June 6, 2009

Saturday, June 7, 1930: Dow 263.93 -4.66 (1.7%)

Assorted historical stuff:

President von Hindenburg supports several measures to improve Germany's economy, including a reduction in wages and internal prices, thereby increasing exports without reducing living standards, a new income tax, a new bachelor tax, and large-scale public works construction.

Los Angeles became the fifth largest city in the US in 1930, increasing to 1,231,730 population from 576,673 in 1920.

President Siles of Bolivia resigns; Washington attributes this to “lack of visible means to meet obligations due this month.”

Candy sales in the US in 1929 were 12 pounds per capita, an increase of 1 pound over the previous year.

Spider-silk – like rayon fibers only .0004 of an inch in diameter have been produced by the American Bemberg company. Rayon may replace the natural silk produced by silk worms, but “Until now the spider has remained unchallenged in his own restricted field, dark corners of attics and of Greenwich Village tea rooms.” A new Broadway restaurant with an Algerian decor has been provided with synthetic spiderwebs made by this process.

Market commentary:

Stocks generally under pressure, trading light until the final hour.

Henry Ford says business is getting back to normal and the worst of the economic depression is past.

General Federation of French Production predicts that Smoot-Hawley tariff will lead to European reprisals. Congressman Hawley (Chair of the Ways and Means committee) says foreign nations would find this unprofitable in the long run.

Economic news and individual company reports:

At U.S. fiscal year-end (June 30), it's anticipated that public debt will have declined more than $500M this year but less than the previous year's $673M decline. Total debt has declined from $16,639M to $16,142M in the period from June 30, 1929 to May 31, 1930, and interest paid on the debt is down from $584M to $561M. Tax receipts are holding up reasonably well though down by a few per cent from 1929.

Auto retail sales are increasing though still below 1929, but companies are cutting back on production to help dealers work through their inventory. Industry anticipates the readjustment will be completed by the end of the year.

Movie company earnings were down in May, but this maybe due to a couple of temporary factors including unusually good weather and a lack of notable film releases. However, earnings in the last half of 1929 and first half of 1930 have been up hugely over the previous year, probably a result of the full-scale introduction of sound. For example, Paramount earnings in the first quarter of 1930 were almost double that in 1929. Earnings for the rest of the year are anticipated to be up but not at the same pace. Production of sound pictures required an initial capital outlay, but now may cost less than silent films due to more careful planning and more filming in studios instead of on location. Widescreen film production is not anticipated on a large scale since “the industry is still digesting the two novelties, sound and color. Development of the wide screen will probably proceed when it is felt a new stimulant is needed.”

Italy and Germany have been raising tariffs on wheat. This may affect exporters including the US and Canada.

Woolworth sales down 11.4% in May vs. 1929.

Brown Shoe Co. reports improved earnings for the six months ended April 30 of $1.83 a share compared to $1.65 a share in the previous year. Sold 15.1 million pairs of shoes last year and is planning to expand capacity.

Melville Shoe Corp. reports improved sales for the first five months of 1930. Sales for May up 8.2% over 1929.


“'IT'S A WISE CHILD.' Comedy about the parental responsibilities of unmarried fathers and mothers, both pretended and real; a sprightly inheritance from last summer.”


“Husband – I wonder when you'll learn to make bread like mother used to make.

Wife - probably by the time you make the dough father used to make.”

June 5, 2009

Friday, June 6, 1930: Dow 268.59 -3.85 (1.4%)

Assorted historical stuff:

Was Chesley Sullenberger, Sr. at the controls? - A New York-bound Colonial Air Transport plane crashed into Boston Harbor shortly after takeoff. The 14 passengers on board were badly shaken up, but nobody was hurt.

Optimistic editorial saying Italy may not be as bent on war as Mussolini's outbursts indicate, based on some more friendly overtures from the foreign minister. “Mussolini strove successfully to give the impression that Italy was ready to fly at her western neighbor's throat” but this was for domestic consumption; “Premier Tardieu replied for France calmly, almost casually.”

The British government abandoned the long-contemplated plan for a tunnel under the English Channel.

Those wacky British have also come up with their own terms of telephone lingo, including telephonist instead of operator, and engaged instead of busy.

The most common lists of suckers used as prospects by stock fraudsters: 1) “the list of 1,000 millionaire widows,” 2) clergymen, 3) lawyers.

Total market value of all stocks and bonds listed on the New York Stock Exchange is 123.4 billion compared to less than 61 billion at the start of 1925.

Market commentary:

Yet another editorial against the Smoot-Hawley tariff criticizes a Congressman Williamson for deceptive arguments in favor: Example of the Congressman's distortions: “This is equal to going into the cotton market where middling is the basic grade, and comparing 'middling fair,' which is a high premium grade, with 'low middling,' a grade selling considerably below the basic.”

Market sluggish, commodity prices sluggish, money sluggish, and sentiment sluggish.”

Volume increased yesterday, bearish professionals active, based on bad business news, particularly in the steel and automotive industries.

Investment trusts (1930's version of mutual funds) undergoing consolidation after market break last fall - “a few arose from necessity resulting from unfortunate experiences in conducting investing activities through lack of preparedness for the fall break” - or, as Buffett more clearly put it some time later, you don't see who's swimming naked until the tide goes out. The New York Trust Co. weighs in with the observation that when deciding if an investment company can offer superior results to those of an individual investor, “management is of paramount importance.”

Economic news and individual company reports:

Short term rates cut by 1/8 percent to 2 1/8.

Manufacturing production in April up 1% over March but “considerably below” 1929. Output of minerals in April up 7% over March but down from 1929. Unfilled orders for manufactured goods down in April both from March and from 1929.

GE plunges on failure to declare special dividend in addition to ordinary one.

Crude rubber prices hit new lows.

Steel scrap markets flat to lower.

Ford car and truck production 191,813 in May against 200,903 in 1929.

Tire prices reduced by Goodyear and other manufacturers.

Gasoline consumption 10% ahead of a year ago.

General Tire & Rubber May business ahead of 1929, plant running at capacity.

Canadian dollar trades at a premium to U.S.dollar.

Otherwise timely joke cleaned up for racism:

A small-town man through painful thrift saved $500 in a checking account of his local bank. Moving to Richmond, he wrote a check to to cover expenses which came back promptly marked 'No funds.' He called for an explanation and received the answer: 'Oh, that doesn't mean you don't have the funds – it means we don't.'

June 4, 2009

Thursday, June 5, 1930: Dow 272.44 +1.26 (0.5%)

Assorted historical stuff:

Forest fires burn 30,000 acres in Minnesota and Wisconsin, and thousands of acres in “a score of widely separated sections of the Canadian Northwest.”

The average size of the family farm unit in the Great Plains region has grown tremendously in both acreage and total investment. For example, in 1916 Montana had about 35,000 wheat farmers. Today it has less than 14,000 who are handling more acreage. Over one million farms are predicted to receive electric service in the next four years.

Committee of European bankers to meet in New York with the Mexican finance Minister to consider the resumption of payments on Mexico's debt.

And you thought daytrading from your front porch was cool - Stock order received from a traveller on the Graf Zeppelin, transmitted from the radio station on the airship.

The New York Hide Exchange ended its first year of operations successfully.

Market commentary:

Market action is dull (transactions are 1.5M-2M shares/day), but leading stocks were firm (“displayed a quiet undercurrent of strength”) in spite of bad news from U.S. Steel yesterday and bad sentiment about the trade situation. Strength in U.S. Steel, GE, oil, and Liquid Carbonic (“the largest factor in manufacturing and distributing carbonic gas and soda fountains”).

Market largely being made by the average trader, big professionals doing very little on either side.

Traders are complaining that price fluctuations have been so narrow that “even the most nimble operators have found it difficult to scalp a profit on either side.”

Brokers and financiers “seem to think the business depression has touched bottom, and the next turn will be for the better.”

A usually bearish market observer “currently sees nothing but bullish signals through studying fundamentals, current movements, and technical indications.”

Economic news and individual company reports:

Commodity price index hits a new low. Average of 87.8, 2.8 below April and 3 below March. Declining commodities include tin and refined sugar.

Daily electric production in April was up 1% over March, reversing the usual seasonal decline; indicates improvement in business conditions.

Continental Baking reports that earnings are almost back to 1929 levels over the 5 weeks up to May 17, after having been down about 35% for the first 15 weeks. Sales have recovered while flour costs remain low.

National Cash Register reports orders in May up 81% over April though still 25% below May 1929.

Goldman Sachs down to a new yearly low after omitting quarterly stock dividend.

Gillette earnings running far ahead of last year. “If one could guess what the decision will be in the Gillette patent suit, he might make a lot of money in the stock.”

Chrysler shipped 40,644 units in May, 26% below May 1929 but 8% ahead of April.

R.J. Reynolds hiring substantially to increase production of Camel cigarettes.

Glidden (paint) 6-month earnings to April 30 down 63% over 1929 – decline in automotive business and inventory losses on raw material price declines.

Sears-Roebuck sales running slightly below 1929, expects earnings for 1930 to be below 1929.

New building and engineering contracts for the New York metropolitan area totaled $96 million for May compared to $101M for April and $99M for last May.

Musical comedies and revues:

“'Fifty Million Frenchmen.' A gala and racy exhibit, with a few inventive departures and some Cole Porter songs well sung.

“Flying High.” An excellent chorus dancing to good tunes around that comical Bert Lahr; for shock-proof audiences.”

Wednesday, June 4, 1930: Dow 271.18 -3.27 (1.2%)

Assorted historical stuff:

American movie industry passes a milestone – from now on, instead of exporting Hollywood films to world markets the industry will have producing units in other countries; instead of internationalizing the Hollywood film will make films indigenous to each country in which it operates. This plan appears to have been a reaction to the introduction of talkies, which threaten to end the easy foreign profits for American films (“In Paris, audiences rioted in protest against the foreign tongue which, from movie screens, was resounding throughout the land. In Berlin 'mammy' songs were muted”). At this point American movie companies are making up to 30% of revenues in the foreign markets, which is a great help in maintaining “the squanderous standard of production of Hollywood films”.

Representative Knutsen of Minnesota says big business is opposing the Smoot-Hawley tariff, because “they want to manufacture in the cheap markets and sell in our markets.”

Madison Square Garden reports a new record for boxing receipts for the 11 month season ended May 28 - $2.27M for 35 shows compared to $1.27M for 26 shows in 1928-29.

New record for Holland tunnel traffic over the holiday weekend of more than 45,000 cars a day.

Record 6000 prohibition enforcement arrests in April.

Market commentary:

Bankers anticipate easy credit - “a liberal supply of funds at low rates for some time”.

The market was “dull and listless,” active issues losing one to three points.

Trade has been down for about nine months – bullish since we're nine months closer to returning to normal.

Bull: 'Common stocks are a buy for the long pull.' Bear: 'Sure, the sooner you buy 'em the longer the pull.'”

Present dull period is giving Wall Street brokers time to improve their prowess at many games, including golf, bridge, checkers, chess, and ping pong.

Economic news and individual company reports:

Retail sales appear improved in April - showed an increase over 1929. Combined march and April sales are only down 2% over 1929. Since the end of 1929, sales of American cars have exceeded production.

U.S. Steel cuts ingot production to 75% of capacity from 79.5% last week and 100% last year, independents at 67.5% vs. 69% and 92% resp. Unfilled orders are also down.

Market turns down in late trading after U.S. Steel news.

Retail Radio equipment sales expected to be up from $590M in 1929 to $645M in 1930.

United Aircraft on uptrend – 1930 gross expected to exceed 1929, net income for Q1 1930 of $900,391 (0.39/share) and expected to trend up for remainder of the year. Government and foreign business expected to make up shortfall from commercial demand.

Alleghany railroads income April earnings up 6% over 1929, exception to general railroad trend.

Southern Railway April net income $1.0M vs. $2.1M in April 1929, four-month net income $1.8M, vs. $5.4M in 1929.

I. T. & T. reports business operations improved in 1929 and so far in 1930. Net income of $17.8M in 1929 compared with $14.6M in 1928.

New record low price for silver.

Fox film optimistic for 1930; budget is $30M, up $10M from previous year, of which $25M is for production of 48 feature films and $5M for new sound stages and equipment. Business for Q1 up 90% over previous Q.

American exports of industrial machinery for first 4 months of 1930 up 4% over 1929.

Coal mining and cotton manufacturing industries suffering from overcapacity and low prices; blamed on industry fragmentation.


“Stepping Sisters” A boisterous farce-comedy about two burlesque queens who become social dowagers.

“Strictly Dishonorable” An Italian opera singer to the rescue of a southern plantation owner's daughter who finds herself deserted in a homey New York speakeasy: perfection in entertainment.

June 3, 2009

Tuesday June 3, 1930: Dow 274.45 -0.62 (0.2%)

Assorted historical stuff:

Agriculture Department continues war against America's food racketeers. Last year obtained 487 judgments against adulterated food products, also 40 insecticides and 296 patent medicines or other drugs were removed from the market. Officials declare the general condition of prepared foods and medicines to be excellent.

Railroads make it possible to supply the country with fresh fruit and vegetables almost all year. First shipment of Georgia peaches arrived in New York on Monday.

Germany reports that the budget planned a month ago, has been upset by falloff in revenues and rise in unemployment. The assumed improvement in business has not materialized. Germany's largest copper producer, the Mansfield Corp., closes its plant, locking out 14,000 workers, after Communist pickets had prevented workers from entering.

Canadian government carries out aerial bombing raids on schools of porpoises blamed for predation on cod.

Airmail lines now reach almost every important city in Mexico. In 1929 Mexico received over 14 million letters from the United States.

Market commentary:

Dull market coming back from Memorial Day holiday. Lowest volume since January 20. Large industrials including U.S. Steel and American Can traded in a narrow range. Good performers included utilities, Montgomery Ward, Woolworth, and some food product stocks. Little change in the business average for the past two months.

Harvard Economic Society predicts stocks will go up because of easy money and favorable business prospects. “Though business activity continues to make unfavorable comparison with that of a year ago, May transactions in the aggregate, as measured by bank debits through the 21st, have shown more than the usual slight seasonal gain over April.”

Most of the large professionals have turned bullish.

Government officials predict a trade revival over the next few months.

Mildly optimistic take on the later-infamous Smoot-Hawley tariff. The final version includes a compromise flexibility section allowing modifications to the tariff schedules by the President and a Commission. “It is a slender reed for the President to lean upon while he signs the bill, but, curiously and significantly he is himself a part of that reed. If the President has the stomach for an indefinite number of knock-down and drag-out fights over specific tariff rates, the reed will do.”

Evidently, there are some food stocks that have been digested and others that haven't been.”

Economic news and individual company reports:

Foreign currency generally down, Britain imports and exports for April down 20%.

Chase National bank formed by merger of old Chase National, Equitable, and Interstate Trust.

The Hobbs oil area in New Mexico is developing into a major operation probably calling for some agreement to restrict drilling or prorate production.

99 Congressional bills affecting the sugar industry over the last 10 years, 15 in 1929.

Several copper companies cut dividends by about 50%.

Monsanto chemical business is improving month-to-month but down YOY.

Ford reducing model prices to 1927 levels.

Car company shipments down big in May vs. 1929 (Buick, Reo, Hupp).

Montgomery Ward sales up 26% in May vs. 1929 but store count up 60%.

Florsheim shoe will probably have profits in 6 months up to April 30, 1930 equal to 1929.

April meat sales up 6% sequentially but down 4% YOY.


Safety in Numbers - A young man from San Francisco who has been sent to New York by his uncle to receive enlightenment as to this city's nightlife. His tutors are three chorus girls who, for $10,000, promise to guide the young man through New York's pitfalls ...

June 2, 2009

Monday, June 2, 1930: Dow 275.07 +1.23 (0.4%)

Assorted historical stuff:

Sears is trying out a 5-day workweek, predicts some increase in hours worked Mon-Fri but employees would generally welcome this in exchange for fewer total hours and longer weekends.

Mass transit in N.Y. city exceeded 3B passengers at 3.356B passengers for 1929, with the largest increase in the I.R.T. lines. Subway lines were up while elevated and street rails were down.

Chrysler building formally opened last Tuesday, Walter P. Chrysler in attendance. Most of the ground floor and basement leased for a new Schrafft's store.

Interesting chart of General Motors subsidiaries, including of course Buick, Cadillac, Chevrolet, Olds, and GMAC, but also lots of other stuff including Fisher body, A.C. Spark Plug, Frigidaire, G.M. Radio Corp., Fokker Aircraft America, and subsidiaries in many countries including Japan, India, China, Brazil, New Zealand.

Unrest in India involving some Gandhi fellow. Difficulties at first dismissed by the British – “talk among the Conservatives of 'Communist propaganda,' which British politicians, like Americans, find useful in diverting attention.” Civil disobedience may be a fizzle, but the economic boycott hurts much more.

Market commentary:

National City Bank of New York anticipates an early recovery. Admits that so far recovery hasn't been marked, but “business has been on the down-grade for nearly a year and in the past 30 years depressions have rarely lasted for a longer period”. Says the danger now is excessive pessimism as opposed to a year ago when it was optimism. Admits serious problems including the worldwide business downturn and fall in commodity prices, but the country has repeatedly demonstrated ability to recover in the past. For the last 30 years, with the possible exception of 1914 (WWI), when business has begun a depression in one year it's always at least started the recovery before end of next year. True that if we look back further there have been some more prolonged depressions (panics of 1873, 1884, 1893). But U.S. business was much less diversified then, and “lacked the recuperative power demonstrated in more recent years”. Also, money markets were uncertain then, as opposed to current easy money conditions. With credit conditions this favorable and the past record of recoveries, predicts a recovery starting slowly in the summer and apparent by fall.

Abreast of the Market: Street generally optimistic, some leading traders who haven't been bullish for a while have bought stocks. The pending Smoot-Hawley tariff bill is causing uncertainty – when resolved and businessmen know where they stand, “considerable activity in many lines now marking time will develop.”

Executives in the financial district taking longer lunches – hard to find between 12:30 and 2:30 PM.

Economic news and individual company reports:

Fed. Reserve Bank of NY reports earnings of 257 companies now available show Q1 1930 earnings down 22% from 1929 but up 5% over 1928.

Natural gas use up 400% over less than 25 years. Originally produced in western Pennsylvania, soon after was in shortage, but “they did not know at the time the great wealth in natural gas hidden underground in other sections of the country”. Consumption in 1930 estimated at 2T cubic feet.

April auto production down 30% from 1929 but up 8% from 1928, but skewed to lower priced cars; part of the auto market is doing normal business but part is in an “acute state of depression”.

Atlantic, Gulf, & West Indies Steamship Lines Q1 income down 27% from 1929.

Columbia Pictures earnings for year ended 6/30 estimated up 125% from 1929.

National Dairy earnings doing better than 1929, Integration of Kraft cheese going well, ice cream up sharply.

Biscuit stocks are rising, which is as it should be.”


Seems there was “a man whose wife was always demanding money. 'She's after money all the time,' he complained to his pal. It's money, money, money – morning, noon, and night. One day it's twenty, the next a hundred, the next ten. Every day she is hounding me.' 'What does she do with it all?' asked the sympathetic friend. 'Blamed if I know,' was the answer. 'I don't give it to her.'”

June 1, 2009

Why this blog - A Socratic monologue

Q. Okay, why are you doing this blog? Are you saying we're in for a replay of the 30's?

A. How did I know you were going to ask me that? No, I don't think things are going to get as bad as in the 30's.

Q. So you're an optimist.

A. Well, that's only mildly optimistic. I mean things in the 30s got really, really bad. For example, between 1929 and 1932, the number of cars produced declined from 4.8 million to 1.2 million ...

Q. Okay - that's pretty bad, but it's only one industry ...

A. Looking at the economy as a whole, GDP went down by 40% and unemployment went from around 3% to 24% ...

Q. Wow! That is really bad.

A. It's actually even worse than that, because back then many more people worked on farms. When you take out farm workers, unemployment hit 37% - an almost unimaginable level for us today ...

Q. You must be a blast at parties ... Well then, if you don't think we'll repeat the 30's, are you saying, in Mark Twain's words, that history won't repeat but it will rhyme?

A. Hey! I wanted to use that line!

Q. Sorry. Well, do you think that?

A. Yes. I believe 1929-1930 has a couple of important similarities to 2008-2009. First and fundamentally, there was a big buildup of debt leading up to both. This was followed by a couple of major economic problems, including many banks running into trouble and a loss in perceived wealth by lots of people. These problems in turn have deflationary implications since they lead to less credit and spending ...

Q. Could you get to the second point before I fall asleep?

A. Second, for the technical stock people, the markets in the two periods do have interesting similarities. In both, the stock markets hit a high and then had a very scary, sharp crash where the panic level was high for a short time, followed by a nice relief rally when the immediate panic abated.

In the case of 1929 this market break is what is commonly known as the Great Crash, including Black Thursday on October 24,1929, quickly followed by Blacks Monday and Tuesday on October 28 and 29. The Dow began 1929 at about the 300 level, hit a peak of about 380, and the Crash cut it almost in half to 200.

What's not as commonly known about 1929 is that the Great Crash was followed by a nice rally with the Dow almost hitting 300 again in April 1930, and, at the point where we begin this blog in June 1930, still hovering in the 270's - not that far off where it was at the start of 1929. The real damage was done in the following two years when, following a spectacular series of further declines and rallies, the Dow bottomed out at 42 - almost 90% off its peak.

More recently, of course, we had a brief period of sheer panic in March 2009 when the Dow hit the 6500's, down from a high over 14000, then had the nice rally we're currently in ...

Q. Zzzzzz ... *snort*! Ah yes, that's all very interesting, but are there any other similarities between the two times?

A. Umm ... homina homina ... other similarities will be left as an exercise for the reader.

Q. Well, have you noticed anything interesting yet?

A. In histories of the Depression the leaders of the time are commonly portrayed as oblivious to what was going on, do-nothing, and stupidly optimistic. For example, every schoolkid has seen the much ridiculed pronouncement by Herbert Hoover that "prosperity is just around the corner." Even from my limited reading so far it's clear this criticism is mostly unfair. It appears that the people in charge at the time were well aware of what was happening, and did most of the things that we're doing now to alleviate it (with a couple of notable exceptions). And as for unjustified optimism, we will see that at least in mid-1930 there was a fair amount of good news coming out about the economy. And I mean actual good news where things were improving month-to-month, not the asinine stories we see today where bad numbers are interpreted as good because they were "better than expected," and declining numbers are called good because the rate of decline is slowing down (AKA second derivative stories).

Q. Anything else interesting?

A. Well, I'm a history buff, especially New York history, so it's interesting to me to see a day-by-day chronicle of a pretty eventful period. Or, as Warren Buffett said in The Snowball by Alice Schroeder (Bantam 2008, pg. 148):

"I would get these newspapers from 1929. I couldn't get enough of it. I read everything - not just the business and stock-market stories. History is interesting, and there is something about history in a newspaper, just seeing a place, the stories, even the ads, everything. It takes you into a different world, told by someone who was an eyewitness, and you are really living in that time."

Q. I knew you wouldn't be able to go the whole interview without sneaking a Buffett quote in. Does he have you on commission or something?

A. No comment. Seriously, though, I do think you get a different feel for history seeing it day-by-day like this - less tidy, but more real. And it just might give you a useful skepticism for some of the more Panglossian commentary we're seeing today when you see that similar things were said back then - and probably with more reason!

Q. Oooohhh ... Panglossian! Fancy Shmancy! You couldn't just say optimistic?

A. So – you want to suppress the truth just like the rest of the mainstream media! This interview is over!