November 23, 2009

Favorites of the week Nov. 17-Nov. 22, 1930

No Journal was published Sunday, Nov. 23, 1930. Once again, a collection of my favorite items of the week. These aren't a representative selection but just the ones that made me smile or take notice.

Nov. 22:

[Note: Interesting.] Extremely high cost of illness, medical and hospital care throughout the US” has led to formation in many Western cities of associations to reduce these costs. A hospital and medical staff is hired by the association to serve members exclusively; members then pay fees less than 50% of those charged by doctors in private practice. Service is not for poor or wealthy but for “that large middle class which is able and willing to pay reasonable fees.”

[Note: Perils of historical precedent dept.] I. Patterson, of Incorporated Investors: “Prices of sound stocks are at very real bargain levels.” Not calling bottom; “The intelligent investor has learned from past experience the impossibility of picking the low point ... But we do say that the sound policy of buying the best near the bottom will prove highly profitable.”

[Note: Perils of contrarianism dept.] One broker's opinion - “Don't become discouraged by the pessimistic talk you hear. It is no different from the talk I have heard in six depressions I have gone through. ... Go against your own feelings. I am blue myself, but have been buying stocks. And believe me, when you buy stocks feeling as blue as indigo, it hurts.”

[Note: So that's what that mast is for.] 205-foot dirigible mooring mast completed at top of Empire State Building; can withstand dirigible pull of 100,000 pounds.

Nov. 21:

[Note: First use of “Jehad” term to insult political opponent?] Editorial by T. Woodlock: in a recent speech, Gov. Roosevelt asked public support in a “war” between those against special regulation of utilities and those who recognize their necessity and seek to prevent them from giving “unreasonable profit” to the few. “Here is a summons to a 'Jehad' - a 'Holy War' issued by a man whose election ... as Gov. ... attracted the attention of the nation as perhaps” the next Democratic Presidential candidate. Stripped of the rhetoric, Roosevelt's stand is unfair; it means all the benefit of innovation and skills applied by the utility owner to provide more efficiency and lower costs must go directly to the users.

[Note: Perils of experience dept.] Broad Street Gossip: The head of one prominent Exchange firm has been seeking opinions among his 1,200 customers; finds that experienced traders are now optimistic, having “been through numerous panics” in the past only to see the country recover and become “more prosperous than ever before”. On the other hand, the young trader with less than 10 years experience “can see nothing but black clouds ahead ... and just cannot see how industry can get back on its feet again.”

[Note: Strangely familiar Dept.] New Jersey Legislature convened in special session to act on needed budgetary reforms after thorough investigation of state affairs by Abell committee aroused public sentiment. “New Jersey is still in a chaotic state of irresponsible officialism even worse than that from which Alfred E. Smith rescued New York.”

[Note: Strangely unfamiliar Dept.] M. Tremaine, NY State Comptroller, points to soundness of NY State finances; net debt is under 1% of total assessed value of $28B; “The state does not issue bonds except for projects that last at least a life time.”

Nov. 20:

[Note: Sheer Genius Dept.] Karsten Statistical Laboratory describes machine they're working on to predict “economic tides”; machine has 50 dials, each representing an economic statistic such as call money rates, gold movements, bank clearings, etc.

[Note: Perils of historical precedent dept.] Advertisement from Saturday Evening Post: “The whole history of Business is golden testimony to the truth that in times like these the seeds of future growth and greatness are ... most enduringly sown. Even now ... the business that are heeding this lesson by working instead of wishing are depression-proof and flourishing ...”

[Note: Strangely familiar Dept.] Total state bond issues now over $2B, or about $17 per capita, vs. $1.4B in 1923; “burden of taxation may be spread over a long period by issuance of bonds and thereby passing a part of the obligations to future generations, yet it does mean heavy taxes and is a problem ...”; heavy spending on roads, schools, hospitals.

Nov. 19:

[Note: This Guy's Good Dept.] Henry Morgenthau, former ambassador to Turkey, says another European war imminent, in which US will be forced to take part. Proposes 5-year postponement of war debt payments to US, with stipulation that any country acting as aggressor in a war would lose deferment.

[Note: This Guy's Good Dept.] F. Goodhue, Internat'l Acceptance Bank pres., criticizes bank practice of putting surplus cash in call loans on the stock exchange: “these so-called reserves in time of stress are apt to prove reserves only in name, not being based on self-liquidating transactions nor on securities eligible for rediscount” with Fed. Reserve. Practice of putting bulk of secondary reserves in call loans prevents Fed. Reserve from exercising its chief functions; banks continue it to avoid moderate loss of revenue.

[Note: Always keep your eye on the freight loadings dept.] Rail freight loadings for week ended Nov. 8 were 881,401 cars, down 53,239 from prev. week and down 167,567 or 15.9% from 1929 week.

[Note: Strangely familiar Dept.] W. Johnson, W. Virginia State Treasurer, calls for “hard boiled system” for controlling govt. spending; “Our governments are over-manned. A few years ago it required one person out of every 22 to administer our governments - national, state, and local, but today it is one out of every 10.” Calls for 25% cut.

[Note: Strangely unfamiliar Dept.] Brokers feed jobless - H. Hentz & Co. set up “rolling kitchen” on Monday near W 31 St. to feed unemployed; 3,000 fed breakfast Tuesday.

[Note: Sheer Genius Dept.] Huge triangular parachute, designed to save airplanes when motors go dead or propellors break, tested successfully at Wright Field.

[Note: Historical Joke Dept.] “'Those girls look exactly alike. Are they twins?' 'Oh, no. They merely went to the same plastic surgeon.'”

Nov. 18:

[Note: The first major banking crisis in the Depression is commonly said to have started with the failure of Bank of United States in about three weeks, since it was the largest bank to fail in US history to that date. However, my impression is the Caldwell failure was probably in the same ballpark in terms of size.] Numerous banks closed - 6 in Kentucky, 3 in Illinois, 4 in Missouri, over 30 in Arkansas. Many of the closures said due to “rumors” and “hasty withdrawals” following collapse of Caldwell & Co. of Nashville, Tenn., largest investment house in the South. Among larger banks closed were National Bank of Kentucky ($41.1M in deposits), Amer. Bank & Trust ($15M), and Quincy State Savings ($6M).

[Note: Interesting.] Dominick & Dominick point to enormous US savings reserves as placing “people in a better position to withstand the present depression” than any time in history. In past 15 years, savings bank deposits tripled to $28.5B, or $232 per capita, vs. $40 in Britain, $33 in Germany, and $10 in France.

[Note: Perils of conservative valuation dept.] Head of an oil company, when asked if his stock was cheap: “Use your own judgement ... If we liquidated today, we could, out of working capital, pay our shareholders more than the stock is selling for,” while still having fixed assets such as refineries, pipelines, wells, etc.

Nov. 17:

[Note: Ay Chihuahua! Dept.] Bankers who have made a thorough investigation of conditions state that the financial horizon is now much clearer than it has been since midsummer ... At the moment no forced selling is overhanging the market.” Barring unforeseen development, don't anticipate selling similar to what caused past 2-month decline.

[Note: Perils of historical precedent dept.] T. Lamont of J.P. Morgan says plenty of precedent for current depression in the 13 crises suffered over past 130 years; hopeful we're at bottom of cycle and “the extreme of our depression is probably as unwarranted as the extreme of our exaltation was 14 months ago.” Thankful that people are now working and saving instead of speculating and spending. Cautions against attempts to overstimulate ailing business with nitro-glycerine pills, which might cause further explosions. Says tariffs have complicated situation to some degree, though “we cannot class them as controlling factors in our present depression.” As causes of depression, lists overproduction, artificially supported commodity prices, fall in price of silver, movements of gold holdings, political unrest, and overspeculation.

[Note: Strangely unfamiliar Dept.] While Pres. Hoover hasn't publicly changed stand in favor of continuing 1% income tax reduction, there's growing sentiment even among those close to the Administration that it would be inadvisable to do this and chance a large budget deficit (as high as $300M). Some believe “a deficit is not such a fearsome thing,” particularly when the govt. can borrow at such low rates; however most presidential advisers apparently believe this is a bad idea in the long run.

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