August 17, 2009

Monday, August 18, 1930: Dow 228.01 -0.53 (0.2%)

Assorted historical stuff:

Editorial: Adversity of the depression has its benefits, including a return of the virtue of thrift. “With unemployment and destitution in evidence” people are more inclined to provide for the future of themselves and their children; in boom times this is easily forgotten. This trend is seen in savings deposits - they gained $273.8M in the first half vs. a decline of $82.7M in second half of 1929; July has shown a further gain for the first time in six years (normally people withdraw money to pay for vacations, etc). Life insurance also shows the trend, with new policies in the first 7 months up 1.5% over 1929.

Pres. Hoover directs $125M of federal roadbuilding funds, with matching state funds, to be made available Sept. 1 instead of Jan. 1.

Former French Pres. Poincare warns Germany that France will not stand for any revision of Versailles treaty, saying German idea of revision is “immediate or progressive remaking of the map of Europe at the pleasure of the Reich.”

Canadian govt. bars most immigration except farmers; policy considered temporary due to unemployment.

Martinez De Hoz, Pres. Argentine Rural Society, says world overproduction in agriculture due to protective tariffs, will exist for years, perhaps decades.

NY City mass transit lines carried about 834.287M passengers in Q1, up 12.326M from 1929. Revenues were $40.314M, up $532,000.

NY City testing new subway cars with doors that just stop when something gets in the way instead of completely reopening.

Movie companies still deciding how to make foreign sound films; possibilities include dubbing foreign voices onto US actors, filming with foreign actors in US, or filming abroad. Paramount filming in Paris using foreign actors in 10 different languages. J. Lasky, Paramount production VP, says this isn't as expensive as it sounds; also notes not much demand yet for color or widescreen films; will test three-dimensional film process.

Dept. of Agriculture testing 58-year old sample of honey at regular intervals. “Like liquor, honey does not deteriorate with age but mellows, the mellowing being manifested in a gradual darkening of the sweet syrup.” Sample is white clover honey; but now resembles blackstrap molasses, “tastes not unlike buckwheat honey.”

Market commentary:

Bears attacked early, hoping market had been weakened technically by extensive forced short-covering Friday; forced early declines in US Steel, American Can, Vanadium, Radio, and other trading favorites. Attempts to extend initial losses met strong buying; urgent short covering resumed in last hour, giving vigorous rebounds in US Steel, Vanadium, J.I. Case, and other trading favorites. Bond market quiet, govts. and high grade corp. firm, convertibles higher.

Financiers and economists “somewhat befuddled” by current business situation; economy has descended from “the heights of the greatest business prosperity the world has seen,” and it's difficult to “get their bearings in the new scheme of things.” Most are “watching and waiting rather than predicting.” Of course, things will eventually turn around, “and when the upturn does come it will be based on the most solid foundations in many years.” In the meantime, the market is marking time.

Level around 215 seen as double bottom, having brought out strong buying support both in late June and past week.

Short interest seen still large in spite of forced covering in past few sessions.

Earnings reports since July 1: higher earnings reported by 120 companies, lower by 307, dividends unchanged by 594, increased by 3, cut by 39.

Economic news and individual company reports:

Some rains in drought-affected areas, improving crop conditions, though further rains would help. Stocks of railroads in affected areas stronger.

External trade of foreign countries generally declines vs. 1929; Canada July trade down about 25%; Argentina exports first 7 months down 35.4%; France first half trade down about 10%, Italy July trade down about 30%,

BLS reports July wholesale prices down 3.4% from June and 14% from July 1929.

Bureau of Securities (prosecute securities fraud) took 124 actions against 444 individuals and companies in first 7 months, vs. 104 against 342 in all of 1929. Increase in prosecutions of “bucket-shop operators and other fraudulent stock manipulators.” Total customer losses $37M.

Companies reporting decent earnings: Jewel Tea, Virginia-Carolina Chemical, Republic Stamping & Enameling.


Howard Hughes presents Hell's Angels. “More spectacular scenes of fighting in the air probably have never been photographed, but the story around which these scenes are built is stupidly improbable. ... views of the huge Zeppelin plowing through the clouds toward London have been photographed with striking beauty. ... to escape the pursuing British planes, the captain of the airship ... commands about a dozen members of the crew to step off into the void - without parachutes - 'for Kaiser and for Fatherland.' Then ... the big Zeppelin is finally set aflame by a British plane ... [that] dives directly down upon it, crashing it in twain.”

+ The Boring Stuff:

Editorial: Russia is being charged with “dumping” manganese (used in steel production). This matter is difficult to investigate properly considering we don't have diplomatic relations, but we shouldn't block Russian imports until we have definite evidence of dumping. Even if we get this evidence, it's the steel industry and consumers that would suffer from any additional tariff; Russia supplies about half of manganese imports, and local production and is only about 5% of requirements.

NY City has 665,829 motor vehicles, up 31,346 this year.

Market seen mostly professional, little public buying. Public also not seen liquidating on declines due to stronger margin position than last fall. Public not expected to enter market on large scale until business fundamentals show improvement; when this happens, stocks should “move ahead decisively.”

Friday's rout of bears provided “electric spark” needed to revive bull spirits. Fundamentals considered positive for business and market, including easy credit, low inventories, and low brokers' loans; however, “it took considerable fortitude to withstand the pessimism which saturated the speculative community during the first two weeks of August.” Some fear that drought had postponed business revival to spring, but drought scares regularly break out in August; bulls held to positive view and accumulated stocks as they were sold by bears, reducing available supply of stocks and resulting in lower volume and narrower price swings. Friday's action “served dramatic notice that stocks were no longer for sale in sizable quantities on price recessions.” This makes the bear position dangerous.

Commodities mostly down. Cotton down sharply to lowest level since 1919-20 depression; Oct. contract at 11.36 cents. Grains generally lower.

Irving Fisher's wholesale index of 200 commodities for week ended Aug.15 was 83.8 vs. 83.1 previous week.

July retail sales generally down. July sales for 48 chain (low-priced) store systems were $221.8M, down 5.8% from 1929; first 7 months sales were up 1.6%. Sales for 519 department stores were down 9% in July and 5% for first 7 months. Mail order, grocery, and general merchandise store sales also mostly down.

New NY Stock Exchange listings in July were $1.113B vs. $783.8M in June and $944.6M in July 1929; of that total bonds were $300.1M vs. $122.2M and $64.9M; stocks were $812.4M vs. $661.6M and $879.8M. Most of July's total was a $621.2M stock issue for Transamerica Corp. Listings for first 7 months were $6.544B vs. $9.001B in 1929.

US exports of grain and grain products were $246.4M in year ended June 30 vs. $330.9M previous year.

World copper production in July was 143,613 short tons vs. 174,507 in 1929.

International Cotton Congress to be held in July 1931, to examine causes of depression in cotton industry and possible remedies.

Little forced marketing of livestock due to drought seen to date. Receipts of cattle at all public markets in July were down 13% from 1929.

Canadian rail loadings in week ended Aug. 9 were 61,272 cars, down 6.4% from 1929 but up 5.5% from previous week. Year-to-date decline was 11.1%.

GM sales to domestic and foreign dealers in July were 70,716 cars and trucks vs. 87,595 in June and 157,111 in July 1929. Dealer sales for first 7 months were 844,195 vs. 1,361,296 in 1929. Brands include Chevrolet, Pontiac, Olds, Marquette, Oakland, Viking, Buick, La Salle, and Cadillac.

United Aircraft [later became Boeing, United Technologies, and United Airlines] continues to operate profitably in 1930 as most aviation companies are losing money, although sales and profits are far below last year. Net income for 1930 estimated at $2.10/share vs. $4.52 in 1929.

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