July 25, 2009

Saturday, July 26, 1930: Dow 237.48 +1.97 (0.8%)

Assorted historical stuff:

Editorial: We've criticized Bethlehem Steel for not being open about executive compensation. Some have disputed this, pointing out that the bonus system was disclosed in the 1917 annual report, and that Chairman Schwab has referred to the "million dollar salary" of Pres. Grace. This understates his 1929 salary by about half a million; also, search of reports in the dozen years since turns up no mention of the bonuses. This disclosure seems insufficient.

Farm Board chairman A. Legge issues blunt statement; says stabilization operations not a sound method of dealing with constant surpluses, rejects plea for Board purchase of 100M bushels of wheat. Says problem can only be permanently solved by collective action of farmers to control production and marketing.

Paramount, Hollywood's largest studio, produced 70 feature films in 1929, employing more than 38,000 actors and actresses. Advent of talkies has eliminated many foreign actors due to their accents.

Largest and heaviest steel truss ever used in building construction is placed in Waldorf-Astoria; assembled unit is 312 tons, 90 feet long by 33 feet high, located above main ballroom, supporting part of hotel from 9th-46th floor; allows 10,000 sq foot ballroom to be free of supporting columns.

505-foot skyscraper of novel design to be built at 22 E 40th; “shadowless” design, no window-sills, exterior glass flush with walls.

J.A. Stransky Mfg. of Pukwana, SD prohibited by FTC from advertising their vaporizer device as enabling Ford cars to get 57 miles/gallon, start easier.

Annie Gamble of Atlantic City sued by broker for $3,279 loss incurred on margin account; Mrs. Gamble claims margin investment is a gambling debt, hence illegal.

Bird banding in the US dates to Audubon around 1803; since then millions have been banded through US Biological Survey. Banding requires federal permit.

Market commentary:

Bears skeptical of recent rally renewed efforts to force lower prices for most of the day. Volume became very low as prices declined; bear pressure lifted in late afternoon and prices rallied at close. Banks and trusts slightly lower, insurance slightly higher.

Goodbody & Co.: "We lean to the opinion that the business recovery may be more rapid than many now believe. But in any event, the ensuing months should be used to accumulate good common stocks."

Bradstreet's weekly review reports sentiment improved although business still dull; "The trade situation at present might well be likened to that of a ship in a calm in slack water and waiting for a new tidal or aerial impulse to carry it in a new direction."

Sentiment more positive; this in itself may improve economy, since "majority sentiment shapes the course of business as well as the course of the market."

Union Trust of Cleveland sees increased construction activity (mainly public works and utilities) as first important sign of recovery; says Pres. Hoover's efforts to stimulate construction immediately after last fall's crash apparently bearing fruit.

Conservative observers still advise waiting for market to show ability to move up through resistance levels. Also report not much increase in outside buying yet.

Some stocks with long-term dividend records: AT&T 48 yrs, Standard Oil NJ 42 yrs, Western Union 57 yrs, Penn. Rail. 75 yrs, GE 28 years.

Economic news and individual company reports:

Oil production cuts have temporarily "blown up" in Darst Creek field in Texas; now producing 75,000 barrels/day, up from 20,000 last week. Unless stopped soon, "oil men feel that it will neutralize much of the ground gained through curtailment of operations in other areas."

BLS reports June 1930 US cost of living down 2.8% from Dec. 1929; decline from June 1929 was 2.1%; from June 1920 was 23.0%. However, was up 67% from 1913. Decline in first half varied between 0.6% and 4.9% in different cities. Food down 6.4%, fuel and light 3.3%, rents 1.5%, clothing 1.0%.

J.P. Morgan acts as syndicate head for largest amount of bonds in Q2 at $268M; next is Halsey, Stuart at $126M and Chase Securities at $121M.

Mexico reaches agreement on settlement of government and National Railway debt.

Worldwide zinc producers cartel reaches argreement in principle, details still to be worked out.

Mark Twain story:

"Mark Twain went calling one day without his necktie. He had been visiting Harriet Beecher Stowe of 'Uncle Tom' fame, and he was not aware of his lack of haberdashery until Mrs. Clemens called attention to it on his return. A little later, Mrs. Stowe answered her door to find a messenger, who gave her a small package. Opening it, she found a black silk necktie, and a brief note: 'Here is a necktie. Take it out and look at it. I think I stayed half an hour this morning without this necktie. At the end of that time you will kindly return it, as it is the only one I have.'"

+ The Boring Stuff:

British House of Commons ratifies London Naval Treaty; Japanese approval seen.

Wheat, cotton up slightly, corn strong. Copper unchanged, zinc up. Heavy buying in copper at $0.11/pound, but seen as mostly speculative, not consumer demand. Prices on some steel products down. Government and investment-grade bonds firm, preferred shares irregular.

Bears have recently attacked as Dow approaches the 240 level, so far without much success. Volume drying up on declines considered favorable to bulls (no forced liquidation). Time also on bull side considering expected seasonal fall rise in business

Past week's foreign markets: London irregular, Paris steady, Berlin weak - reaches four-week low.

Foreign financing in US during Q2 was $466M, of which only $39M was refinancing; total was almost as large as two biggest quarters in 1929 combined.

Commerce Dept. reports June worldwide shipbuilding up over 1929, but down from Q1. US now second to Britain; has 238,163 tons under construction vs. 119,000 in 1929. First half US exports of farm machinery hit new high of $78.997M vs. $72.069M in 1929.

First 21 rails report June operating income $20.9M vs. $28.6M in 1929, revenues $120.8M vs. $141.9M.

Packard Motor Car Q2 net $0.19/share vs. $0.17 in Q1 and $0.50 in Q2 1929. Willys-Overland first half net was $151,704 including $1.402M of special items, vs. $4.155M in 1929.

Stewart-Warner (automotive gauges) Q2 net $0.67/share vs. $0.80 in Q1 and $2.02 in Q2 of 1929; raises quarterly div. from $0.25 to $0.50 after cutting from $0.87 in April.

New England Power Assoc. first half net $5.895M vs. $4.889M in 1929. Niagara Hudson Power first half net $8.313M vs. $8.354M in 1929.

Radio Corp. adds 7,000 employees to Camden plant, optimistic based on incoming orders. Number of dealers has increased from 10,000 to 30,000 in past couple of years. Crosley (low-priced radios) expands employees 50% in past month, scaling up to over 1,000 radios/day. Makes 7 sets ranging from $64.50 to $137.50, the last being a combined radio-phonograph. Q2 earnings will be poor but expects good second half.

American Ice expects July/August sales and profits ahead of 1929; first half net was $1.968M vs. $2.108M in 1929.

Walgreen first half net $0.86/share vs. $1.63 in 1929; sales $25.9M vs. $21.0M.

Kelvinator Q2 profit $1.19/share vs. $0.74 in Q1 and $1.22 in Q2 1929.

Corn Products first half net $2.28/share vs. $2.36 in 1929; Q2 net $1.21 vs. $1.18

Industrial Rayon Corp. Q2 net $2.70/share vs. $1.79 in Q1 and $1.65 in Q2 1929.

Autostrop Safety Razor first half net $722,808 vs. $370,655 in 1929.

General Railway Signal first half net $3.03/share vs. $2.69 in 1929.

Truscon Steel Q2 net was $0.82/share vs.$0.10 in Q1 and $1.59 in Q2 1929.

Curtis Publishing Q2 net $2.32/share vs $2.75 in Q1 and $2.51 in Q2 1929.

Melville Shoe first half net $2.33/share vs. $1.80 in 1929.

American Thread profit for year ended March 31 was $0.88/share vs. $1.22 in 1929.

Neptune Meter first half net $2.02/share vs. $1.58 in 1929.

Diesel-Wemmer-Gilbert (cigars) Q2 net was $0.70/share vs. $0.50 in Q1 and $0.78 in 1929.

July 24, 2009

Friday, July 25, 1930: Dow 235.51 -3.82 (1.6%)

Assorted historical stuff:

Editorial: Dismisses threat of Soviet dumping of wheat, coal, etc., says they should be allowed to “buy American machinery, hire American brains, and use American banking credit” to build industry; since rest of world is trading with them, “Our refusal ... will merely transfer her commercial relations to other countries.”

Ultraviolet rays demonstrated to cause cucumber and tomato plants to grow a third faster than usual. X-rays, however, found to retard growth.

New York construction sites tend to attract crowds. "Just any old depression in the ground holding a couple of workmen is enough to attract a four-deep crowd." Part of the crowd thought to be idlers, but many may be investors studying the operations of some of our best corporations such as Consolidated Gas and AT&T.

European auto manufacturers to meet July 31 in Paris to discuss plan for curtailing sales of American cars in Europe.

Chinese Ministry of Communication in negotiations with RCA to establish radio-telephone service between US and China.

England starts "Eat More Fruit" campaign involving posters, newspaper and magazine ads, and talks in schools.

David Belasco says public tiring of talkies, predicts return to silent films, also revival of "legitimate stage."

James Eads How, hobo's friend, passes away; leaves almost $1M to "workers of the world," $5 each to brother and stepson.

Market commentary:

Main trading stocks declined; volume substantially lower. Bullish sentiment dampened by business news (further auto production cuts and no upturn in rail traffic) and technically by Dow recovery close to 240 peak of current rally. Bears tried to capitalize by pressuring particular sectors, although trading favorites continued up in the morning. Markets turned generally down in afternoon; large declines in recent leaders on falling volume. Utilities, oils, dull. Banks and trusts lower.

Goodbody & Co. prepare list of 20 recommended stocks; "Out of financial panics and subsequent business depressions fortunes are made." Such opportunities occur few times in the average life; most successful strategy is not to try and pick the bottom but to buy below normal "as measured by price-earnings ratios, potentialities, yields, etc."

Union Trust of Cleveland sees improving business sentiment, upturn starting soon. Positives include production generally below consumption, ample purchasing power as seen in bank deposits, strength in construction and public works, and easy credit. Cautions that recovery may not be quick and easy, but rather gradual over some months.

US Steel diversifying (buying Atlas Portland Cement and Oil Well Supply Co.); other large corporations such as Anaconda Copper also doing so.

Consensus that business will improve seasonally in fall, but while optimists expect improvement to continue through winter, conservative authorities expect another slowdown in winter, and sustained upturn not until spring of 1931, and therefore continue to advise selling stocks on rallies and waiting for breaks to buy.

Reported industrial earnings so far have been considerably better than expected.

Economic news and individual company reports:

Fed. Reserve Board report for June: Industrial production and employment down more than usual seasonal amount; prices down sharply; interest rates continued down; large volume of building contract awards. Freight car loadings continued well below 1929 and 1928 levels.

May US imports $249M vs $400M in 1929; exports $320M vs. $385M.

US Cigarette production for first half was 59.4B, up from 58.5B in 1929.

Cement shipments for first five months were 51.343M barrels vs. 51.299M in 1929.

US electric output for week ending July 19 was 1,632 GWHr, down 3.3% from 1929.

Miami bondholders asked to exchange $1.582M of maturing bonds for new ones after “New York bankers” unwilling to help refinance.

US Steel Q2 net estimated about $3/share vs. $3.44 in Q1 and $6.68 in Q2 1929; likely to do better than most other steel companies.

RKO (movies) Q2 net expected better than 1929 but not as good a gain as Q1; theater attendance slumped in Q2 but reported better in July.


"A man was confronted in a dark London alley by a desperate fellow. 'Hand over your money or I'll blow your brains out,' was the demand. 'Blow away,' was the calm reply. 'You can live in London without brains, but you must have money.'"

+ The Boring Stuff:

Wheat unchanged; cotton down sharply to new season lows for most future months. Metals little changed. Bonds generally higher.

First half NYSE new listings: total $5.431B vs. $8.056B in 1929, but second highest on record; bonds $1.419B vs. $1.134B; stocks $4.012B vs. $6.922B.

Brokers' loans in past week down $17M to $3.226B.

Collins & Aikman doing well in spite of large automotive business; new type of pile fabric for upholstery is being widely adopted. Has also developed new type of rubber backed carpet that can be undetectably patched; large sales expected to hotels, steamships, and theaters.

IBM announces South American orders in first half running 67% ahead of 1929.

GM seen in strong position considering depression; profits have held up relatively well, and balance sheet is in good shape, particularly inventories.

National Cash Register estimates second-quarter earnings will be about $.60/share vs. $1.63 in 1929, cuts all wages 10%.

US Industrial Alcohol first half net $1.47/share vs. $5.30 in 1929.

National Supply (pipeline and oil field equipment) Q2 net estimated $2.95/share vs. $0.40 in Q1 and $2.11 in 1929.

Island Creek Coal first-half net $1.73/share vs. $2.33 in 1929.

Prairie Pipe Line first-half net $2.60/share vs. $2.71 in 1929.

Transcontinental Oil first half profit before taxes $2.363M vs. $1.716M in 1929.

International Silver Q2 net loss $154,664 vs. net profit $168,148 in Q1 and $383,622 in Q2 of 1929.

Hupp Motor Q2 net $509,053 vs. $2.831,382 in 1929.

Motor Wheel Corp. Q2 net $0.43/share vs. $0.72 in Q1 and $1.94 in Q2 1929.

Fedders Mfg. first half net $2.66/share vs. $5.28 in 1929.

Briggs Mfg. (auto parts) first half net $1.76/share vs. $1.21 in 1929.Supplier to low-priced auto companies inluding Ford, Packard, Chrysler.

United Piece Dye Works first half net $1.85/share vs. $1.88 in 1929.

City Ice & Fuel first half net $3.202M vs. $2.982M in 1929.

Briggs & Stratton first half net $2.07/share vs. $2.70 in 1929.

National Biscuit Q2 net $1.48/share vs. $1.50 in 1929.

Abbott Labs first half net $2.12/share vs. $1.96 in 1929.

Endicott-Johnson (shoes) net for 6 months ending July 5 was $2.12/share vs. $0.16 in 1929.

I. Miller (chain store, shoes) earnings for first 4 months $292,733 vs. $275,097; sales $5.002M vs. $4.491M in 1929.

Spiegel, May, Stern (mail order) first-half net loss $784,146 vs. profit of $730,298 in 1929.

July 23, 2009

Thursday, July 24, 1930: Dow 239.33 +5.03 (2.1%)

Assorted historical stuff:

Editorial: Bethlehem Steel executives may have been worth $3.4M in bonuses in 1929, but it was a mistake to keep the size of the bonuses secret; openness would have avoided the current embarassment and allowed shareholders to express their opinion pro or con. “It cannot be imagined that Mr. Grace or his associates would have wished to continue in receipt of salaries condemned by holders of the majority of the company's shares.”

North Side Chicago community of "Little Sicily" has had 12 to 20 murders yearly for past 18 years in square half-mile area. Most have remained unsolved due to necessity of informants appearing in court.

J.G. Latham, Australian opposition leader, says unemployment is at 18.5% of working population; calls for cuts in government expenditure, against tax increases.

Spanish cars using olive oil as lubricant. Olive producers asking government to support research to expand its use.

"Mrs. A. Barton Hepburn, widow of A. Barton Hepburn," named director of the Industrial Banking Corp. Believed to be first woman director in industrial banking field. Selection is recognition of Mrs. Hepburn's business achievements and her long interest in "the advancement of women in active participation in financial and industrial affairs." Mrs. Hepburn is a leader in many civic associations. "Her clubs are the Colony, the Cosmopolitan, and the Colonial Dames."

Market commentary:

Market opened with large buy orders for major industrials. Many majors in early trading reached highest point of last week. Buying broadened to rest of industrials in late morning; upward movement continued almost all day. Some short covering seen. Car stocks strong, particularly GM; in spite of generally weak news. Utilities strong; amusement stocks dull. Banks and trusts weak.

Prominent brokers, rumored to be supported by banking interests, recommended buying sound industrial stocks. Believe this month marks the bottom of the industrial recession and stocks are likewise scraping bottom. M.J. Meehan & Co. expressed confidence in industrial outlook and recommended investment in representative stocks at current prices.

L.G. Federman, Pres. Interstate Dept. Stores, believes “Business in general hit bottom last month,” and likewise for commodity prices. “Both are now picking up and I am confident the advance will rapidly gain momentum.”

Conservative observers remain cautious; believe broker recommendations have so far attracted traders looking for quick profits, not long-term investors and general public. Recommend not reaching for stocks but buying leading issues on declines. Immediate outlook uncertain, but longer term considered encouraging.

Second-quarter earnings so far better than expected. Third-quarter predictions are difficult; current business is below second-quarter average; if seasonal pickup does not develop until September, as leading authorities expect, the improvement won't be reflected in third-quarter earnings.

Economic news and individual company reports:

Deposits at member banks up $1.494B to $21.317B in past six months. Similar increase to 1924, which was soon followed by business revival; caused by easy money policies of Reserve banks. However use of the money has been different from 1924; banks then increased commercial loans, but now there's been a large decrease in commercial loans and large increase in security loans and investments; easier credit policy has so far failed to increase demand for business credit. However, if a recovery does come, the Fed would be reluctant to allow rates to rise; necessary expansion in Reserve credit could then lead to inflation.

Current interest rates: Fed. Reserve NY discount 2.5%; commercial paper 3.25%-3.5%; 90-day bankers' acceptances 1.875%; call loans 2%.

First 8 rails reporting June earnings total $10.368M, down from $10.912M in May and $14.137M in June 1929.

Oil refineries now operating nationally at less than 70%; California at 58.2%. This curtailment should soon strengthen refined product markets.

First-class ocean travel in first-half down about 20% from 1929; third class travel increased.

New York Stock Exchange seat sold for $400,000, down $68,000 from last sale.


Mysteries of Nature. Film opens with scarab beetle rolling ball of camel dung; other details of beetle lifecycle; studies of plant life including the "uncanny fly-trap;" capture of large Nile crocodile; laboratory experiments with sound waves; large tropical spiders; and finally, "battle-to-death between the most poisonous tropical snake known and a non-poisonous adder," each more than 6 feet long (adder wins after terrific struggle).

+ The Boring Stuff:

Technical analysis: Last Friday's close recovered about 50% of the downward movement from May 29-June 24; setback of 10 points followed Sat. and Mon.; now upward movement has been resumed back to Friday's close of 240. If rally can carry well past that point, would indicate a substantial continuation of uptrend.

Sentiment in iron and steel positive although visible gains are still very small. Product prices stable in past week.

Conditions in bond markets seem positive, including low money market rates and commodity prices, and stock price instability since last fall. Rise in bond prices may have been slowed by large number of issues, selling of bonds to meet margin calls, and investors waiting for upturn in business.

Packard (cars) number of shareholders was 62,917 on May 15, up from 9,798 in 1929. Most hold 1-25 shares. Still controlled by small group of shareholders.

Cotton down, wheat fractionally lower. Metals little changed. Bonds generally higher.

New construction undertaken in 37 states east of Rockies $215.3M for July 1-18, down 43% from 1929; Total so far in year is $2.853B vs. $3.418B in 1929.

Washing machine sales in June were 48,383, down 19.6% from May and 17.6% from June 1929.

Ford extends vacation shutdown to three weeks from two.

Experimental farms operating in Alaska demonstrate possibility of raising wheat, oats, sugar beets, cattle, pigs, etc.

Spanish government raises tariffs on luxury articles, including cars; New Zealand gives tariff preference to British goods and disadvantage to American.

Argentine exports for first five months 300.5M gold pesos, down 34% from 1929.

International Salt's good results (first half net up 40% from 1929) attributed to advertising campaign.

Union Carbide Q2 net $.70/share vs. $.72 in Q1 and $0.88 in Q2 of 1929. Monsanto Chemical Works Q2 net $0.80/share vs. $0.71 in Q1. Westvaco Chlorine Q2 net $0.76/share vs. $.89 in Q1 and $1.21 in Q2 1929. Commercial Solvents Corp. Q2 net $.30/share vs. $.38 in 1929.

General Motors Q2 net $1.17/share vs. $2.01 in 1929.

Foster/Wheeler (engineering/power) first half net $4.27/share vs. $3.57 in 1929; unfilled orders June 30 were $10.7M vs. $6.6M in 1929.

Trico Products (auto equipment) Q2 net $1.56/share vs. $1.90 in 1929.

Sharon Steel Hoop first-half net $0.08/share vs. $2.46 in 1929. A.M. Castle (iron and steel) Q2 net $1.14/share vs. $1.96 in 1929. Michigan Steel first half net about $3/share vs. $5.36 in 1929. Gulf States Steel Q2 net loss $98,439 vs. profit of $405,630 in 1929.

Worthington Pump & Machinery first half net $1.053M vs. $1.099M in 1929.

Bowman Biltmore Hotels first half net $492,155 vs. $855,643 in 1929.

National Power & Light expects net for year ended June 30 about $2.30/share vs. $1.99 in 1929. United Light & Power net for year ended June 30 was $2.40/share vs. $1.78 in 1929. Los Angeles Gas & Elec. net for year ended June 30 was $4.038M vs. $5.995M in 1929. So. Cal. Edison first half balance after tax & charges $8.715M vs. $8.985M in 1929.

July 22, 2009

Wednesday, July 23, 1930: Dow 234.30. +5.01 (2.2%)

Assorted historical stuff:

After strong resistance, Bethlehem Steel forced to reveal executive bonus amounts (in trial concerning suit by Eaton-Otis interests to block proposed merger of Bethlehem with Youngstown Sheet & Tube). 1929 bonus for E.G. Grace, president, was $1.624M; 1929 bonuses for six vice presidents totalled $1.432M. 1929 bonuses for remaining executives totalled about $370,000. Total bonuses for Grace since 1925 were $5.432M.

Western Electric reaches agreement with Tobis-Klangfilm on sound film patents. Should expand European exhibition market for American films (currently Warner Bros. is the only US company allowed to exhibit in Germany). Territories for sound equipment divided between the companies. American companies now face a problem with language barrier. When talkies started this wasn't important since "audiences were attracted by the novelty of sound regardless of language." Now that novelty has worn off, current plan is to produce foreign versions abroad; "a copy of the original film is sent this over to act as a guide."

Editorial: War Sec. Hurley broadcasts speech on waterway development advocating it “wherever economic justification can be shown.” This phrase is an alibi “invariably written into official programs for spending the people's money and promptly forgotten.” If honestly applied to these projects, “would reveal nine-tenths of them as what they are, plans to subsidize a little transportation out of the national treasury for the advantage of particular localities.”

Hoover signs London Naval Treaty; now awaiting ratification by Britain and Japan. Under conditions of treaty US will reach naval parity with Britain by 1936; Japan naval building will almost stop.

Chilean government cuts salaries of all public employees by 15%, also suspends "certain gratifications and rent money."

Montgomery-Ward issues 730 page fall/winter catalog; theme is "savings and thrift."

Weekly food cost for family of 4 estimated at $13.72; many staples 20%-40% below 1929.

Market commentary:

Market opened at about the previous low levels with some further decline; increasing resistance to bear efforts as the morning progressed; rallies developed in recent trading favorites. Good news on steel encouraged bulls, as well as rumors of important operators "lining up their forces for another bullish demonstration;" rally broadened in the afternoon. Good rebounds from Monday lows in many majors. Banks and trusts higher.

Administration members reported telling Wall Street that business has turned corner, and should curve slowly upward until winter, becoming clearest in October. No forecast beyond that ventured. However, administration strenuously denies rumors of using "its influence to bring about organized support for the stock market."

Irving Trust July review says we may be entering "ultimate pit of the depression;" sees mostly bad news in June, including declines in most lines of business, lower commodity prices, stock market declines, and possible tariff reprisals. Nevertheless, advises remembering that "It is always darkest before dawn."

Sentiment improved by market support yesterday. Conservative observers still advise buying on dips and selling rallies, but if market can get above previous resistance, would be considered confirmation of uptrend and convert many observers to the bull side.

Economic news and individual company reports:

Banks reported deposit increase by $257M in past week, to $21.317B; most of money not employed; increase of $37M in loans and $82M investments.

Rail freight loadings for week ended July 12 were 915,985 cars, down 150,429 from 1929 and 108,940 from 1928, but up 123,844 from July 4 holiday week.

US Steel production in past week was almost 64% vs. 63% prev. week and 55% holiday week; industry was 57.5% vs. 57% and 48%.

Drastic curtailment cut oil production in June down to 2.506M barrels/day, lowest level since Nov. 1928. Average last Feb was 2.699M, last August 2.975M.

US/Canada June truck production was 48,667, down 15.4% from May and 50.4% from June 1929. First half 337,345, down 30.9% from 1929 but up 31.6% from 1928.

Frigidaire subsidiary of GM introduces new low-priced refrigerator for $157.50; previous lowest priced model was $182.50.

Prestone coming out with improved antifreeze for next winter; will be green for easy identification. Promises to be very profitable.


Old-Timer's Week at the Palace; a group of vaudeville favorites of the old days appearing, ranging in age from 64 to 86. Tom Harris, the oldest, is a tap dancer, shows he is up on the newest steps, “concludes by executing a few rapid steps in the old style;” “Lizzie Wilson sings the well-known German drinking song 'Das Ist Ein Schnitzelbaum,' with the aid of a chart and baton. Josephine Sabel gives an animated rendition of 'There'll Be a Hot Time in the Old Town Tonight.'” Show is being very well received.

+ The Boring Stuff:

Patent office issues 49,599 patents in the year ended June 30 [number in 2008 was 157,772].

Chicago metro area population 4.657M, up 1.135M from 1920.

Commodities little changed; wheat, cotton slightly higher, corn up on drought. Copper remained at $0.11/pound. Bonds irregular; foreign govt's up, US steady.

Developing consensus among brokers is that market is in general uptrend with occasional downward reactions. Advise gradually buying high-grade stocks for investment, advise traders to buy on dips and sell on rallies. Enough bears still around "to make trouble when the market begins to show signs of wavering."

Technical analysis: Next week is crucial to determining whether the current rally was due to fundamental factors or just technical. As of last Friday market had recovered about 50% of the June break. Bear test on Saturday and Monday then wiped out about a third of the rally gains. New support yesterday was encouraging; if market continues up, this indicates rally is due to fundamental reasons (increased business confidence).

Current month is the anniversary of the business slowdown; October will be anniversary of the stock decline. "Every succeeding day means we are just that much nearer a definite turn for the better." Meanwhile a Canadian broker points out: In the 1907 panic March 14 was the low, and the nearest low afterwords was 224 days later. Likewise in the 1929 panic, Nov. 13 was the low and the nearest low afterwords was 224 days later (on June 25)!

Meatpacking industry sales first 5 months sales $5.083B, almost as large as last year. Packing stocks in a rut thanks to low profit margins.

Machine tool market still dull, but thought to be at bottom; sentiment improved.

Gas sales in May down from 1929; decline is 1% for manufactured gas and 11% for natural gas. Attributed to decline in commercial and industrial use.

American Gas & Elec. net for 5 months ended May 31 was $2.62/share vs. $2.54 in 1929.

American Ice June profit of $914,382 vs. $906,799 in 1929. Profit for first half $1.968M vs. $2.108M.

McKeesport (tin plate for canning) first half net $5.05/share vs. $3.61 in 1929.

Jones & Laughlin Steel first half net $8.50/share vs. $16.05 in 1929. Magma Copper first half net $611,413 vs. $1,805,774 in 1929.

Pacific Western Oil first half net $1.22/share vs. $1.06 in 1929.

E.I. du Pont de Nemours first half net $2.84/share vs. $3.84 in 1929.

Yellow Truck & Coach Mfg. first half net $1,437,863 vs. $859,659 in 1929.

Allis-Chalmers (farm and industrial equipment) first half net $1.87/share vs. $1.73 in 1929. Bookings and unfilled orders up slightly from 1929.

Mapes Consol. Mfg. (egg cartons) first half net $4.66/share vs. $3.62 in 1929.

Congoleum-Nairn (floor coverings) first half net $0.40/share vs. $0.54 in 1929.

F&W Grand-Silver Stores first half net $1.71/share vs. $1.47 in 1929. Grand Union store sales for 28 weeks to July 12 were $19.5M vs. $17.1M in 1929.

Pierce-Arrow (cars) Q2 net $569,277 vs. $461,401 in Q1 and $1,288,643 in 1929. Hupp Motor Car Q2 net $0.29/share vs. $0.04 in Q1 and $0.95 in 1929.

July 21, 2009

Tuesday, July 22, 1930: Dow 229.29 -7.36 (3.1%)

Assorted historical stuff:

Editorial: Federal expenditures have gone from about $300M to $4.8B in less than 50 years; state and local expenditures have likewise enormously increased since the war. Much of this is used for vital services including schools, water systems, roads, etc, but not all of it is justified on the basis of results. For example, $250M so far has been spent on the Farm Board, "and the result has been like pouring water through a sieve;" yet one senator wants to give it a billion. "Herein is the fault of legislative bodies in ordering public expenditures. They do not have to make the budget balance and care little about the responsibility on those who have that delightful task."

Pennsylvania oil producers agree to cut oil production 30%. "This makes strange reading for very old-timers recall that as far back as 50 years or more ago the majority believed the oil reserves of Western Pennsylvania would be exhausted in a few years."

Dress- and cloak-makers boards, representing 60,000 workers, vote general strike of 7,000 children's dressmakers to protest sweatshop conditions.

Radio Corp. license extended to television, suggesting systems may be coming sooner than the anticipated 5 years.

Danish business satisfactory; first half 1930 up substantially over 1929 level.

Canadian government may take over development of commercial aviation, as most countries have. Airline would be owned by the Canadian National Railways.

Torbanite Products, Ltd. opens Nova Scotia plant to extract oil from oil shale. First Canadian plant to attempt this; to exploit huge deposits of oil shale throughout Nova Scotia. Oil shale rocks are heated to 800 deg. F. in airtight retort; hydrocarbon gases are then cooled and condensed to oil. Plant handles 50 tons/day; average yield is 1 to 1.5 barrels/ton.

Stromberg Motor Devices Co. wins patent suit lasting 16 years; awarded $261,511 plus costs.

Market commentary:

Market opened weakly, then turned dull with most major stocks trading around the early lows. In the final minutes of trading additional sales by bears extended early declines and stocks closed sharply down, with bigger declines in thinly traded issues (Vanadium, Auburn). Utilities, banks, and trusts weak.

Dull trading attributed to large professionals extending weekend due to recent heat wave.

Quite a few companies so far have reported good first-half earnings, including US Pipe & Foundry, American Chain, United Biscuit, Briggs.

Little improvement seen in Q3 earnings; quarter begins with production and prices of commodities generally lower. Improvement hoped for in fourth quarter.

Index of farm commodity prices at lowest level since 1922, down 9% in past year; general commodity price level lowest in 13 years, down 4% in June.

Harvard Economic Survey predicts business upturn in second half; cites increase in construction projects, stock market improvement, steadier commodity prices.

Officials from several large companies operating plants in Erie, PA, including GE and Hammermill Paper, say that although employment is down from 1929 they're beginning to see better business and expect to recall many workers within 30-60 days.

Economic news and individual company reports:

US June auto production was 335,475 vs. 417,406 in May and 545,932 in June 1929. First half was 2.220M vs. 3.224M in 1929.

Number of cars entering Quebec from US up 20% over 1929; J.L. Boulanger, Canadian Min. of Highways, optimistic on tourism.

California fruit growers and canners propose price stabilization plan involving dumping 40% of the crop.

Colgate-Palmolive-Peet first half earnings improvement of 19% vs. 1929 attributed to sharp decline in raw materials prices, cuts in selling and admin. expenses.

Procter & Gamble for year ended June 30 was $3.37/share vs. $2.89 previous year.

General Foods Q2 net $.88/share vs. $.90 in 1920

Westinghouse Electric first-half net $3.13/share vs. $4.92 in 1929. Some of decline due to transfer of radio manufacturing to Radio Corp. in exchange for stock.


"The story is told that a certain restaurant advertised 'partridge pie' on its menu. Patrons swarmed to the place but found the dish lacking in taste. They questioned the proprietor. He admitted casually that he had, it was true, mixed in a little horse meat. 'How much,' persisted the customers. 'Oh, half and half,' he replied. 'One horse to one partridge.'"

+ The Boring Stuff:

Editorial: NY Governor Roosevelt is the leading Democratic possibility for president in 1932. Therefore his handling of a local scandal is of national interest. Roosevelt has rejected Republican calls for a special legislative session to investigate Tammany Hall, seeing it as a fishing expedition based on unspecified charges. In trusting the New York State government and courts to investigate the many specific charges now percolating, Roosevelt leaves himself open to political damage if they fail. "There is politics here, of course, but it is not the cheap politics of personal safety first."

Commodities generally weak, including cotton, wheat, corn, copper. Raw sugar futures hit new record low of $1.17/pound; record low before current break was $1.56 in 1902. Bond market dull, irregular; US & foreign governments firm.

Fewer new stock issues since last November; financing has been done increasingly with bonds.

Some observers say record indicates that commodity prices will not improve until after substantial business upturn.

A.W. Zelomek, statistician-economist for the Fairchild Analytical Bureau, says the world wool crisis which climaxed with drastic price deflation in the first-half has passed. However does not see strong upturn in prices this year.

Detroit companies generally not able to reduce factory workers salaries; instead hours worked have been cut, including by unpaid "vacation."

US Dept. of Agriculture reports 111,175 acres of land planted to forest in 1929.

Total foreign govt. & corp. financing in first half was $839M vs. $720M in 1929 and $1.479B in 1928.

Canadian exports in June were $78.7M vs. $112.2M in 1929; imports were $91.8M vs. $111.9M.

1930 wheat crop in 12 countries estimated at 1.907B bushels vs. 1.827B in 1929. US 1930 forecast is 807M bushels, unchanged from 1929.

Northwest Pennsylvania crude oil production to be curtailed by 30% starting July 21.

Lucky Strikes June cigarette sales up 573M over 1929; first half up 2.957B.

Atlantic Refining first half net $1.05/share vs. $3.67/share in 1929.

Texas Gulf Sulphur first half net $2.93/share, unchanged from 1929. International Salt first half net $322,901 vs. $231,298 in 1929.

Collins & Aikman (pile fabrics, mainly for cars) estimated net for fiscal first half ended Sept. 1 is $2/share vs. $1.90 for year ended March 1.

Briggs Manufacturing doing well thanks to sales to Ford and Packard. Q2 net was $1.38/share vs. $0.51 in 1929.

Blaw-Knox (steel products, largely used in public works construction) first half net $1.27/share vs. $1.05 in 1929.

Lily Tulip Cup (paper cups) first half net was $2.34/share vs. $1.89 in 1929.

Bickford's (food store) first half net $1.04/share vs. $0.67 in 1929.

Beech-Nut Packing Q2 net $1.72/share vs. $1.87 in 1929.

Intertype Corp. (typesetting equipment) Q2 net $0.47/share vs. $0.97 in 1929 [profiled in Graham & Dodd's Security Analysis, 1940 ed. p 516].

July 20, 2009

Monday, July 21, 1930: Dow 236.65 -3.92 (1.6%)

Assorted historical stuff:

[Note: Emphasis added to highlight the more-than-a-little-spooky part.] Governor R.A. Young of Fed. Reserve Bd. warns banks to be careful about the increasing amount of loans against securities. About the crash last fall, says: “there is food for serious thought in the fact that, under our excellent banking system ... we nevertheless came to the brink of a collapse, had to resort to heroic action to prevent a panic, and were not able to avoid ... severe liquidation and what appears to be a business depression. Is this unavoidable? Is it necessary for this country to go through periods of reckless exuberance, accompanied by enormous credit expansion and fantastic levels of money rates that profoundly disturb the financial structure not only here but all over the world?” The cost of these episodes is paid in unemployment and worldwide depression. Reminds banks that security loans are safe only if a liquid market exists for the security; large scale sales can cause a drop in value, “and there is no telling when such a drop may terminate and what catastrophe may follow ...” Calls on banks not to assume Fed will always be able to help them, since its resources are “not inexhaustible.”

Letter to the Editor: Burden of war debts is crushing. "The day of isolated peoples is gone ... in an economic system one nation cannot punish another nation by destroying its purchasing power; it cripples itself. It is becoming daily more clear that the vast structure of war debts is unsound, ill-advised, damaging ... if we can have a debt holiday and tell the world to use its money in buying, then there will come an era of good-feeling that will make war unthinkable for a hundred years."

China builds world's biggest, best equipped mint at Shanghai; completes “one more of the steps necessary to bring order out of China's monetary chaos.”

Persistent rumors that Great Britain will buy all or part of Greenland from Denmark; desired for air route to Canada.

Dr. Lee DeForest, vacuum tube inventor, to move organization to Hollywood to work on equipment for movies and television, for which he predicts great future.

Soviet military and aviation forces planned to increase to 17 million men by Oct. 1933.

Empire State building going up on site of old Waldorf-Astoria. Currently 3000 men working, 7000 anticipated at peak. About four stories being added per week. To use more than 75 miles of waterpipe and 2,000,000 feet of wiring.

Market commentary:

Market encountered first significant correction in 10 days; anticipated on technical grounds since it had retraced almost 50% of the June break. US steel advanced to new rally high early, then turned down. Other major shares took their cue and likewise declined. Volume and extent of declines mostly moderate. Utilities lower. Substantial short interest still seen.

Hornblower & Weeks issue special letter with theme "Buy sound, standard American stocks now." Predict seasonal recovery and higher stock prices this year, say that stocks can't continually decline in the face of cheap money, commodities, and abundant labor. "Investors will not leave money on deposit for any length of time at 1.5% interest when sound dividend paying stocks can be purchased to net from 5% to 6%."

McNeel's Financial Service predicts boom due to "a program of expansion, invention, scientific development, and the arising of new industries and new modes which promise to make the next 10 years in American industry and finance far greater than anything that has ever been accomplished ... in the life of the nation." This would simply repeat the history of all previous US depressions and panics, after which country has rapidly progressed to new heights.

Current conditions seem quite similar to postwar deflation in 1920-2. From peak in June 1920, business gradually declined until October, and sharply until April 1921. "At the bottom of the movement, pessimists were talking of the worldwide character of the depression, of the tremendous surplus of commodities, widespread unemployment, and even of the baneful influence of the tariff." Shortly afterward "a solid recovery set in, leading to nine years of unprecedented prosperity."

"Eventually a stock will reach its intrinsic worth without manipulation. But manipulation generally helps it along."

Economic news and individual company reports:

June exports $299M vs. $393M in 1929; imports $250M vs. $353M in 1929. First half exports $2.080B vs. $2.623B; imports $1.736B vs $2.286B.

Highway construction and maintenance 1930 expenditures estimated at $1.750B, up over $250M from 1929.

48 Of 52 major rails have decline in freight loadings for 4 weeks to June 28.

11.750B small cigarettes produced in June, up 910M over 1929. Other cigarette/cigar categories lower.

Eastman Kodak has 50th anniversary this year; stock sells for 20 times earnings, yields 3.7%. GE selling about 35 times earnings.

By popular demand - another great market rhyme!

"Sitting in the broker's office, Wondering what in heck to do;
Watching, waiting, hoping, fearing, Praying all my dreams come true. ...
NPT is still a dairy; old VA has just gone by;
BMT is slowly mending; Radio is flying high.
Will I? Won't I? Hurry, Hurry; Down she wavers; up she goes.
'Buy,' I shout with great decision; Comes the answer - 'Market closed.'"

+ The Boring Stuff:

Editorial: Senator Caraway's lobby investigating committee has announced it won't be issuing its report on prohibition until after the Congressional election. This indicates they realize the public is getting tired of this committee's extra-legal behavior and “endless browbeating.” Senate committees generally seem to think they can mold public opinion by “persistently emitting loud and terrifying noises.” It's time they got back to the “real business of legislators.”

Letter to the editor: Suggests government production and distribution of alcoholic beverages at slightly below cost to undercut bootlegging.

Soil erosion has damaged 13M of 16M acres of cultivated farmland in Oklahoma. 1.7M acres abandoned in past four years.

AT&T has over 500,000 registered stock holders; probably over a million holders of stocks, bonds, and associated companies; between 450-500 thousand workers; spending $2M/day on improvements and new construction.

Wheat up sharply; cotton up. Bond market more active than usual for Saturday session, prices mostly firm.

Current conditions of abnormally low money rates have always led to renewed prosperity even in much worse previous depressions (1884, 1894, 1904). "Without patience and belief in the United States the millions now possessed by the Rockefellers, Mellons, Morgans, Bakers and scores of other multimillionaires would not have been made. Ask any of them, and if they care to talk they will tell you that they did not dump what they held when stocks were being sacrificed."

Industry and financial markets more optimistic over past week. Steel production up from July 4 lull; car inventories low; credit remains very easy.

Farm Board anticipated not to buy further wheat, cotton, etc.; intends not to try further price support unless temporary emergency exists with a particular commodity.

Youngstown steel output at 60% this week, unchanged from previous week.

Auto companies probably will need to raise production soon; inventories are low, production has been running behind sales, and difference should be larger in July due to production holidays.

Illinois employment in June down 10.9% from 1929, payrolls 18.4% lower. All industries down but paper and printing. Employment index lowest since 1921 depression.

Procter & Gamble net for year ended June 30 estimated $3/share vs. $2.97 previous year.

Campbell, Wyant & Cannon Foundry first-half net $1.68/share vs. $3.05 in 1929.

Bayuk Cigars first half net was $1.79/share vs. $4.09/share in 1929.

American Chain (chains ranging from jewelry to ship anchor) first-half net $3.29/share vs. $2.63 in 1929.

Johns-Mansville Q2 net $1.16/share vs. $0.81 in Q1 and $2.40 in Q2 1929.

Scott Paper first half net $2.64/share vs. $2.29 in 1929.

July 19, 2009

Favorites of the week July 14-19, 1930

No Journal was published July 20, 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.

July 19:

[Note: Strangely familiar times 10. How many times has this story appeared over the years? It reminds me of the item I see every five years about how the American mafia used to be bad five years ago but is now no longer a threat.] Increased public participation in the market is seen by the larger numbers of shareholders and smaller floating supply for major companies. This buying is for long-run investment; “It is a well informed public now, informed because the well managed corporations are liberal in dispensing information to their shareholders,” unlike the case 25 years ago when “many big industries believed secrecy was the better business policy.”

[Note: Strangely familiar #2.] Bradstreet's Journal and Dun's review report slightly more cheerful opinion in many lines of trade, though "not translated as yet into much apparent activity."

[Note: But they make it up in volume.] Wheat farmers in most of grain belt estimated to have production cost of $1.24/bushel, will get about $.68/bushel when sold.

July 18:

[Note: Sheer Genius department.] Movie house operator in Tehran fined for faking talking film by using phonograph manually operated to match silent film's speed.

[Note: Wait ... you mean stimulating speculation to dangerous proportions is bad??] Federal Reserve faces tough problem in how long to continue easy money policy, since in time “this has always stimulated speculation to dangerous proportions.”

[Note: You might have done OK on that one.] Wrigley selling for about $75, earned $2.82 in first half, dividend of $4. Expected to benefit from removal of tariff on chicle.

July 17:

France proposes "United States of Europe" federation. Britain cool to the idea, but it's probably workable without them. However, German participation would be essential. German response "conciliatory in tone," but raises some big obstacles, indicating desire for revision of the World War peace treaties, "including, presumably, alteration of certain of her new boundaries and removal of the treaty restriction upon her military establishment."

[Note: Arabia?? How are they going to afford all that gasoline?] World registration of automobiles was 35.1M at start of 1930, about 76% in the US (about two cars for every nine people in the US). This suggests a large market to be developed in the rest of the world since desire for cars is almost universal. "Even in Arabia, where the love for the horse is almost worship, the automobile is making its way and finding friends."

July 16:

[Note: Strangely familiar #3.] American Museum of Natural History produces The Bottom of the World, a film about expedition to the Antarctic; "The penguins, to which a large part of the film are devoted, are excellent camera subjects, and provide a natural humor in their likeness to human beings."

[Note: Pretty amazing list of new industries.] About 4.7 million people owe their living to the auto industry, 3.96M directly employed. Industry has gone from being insignificant 25 years ago to now essential to prosperity. Other important industries developed in that period: telephone, radio, electricity, electric refrigerator, airplane [true, but we've produced twitter!].

Hopeful sign seen in low inventories carried by industry and retail; about as low as ever compared to volume of business. Retailers have been buying "hand to mouth" for months. This differs from the 1921 depression, when inventories were at record highs. This should add a large boost when the economy turns.

More bullish factors: Dow yield, allowing for probable dividend cuts, is 4.75% vs. 3.25% for commercial paper; a spread over 1% has been a reliable buying indicator. Also, generally low interest rates, and the passing of a year since business began to turn down.

July 15:

Association Against Prohibition Amendment estimates last year's cost at $959.9M; about 90% is lost Federal revenue, remainder lost local revenue and costs of enforcement. Finnish Education Min. P. Virkkunen calls prohibition in Finland "chief source of intemperance, as well as failure on economic grounds."

[Note: Could explain high number of accident deaths.] Survey of 100 Detroit drivers held for violating traffic rules finds "42 were classified as of inferior intelligence, 12 as definitely feeble-minded, one as insane, and three as physically handicapped." Also, 46 were impaired by alcoholism, and only 13 were completely clean.

Good signs seen in rise in life insurance sales and bank deposits vs. 1929.

July 14:

Industrial cities in Ruhr region of Germany suffering from slag heaps (artificial hills of industrial waste) that can smolder for decades. At Essen, slag heap of Krupp's works has been burning continuously since 1914.

Luther Burbank invents "prunasimmonia", cross between prune and persimmon. Delectable fruit with tomato-like skin and "rich, golden yellow meat."

Industries with good first-half earnings include cigarettes, sulfur, can, baking/biscuit, oil, and chain stores.