July 27, 2009

Monday, July 28, 1930: Dow 240.31 +2.83 (1.2%)

Assorted historical stuff:

Contrary opinion from a subscriber regarding W. Grace's $1.5M bonus from Bethlehem Steel: “I don't believe there is any man worth $1M a year. Rather, I believe a man of high office in a corporation should be content with a reasonable salary and rely upon his interests as a stockholder for further compensation. I do not mean to detract from the all-important factor of management, but there must be a line drawn somewhere - if not, why shouldn't the heads of some companies like US Steel and AT&T receive $10M a year?”

Germany in crisis: von Hindenburg's dissolution of the Reichstag is climax of long series of financial crises. After a remarkable economic recovery in the past five years, Germany's access to foreign capital has been cut off by the financial crisis; they're now faced with severe unemployment and need to bridge large budget deficits. Temporary dictatorship is an opportunity for drastic measures, though there is some worry that after new elections Socialists and National Socialists will gain. Some positives in continued export growth and solid condition of Reichsbank.

French workers strike against government social insurance plan, demanding raise to compensate for 4% tax on earnings.

Canadian election result awaited; Liberal party expected to retain power, with smaller majority.

Agreement on Mexican debt reached; overdue interest reduced, term extended 45 years. Now awaiting ratification by Mexican Congress.

$50M “clearing house” to be formed in London to protect firms selling on credit (installment plans) by gathering information on customer's other credit obligations.

Dr. W. Goodwin of Columbia carries out 400-person study of happiness. Finds happiness unaffected by age, intelligence, or education. Men generally happier than women, married people happier than single, “although the survey did not show whether celibacy induced unhappiness or unhappiness resulted in celibacy.”

Annual numbers for US ice cream industry: 1.75 billion pounds produced, using 6 billion pounds milk, 243 million pounds sugar.

Most expensive chairs in public use in New York probably a set of five gold-leaf and red plush Louis XV chairs in lobby of St. Regis Hotel. Constructed about 1905 in Paris for about $1,500 each; “Even in these days of frenzied bidding for antiques it takes a rare Chippendale to bring $1,500 on the auction block.”

Market commentary:

Bulls were encouraged by Friday's action, particularly evaporating volume on declines and sharp rally in last few minutes. GM particularly strong; as was US Steel and AT&T. Trading favorites strong (Vanadium, Radio, United Aircraft). Market advanced broadly. Some public buying seen. Investment-grade bonds strong; speculative bonds and preferreds irregular.

Market encouraged by ability of US Steel and GM to earn almost all the full year's dividend requirement in first half. Many other companies have also reported earnings better than expected (“the reports of many corporations for the second quarter have been a disappointment to traders on the bear side”).

Some positive feeling from weekly business reviews expecting bottoming out and seasonal upturn, though this expectation so far “has been based on hopes rather than actual signs of increasing activity.” Many industries have consumption running ahead of production and low inventories; credit is also very easy. In particular, resumption of car production soon is seen as positive for steel and other industries.

Economic news and individual company reports:

Commodity news: Irving Fisher's index of 200 commodities 83.3 in week ended July 25 vs. 83.4 prev. week, 93.3 in Jan. 1930, 97.4 in Jan. 1929, 91.2 in Jan. 1922, and 167.2 in May 1920. Crude rubber prices lowest in many years in spite of record consumption in first half, 267% over 1921 level. Wheat market unsettled by Russian exports.

103 telephone companies operating earnings for May were $22.924M vs. $23.338M in 1929.

General Foods selling about 55, earned about $2 in first half, yields about 5.5%. American Ice: about 35, earned $4.22 in 1929, yields about 8.6%.

General Mills profit for year ended May 31 was $4.83/share vs. $4.57 previous year. Hershey Q2 net $2.16/share vs.$2.25 in 1929.

GM first half net $2.32/share vs. $3.28 in 1929. Earnings were 77% of $3 full year dividend.


“Father of the Bride - My daughter will have a dowry of $50,000, but of course I must make inquiries of your antecedents and prospects.
Suitor - Don't make any inquiries, and I will take her for $25,000.”

+ The Boring Stuff:

Editorial: London Naval Treaty is good in that it restricts navies to parity at a less expensive level. Question now is whether to spend the $1B required by 1936 to actually reach the parity allowed by the treaty. We should do this only if necessary for defensive security, not for vague diplomatic reasons.

Editorial praising Farm Board chairman Legge's stand against buying more wheat to support prices; “His present decision is right and the farmers will eventually commend him for it.

Dr. J. Klein, Assistant Commerce Sec., speculates that security interchanges “might sometime become the foremost settling item in America's international accounts, coming before even gold shipments.”

Stock market execution now so efficient that many reports to clients are received almost as soon as trade hits the tape.

Market action seen technically positive; Dow has been trading in a 10-point range since the 30-point rally from June 24 low; seen as period of consolidation.

Guaranty Trust Survey reports further business slowdown in past few weeks, attributed mainly to seasonality; some positive news from construction and rise in stock markets. Expects next month to continue slow, then gradual recovery. Sees most reliable indicator of recovery as rise in commodity prices.

State banking association reports banking system in healthy condition; as of March 27, there were 24,614 banks (17,298 state and 7,316 national), with capital, surplus, and undivided profits of $9.963B, and total deposits of $57.446B.

Customs collections first 23 days of July were $18.3M vs. $37.5M in 1929; decline blamed on efforts to import before tariff took effect June 18.

48 state highway departments spent $910.5M in 1929 to improve 32,522 miles of road.

Dept. of Agriculture reports wheat production in 15 countries this year 1.924B bushels vs. 1.861B previous year.

Manganese Producers Assoc. appeals for embargo on Soviet manganese, citing dumping and use of “slave labor” in production. Treasury department bars Soviet shipment of pulpwood citing use of convict labor to load.

Gillette advanced to new high on merger rumors.

Scott Paper (wood pulp, toilet paper, paper towels) first half net $2.64/share vs. $2.20 in 1929 and $1.91 in 1928.

Douglas sees record 1930 profit on military planes.

Caterpillar first half net $2.99/share vs. $2.80 in 1929.

Gannett (newspapers) first half net $988,341 vs. 1,290,416 in 1929.

Federal Trade Commission cites Pro-phy-lac-tic for toothbrush price-fixing.

Radio Corp. tests coast-Honolulu telephone service.

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