No Journal was published Sunday, Nov. 2, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.
[Note: Sheer Genius Dept. - this one is from after the crash in 1929, of course.]
The Trader's Lament:
“They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”
[Note: And another item from 1929 - I feel the need to honor the one guy I found quoted in the Journal who got things right.] P. Mazur of Lehman Bros. took a contrarian view: “Yesterday's crash on the stock market is likely to have an immediate and probably lasting effect on retail buying. Not only will those who have lost money in the collapse cease to purchase luxuries for a time, but will withhold commitments upon necessities.”
[Note: How could anyone put their money into fly-by-night outfits like those? Dept.] Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.
[Note: Behavioral Finance before its time Dept.] Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”
[Note: Stimulus Dept. ] Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.
[Note: Stimulus Dept. Interesting - an indication stimulus in 1930 may be undercounted, since much of it came through “volunteering” of industry by govt., and so wasn't counted in govt. budgets.] Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.
[Note: Words to live by Dept.] Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”
[Note: Ay Chihuahua! Dept.] H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.
[Note: A depression is a depression, but a good cigarette is a smoke.] Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.
[Note: Huh??] Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.
[Note: Interesting claim Dept.] British PM MacDonald states if US used same system as English in figuring unemployment, they would show unemployed of 10M-12M.
[Note: Ay Chihuahua! Dept.] Editorial: An analysis by Banker's Monthly finds that of the many small bank failures in the past 9 years, a large portion happened due to the communities themselves “melting away” rather than bad banking. Nonetheless, speculation in real estate and other unsound practices were also large factors. It's a good thing this dead wood was cleared away before the current depression; “one of the reassuring aspects of the situation today is the stable banking position.”
[Note: Sheer Genius Dept.] Calif. State Dept. of Public Works announces will use no mechanical devices at four construction camps in order to provide work for more men.
[Note: Best final words Dept.] Theater: The Noble Experiment - “Almost the entire array of racketeers is present, including bootleggers, gamblers, gangsters, dope-peddlers, hijackers, prostitutes, and corrupt sheriffs and judges, yet they are all unbelievable and at best only laughable caricatures.” Protagonists final words: “When you see my people in Europe, tell them I died in a country where the people have bathtubs for their bodies but none for their souls!”
[Note: Strangely familiar Dept.] Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”
[Note: Stimulus Dept. ] Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.
[Note: Strangely familiar Dept.] Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.
[Note: Yeah, but what have you done for me lately? Dept.] GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.
[Note: Ay Chihuahua! Dept.] J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”
[Note: Doesn't exactly look overvalued ... but there was almost an 80% downside from here in about a year and a half.] Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.
[Note: Speculators affecting prices - that's crazy talk!] G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.
[Note: Strangely familiar Dept.] Union Trust of Cleveland says fresh wave of business pessimism in Oct. was unwarranted; notes definite evidence of improvement in merchandising and residential building, and very low inventories. Says business may be disappointed at slow pace of improvement, but believes fourth quarter will be looked back on at start of business recovery. Criticizes attempts at the “false stimulation” of trade.
[Note: Strangely familiar Dept.] Sept. rail earnings have so far been much better than expected, with first 12 rails reporting a 13.8% decline vs. 1929, compared to a 32.5% decline for all rails in Aug.; improvement is attributed to expense cuts in response to lower revenues.
[Note: Rate in 2006 and 2007 was 14.3, in 2008 was 13.9.]US birthrate in 1929 is lowest since 1915, at 18.9 per 1,000 population.