July 29, 2009

Wednesday, July 30, 1930: Dow 238.40 -2.41 (1.0%)

Assorted historical stuff:

Leading feminist organizations in France campaign to eliminate use of guillotine in executions, supported by "practically all the radical newspapers."

Canadian Conservatives win sweeping election victory; some fear of resulting tariff measures since Conservative leader Bennett campaigned on policy of high tariffs to keep Canadian spending in Canada and relieve unemployment.

Administration announces it has no intention of discriminating against Russian goods even though Soviet govt. not officially recognized. Lumber industry expresses concern about competition, claims use of forced labor in Russian logging.

Editorial: Communist threat may be exaggerated; propaganda naturally causes counter-propaganda. “Every reasoning effort to estimate quantitatively the progress of Communism in this country forces the conclusion that as yet it has been pitifully small in comparison with the effort expended and the noise made on its behalf.”

Editor: "You have mentioned various reasons for the continued progress and prosperity of the US, but you have overlooked the main reason. Last year college students enrolled in the US numbered 1,237,000, exceeding the total of the rest of the world by 287,000. No further comment is necessary."

"A transpersian Railway, about 1000 miles long, is now being built by American contractors as a part of the modernization scheme sponsored by the Shah of Persia." Railway will extend from Persian Gulf to Caspian Sea, construction cost about $125M.

Captain L. Yancey talks by radio phone to Sydney, Australia from plane 5000 feet over Buenos Aires, total distance of 14,000 miles.

Daily plane service started between New York and Saratoga for racing season; fare is $30; flights leave daily at noon and return after the last race at 5:30.

Market commentary:

Market action generally not bad, but pronounced weak spots, particularly in rails on bad earnings news. Utilities and industrials relatively firm, including Standard Gas and GM. Steel industry encouraged by plans for higher auto production in August. Short covering seen through most of session; decline became more general in last hour. Bonds irregular - foreign governments strong, rails and preferred stock weak.

The Room Wit: "The one trouble of the trader who thinks his judgement infallible ... is that the margin man bothers him too much."

T.S. Holden, V.P. of F.W. Dodge Corp., reports on construction: public works and utilities up 40% over 1929, but residential down 47%, though improving since March. Blames “overproduction that started long before the fall stock market break.” However, says most surplus residential space has been liquidated, and sees easy money stimulating renewed residential building. Calls for improvement in house quality similar to that in autos, radios, etc.

Earnings in a number of sectors are being artificially depressed by very low inventories. This suggests increased earnings when purchasing returns to normal.

Some of the more optimistic steel producers expect production at over 80% before end of year; this should mean satisfactory earnings for the industry.

Favorable market factor seen in "absence of over-speculation" by both traders and investors; public has been slow to buy, traders are quick in taking profits, and brokers' loans are at lowest level for many years.

Conservative observers still advise caution until market demonstrates further recovery on good volume; advise taking profits on sharp upturns in individual stocks, and also "switching from stocks with doubtful prospects into those with a better outlook."

Economic news and individual company reports:

President Hoover asks Attorney General for major investigation of bankruptcy laws, to recommend needed reform legislation.

Undaunted by recent "hot" reception in Kansas, Farm Board Chair Legge to travel to Central and Northwest states to resume pleas for reduced wheat acreage.

Bank loans continue to decline; in past month, security loans down $26M to $8.398B and "all other" down $118M to $8.454B. With low demand for credit, banks have been investing heavily in government and other securities and paying off debt to Federal Reserve.

Department store sales for June in 266 cities were down 10% from 1929; first half sales down 5%.

Companies reporting good business: IBM, General Foods, Allis-Chalmers (farm and industrial equipment), Raybestos-Manhattan (asbestos), United Biscuit.

US Steel Q2 earnings $3.02/share vs. $3.44 in Q1 and $6.68 in Q2 1929.

Bible humor:

William Jennings Bryan asked John Baird to marry his daughter Mary E. Baird by quoting Solomon's proverb "Whosoever findeth a wife findeth a good thing and obtaineth favor of the Lord." Baird countered with Paul's observation that "While he that marrieth doeth well, he that marrieth not doeth better." Bryan won argument by pointing out that Solomon ought to be a better authority, having married a thousand times to Paul's zero.

+ The Boring Stuff:

President Hoover to appoint committee to establish better methods for measuring unemployment; to include representatives of labor, business, and economists.

British registered unemployed July 21 were 1.973M vs. 1.940M previous week and 1.123M in 1929.

French textile workers join iron and steel workers in strike demanding raise to compensate for new social insurance law.

Romanian oilfield workers set fire to plants to protest oil companies policy of cutting production and dismissing workers.

Brotherhood of Sleeping Car Porters seeks injunction preventing Pullman from operating "company union using coercion and intimidation."

Bank of England dispatches leading official Sir O. Niemeyer to Australia to discuss how to address serious financial situation. Large deficits anticipated, aggravated by lower incomes and tax collections due to business depression. Australian importers having difficulty obtaining credit abroad.

Mexican debt settlement wipes out $330M of overdue interest and $21M of principal, leaving about $492M in principal.

Commodities mostly lower. Wheat futures touch yearly lows below $0.86/bushel; sugar, rubber hit new lows.

Technical Analysis: Market has made three attempts in past two weeks to break through 240 level; success would point to substantial continued uptrend.

In all but one depression or recession since 1900, stock prices recovered before or at the same time as business conditions (exception was in 1921).

Some increase in short interest noted in past week, thought to account for some setbacks in market. Bears have apparently not given up on testing the market.

Bulls encouraged by lack of volume on declines, considered "good indication of better markets in the future."

Despite some reports, investigation finds bankers not actively supporting the market; most interests believe market should be allowed to stabilize itself.

Foreign bond sales have been encouraged by higher yields, averaging 1.66% higher than domestic, or a yield 35% higher.

Rail freight loadings for week ended July 19 were 928,256 cars, down 151,712 from 1929 and 95,587 from 1928, but up 12,271 from previous week.

Steel production in past week at 57.5% of capacity, unchanged from previous week.

Recent hot, dry weather has reduced corn crop by 200M bushels but increased value by $270M. Wheat now being used in large volume for animal feed.

IBM first half earnings $5.73/share vs. $5.29 in 1929.

Southern Railway first half earnings estimated $0.36/share vs. $5.74 in 1929. Union Pacific June operating income off 46% from 1929. Rock Island fails to cover preferred dividends for first half.

Procter & Gamble: following strong earnings for year ended June 30 (sales up 1%, earnings up 17%), looks to expand abroad; buys Britains largest independent soap mfr. Hedley & Co., going into competitor Lever Bros. home market. This seems to make earlier rumored merger of P&G with Lever unlikely.

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