August 11, 2009

Tuesday, August 12, 1930: Dow 224.13 +1.54 (0.7%)

Assorted historical stuff:

Charles J. Correl and Freeman Gosden, AKA “Amos 'n Andy,” NBC radio stars, sign 5-year sponsorship contract with Pepsodent Co. (toothpaste) ; will make them highest-paid radio entertainers ever.

Editorial: If Congress is to be reapportioned by results of the census, would result in large increase in political power for West and small one for industrial East, at expense of South and “habitually insurgent” Midwest; uncertain if Congress will do this or exercise its option to ignore the census results as it did in 1920.

US oil production has been fortunate for whales; since a mature whale produces about 50 barrels of oil, 1929 US production of about 1B barrels would have consumed 20M whales. Whales should now be more secure barring return to fashion of the corset, with consequent demand for whalebone.

In past 5 years, Bell telephone system wire mileage increased from 39.9M to 68M; workers from 280,000 to 365,000; calls daily from 45.8M to 63M.

Waldorf-Astoria orders phone system from NY Telephone capable of handling 10M-12M calls annually.

Refrigerated” movie theaters have been doing good business in the heat wave; one theatergoer told manager it was his first good sleep in 3 days.

Market commentary:

Bears continued operations to start the week, attacking US Steel, other major industrials, and utilities. Volume dried up on declines; some buying came in after cooler weather and forecast of some rains in drought areas. Fairly vigorous rally developed late; US Steel, Vanadium, Consolidated Gas rebounded sharply. Utilities weak; banks and trusts mixed. Bond market very dull and irregular; govts. and high-grade corp. steady.

Short interest has increased considerably in past week, drawing in some outside sellers in addition to the usual professional bear traders.

Resistance to decline taken as encouraging; sign that overly margined accounts and forced liquidation are no longer helping bears, as in previous breaks. Prospect of business improvement is also better due to seasonal factors. Also encouraging that market advanced in spite of higher call money rate.

Goodbody & Co. now advise caution: “There is nothing in the news to cause any haste to buy stocks ... This week should test the market further, and we advise caution in making commitments on either side.”

Next week's market movements considered very significant; break below 211.84 June bottom not expected and would be discouraging. Up to this point, market resembles that of 1920-21, including break in May/June, rally from end of June into July, range-bound trading for about a month, and further break in August. June resistance level held; this also marked bottom of business conditions and laid the ground for the great 1920's bull market.

Economic news and individual company reports:

Strange dispute between France and Britain about gold shipments required by gold-backed currency. Conditions have been such that Britain has been required to ship large amounts of gold to France. Britain has now said it will only ship “standard” gold bars (91.6% gold) instead of “fine” bars (99.5%). France not willing to accept them since refining “standard” into “fine” bars is expensive; “it would be wiser for nations, when establishing the 'gold-bullion' standard, to define what they mean by 'gold bullion.'”

Chain stores, grocery stores, and restaurants generally had a poor July, including Sears, Ward, Woolworth, Kresge, Safeway, National Tea, Childs. Biggest decline in sales was Sears, 14.9%, most declines in single-digit percentages; few companies showed gains.

Commerce Dept. reports economic conditions in Latin America generally worsened in 1929; attributed to high money rates, low commodity prices.

Yields on South American bonds range from 6% for highest rated bonds (Argentina, Uruguay), to over 9% for lowest rated (Bolivia).

Brokers' loans on Aug. 1 were 5.49% of total market value of listed shares vs. 5.83% on July 1 and 8.87% on Aug 1, 1929. Value of loans was $3.689B vs. $3.728B and $7.473B. “All other” (commercial) loans at Fed. Reserve member banks down $57M in week ended Aug. 6, demand deposits down $134M.

Call money was up to 2.5% in spite of decline in brokers' loans; taken as possibly bullish sign of increased credit demand.

New York produce merchants estimate prices will go up 25%-100% this week due to drought damage.

Companies reporting decent earnings: Melville Shoe, National Electric Power Co., Equitable Office Bldg., American Bank Note (stock/bond certificates).


“'Ladies All' - A good cast in a passable American rendition of a somewhat ostentatiously naughty French comedy.”

+ The Boring Stuff:

Hoover's unemployment conference receives forecast NY City may spend over $2B on public works in next 12-13 years; annual increase of about $50M

Traveler's Insurance Co. estimates number of deaths in US auto accidents for first 7 months was 16,500 vs. 15,400 in 1929.

Soviet Union orders 5 of world's largest hydroelectric generators from GE; orders $40.5M of agricultural machinery for collective and state farms.

Commodities mostly down: corn up, other grains down; cotton down slightly, touching new season lows; rubber down to new record lows at 9.70 cents; cocoa hits record low at 7.13 cents.

Paine, Webber considers the 241 level significant, being a 50% recovery of the loss from May 29 top to June 24 bottom. This would normally be limit of a bear market rally; if market moves above it, would indicate fundamental recovery and end of bear market. Whether business is on the verge of fundamental recovery is, however, unclear; some factors are bullish while others are uncertain, particularly effect of the drought on employment and spending.

GM handling this depression better than previous 1920-21 depression. While sales patterns leading up to depressions were remarkably similar, in 1920 GM was already raising money heavily from banks and security markets, and inventory continued to increase until depression was acute. In 1929, GM was much quicker to adjust; inventories started to decline by Sept. 1929, and cash increased over $30M to $187.7M. It looks like GM won't need to make the large writeoffs of inventory that caused its only annual loss in 1921. While it's too early to say what the full effect of the depression will be on GM, the first-half results in 1930 vs. 1929 are relatively better than those in 1921 vs. 1920 (unit sales down 34% in 1930 vs. 62% in 1921); second half of 1921 saw a sharp pickup in business.

B.F. Goodrich suspending $4 annual dividend taken as indicating second-half earnings recovery unlikely. Stock has declined from over 80 in 1929 to 22 1/2. Goodyear maintained dividend although earnings were down over 50%.

New Canadian tariff policy expected to benefit textiles, coal, steel industries.

Net debt of Canada as of March 31 was $2.178B vs. $2.226B previous year.

Canadian business seen down moderately in June, somewhat below usual seasonal slackness.

Mexico Pres. Rubio orders companies that laid off miners at Pachuca (world's largest silver mining camp) to rehire them until an arbiter can decide on extent of layoffs. Follows killing of prominent Labor party member A. Gomiciaga while trying to mediate between labor and employers.

Agricuture Dept. Aug 1 corn crop forecast 2.212B bushels vs. 2.802B July 1; wheat 821M bushels vs. 807M. Cotton estimated 14.362M bales, vs. 14.828M produced last year. Substantial changes still possible based on weather conditions over near future. Demand for farm labor Aug. 1 was 16% below a year ago.

Airmail handled in July was 695,627 pounds, up 12,967 from June.

Exports of sound and silent films for first half were 144.933M linear feet vs. 121.810M in 1929.

Boot and shoe production in June was 23.825M pairs, down 2.8% from May and 15.3% from June 1929. First half was 158.4M, down 8.2% from 1929.

Worldwide production of Ford cars and trucks was 133,305 in July vs. 174,528 in June and 196,505 in July 1929. US production 116,805 vs. 180,804.

No comments:

Post a Comment