

Foreign markets in past week: London irregular, Berlin weak, Paris “becalmed.”

Crops seen reduced by bad weather, particularly corn.

More indicators of worsening employment situation: NY State factory payrolls down over 2% vs. usual slight increase. Average weekly earnings for employed workers down roughly in line with deflation. Farm wages down 13% year-over-year, supply of farm labor highest on record. Slight decline in June output of most important industries, July seems likely to show further substantial decline.

State and municipal borrowing in first 7 months was $859.7M vs. $786.9M in 1929.

June electric production by public utility plants was 7.748 GWHr vs. 8.014 GWHr in May and 7.768 GWHr in June 1929.

Youngstown district steel operations 58.5% this week vs. 58% last week, first gain in several months.

Darst Creek oil curtailment restored at compromise quota of 44,000 barrels/day.

Farm prices paid to producers declined to 111% of prewar level as of July 15, decline of 12 points from June 15, same level as July 1921.

Lumber production in week ended July 26 by 893 hard and softwood mills was 275.8M feet vs. 308.3M feet previous week.

Hosiery workers agree with manufacturers on 20% wage cut, arbitration for industry, and establishment of unemployment insurance fund.

Carpet looms operating in June at 35.8% of single shift capacity vs. 44.1% in May and 69.2% in June 1929; wide wool looms at 52.7% vs. 51.2% and 64.8%.

Grand Union (food stores) first half sales up 14.5%, net up 15.5% over 1929. Policy of geographic consolidation, low inventories, owning few non-liquid assets.