Assorted historical stuff:
Leading economists say improvement in business will come through cuts in output eventually reducing inventories. However, output cuts do in turn cause further cut in consumption due to reduced purchasing power, and “the vicious circle continues until the point of minimum consumption is reached.” This then causes recovery as production is increased. Low production this year has been “working toward an ultimate cure of the overproduction situation.”
W. Green, AFL Pres., calls selling of goods produced with convict labor “industrial piracy”, says adding to burden of nations 3.7M unemployed.
Farm representatives after meeting with Pres. Hoover say approve of his relief program, will cooperate in every way.
Cotton picking wage reduced to $0.65-$0.75 per 100 pounds from $1.00-$1.25 average of past several years, due to low cotton prices.
F. Lisman, writing in Railway Age, says long-term prospects for rails poor, calls for joint action to tackle difficult problems including competition from trucks and buses, reducing waste, ruinous competition. Calls for “rate czar” to control freight rates.
S. Insull, Pres. Chicago Civic Opera Co., reports 1929 loss of $558,528 due to “constantly increasing cost of producing grand opera.”
Stocks staged a sensational late rally attributed to “wild covering movement” by over extended shorts. Pessimism over drought affects on business had induced “perhaps the largest” short interest in history. Bears made some further attempts early, particularly against coppers. News of heavy rains in drought areas caused a short covering movement, at first cautious but turning into a rout in late afternoon. “Spectacular uprushes” in stocks under recent pressure including US Steel, J.I. Case, Vanadium; general market rose aggressively. Bond market dull; corp. and preferreds up, foreign govts. mixed, US govt. steady.
Bears also possibly unnerved by recent decline in brokers' loans, and report that Roger W. Babson (economist, made good bearish call in fall 1929) was preparing to issue statement to clients stating that “the time to buy representative stocks had arrived.” Some investment buying by “banking interests” also seen.
Market sentiment “somewhat improved” though conservative observers still cautious; advise against buying until leading stocks break through resistance levels on higher volume; also advise against short-selling, and advise clients to cover all outstanding short positions.
Editorial: Wall Street technical conditions considered much stronger than a year ago. Most obviously, mechanical system broke down under high volumes of market break last fall; new high speed ticker system should better handle high activity. However, fundamentals have also been repaired. Banking system has never been stronger; banks are carrying large excess reserves, and borrowings from Fed are lowest in many years. Brokers' loans are down to 5.49% of total listed market values, down from 9.82% last fall. “Wall Street's facilities have been put in order against the day of revived activity.”
Economic news and individual company reports:
July exports were $269M, lowest since Feb. 1922 and down 33% from 1929; imports were $219M, lowest since Apr. 1922 and down 38% from 1929.
US Bureau of Labor reports employment dropped 2.6% from June to July; employee's earnings down 7.1%. Employment in manufacturing down 4.6% in July and 16.6% in year ended July.
F.W. Dodge report new construction contracts in 37 states east of Rockies Aug. 1-8 were $13.538M/day vs. $14.136M in July and $18.803M in Aug. 1929.
44 life insurance companies report July new insurance was $1.092B vs. $1.094B in 1929; first 7 months was $7.749B vs. $7.634B in 1929.
New Jersey legislature to meet in special session on relief of 32 municipalities over their bond limit.
Companies reporting decent earnings: Hudson & Manhattan Railroad, Duplan Silk, Mexican Seaboard Oil.
White Rock (mineral water and soda) selling about 45, annual dividend $4, earned $4.42/share in 1929 and $2.38/share in first half.
Warner Bros. suffering from slowdown in movie business attributed to wearing off of talkie novelty, heat wave, depression, and bad movies. Dividend omitted.
General Foods says has saved “American housewives” over $10M by cutting prices, recent cuts will save even more. Brands with prices cut include Maxwell House, Log Cabin Syrup, Hellman's Mayonnaise, Swans Down Cake Flour. Don't intend to raise prices due to drought.
“It reminds us of the old wheeze about the American who was explaining to a British visitor the construction of an electric sign his concern was about to place on Broadway, New York. 'It will contain,' he said, '20,000 red lights, 17,000 blue lights, 10,000 white lights, and a central sunburst of orange and purple.' The Englishman was impressed. 'Most extraordinary,' he said. 'But don't you think, old chap, that it will be just a bit conspicuous?'
+ The Boring Stuff: