December 1, 2009

Monday, December 1, 1930: Dow 183.39 +2.48 (1.4%)

OK, this is the first day of the new more-opinionated format. I'll try to make the transition not too jarring.

Assorted historical stuff:

[Note: My general impression from reading a few months of this guy's writing is that he's extremely long-winded and obtuse. It was therefore surprising to read a cogent and well-written editorial by him with a constructive proposal for attacking a big piece of the debt problem at the time.] Editorial by T. Woodlock: Problem of European debts to the US is becoming a crushing burden. “The US did not lend gold to Europe; she lent an immense mass of commodities of all sorts and many services. And the 'money' debts” that Europe owes in return are now equivalent to a much larger amount of commodities and services. International debts must be treated differently from individual ones; a “first-class nation ... cannot be put into a receiver's hands and it cannot be liquidated.” Debts between nations generally are a threat to peace; when they are a very heavy burden on almost all major countries, the danger is intensified. The US should reduce the debts owed it proportionally to price declines; this would sacrifice “nothing which ... is fairly ours to claim, and nothing which in fact ... we are even likely to receive.”

[Note: Sad but probably true dept.] House Speaker Longworth says he's opposed to an extra session of Congress; believes business recovery in the past year has been retarded by long Congressional sessions, and an extra one would result in further delaying the recovery.

New Congressional session formally opens today, though main business of the session has been under way for 3 weeks under the House Appropriations Committee. There's unlikely to be time to take up much other than the appropriations bills in this session, though the Glass financial hearings will attract some interest. Once the session ends March 4, barring an extra one, “the country can pretty well forget Washington and politics” until Dec. 1931.

[Note: Strangely familiar dept.] About 25 years ago, there was much talk about the life of copper industry reserves, with Utah Copper given 30 years, Nevada Consolidated less than 20, etc. Strangely, even though no major new mines have been discovered in the US and most of these mines are now producing two to three times more copper than 25 years ago, you now hear little about this problem - in fact, the complaint now is that too much copper is available and production must be cut.

[Note: The carrier pigeon version of John Henry ... ] Five carrier pigeons recently won a race with a Norwegian air force plane travelling 105 mph between the cities of Oslo and Jesshim in Norway, a distance of 70 miles. Pigeons were released at the same time as the airplane took off.

[Note: Not sure if Prune Center or Silicon Valley has a nicer ring to it.] San Jose, Calif. is proudly known as “Prune Center”; the Santa Clara Valley, of which San Jose is the commercial center, has about 70,000 acres of prune bearing trees.

Market commentary:

This section will be shorter from now on. In my opinion, one of the most important lessons you can get from this blog is that the day to day blather about why the market did what it did (which takes up most of this section and which is most of what's on CNBC, MSNBC, etc. these days) is almost entirely random noise, though some of it is undeniably entertaining.

Market wrap: Stocks slightly firmer on very dull trading. Bonds mixed; corp. down with many new yearly lows; foreign and US govt. mostly steady.

Noteworthy market moves in past week: US stock rally checked. Most classes of bonds trended down, with notable exception of US govts. Berlin stocks down sharply early in week, hitting four-year lows, but recovered some of the losses toward end of week; no sign of capital flight. Grains traded in a narrow range, tending downward. Cotton drifted down close to season lows.

Market observers still “conservatively bullish” although bears are said more confident, and renewing selling operations.

Conditions now seen favoring further market decline; Dec. is usually an irregular month for stocks, Congress will reconvene, and industry is seasonally unlikely to improve before end of year. However, “no thought in important quarters that the selling movement will be resumed on anything like the scale” from Sept.-Nov.

[Note: Rule 1 of banking crisis - there is no banking crisis.] National City Bank notes epidemic of bank failures, and that “processes of deflation operate in a vicious circle” but is nevertheless optimistic: “obviously this sort of thing has to come to an end some time, and by the very nature of the circumstances the turn comes ... [when] everything looks the blackest.” Business decline has lasted about 15 months and is 35% below peak; this is as severe as any decline in past 50 years, warranting “a strong assumption that the decline is nearing its end.” Local banks were clearly overextended in many parts of the US, leading to some inevitable collapses, but overall banking system is “exceedingly strong” with banks having little indebtedness to the Fed. and over $7B of paper usable for rediscount there. [July 15, 2008: US banking system is “well capitalized.” - B. Bernanke.] No general breakdown of credit has happened or will happen.

[Note: The creeping stage - well, at least you can't accuse him of wild overenthusiasm.] W. Woodin, American Car & Foundry Chair., says believes we've hit bottom and business will gradually improve from now on: “It is a little bit like a child that first must creep before it walks. I really believe that we have reached the creeping stage toward rehabilitation of business.”

A. Sloan, GM chair.: “No one can deny that the economic machinery of the US and of the whole world is badly out of joint. The contributory causes are so numerous that no single factor can be emphasized.” Thinks readjustment would have taken place regardless of the stock market crash “because we exceeded the speed limit [in industry] by developing an obsession for high records.” Believes we can only recover at a normal rate.

Economic news and individual company reports:

[Note: US unemployment wasn't very well measured at this time, so data points like this are interesting. Perkins later became Roosevelt's Labor Sec. and first woman in a US Cabinet.] NY State Industrial Commissioner Frances Perkins reports on Nov. study of unemployment in Buffalo, NY - of 14,002 men and women, 19.9% were unemployed, of which 16.1% were able and willing to work; 16.6% were employed part time and 63.5% full time. Compared to Nov. 1929, proportion of men over 18 unable to find work was up over 2.5 times, as was proportion working part time.

Irving Fisher's index of 200 commodities for week ended Nov. 28 was 80.6 vs. 80.8 previous week and vs. 92.3 a year ago.

New car inventories in US and Canada were 304,690 on Nov. 1 vs. 562,800 on Nov. 1, 1929.

O. Young, GE chair., returns from Europe, refuses for now to comment on conferences with leading bankers on world's gold problem.

Some investment trusts (similar to mutual funds) are selling stocks they own and buying up their own shares due to the 20%-30% discount their shares are selling at. [Note: Apparently the idea of liquidating and returning the cash to shareholders was too horrifying to contemplate.] Gossip has it that some brokerage houses that sponsored investment trusts have found they didn't bring the “joy to their parents that had been expected” and are looking for a graceful exit.

Companies reporting decent earnings: Parke-Davis (drugs, has paid dividends for 51 years without interruption), Engineers Public Service.

Bond market joke:

“'Good morning, sir. I'm a bond salesman.' 'That's all right, my good fellow. Here's a quarter - go buy yourself a square meal.'”

Forgotten genuises dept.:

One of the great pleasures of doing this blog is coming across entertainers of the time who I've never heard of before, but who are absolutely fantastic. Here's a little of Borrah Minevitch's harmonica band, mentioned on Nov. 24 as part of the Sweet and Low revue:

Play "Borrah Minevitch & His Harmonica Rascals" on Youtube

Play "Borrah Minevitch - Daybreak Express" on Youtube


  1. Nicholas Longworth, Speaker of the House, was a something of an iconic figure, for the Republican Party. Fourth of that name in a prominent Cincinnati family, he was the cuckolded husband of Teddy Roosevelt's eldest daughter, Alice, but he was also one of the Taft loyalists in 1912. The Ohio-Taft regulars, in their implacable hostility to the left of their own Party -- the "insurgent" Progressives -- would make the Republican Party thoroughly reactionary and conservative, and push those elements into the Democratic coalition alongside city machine politicians and white supremacists.

    Longworth had led the revolt against Cannon in 1910, that had stripped the Speaker of his power, but he reaquired much of that power with his accession in 1925. Longworth was an acknowledged expert on the tariff, the Republican Party's signature issue, throughout its long ascendancy, 1894-1930.

    Longworth would, like more than a dozen other Congressmen, die before the next Congress assembled. Although the election results in November 1930 seemed, still, to favor the Republicans by possibly a couple of seats, party turnover in subsequently vacated seats would keep issue in doubt, and Longworth's own seat would be one that changed to the Democrats, who, taking advantage of "insurgent" dissension among the Republicans, elected the next Speaker, John Nance Gardner.

    I hope I wouldn't be spoiling your fun, if I occasionally throw in something along these lines in comments. I do enjoy your blog.

  2. First, thank you for your blog. It's nice to see how much hasn't changed. Worrisome but nice.
    Second, if you could, I would like to see a Dow chart on the page of the years in queston. It may be interesting to see what happened and what is about to.


  3. Bruce - You're absolutely not spoiling my fun, I like the additional information - please keep it it up.

    imreek - I'm looking into putting up some historical series like that - not sure of the best option for doing that yet.

  4. I like your new format; snarky commentary by you is fine and helps reinforce the point.

    Keep up the fine work!