Friday, July 11, 1930: Dow 227.39 +5.35 (2.4%)

Assorted historical stuff:

Sears-Roebuck fall/winter catalog to be mailed; over 1,100 pages, 46,000 items, more pages in color; will have average price cuts about 10%.

E.W. Beatty, pres. Canadian Pacific Rwy., advises curbing immigration from US and Europe to relieve unemployment.

Editorial: Farmers are complaining about tobacco taxes. However, acreage and prices paid have both been steadily increasing the past few years, suggesting the industry isn't exactly hurting. Also, the tax collected $450M [over 10% of total taxes] last year, which would have to be replaced. Sales taxes are fair because they tax proportional to use; “there can be no 'injustice' if the tax is reasonable in proportion to the value of the article.”

About $200M annually spent on industrial research by companies listed on the NYSE.

Front page of a San Francisco newspaper transmitted to Schenectady, NY by “telephoto.”

Daniel Guggenheim to support work of R.H. Goddard on designing rockets able to reach upper atmosphere.

New York City metropolitan area population 11.005M, up 2.395M from 1920.

Market commentary:

Stocks advanced for a third day in a row for the first time since end of May. Bears attempted attack on major stocks in first hour, but volume immediately dried up after small declines. A powerful rally then started in major industrials, rails, and utilities. US Steel rallied in spite of lower unfilled orders; rails possibly helped by rise in freight rates. Banks, trusts, and insurance companies also higher. Active short covering came in to help fuel the rally; many highs hit in the last hour.

Investment trusts [similar to mutual funds] faced with some hard questions after being heavily invested before the market breaks both in October and June. Now developing “more thorough appreciation of the task of handling the large amounts of money entrusted to them” and realizing “the essentiality of constant study of conditions, general as well as particular.”

A subscriber suggests one cause of the current downturn may be a bubble in construction; level is 100%-150% above prewar vs. 50%-60% for general business.

Rumors of big bankers and industrial heads getting together to “relieve the people of the pessimism which now engulfs them.”

Rumors of “bull pools” being formed by “prominent operators” to bid up particular stocks including Standard Oil of New Jersey, and Vanadium.

During the depression, industrialists have been cutting costs and increasing efficiency. This will increase profit margins when the recovery comes.

F.H. Medart points out that depression years of 1921 and 1930 both added up to unlucky 13; therefore, after 1930 there should be clear sailing until 2029.

Economic news and individual company reports:

German economy suffering; unemployment up, exports expected to decline due to world depression. Continued deflation blamed on “the fact that international income and the investment of capital have lagged behind the increase in production.”

Japan discussing ways to build a domestic auto industry - may help lighten impact of London Naval Treaty on shipyards. Current Japanese auto market is almost insignificant; domestic production is about 400 cars/year.

Combined earnings for 20 major aviation companies in 1929 were $7.5M, but all of it was by United Aircraft [later became Boeing, United Technologies, and United Airlines]; remaining 19 companies had $800,000 loss. Earnings considerably worse so far in 1930.

Montgomery-Ward says that in spite of just announced price reductions profit margins are being maintained thanks to lower inventory prices paid. Also defends easy payment installment plan, says experience over many years has been “thoroughly satisfactory and our bad debt losses negligible.”

IBM reports June sales highest of any month in 1930; sales in May were record. Q1 earnings were 13% over 1929 Q1.

Ford of Germany sales for first half up 55% over 1929. Ford also building new plants in Milan, Italy and near Mexico City.

Musical:

Who Cares, a revue by the Satirists, Inc. Numbers include “The Hunting Ballet,” in which a troupe of 12 “grinning and prancing” men impersonate ballet girls; “While good-naturedly funny, it [acknowledges] the excellence of the original.” Also “Thisishota,” a parody of Lysistrata, and “So This Is Television.”

+ The Boring Stuff:

Editorial: Some in Congress are demanding to see private communications about the London Naval Treaty negotiated this year. Hoover has refused on grounds the executive must keep these communications confidential [executive privilege]. Senators who have seen the letters say there's nothing sinister to be found. Opponents are using this as a distraction to delay or defeat treaty, hoping to find “a blazing indiscretion on the part of some incautious diplomat.”

Sentiment improved by run of 3 up days, but conservative observers still advise caution; suspect rally mainly technical/short covering and new bear attacks may follow. No strong rally expected in near future.

Commodities and foreign currency mixed. Foreign and corporate bonds higher including weaker issues; US government bonds lower.

Cattle, sheep, and lamb have had unprecedented price declines in the past year; Farm Board not involved in livestock.

Street bullish on oil; crude oil production and gasoline refining has been cut about 10% from last year; gasoline consumption still rising though at a slower pace.

Some support from brokers for automotive companies in spite of bad reports; several leaders are selling below book value; good reports on new models. Companies showing strength include GM, Studebaker, Chrysler, Auburn, Nash.

Merrill, Lynch says chain store sales declines for June due to lower commodity prices and discontinuing loss leaders. Expects profits to hold up better than sales.

Japan's economy in free-fall; many factors including government cuts, falling commodities, Chinese instability. Trade for first 5 months of 1930 down 35% from 1929. Many efforts to stabilize prices in silk (most important export) and other industries by coordinating production cuts and removing supply. Government rejects calls for borrowing and public works, calls for industry to “get down to bedrock.”

Total office, house, and store building permitted in 215 cities in June was $152.8M, down 12.2% from May and 30.1% from 1929.

Total auto exports first 5 months $173M vs. $299.4M in 1929, $213.9M in 1928. May exports $31.6M vs. $45.3M, $49M in 1928.

US Steel unfilled orders 3.968M tons, down 91.1M tons from May and vs. 4.257M on June 30, 1929. Decline not as bad as worst forecasts. Upturn expected in fall, but won't be apparent until August 15 at the earliest.

Electrical equipment exports for May $11.653M, up $244,810 over 1929; first 5 months $60.278M, up $1.513M.

Grape growers in California voting on industy plan to remove surplus from market.

Britain and Argentina refuse to accept American certificates that apples are free of fruitfly; apple growers say this all but closes export markets.

Gillette Q2 earnings $1.20/share vs. $0.95/share in Q1 and $1.84/share in 1929.

Auburn Automobile net for quarter ended May 31 was $4.25/share, down from $8.05 in 1929 but up from $0.53 in previous quarter. Nash Motors net for 6M ended May 31 was $1.36 vs. $3.93 in 1929; lowest level since 1924; dividend cut to $1/quarter.

Underwood (typewriters, office equipment) Q2 earnings $1.33/share vs. $1.89/share in Q1 and $1.94/share in 1929.

Continental Can sales for first half greater than 1929; assuming normal crops, expects full year equal to 1929.

Crown-Zellerbach (paper) net for year ended April 30 was $1.43/share vs. $1.72 in 1929.

Middle West Utilities electricity output so far in 1930 up over 1929; expects full-year earnings higher than 1929.