August 25, 2009

Tuesday, August 26, 1930: Dow 231.52. -2.90 (1.2%)

Assorted historical stuff:

Dr. D. Laird of Colgate U. claims at least 5% of US payrolls is wasted due to inefficiency caused by noise. Tests of typists found up to 30% increase in output when noise was reduced; noise apparently harms nervous system even when workers are used to it and don't consciously find it disturbing; typists used 25% more energy in a noisy room “as a result of pounding the keys harder and of muscular tension.”

Editorial: Gov. Roosevelt is considered heir apparent to former Gov. Smith as Democratic standard bearer, but now faces a tough situation: needs support from NY City Democrats but faces a brewing scandal in the City govt. now controlled largely by Tammany Hall and Mayor Walker. He's trying to arrange a limited investigation by the courts rather than one by a Republican legislature that could “run amuck” - but this could backfire if he looks like he's covering up.

Enlistments in Navy in year ended June 30 were 94,778 vs. 81,815 previous year; in Marines were 45,190 vs. 32,395; attributed to unemployment situation.

Japanese airmail to Europe and Americas now available; leaves Japan by boat, transferred to plane for Europe on reaching Siberia.

Peru Pres. A. Legula flees country, govt. in hands of military committee.

Latin American representatives to meet in Washington to “devise means to limit manufacture of narcotics to medical needs.”

Market commentary:

Following early advances, bears renewed tests of leading stocks, resulting in moderate declines. Market grew more unsettled following bad break in Vanadium on news of July loss. Oils continued weak. Recent trading favorites (United Aircraft, Radio) had sizeable setbacks. Bulls, however, encouraged by evaporating volume as decline progressed. Bond market very dull, most prices firm except Peruvian govt.

Farm Board chair Legge denies Board is being “radical or socialistic” in suggesting farmers cut back production to market requirements.

J.S. Bache & Co. says current optimism has more sound foundation than the misplaced confidence of last spring. Bullish factors include recent gradual improvement in business news, easy credit, strong bond market, passing of drought scare, and declining margin loans. Stock buyers can also take heart from repeated ability of market to resist declining back to last year's lows. This seems a good time to deploy investment funds; if buyers wait until “every element of doubt is removed,” stock prices will be substantially higher; trying to pick exact bottoms is usually futile.

Bank of Nova Scotia points to general overproduction, says purchasing power not adequate to handle current production volume. This may be corrected by increased purchasing power, cutting production, or cutting prices. Current most important question is, at what price level will this happen (where will prices stabilize).

GM Pres. A. Sloan expects buildup of delayed car purchases due to depression, but sees little chance of improvement in second half. Thinks growing popularity of low-priced cars partly due to depression and partly to improvements in values offered. No plans for change in wage rates.

Economic news and individual company reports:

Fed. Reserve Bd. reports business activity down further in July; output of factories and mines (seasonally adjusted) down 6%; factory employment and wages down to lowest level since 1922; building contracts, freight loadings, and dept. store sales down; wholesale prices continued down sharply.

Census Bureau reports as of April 1 US has 2.508M unemployed, 2% of total population and 5.2% of estimated workers (those without jobs, able to work, and seeking work). Highest number of unemployed were in New York (364,617); highest percentage was in Michigan (8.2% of est. workers).

Internal Revenue collections for 1930 fiscal year ended June 30 were $3.040B; largest state was NY, $830.2M; cost of collection $1.13 per $100.

Fed. Reserve member banks report for week ended Aug. 20 shows loans on securities down $61M, all other loans (commercial) almost unchanged.

Agriculture Sec. Hyde committed $121.9M federal matching highway funds to be paid out to states on July 31, 1931; this should allow states to begin construction projects now to relieve unemployment, particularly in drought areas.

Companies reporting decent earnings: Autostrop Safety Razor (July earnings 60% ahead of 1929, heavy advertising this year).

Canadian Industrial Alcohol (whiskey) says sales held up well so far this year, but recent tightening of US border has severely curtailed them.

Movie review:

The Matrimonial Bed, an entertaining farce adapted from the French. Adolphe Noblet, a happily married man, suffers amnesia after a rail accident and is believed dead. He becomes a barber, remarries, and has 4 children. Five years later, his wife and old friends are marking the anniversary of his death, when his wife (now remarried) decides to change hairdressers and gets the shock of her life. “Innumerable complications” ensue. One friend hypnotizes the barber, causing him to wake as his former self and forget his current wife as well as “the ladies to whom he has shown more than ordinary attention as their hairdresser.” Finally, in order to free his former wife to be happy in her second marriage, he is hypnotized again and pretends to have a relapse and return contentedly to his second wife, although he does fail to recognize his children by name.

+ The Boring Stuff:

Aviation industry predicted to do better in 1931; while most will lose money this year, overproduction has been relieved, there have been fewer “unfortunate accidents” this year, and the new Watres airmail bill together with govt. buying should increase aircraft demand. Watres bill should also help loss-making passenger air business. Govt. is also developing 25,000 mile lighted airway system across country, and taking other steps to make travel safe and reliable.

Federal govt. spending $19,000 daily to fight forest fires in national forests.

US canned food production has increased almost 500% in past 25 years; attributed to large population shift to cities - from 40% in 1900 to 57% currently. Canners experimenting with new technology to counter frozen foods, including cans with glass sides.

Canadian govt. will reduce Soviet coal imports said to be partly produced with convict labor.

Some observers believe recovery may be slow, pointing out that in 3 previous depressions full recovery took 13-17 months. However, statistical dept. of a large utility department is more optimistic; predicts trade activity, now about 17% below normal, will recover to 5% below by next Feb. and normal levels by next July.

Recent rally has regained about 75% of the decline from July 28-Aug. 12, but has been on continued low volume under 2M shares/day.

Commodities mixed. Grains mostly slightly lower. Cotton up despite favorable crop weather. Buying of copper very low, with price deadlock continuing at 10.75 cents bid/ 11 cents asked. Cocoa breaks sharply to new record low at 6.5 cents (previous record 7 cents). Sugar also hits new low at 1.06 cents.

Standard Oil NJ's publication, The Lamp, warns oil refiners they must cut back operations to balance with lower seasonal demand in rest of year, criticizes past overproduction leading to long-term buildup of excessive inventories; calls for long-term rationalized program rather than emergency measures. However, E.B. Reeser, Pres. American Petroleum Institute, says industry is in best statistical condition of the year, with curtailment having been largely successful.

Agriculture Dept. estimates 1930 wheat production in 22 countries 2.287B bushels, up 4% from 1929. Believes wheat price decline near end.

Dept. of Commerce reports worldwide idle shipping tonnage on July 1 was 2.055M tons over 1929, increase of 60%; total tonnage was 66.441M. Index of full-cargo shipping rates was 83 in Q2, a new postwar low.

First 20 rails report July operating income down 30% from 1929 but up 17.8% from June. An small but increasing number of rails are not earning enough to cover dividends, and margin of safety is generally declining. Rails seen not offering much speculative opportunity due to increasing regulation of rates and earnings.

US auto production in July 262,363 vs. 335,477 in June and 500,840 in July 1929; first 7 months 2.481M vs. 3.726M.

Chicago territory steel demand improves; last week's sales best in month. Prices still seen too low for profitability.

British unemployment reported slightly improved in London and rural south, but still at crisis levels nationwide; up to 30% in manufacturing and mining sections.

Kreuger & Toll interests acquire control of large new Boliden copper mine in Sweden.

Pacific Gas & Elec. says spent $22.973M on new construction in first half, more than in 1929 first half; has added 3,000 to payroll in past year.

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