Wednesday, September 3, 1930: Dow 240.42 +0.0 (0.0%)

Assorted historical stuff:

Prof. C. Persons quit job in Census Bureau because higher official decided to exclude from count of unemployed those laid off with “promise of reemployment at some indefinite future time”; Prof. Persons estimates there are 5M unemployed, contradicting census estimate of 2M-3M.

Times asks J. Gerard's list of 64 “rulers” of US how to tackle business depression. Buckling down to work recommended by S. Mitchell of Electric Bond & Share and A. Zukor of Paramount; W. Crocker of First Natl. Bank San Francisco, sees depression as severe only compared to 1929 boom, says mental adjustment needed to slower advance in business; W. Green of AFL, calls for teamwork between business and govts., fulltime employment of workers.

Editorial: “Deep as may be American sympathy for ... self government, the Indian question cannot be judged by American viewpoints.” Sir J. Simon makes case that India not ready, although British govt. pledged to “give them that opportunity as rapidly as they are prepared for it.” India is mix of a dozen languages with hundreds of dialects, as well as religious split between Hindu and Muslim. Also, rigid caste system “is not a promising field for independence and self government.”

Market commentary:

“With the new high-speed ticker in full service, the entire machinery of Wall Street seemed geared to greater efficiency yesterday.” Rally based on business optimism continued in morning, with leading industrials hitting rally highs. Automotive shares strong on Mack Truck continuing dividend; movie stocks strong on better theater attendance in cooler weather. Profit taking came in early afternoon, but was absorbed without much trouble. Utilities, banks and trusts strong. Bond market quieter, generally steady; South American govts. fluctuated.

Market has now reached resistance level where it ran out of steam on July 18 (240.57) and July 28 (240.81). Breaking through this level would be considered highly bullish signal. General confidence that this will happen based on recent market action; many leading stocks have already surpassed July highs. Further positive technicals seen in recent volume pattern (higher on rallies and lower on pullbacks), and in continued large short interest.

Some wariness based on recent good rally recovering all of drought-related break; some observers advise taking profits on at least part of long positions, to be in position to rebuy on good pullbacks.

Most economists agree business upturn close; peak in business was reached July 1929, so depression has lasted about 14 months. “Those who have faith and confidence in the country and its ability to come back will profit by their foresight. This has also been the case over the past half century.”

National City Bank says August business showed little improvement, but this was not unexpected; current situation “affords a basis for belief that the worst months of the depression have been seen.” Sees business down to “solid minimum” that proceeds “regardless of price fluctuations”; some improvement in last week of August strengthens confidence in at least a seasonal fall upturn in business. Calculates corporate return on capital in first half at 9.2% vs. 14.8% in 1929 and 11.7% in 1928; in spite of decrease, 9% is not too bad considering conditions and doesn't justify extreme pessimism on corporate earnings.

Harvard Economic Society points to steady rise in bond prices as favorable for stocks. Says there is “every prospect that the [business] recovery ... will not long be delayed,” although fall period may not be strong as expected. Notes worldwide decline in business, but 1922 recovery demonstrates US due to “great size, natural advantages, and diversity of conditions ... can lift itself out of depression without the stimulus of improved foreign demand.”

Economic news and individual company reports:

Rail freight loadings in week ended Aug. 23 were 940,549 cars, up 17,726 from previous week but down 197,417 (17.3%) from 1929; largest decline this year.

American Gas Assoc. reports first half manufactured gas sales up 1.4% over 1929; natural gas down 3.2%. These results showed more stability than any other major industry aside from electric power production.

Fed. Reserve member banks report for week ended Aug. 27 shows “all other” (commercial) loans down $64M to $8.416B; loans on securities up $62M to $8.377B; investments down $11M to $6.329B.

Mack Truck and National Cash Register continuing dividends at current rate in spite of lower profits; optimistic on future outlook.

Companies reporting decent earnings: Electric Power & Light, Monigan Mfg. (excavating machinery).

Warner-Lambert (Listerine, Pro-Phy-Lac-Tic brushes, other toiletries & medicinals) selling about 94, earned $5.02 in first half, yield about 8.5%.

Theater:

“Dancing Partner. A skeptical ne'er-do-well falls precipitously in love, under the spangled chandeliers of Paris and Biarritz ... David Belasco has staged a fatuous comedy skillfully.”

+ The Boring Stuff:

Editorial: British opinion on tariffs is divided; latest statement signed by 116 bankers and businessmen favoring free trade follows statement by other leading bankers favoring tariff wall around empire; trade unions thought leaning toward protection. In present highly competitive conditions, with other nations crowding Britain out of foreign markets and flooding her domestic maket, some protective tariffs are in order; “for a country to persist in a policy of defenselessness for the sale of an ideal seems like courting disaster.”

Hoover advisor Henry M. Robinson rumored as replacement for R.Young as Fed. Reserve Gov.; Young will now head Boston Fed. Reserve Bank; says reserve system in better condition than a year ago, all reserve banks ready to function if business revival develops; disagrees with idea that New England is “backward or decadent.”

Commodities weak. Cotton down. Grains down sharply, wheat at new season lows. Copper still quoted at 11 cents asked, some available at 10 3/4.

Shearson, Hammill & Co.: “moderate improvement is reasonably certain during the coming months ... we believe prices of many securities are sufficiently low or deflated to justify their purchase.”

While business sentiment is now more optimistic that a recovery is underway, it's still conservative about how strong the recovery will be. Recovery from depression is usually “tedious process.” Also, purchasing power of farmers and workers has shrunk by about $2B each in past 10 months. However, “veteran economists” point out that past depressions have never lasted longer than a year unless accompanied by “weakening of the nation's financial structure”. Therefore, since “credit structure was never in stronger position,” and inventories are low, recovery may be fairly strong; this should “justify a worthwhile advance in stocks.”

Sharp decline in trade starting in late 1929 blamed on lower flow of US capital abroad due to absorption in US stock market. This led to depletion of dollars abroad and export of gold to US to settle balance of payments. This has mostly corrected itself; US market now deflated, and foreign exchanges now mostly high enough to avoid gold exports. Trade situation should gradually improve.

A.C. Huffman, Pres. Continental Can, says expects normal year for can-making industry; expects amount of vegetables canned slightly below 1929 and fruits above; thanks to increased consumption, expects carryover of canned fruits and vegetables to be cleaned up. Also notes some improvement in demand for general-purpose line of cans used by many industries.

German production in first half down 10% from 1929; production in June down 20%.

Canadian economic stats: construction started in August up 32.2% over July but first 8 months 17% under 1929; July steel ingot production was 68,424 tons, 28% under June and 47% under July1929; freight loadings in week ended Aug. 23 were 64,014 cars, down 29 from previous week and down 5,883 from 1929.

July output by public utility power plants was 7,870 GWHr vs.7,753 in June and 8,072 in July 1929; 5,009 was produced by fuel and 2,862 was hydroelectric; amount of hydro power was curtailed by drought.

Profits of 24 oil companies for first half were $57.0M, down 30.6% from 1929 but up 18.8% from 1928.

Crude oil production in week ended Aug. 30 was 2.473M barrels/day vs. 2.970M in 1929 and down 2,245 from previous week.

Company reports since July 1: 181 companies reported increased earnings vs. 1929 and 430 decreased; 842 dividends unchanged, 15 new, 8 increased, 58 cut.

Exports of industrial machinery in first 7 months were $149.5M vs. $148.1M in 1929.

Youngstown district steel activity reported unchanged this week at 57% of capacity, except for usual Labor Day shutdowns.

Report of 878 lumber mills for week ended Aug 23 shows orders 95% and shipment 98% of production of 279.3M feet, vs. 87% and 91% of 295.5M feet.

Cadillac reduces prices on Cadillac and La Salle lines by $180-$900 to new range of $2,195-$3,795.