August 21, 2009

Thursday, August 21, 1930: Dow 232.98 +2.30 (1.0%)

Assorted historical stuff:

Movie business seems to be recovering after recent slump; decline in attendance attributed to heat wave (only 400 theaters in US are refrigerated), recent run of movies depending too much on “spectacle, color, and singing,” not enough on “good plots, interesting dialogue, and popular stars.” Upcoming movies include Moby Dick with John Barrymore, Common Clay, Dawn Patrol, The Big House, and Animal Crackers with the Marx Brothers. Most movie companies except Warner Bros. still expected to have good earnings for the year.

Actuarial Society of America survey reports death rate for passengers travelling on scheduled airlines is 1 in 5,000, or 200 times railroad death rate; safety increases by 63% after pilot has had 400 flight hours.

Commerce Dept. plans Southern “transcontinental airway” from Birmingham to San Diego. Airway from New York to Birmingham via Richmond already exists.

J. Richardson leading plan for comprehensive air and rail service across Canada. Canadian govt. may create Communications Dept. covering radio and aviation.

New wingless aircraft based on rotor principle being tested at Mamaroneck; backed by Walter P. Chrysler and H.E. Talbott, Jr.

London considering “fostering the acceptance of compulsory peaceful settlements of all disputes” for dominion countries.

New Australian plan for balancing budget coming under criticism for bias toward tax increases (including new 2.5% sales tax) rather than cuts in expenditures.

Iraqi King Feisal rumored trying to organize new oil company to break monopoly held by Iraq Petroleum Co. controlled by US and European oil interests.

NY State industrial deaths in July were 164, down 31 from June and down 52 from July 1929.

Market commentary:

Bulls got some good economic news in Iron Age report of improvement in steel production. US Steel responded, rallying to highest levels since July top. Other major industrials including American Can and J.I. Case followed. Utilities rallied strongly. Sears, Paramount, and Loews stood out in other categories. Prices turned irregular in late afternoon; coppers and some oils weak on dividend concerns. Banks, trusts, and insurance strong. Bond market dull but broadly higher.

E. Woollen, Pres. Fletcher Savings & Trust, catalogs some of the follies recently committed by businessmen: thinking rate of business in early 1929 could last; thinking the depression was caused by the market crash (the crash came 4 months after the depression had inexorably started); thinking the depression was caused by bad psychology; thinking our economy independent of the rest of the worlds'; “mortgaging future income for luxuries.”

Baar, Cohen & Co. believe stocks headed higher, “and we think within a few days sufficient momentum will be generated on the bull side to start the advance in earnest.” Foresee general business improvement, even if only seasonal, and halt in commodity price decline.

J. Barringer, National Cash Register GM, optimistic on foreign sales, and on general business outlook in Europe. “Germany, in my belief, is recovering from the world-wide depression, and France seems to be entirely over it.” Believes US depression has hit bottom and “we are slowly but surely on the upward trend.”

Some disappointment reported by market observers and steel industry leaders that normal seasonal improvement in business hasn't developed yet.

Continued weakness in freight car loadings as of Aug. 9 is surprising, but may reflect some lag from factory openings; Aug. 16 should then show improvement.

Economic news and individual company reports:

Iron Age sees moderate improvement in steel trade, though definite turning point not yet reached. Steel ingot production at 53%, but improved in past few days; some indications of larger orders in September. Discrepancy with yesterday's report of decline explained by extra “day or so” included in Iron Age report.

Agriculture Dept. reports uneven weather conditions; much of country except West has had some relief from drought, but followup rain needed in many areas.

Bankruptcy cases pending as of June 30 were 61,430 vs. 59,113 in 1929. Liabilities in cases concluded were $948.3M vs. $883.6M in 1929.

Company reports since July 1: 137 companies reported increased earnings vs. 1929 and 341 decreased; 649 dividends unchanged, 3 increased, 41 cut.

Companies reporting decent earnings: Public Service NJ, Atlas Plywood.

Curtis Publishing (publishers of Saturday Evening Post, Ladies Home Journal) selling about 114, annual div. $6, first half earnings $5.07/share vs. $4.83 in 1929.


“Farmer's Wife (to druggist) - Now, be sure and write plain on them bottles which is for the horse and which is for my husband. I don't want nothin' to happen to that horse before the spring plowin'.”

+ The Boring Stuff:

Editorial: Some have suggested higher wages (to increase general buying power and demand) as a solution to the depression. While wages and salaries are a major part of the buying power of the US (estimated at over $50B of total $90B national income in 1928), this proposed solution would make things worse by overtaxing business, possibly leading to a relapse. Wages are the workers' cut of the cost of production, and there is currently too much production. Therefore, increasing wages would just be “piling up surplus goods at higher cost to capital.”

New Zealand PM promises bill taxing all male workers $7.50 to provide relief for unemployed.

New regulations on use of industrial alcohol seen by some as distinctly tightened, but this is denied by Dr. Doran of Bureau of Industrial Alcohol; sees new requirements as no more strict, but merely more voluminous.

NY City Health Dept. reports week ended Saturday had lowest mortality record of the year.

Commodities generally up. Grains up strongly. Cotton closed up slightly after resisting selling pressure; second up day in a row, and first day since Aug. 8 that new season lows were not reached in intraday trading. Hog prices up to new yearly high.

Conservative observers still advise caution, believe only the most nimble trader can profit in current conditions. Those inclined to buy are advised to wait for reactions to buy leading stocks gradually, and to reduce long positions on rallies.

L. Critchell of Prince & Whitely returns from 5,000 mile motor trip through Midwest and Canada, reports generally optimistic feel on business, with as many reporting business improved over last year as reporting decreases; also noted heavy tourist traffic, difficulty finding accomodations at many major hotels.

Some bears have been profitably selling stocks that issue rights (to existing shareholders to buy additional shares).

American Metal Market says drought had “unfavorable sentimental influence upon business,” but little or no long-term effect.

Treasure Sec. Mellon denies making statement on general business situation.

Mackay & Co. reports foreign govts. and corporations obtained about $750M in bond financing from the US market between Nov. 1929 and Aug. 1930; largest borrower was Canada at $230M in 22 issues.

Price of heavy melting steel scrap up $0.25 to $15.75/ton.

Chemicals used in US were mostly imported prewar; now, US is the world's largest producer of chemicals; annual production estimated at almost $7B.

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