September 3, 2009

Thursday, September 4, 1930: Dow 237.54 -2.88 (1.2%)

Assorted historical stuff:

Gov. Roosevelt charges public utilities with stock watering, also singling out Associated Gas & Elec. for refusing to allow examination of books to determine reasonableness of rates.

Editorial: Gov. Roosevelt's program for building bridges across Hudson is economically sound and beneficial; should be coordinated with new Mid-Hudson Bridge Authority; “the great success of the New York Port Authority stands as a condemnation of the blind partisanship that delayed it for several years.” There will soon be four state-owned bridges in the 150 mile stretch between NY City and Albany, paid for entirely by tolls, not taxes; eventually there may be many more.

British trade unions adopt report calling for favoring groups within British empire for trade development.

Govt. spending over $19,000/day to fight forest fires in many of the 149 US national forests; danger increased by drought conditions.

Market commentary:

Leading stocks steady for most of the day but broke in final 15 minutes; attributed to discouragement over continued failure of seasonal business improvement to materialize, rise in call money to 2.5%, some mildly bad business news. Bears, thought to be defending resistance level slightly above 240, pressed advantage on bad news; volume increased at close. US Steel particularly weak. Bond market volume moderate, prices generally slightly higher; Dow 40 bond avg. at 97.15, highest since July 1928.

Bulls discouraged by some bad business news including slight US Steel production cut due to Labor Day, drop in commercial loans, continued bad freight figures.

Conservative observers say not surprised by market decline; continue to advise reducing long positions and only buying gradually on declines; expect further selloff before next rally.

Cassatt & Co. recommend against trying to catch reactions for trading purposes, favor holding long positions and adding on declines.

Chatham Phenix Natl. Bank says August business activity improved somewhat from July low, indicating July level was “extreme low of the depression, with the natural corollary that from now on the curve of activity will rise.” Finds some improvement in employment; sees likely rise in commodity prices.

Iron Age and American Metal Market report some small signs of improvement in steel production in past few weeks (small increases in production, high demand for structural steel, some improvement in tin plate and automotive demand). This month seen as determining course of steel for rest of year; even mild seasonal recovery will help the industry return to firmer basis.

C. Denney, Erie railway Pres., sees signs of business improvement in recent Erie freight loadings.

Economic news and individual company reports:

Fed. Reserve member banks report for week ended Aug. 27: “all other” (commercial) loans down $64M to $8.416B; total decline of $156M since June 25, was reverse of usual seasonal rise - may indicate “process of business retrenchment is not yet at an end.”

National debt as of Aug. 31 was $16.188B, up $12.1M from July 31 but down $617.8M from 1929.

Brokers' loans to NYSE members Aug. 29 were $3.599B, vs. $3.689M on July 31 and $7.882M on Aug. 30, 1929.

New car registrations for July were 254,098 vs. 260,861 in June and 432,503 in July 1929; for first 7 months registrations were 1.908M, down 26% from 1929. Ford market share in July was 43% with 109,372 vs. 112,717 in June and 151,901 in July 1929; market share for first 7 months was 41.6%.

NYSE Stock transactions in Aug. averaged 39.868M shares/day vs. 95.603M in 1929 and 67.160M in 1928.

Weather Bureau reports substantial rains helping South, but severe drought continuing in large areas including Oklahoma, Texas, Iowa, Missouri; rain generally needed almost everywhere east of Rockies, except for some areas of Great Plains.

Surprisingly, National Casket Co. reports bad earnings due to depression; Pres. P. Heintz attributes decline to lower mortality during depressions and switch to lower-priced caskets.

Newport News Shipbuilding & Drydock Co. submits low bit of $15.560M for construction of new aircraft carrier.


“A Russian was being led to execution by a squad of bolshevist soldiers one rainy morning.
'What brutes you bolsheviki are,' grumbled the doomed one, 'to march me through a rain like this.'
'How about us?' retorted one of the guards. 'We have to march back.'”

+ The Boring Stuff:

A.Coleman, Asst. Postmaster General, blames unemployment among substitute mail carriers and clerks on unusual 15% Aug. slump in mail volume vs. 1929.

Spanish Finance Min. calls on Bank of Spain to help defend currency. Most of Bank's executives reported unfavorable to new bank governor, “who is considered to be entirely under the dictates of the government.”

Market notes: most Stock Exchange brokers more optimistic, but only moderately so; believe “good stocks now are worthy purchases,” but improvement will only be gradual. Short interest remains large. Many small investors have been buying, but in much lower volume than 1929; most accounts using much less margin.

Seasonal upturn in business would normally be expected this month, though it may be delayed due to upset sentiment and low price levels. However, this should be countered by depleted state of inventories as result of long period of “hand-to-mouth” buying. Most trade authorities now expect only seasonal upturn in fall and sustained upturn in business not until spring. Despite lower business, many leading corporations are well-positioned to take advantage of any revival.

Commodities mixed. Cotton moderately higher. Grains lower, wheat hits new season lows in spite of some bullish news. Copper stays at 10 3/4 bid, 11 ask, but with “somewhat firmer tone.”

Some of strength in bond market may be caused by bank buying; Fed Reserve member banks reported bonds other than US govt. at $3.420B on Aug 27, up about $600M since start of year.

Thus far larger steel companies have held up better to declining demand than smaller ones, generally maintaining earnings above dividend requirements; attributed to diversity of markets. Smaller steel companies may also be suffering from focus on automotive parts. US Steel now at 13 x earnings, 4% yield; Bethlehem at 9 x, 7%; each is still earning enough to cover dividends.

Railways operating in East protest new rate structure given by Interstate Commerce Commission, say it will reduce overall revenues rather than increase them.

British registered unemployed were 2.040M on Aug. 25 vs. 2.018M on Aug. 18, and 1.156M on Aug. 26, 1929.

Steel ingot production in week ended Monday was almost unchanged at 57%; US Steel about 65% vs. 66% previous week.

Gasoline in storage at refineries for week ended Aug. 30 was 38.518M barrels, down 1.027M from previous week and 16.184M from March 29 high. Refineries operated at 69.2% of capacity vs. 72.4%; crude oil production was 2.461M barrels/day, down 9,150 from prev. week and down 512,100 from 1929.

Corn crop now estimated at 2B bushels vs. 2.614B a year ago and 5 year average of 2.7B. If current higher corn prices are maintained the total value of the crop would be almost as high as the initial July 1 estimate based on a 2.8B crop. However, this is doubtful; other grains including wheat, oats, and barley are available in abundance and may be substituted; also scarcity will probably cause economies in use and lower consumption.

US flour production in week ended Sept 3 was 6.621M barrels, down 163,748 from 1929.

F.W. Dodge reports Aug. new construction contracts for New York metro area were $76.7M vs. $68.9M in July and $75.7M in Aug. 1929; total for year to date was $658.1M vs. $846.9M in 1929.

Two copper companies cut dividends (Kennecott from $3/year to $2; Consolidated Copper from $1.50 to $1 after cut from $3 last quarter).

Kreuger & Toll pay $46.5M to Germany as first installment of $125M loan in exchange for granting Swedish Match and International Match (US subsidiary) major participation in German match business for 30-50 years. Kreuger interests also acquire L.M. Ericsson Co.

Stock of 17 of largest utilities now selling at average of 20.5 x earnings in year ended June 30 vs. 33.7 x 1929 earnings at market peak last Sept. and 12.5 x 1929 earnings at low last Nov. These stocks have recovered about 28% of the loss in the Nov. break, vs. 23% for industrials and almost no recovery for rails.

Companies reporting decent earnings: American Cyanamid.


  1. What a flash:
    "Surprisingly, National Casket Co. reports bad earnings due to depression; Pres. P. Heintz attributes decline to lower mortality during depressions and switch to lower-priced caskets."

    The last thing one can expect in a depression is a decline in mortality rate. It's really surprising at first, but not so if you imagine how much the caskets cost - would someone dare to die knowing that his/her family has to pay that price too? No! Just grab the life and don't let it go until the crisis is over.

    Anyway, please excuse my terrible sense of humor.

    Great blog, ikedim!

  2. Thanks, Geno and Monetarist!
    It is interesting to see what companies hold up and what don't - some of it is what you'd expect but there are some surprises too.