August 6, 2009

Thursday, August 7, 1930: Dow 234.38 -4.09 (1.7%)

Assorted historical stuff:

Much interest recently generated by case of a visiting Turk reputed to be 156 years old. The climate or food of Turkey may account for longevity of many of its citizens. The New York Life Ins. Co. has just investigated many claims of people to be 110 or older without finding any authentic cases; a few of their policyholders have reached 100, with the oldest being 102. Oldest policyholder of any US or European insurance co. was 106.

Severe drought conditions prevailed over much of the US at end of July, drought as long as eight months in many sections; both winter and spring were exceptionally dry in large parts of the country, with rainfall below 50% of normal in many places; July was dry and very hot, intensifying the drought.

Editorial: Strengthened laws will enable NY State Banking Dept. to more strictly oversee private banking; this may improve matters. Purpose of private banking regulation was to “safeguard the poor and ignorant classes from irresponsible adventurers,” so previous laws were focused in that direction, and excluded “the large private banking institutions of standing.” These laws, however, were too easy for “unscrupulous concerns” to evade, as reflected in some recent scandals. New law gives Banking Dept. more power, should be an improvement if well enforced.

Over past 30 years, US death rate from typhoid fever has been reduced from 34 per 100,000 to less than 5; tuberculosis from 200 to less than 78.

Over the past 40 years, New York Telephone has gone from 8,000 to 1.150M subscribers.

AFL Pres. Green visits White House, says agreements to support wages and working conditions reached in last Nov. unemployment conference have been kept.

Mexican Fin. Min. L. Montes de Oca welcomed by 400-500 people on his return to Mexico City following successful debt settlement negotiations.

Market commentary:

Market surprised by Iron Age report of cut in steel production to 54% from 56% last week, after expected seasonal increase from automotive demand and public optimism from US Steel. Selling wave started with Steel, spread to other current leaders including American Can, Westinghouse, Standard Oil NJ, Radio, Vanadium. Utilities, oils lower. Investment-grade bonds continue firm; have advanced for past two weeks, well into highs for year. Govt. bonds dull, steady.

W.C. Teagle, Pres. Standard Oil NJ, sailing on the Berengaria for vacation abroad, calls for more cooperation in oil industry to address overproduction.

Some optimism that new Canadian govt. tariff plans won't seriously damage trade; Conservatives expected to concentrate on aiding domestic production, and many US products don't compete with Canadian industry. Previous Canadian tariff law was enacted May 2; US-to-Canada exports were down about 26% in May vs. 1929, but much of the decline was due to the depression; 40% of Canadian income is agricultural, which has been badly affected by commodity price declines.

Editorial: Commodity price decline is most obvious obstacle to economic recovery. Opinion is now increasing that commodity prices are stabilizing; this is so far based more on feel than any statistical evidence. However, prices have declined about 15% on average since last summer, a bit more than postwar deflation; it's therefore reasonable liquidation has “been practically completed,” since the accumulation of unsold goods last fall was much less than in postwar period (1920).

One broker notes that at least there is no current overproduction of stocks; since last October, almost all financing has been through bonds.

Heard on the Street: “Many of the wheat shorts ... will feel the heat wave in more ways than one.”

Economic news and individual company reports:

German market hit peak in May 1927 after success of economic stabilization, has been mostly declining since; company earnings peaked in 1928. Average yield for listed dividend-paying stocks now about 7%, some leading shares have higher yields.

July building contracts in 37 states east of Rockies $367.5M, down 39% from June and 44% from July 1929.

Decline of 16.6% in freight car loadings for week ended July 26 was largest so far in 1930.

French govt. increases aid to shipbuilders, including $10M of direct aid and reducing loan rate to 2%; French shipyards operated at 26.7% of capacity last year.

Companies reporting decent earnings: General Mills, Economy Grocery, MacAndrews & Forbes (licorice, mainly used to flavor cigarettes), Holland Furnace, Public Service Corp NJ (utility).

MacAndrews & Forbes stock about 30, earned $3.13 last year, paid $2.85 in dividends.


“'Is this train ever on time?' growled the grouchy passenger.
'Oh,' replied the conductor, 'we never worry about it being on time. We're satisfied if it's on the track.'”

+ The Boring Stuff:

Nanking govt. in China turning to local bond market to borrow at rates of 9%-13%, probably due to foreign terms being too harsh. Policy is aided by severe decline in value of Chinese currency making it less profitable to send money abroad. Govt. seems aware of importance of maintaining credit, unlike defunct Peking govt., which borrowed “from any source, at home or abroad, at almost any terms.”

About 45,000 textile workers join French strikers demanding raise to compensate for compulsory 4% social insurance premium.

R. Brown, former Pres. Manhattan Electric Supply, 24 others subpoenaed by Federal grand jury to investigate pool that ran the stock from 20 to 55.

Union Pacific Railroad to build 30-mile extension from Las Vegas to site of Boulder [later Hoover] dam.

Third African-American owned bank in Chicago, Citizens Trust & Savings, closes due to run.

Radio Manufacturers Assoc. trade show last year in Atlantic City drew 20,000 “radio jobbers, dealers, and manufacturers.”

Commodities mostly up. Wheat up sharply, corn very sharply; very high volume, sizeable short-covering and public buying seen. Cotton up. Rubber off to new record low (10.20 cents, down about 11 cents from 1929). Public has apparently “finally realized” there has been heavy damage to crops due to heat and drought . Ultimate effect on livestock prices should be bullish, though there may be a run of “unfinished” livestock to market first, temporarily depressing prices.

Stocks failed to rally on higher commodity prices, particularly sharp rises in wheat and corn.

Conservative observers still cautious, advise taking profits on rallies and staying on sidelines until stocks break out of trading range.

June net operating income of 172 class 1 railroads was $68.9M vs. $105.8M in 1929.

July steel ingot production was 112,823 tons/day vs. 137,610 in June and 186,561 in July 1929.

June electric output was 7,748 GWHr vs. 7,768 GWHr in 1929; improvement from May 1% decline vs. 1929. However, output in week ended Aug. 2 was 2.7% below 1929 level. Output has been flat to down since start of year, but utility earnings have generally held up.

July new bond offerings were $508.8M, down from $525.4M in June but up from $242.1M in July 1929. Largest category was utilities, 44%.

Nat'l. Assoc. of Mutual Savings Banks reports number of depositors in savings banks increased 293,683 between July 1, 1929 and 1930. Encouraged that such an increase took place in face of market crash and increase in unemployment.

British registered unemployed 2.011M on July 28 vs. 1.973M on July 21 and 1.544M on July 29, 1929.

Canadian fur industry has traded over 100,000 silver fox pelts in past year, about 98% raised on ranches.

Agriculture Dept. reports 1930 lamb crop about 2M head or 8% above 1929, demand well below; causing trouble for western sheep growers, substantial cut in production expected over next 2-3 years.

GM first half Q2 net was $1.34/share vs. $0.98 in Q1 and $2.01 in Q2 1929.

F.W. Woolworth July sales $20.737M, down 7.9% from 1929; first 7 months sales $152.057M, down 3.9%.

White Motor Co. (cars) stock about 31, earned $1.31 in first half (down 25% from 1929), annual dividend rate of $2, working capital of about $35/share.

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