September 5, 2009

Saturday, September 6, 1930: Dow 240.37 +4.33 (1.8%)

Assorted historical stuff:

Editorial: Lindbergh proved the northern Atlantic could be flown eastward, and Costes and Bellonte, landing in Dallas on Sept. 4, proved it could under certain conditions be done westward. “No commercial use can be made of that information” now, but this was true of many technologies when first invented such as the steam engine and telephone - as a result of their development “the idea, handed down from primitive times, that every stranger is an enemy, has to a large extent been broken down under the influence of quick transportation and communication.” In the near future, aviation too will be developed; success will be measured by progress “in standards of living, and in social relationships that foster peace and goodwill between nations.”

French Ministry of Public Works reports nearly all reconstruction of regions devastated by World War has been completed. Almost all trenches filled in; most of 8M or more acres of ravaged soil has been cleaned. “Nature has healed the scarred and desolate land of 1918 beyond the most hopeful expectations.”

Brazil suffering from political disturbances, falling currency, coffee crisis, and pessimism regarding ability to get through depression without damage to credit.

Rumors Canadian govt. will shortly announce new policy to help industries such as textiles hurt by foreign competition; unclear what form policy will take.

New York metro area population is 10.741M, of which 64% live in 5 boroughs, 25% in New Jersey, 9% in other New York counties, and 1% in Connecticut.

Market commentary:

Market appeared to have been strengthened by past two days of consolidation; bulls encouraged by failure of bear efforts to bring out liquidation; also by increase of $8M in brokers' loans, taken as sign of greater public participation (though a relatively small increase). Retailers strong following news of improving Aug. sales at Woolworth. Major industrials recovered vigorously from recent lows. Amusements, utilities, banks also strong. Volume increased as prices went higher, and “bullish demonstrations” spread. Rails and oils neglected. Market closed on day's highs. Bond market strong; Dow 40 bond average at new 1930 high of 97.29; high grade corp. strong; convertibles more active; govts irregular, little changed.

Market opinion now sharply divided; bears cite repeated failure to break through 241 resistance level, bad farm news, and recent bad business news; bulls point to market resistance to selling (volume drying up on declines), and to strong positive reaction to good news as indicating path of least resistance is upward.

More brokerage houses advising purchase of stocks in their market letters; considered supporting factor for market.

One broker advises patience for current type of market; “If you hold the good stocks long enough you are bound to make money,” but if the average trader buys a stock and “it fails to move as expected, he soon tires and sells out.”

Veteran observers encouraged by recent bond market action; strength has spread from bonds to preferred stocks; this usually precedes rise in common stocks.

Bank merger rumors recently revived; possible resumption of vigorous 1929 competition to become largest financial institution.

Foreign markets including London, Paris, and Berlin sharply higher in past week; however, no increase in public trading seen and little foreign buying in New York.

M. Katzenberg, Pres. New York Hide Exchange, issues review of Exchange's first year of operations, says hide prices have declined to extremely low levels.

Economic news and individual company reports:

Bradstreet's review notes “unmistakable” business improvement from July and early Aug. dullness, back-to-school buying; Dun's review sees “acceleration of activity,” though commercial recovery still expected to be gradual.

Index of import volume for July was 91 vs. 97 for June and 124 for July 1929; lowest since Aug. 1924. July cotton imports $3.580M vs. $9.271M in 1929.

Weekly report by Fed. Reserve member banks shows currency in circulation up $65M vs. $81M in 1929; “all other” (commercial) loans up $3M vs. $41M.

Agriculture Dept. reports based on 100,000 special crop correspondents: corn crop futher damaged in first 3 weeks of Aug.; pasture also affected by drought; feed shortage said worst since 1901. Aug 1 estimate was for crop 500M bushels below average; deficit is now “no doubt considerably larger.”

Companies reporting decent earnings: American Fruit Growers, Prentice-Hall (textbooks), Penick & Ford (corn products).

Company reports since July 1: 187 companies reported higher earnings vs. 1929 and 446 lower; 918 dividends unchanged, 16 new, 10 increased, 71 cut.

Public reception favorable to new lower-priced Cadillacs; Sept. production increase announced.


“'Are you married?' they asked the bachelor. 'Alas, no, thank heaven,' he answered.”

Movie news:

Paramount presents the Marx Brothers in Animal Crackers. Film is “usually amusing, and, once or twice, hysterically so. It is, however, almost tedious in those spots where the authors have allowed their propensity for punning to get beyond control.”

+ The Boring Stuff:

Farm Board chair Legge sees Russian return to wheat market inevitable, says only way to ensure profits for US farmers is restricting production to domestic needs. Farm Board asked to approve plan by US and Cuban sugar growers to curtail output.

GE asks employees for suggestions for improving their jobs; in first half, 17,474 suggestions were made, 5,616 adopted, and $56,974 paid to suggesters.

Acquisition by Procter & Gamble of independent British soap maker Hedley & Co. indicates they may be gearing up to challenge Unilever's effective monopoly on the British soap and margarine trade. Unilever controls every step from production of raw materials in Africa to distribution through extensive retail outlets.

Public participation in market trading still not believed large, but reported to be increasing.

Commodities mostly strong. Cotton up after rally in final hour. Grains strong; wheat up strongly, corn down slightly on profit taking, other grains up. Copper remains dull, price unchanged at 10 3/4-11 cents. Cocoa and crude rubber touch record lows at 6.04 and 8.80 cents, respectively.

F.W. Dodge reports construction contracts awarded in 37 states east of Rockies in August was $347.3M, down 5% from July and 29% from Aug. 1929. Total for first 8 months was $3.353B vs. $4.157B in 1929.

Wholesale gasoline prices in mid-continent (central US) market have increased by 1/2 cent to 6 cents in past few days. Due to oil curtailment, gasoline in storage has been reduced by 16.148M barrels since peak on March 29, although current total of 38.815M is still up from 31.233 on Aug. 31, 1929.

Steel industry currently producing at 55% of capacity, about at lowest level hit in severe depressions in past. However, inventories have not been piled up as in the past; production has been limited to requirements. Companies continue to invest in more capacity, confident in eventual growth of demand.

British steel trade reported improving from current low level; higher inquiries and better outlook.

Russia to spend 3.5B rubles to improve transportation system, of which 2.320B will be on rail system.

Freight cars ordered from US makers in Aug. were 823 vs. 1,306 in July and 2,562 in Aug. 1929; passenger cars were 13 vs. 32 and 131.

July aircraft produced were 244 (63 military); aircraft delivered were 282. For first 7 months 1,721 aircraft were produced and 1,832 delivered.

Curtiss-Wright reports first half loss of $5.352M; says company still in sound fiscal condition, but is “less than one year old, and ... still in the phase of pioneering development of a new industry”; also, industry is still recovering from severe overproduction in 1929.

September 4, 2009

Friday, September 5, 1930: Dow 236.04 -1.50 (0.6%)

Assorted historical stuff:

Editorial: A Senate committee has been investigating campaign expenses of Mrs. Ruth McCormick, a Senatorial candidate. Mrs. McCormick retaliated by herself investigating one of the Senators, hiring a detective agency for that purpose. The Senator described McCormick's investigation as “shoddy, scabby, unprincipled, unconscionable, contemptible”; this may indicate he has lost “the fine judicial poise that befits the toga.” Public sympathy is mostly with McCormick, thanks to the Senate's tactics in previous investigations, including treating witnesses arrogantly, taking private papers unconstitutionally, and making their contents public.

Editorial: Real estate owners are organizing to reduce local tax burden. Real estate taxes have always been major part of local taxes, but some states including New York and Massachusets have now adopted an income tax as well; curiously, the new tax, “though it has raised much money, has not materially reduced the tax on real property.” New York state is now organizing a bipartisan commission to study whether a sales tax can be applied to relieve the real estate tax.

International Law Assoc. recommends to world govts. that contracts between residents of countries at war should be dissolved at outbreak of hostilities.

New York's tiny housekeeping apartments of today are nothing new under the sun. In London, following the Great Fire of 1666, vast numbers of families were obliged to live in one room and two room apartments.”

New York city has 20,000 postal employees handling daily 300,000 sacks of mail totalling 17M individual pieces.

Construction of 30 “baby” blimps 100 feet long by 25 feed wide with capacity of up to 8 people started at US Navy hangar in Cape May, NJ.

Audo-Cinema contracts to help wire 1,000 Soviet movie theaters for sound films; currently only one theater in Moscow is wired.

Market commentary:

Generally dull session; volume down, little public participation, leading stocks traded in narrow range. Bears attempted to extend late market break Wednesday into yesterday's session, but no liquidation was forthcoming and buying support came in on setbacks. Some declining tendency in final hour. Banks and trusts weak. Bond market more active; utilities higher, Dow bond average at new 2-year high of 97.27; govts. mostly firm except South American.

Market technicals seen favoring higher prices; most recent rally recaptured all of ground lost in break from July 28-Aug. 12, first time that happened since current bear market started last Sept. However, period of consolidation is logical considering swiftness of the advance since mid-August.

Conservative observers more cautious, noting failure to break through July resistance level about 241. C.O.'s also inclined to wait for actual business improvement before taking long positions.

Positive sign seen in increasing savings deposits and increasing number of shareholders in large corporations; this indicates continued “prosperity for many in a period of depression,” since they mean a surplus left after expenses.

Goodbody & Co. expresses some conservativism about business recovery; says will be gradual, may only be seasonal. However, because of amount of liquidation already and professional nature of market, “we doubt whether much of a decline will take place from the present level.”

J. Mills, Pres. Natl. Purchasing Agent's Assoc., advises Pres. Hoover he believes business will be slow during winter but turn up in late winter and spring.

Economic news and individual company reports:

Census finds most of unemployed concentrated in big cities; those with population over 100,000 had proportion of unemployed about 50% over US as a whole.

June gasoline consumption in 44 states was 33.331M gallons/day, up 2.418M from May and up 2.005M from June 1929.

US and Canada Aug. car production hits new 1930 low of 240,100 vs. 272,551 in July and 512,842 in Aug. 1929; first 8 months was 2.843M vs. 4.445M in 1929. Little prospect seen of upturn for next few months; car industry seems determined to hold output down to finish clearing out old inventory this year, then make “new start on its next era of prosperity,” though inventory is quite low already; upturn expected in 1931. Normal market demand seen as about 4.6M cars/year.

Many large companies seen able to maintain dividends due to huge surplus accounts built up in past.

August customs collections were $32.1M vs. $56.4M in 1929, but increased from July.

Companies reporting decent earnings: Canada Dry Ginger Ale.


“'I want a very careful chauffeur - one who doesn't take the slightest risks,' warned the would-be employer.
'I'm your man, sir,' answered the applicant. 'Can I have my salary in advance?'”

+ The Boring Stuff:

J. Dunn of Dunn, Fisher & Co. (London investment house) says British opinion moving toward policy of free trade within empire and high tariffs for outside trade; cites recent statements from both bankers and trade unions; says US “has become the most progressive and richest of all nations” through system of high tariffs. Britain said to be slowly “emerging from the Cobdenite miasma of more than 80 years” during which British prosperity was attributed to free trade rather than its 100-year lead in manufacturing and commercial development. Current crisis has made clear that high tariff countries are using Britain as dumping ground for their products while shutting British products out of their markets. Ever-increasing unemployment, depression, and drain of gold to France are working to cause change .

In 15 years ended 1928, coal consumption went up 5% while other energy sources including crude oil, natural gas, and hydro power, increased 133%-243%.

Pres. Hoover nominates Eugene Meyer, Jr. to succeed R. Young as Fed. Reserve Board Gov.; former chair of Fed. Farm Loan Bd., said favored by Mellon.

NY City independent subway lines (the BMT and IRT) seen moving to unification with the new city system that will start operating late in 1931, though IRT has been resistant. Some dispute over valuation of both companies; values assigned to BMT vary from below $200M up to $273M.

Steel industry has passed through difficult period, though observers are now hopeful for gradual improvement in rest of year. Hopeful signs include low stocks on hand, good demand from some sectors such as tin plate, and improving scrap prices. Most authorities don't expect dramatic improvement until next spring; declining steel prices have caused extreme caution in ordering.

Commodities mixed. Cotton up slightly. Grains generally down, wheat again hits new season lows. Copper remains at 10 3/4-11 cents with little buying.

Lack of anticipated public participation in market following Labor Day seen as discouraging to bulls.

Public interest in investment trusts (similar to mutual funds) currently at a low ebb; “while waiting for improved conditions, considerable thought is being given to various phases of investment trust operation.” United Founders favors active management and continuous supervision; likens other approaches to pilotless ships.

American mining interests pleased with new Mexican mining law offering better terms to foreign investors.

Brokers' loans reported by Fed. Reserve member banks up $8M in past week to $3.110B. Call money continued at 2.5% but expected to return to 2% shortly.

New bond offerings in Aug. were $202.8M vs. $508.8M for July and $129.7M in Aug. 1929; new low for 1930. First 8 months $4.002B vs. $2.279B in 1929.

R.G. Dun & Co. report Aug. business failures were 1,913, down 5.7% from July but up 8.6% from Aug. 1929; first month this year below 2,000. Total liabilities were $49.2M, up 23.5% from July and up 45% from 1929.

Construction costs for industrial buildings are lowest in past 8 years; decline is due to efficiency and lower material costs, not lower wages.

Activity in steel scrap metal markets down in past week although recent firmer prices have held. Finished steel prices also steady at 1930 lows.

Gasoline in Chicago wholesale market was up 1/4 cent.

Total dividends paid by 18 copper companies now down to 48% of peak dividend rate.

July sales by meatpacking companies were 6% below June and 20% below July 1929, largest decrease this year.

Ericsson Telephone Co. meets, confirms takeover by Kreuger & Toll, who is now seen backing Siemens-Ericsson combination in telephone field.

Company reports since July 1: 185 companies reported increased earnings vs. 1929 and 440 decreased; 898 dividends unchanged, 16 new, 8 increased, 70 cut.

September 3, 2009

Thursday, September 4, 1930: Dow 237.54 -2.88 (1.2%)

Assorted historical stuff:

Gov. Roosevelt charges public utilities with stock watering, also singling out Associated Gas & Elec. for refusing to allow examination of books to determine reasonableness of rates.

Editorial: Gov. Roosevelt's program for building bridges across Hudson is economically sound and beneficial; should be coordinated with new Mid-Hudson Bridge Authority; “the great success of the New York Port Authority stands as a condemnation of the blind partisanship that delayed it for several years.” There will soon be four state-owned bridges in the 150 mile stretch between NY City and Albany, paid for entirely by tolls, not taxes; eventually there may be many more.

British trade unions adopt report calling for favoring groups within British empire for trade development.

Govt. spending over $19,000/day to fight forest fires in many of the 149 US national forests; danger increased by drought conditions.

Market commentary:

Leading stocks steady for most of the day but broke in final 15 minutes; attributed to discouragement over continued failure of seasonal business improvement to materialize, rise in call money to 2.5%, some mildly bad business news. Bears, thought to be defending resistance level slightly above 240, pressed advantage on bad news; volume increased at close. US Steel particularly weak. Bond market volume moderate, prices generally slightly higher; Dow 40 bond avg. at 97.15, highest since July 1928.

Bulls discouraged by some bad business news including slight US Steel production cut due to Labor Day, drop in commercial loans, continued bad freight figures.

Conservative observers say not surprised by market decline; continue to advise reducing long positions and only buying gradually on declines; expect further selloff before next rally.

Cassatt & Co. recommend against trying to catch reactions for trading purposes, favor holding long positions and adding on declines.

Chatham Phenix Natl. Bank says August business activity improved somewhat from July low, indicating July level was “extreme low of the depression, with the natural corollary that from now on the curve of activity will rise.” Finds some improvement in employment; sees likely rise in commodity prices.

Iron Age and American Metal Market report some small signs of improvement in steel production in past few weeks (small increases in production, high demand for structural steel, some improvement in tin plate and automotive demand). This month seen as determining course of steel for rest of year; even mild seasonal recovery will help the industry return to firmer basis.

C. Denney, Erie railway Pres., sees signs of business improvement in recent Erie freight loadings.

Economic news and individual company reports:

Fed. Reserve member banks report for week ended Aug. 27: “all other” (commercial) loans down $64M to $8.416B; total decline of $156M since June 25, was reverse of usual seasonal rise - may indicate “process of business retrenchment is not yet at an end.”

National debt as of Aug. 31 was $16.188B, up $12.1M from July 31 but down $617.8M from 1929.

Brokers' loans to NYSE members Aug. 29 were $3.599B, vs. $3.689M on July 31 and $7.882M on Aug. 30, 1929.

New car registrations for July were 254,098 vs. 260,861 in June and 432,503 in July 1929; for first 7 months registrations were 1.908M, down 26% from 1929. Ford market share in July was 43% with 109,372 vs. 112,717 in June and 151,901 in July 1929; market share for first 7 months was 41.6%.

NYSE Stock transactions in Aug. averaged 39.868M shares/day vs. 95.603M in 1929 and 67.160M in 1928.

Weather Bureau reports substantial rains helping South, but severe drought continuing in large areas including Oklahoma, Texas, Iowa, Missouri; rain generally needed almost everywhere east of Rockies, except for some areas of Great Plains.

Surprisingly, National Casket Co. reports bad earnings due to depression; Pres. P. Heintz attributes decline to lower mortality during depressions and switch to lower-priced caskets.

Newport News Shipbuilding & Drydock Co. submits low bit of $15.560M for construction of new aircraft carrier.


“A Russian was being led to execution by a squad of bolshevist soldiers one rainy morning.
'What brutes you bolsheviki are,' grumbled the doomed one, 'to march me through a rain like this.'
'How about us?' retorted one of the guards. 'We have to march back.'”

+ The Boring Stuff:

A.Coleman, Asst. Postmaster General, blames unemployment among substitute mail carriers and clerks on unusual 15% Aug. slump in mail volume vs. 1929.

Spanish Finance Min. calls on Bank of Spain to help defend currency. Most of Bank's executives reported unfavorable to new bank governor, “who is considered to be entirely under the dictates of the government.”

Market notes: most Stock Exchange brokers more optimistic, but only moderately so; believe “good stocks now are worthy purchases,” but improvement will only be gradual. Short interest remains large. Many small investors have been buying, but in much lower volume than 1929; most accounts using much less margin.

Seasonal upturn in business would normally be expected this month, though it may be delayed due to upset sentiment and low price levels. However, this should be countered by depleted state of inventories as result of long period of “hand-to-mouth” buying. Most trade authorities now expect only seasonal upturn in fall and sustained upturn in business not until spring. Despite lower business, many leading corporations are well-positioned to take advantage of any revival.

Commodities mixed. Cotton moderately higher. Grains lower, wheat hits new season lows in spite of some bullish news. Copper stays at 10 3/4 bid, 11 ask, but with “somewhat firmer tone.”

Some of strength in bond market may be caused by bank buying; Fed Reserve member banks reported bonds other than US govt. at $3.420B on Aug 27, up about $600M since start of year.

Thus far larger steel companies have held up better to declining demand than smaller ones, generally maintaining earnings above dividend requirements; attributed to diversity of markets. Smaller steel companies may also be suffering from focus on automotive parts. US Steel now at 13 x earnings, 4% yield; Bethlehem at 9 x, 7%; each is still earning enough to cover dividends.

Railways operating in East protest new rate structure given by Interstate Commerce Commission, say it will reduce overall revenues rather than increase them.

British registered unemployed were 2.040M on Aug. 25 vs. 2.018M on Aug. 18, and 1.156M on Aug. 26, 1929.

Steel ingot production in week ended Monday was almost unchanged at 57%; US Steel about 65% vs. 66% previous week.

Gasoline in storage at refineries for week ended Aug. 30 was 38.518M barrels, down 1.027M from previous week and 16.184M from March 29 high. Refineries operated at 69.2% of capacity vs. 72.4%; crude oil production was 2.461M barrels/day, down 9,150 from prev. week and down 512,100 from 1929.

Corn crop now estimated at 2B bushels vs. 2.614B a year ago and 5 year average of 2.7B. If current higher corn prices are maintained the total value of the crop would be almost as high as the initial July 1 estimate based on a 2.8B crop. However, this is doubtful; other grains including wheat, oats, and barley are available in abundance and may be substituted; also scarcity will probably cause economies in use and lower consumption.

US flour production in week ended Sept 3 was 6.621M barrels, down 163,748 from 1929.

F.W. Dodge reports Aug. new construction contracts for New York metro area were $76.7M vs. $68.9M in July and $75.7M in Aug. 1929; total for year to date was $658.1M vs. $846.9M in 1929.

Two copper companies cut dividends (Kennecott from $3/year to $2; Consolidated Copper from $1.50 to $1 after cut from $3 last quarter).

Kreuger & Toll pay $46.5M to Germany as first installment of $125M loan in exchange for granting Swedish Match and International Match (US subsidiary) major participation in German match business for 30-50 years. Kreuger interests also acquire L.M. Ericsson Co.

Stock of 17 of largest utilities now selling at average of 20.5 x earnings in year ended June 30 vs. 33.7 x 1929 earnings at market peak last Sept. and 12.5 x 1929 earnings at low last Nov. These stocks have recovered about 28% of the loss in the Nov. break, vs. 23% for industrials and almost no recovery for rails.

Companies reporting decent earnings: American Cyanamid.

September 2, 2009

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

Assorted historical stuff:

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

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

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

Market commentary:

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

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

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

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

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

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

Economic news and individual company reports:

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

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

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

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

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

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


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

+ The Boring Stuff:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Administrative note, Sept. 2, 2009

Some of you may have noticed some delay in posting last week.

The cause of this, briefly, was that Google decided that my blog was a suspected splog (spam blog). For those of you who've managed to avoid splogs so far, these are automatically produced blogs that get their content by more or less randomly cutting and pasting pieces from other sites on the web. The effect is rather strange - at first glance, the splog looks like a legitimate blog and each small fragment likewise looks legitimate, but after 10 seconds of looking you generally realize that the blog as a whole makes no sense. I believe the reason people make splogs is to generate traffic from search engines or other illegitimately obtained links, and thereby make money from ads.

This note may seem a bit ungracious, considering that Google gives out lots of cool services for free and splogs are a growing problem that they do have to tackle. In fact, I wasn't going to write this until the blog my girlfriend is developing was also flagged. This made me think some suggestions to Google might be in order, specifically about a couple of idiocies that they should probably think better of.

The first idiocy is that for this, as for their other services, Google makes it impossible to contact a human to fix problems; the only message from Google was a no-reply email with a notice that my blog had been locked to new posts and would be deleted in 20 days, and a link for me to click if I believed my blog wasn't spam. if I did this it was intimated that Google would get around to checking things out sometime in the next 2 business days and unlock the blog if they did decide it wasn't spam. Let me suggest to Google that they change this no-human-contact policy since it's really dumb. I don't have much hope this suggestion will be taken because it does appear to be a fundamental principle at Google that the algorithm is to be trusted over human judgement.

Second, If you do insist on giving algorithms primacy over humans, it would at least behoove you not to use lamebrained algorithms, as you did in this case. A few examples of how a smarter algorithm could easily tell this blog isn't spam:

- It has been mentioned on and linked to by writers for the Financial Times, Wall St. Journal, The Atlantic, The NY Times, and most recently by the estimable Australian economist Steve Keen (that website has lots of interesting stuff by the way). The odds of these people talking about and linking to a spam blog are close to nil.

- It has around a thousand subscribers from many countries who read items regularly; while in theory this could be faked, I'd guess very few splogs take the trouble, so it might make sense if you find this situation to delegate a human to spend the 10 seconds necessary to check if the suspect blog is in fact spam.

- My girlfriend hadn't launched her blog yet, so it was set to be invisible to search engines and other readers. The odds of a spam blog having this setting seem very small. I'm guessing the spam detection was set off because she had a bunch of repeated text in dummy blog posts, but this seems it would like a fairly common thing for authors who are setting up the design of a new blog.

Once again, I'm sorry to have to complain like this about a free service. I'm sure your spam detection algorithm was programmed by a crack team of dual linguistics-computer science Ph.D.'s and is the last word in sophistication, but I think a little common sense might also be added to the mix. While I'll continue to use your blog service since it's free and pretty good, this experience has certainly reduced the possibility of my using a Google service for anything crucial to my financial or physical well-being without some policy changes on your part.

September 1, 2009

Cleaning out the attic, Sept. 1, 1930

No Journal was published Monday, Sept. 1, 1930 or Tuesday, Sept. 2, 1930 due to the Labor Day holiday weekend. I'll be putting up some assorted fun and/or possibly informative stuff that I've accumulated instead.

1) A 1930 singoff: Here's a couple of 1930 versions of “My Baby Just Cares For Me:
Eddie Cantor from his 1930 film Whoopee,
a more uptempo 1930 version from Jack Payne,
and for good measure a modern version by Nina Simone.
Feel free to comment on which one is the best (the correct answer is the second). Also, make sure to check out the great Eddie Cantor 1930 version of Making Whoopee (I just put this up on the right side of the blog web page as well).

2) For the investors among you, a great effort by someone named Vinod. The bible of value investors, Security Analysis by Graham and Dodd, came out a few years after 1930, with weapons forged in the fires of the Depression. For those of us not up to wading through the full 800-odd pages at the moment, here's a summary of the book so you can at least get the flavor.

3) For both investors and non-investors, a pretty good interview with Charlie Munger from last spring on how we got into this mess and what we should be doing now (HT CR).

August 30, 2009

Favorites of the week August 25-August 30, 1930

No Journal was published Sunday, August 31, 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.

August 30:

[Note: I understand Amtrak now offers two kind of hot dogs ... ] Canadian Natl. Railways facilities for Toronto-Vancouver train include mini-gym with “Swedish massage machines, vibrating apparatus, and foot and hand exercisers,” shower bath, ice cream parlor, barber shop, valet service. Windows in observation cars are of “vita glass” transparent to UV rays.

[Note: Interesting difference - lack of safety net, and similarity - consumer-driven economy. ] Editorial: Gov. Roosevelt's proposed state-supported unemployment insurance may be debatable, but he's at least called attention to a crucial problem. Workers make a majority of the national income (in 1928, 46.6M workers of a total population of 119M made $50B of a total income of $89.4B, the rest being interest, dividends, rents, etc). Therefore, business life depends on workers' income and consumption, and it's crucial that there be steady and well-paid work for all those willing and able. Automation and other factors have contributed to unemployment; solution “calls for deep study of experts and an economic, not a political cure.”

[Note: Strangely familiar dept. ] Pres. Hoover meets with heads of govt. building activities with view to accelerating programs.

[Note: Interesting stat if accurate. ] American Tree Assoc. says world's forests are concentrated in Russia, British empire, Brazil, and US; these four contain 2/3 of world forest land.

August 29:

[Note: For you non-Depression-buffs, Whitney would turn out to be yet another Depression Disgraziato, winding up in Sing Sing prison a few years later. ] Richard Whitney, NYSE Pres., to give opening address at NYSE Educational Institute on subject “Trade Depressions and Stock Panics.”

[Note: Sheer Genius dept.] NY City has thriving trade in shops renting complete outfits for weddings, including bridal gowns, tuxedoes for groom and best man, gowns for bridesmaids, and outfits for family members. Larger shops have up to 300 gown selection; bridal outfits rent for $15-$25, grooms for $5 including stovepipe hat.

August 28:

[Note: Strangely familiar dept. ] There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

[Note: Not so sure about whether the last part is still true dept. ] Fed. Reserve seen continuing easy credit policy pursued since start of year. Some concern that increased reserve credit “will flow into speculative channels,” but this doesn't seem to have happened much yet.

August 27:

[Note: Thank goodness we're now getting back to the civil, rational discourse of old-fashioned town hall meetings.] Editorial decrying the 1930 election campaign being waged using the new mass medium of radio: “A practically new kind of artillery is used, known as the radio which is charged with political hot air and fired, not at the opposing side but at the people ... the contestants count on keeping up the bombardment until the November elections by which time the people will be gassed into submission to one side or the other.” Cause of current depression is that “this, the richest nation on earth, with millions of idle money is not giving employment to a large consuming class,” but neither side in the campaign is offering constructive solutions.

[Note: Strangely familiar dept.] Economists say unemployment is biggest factor keeping business down and delaying recovery; point to loss of 1.6M factory jobs since last September.

[Note: Strangely familiar dept.] Commercial credit continues down slightly; this may not be significant, however, since corresponding weeks in previous years have also been down. Banks have also been reducing loans on securities, though they remain high. Banks have been pouring surplus funds into investments, now at highest level on record.

August 26:

[Note: Forgotten wisdom dept. ] Dr. D. Laird of Colgate U. claims at least 5% of US payrolls is wasted due to inefficiency caused by noise. Tests of typists found up to 30% increase in output when noise was reduced; noise apparently harms nervous system even when workers are used to it and don't consciously find it disturbing; typists used 25% more energy in a noisy room “as a result of pounding the keys harder and of muscular tension.”

[Note: Good luck with that dept. ] Latin American representatives to meet in Washington to “devise means to limit manufacture of narcotics to medical needs.”

August 25:

[Note: I believe Dept. of Fisheries later produced educational film with Dean Martin titled That's A Moray.] US Dept. of Agriculture has extensive department producing educational films, including T.B or not T.B., Insect Allies, That Brush Fire, and Persimmon Harvesting and Storage in China.

[Note: Strangely familiar dept. ] Editorial: Some have suggested banning short-selling as aid to business recovery. But recent market swings have not been due to short-selling but to public recognition of reduced earning power; similarly, farmland in corn belt has gone down by 2/3 from wartime level, though noone has been selling it short.

[Note: Strangely familiar dept. ] Alarmed by shrinking population, France budgets $45M to encourage large families; parents to receive $20 for second child, $30 for each additional.

[Note: It really wasn't that deep. ] Second Greta Garbo sound film released, Romance - her “deep sonorous voice” is no longer surprising, but another interesting facet of her screen presence. No actress in Hollywood photographs better; melodrama with fine cast stars her as Italian opera singer Rita Cavallini in ill-fated romance with Tom Armstrong.

[Note: Truer words were never spoken dept. ]
“'Politics is very uncertain.'
'Very,' agreed Senator Sorghum. 'Even after a man succeeds in being elected, he doesn't know whether he's going to take credit for what happens or whether he's going to get the blame.'”