August 1, 2009

Saturday, August 2, 1930: Dow 233.57 -0.42 (0.2%)

Upcoming movie news:

Howard Hughes to release movie Hell's Angels after spending 3 years and $4M in production; third film by Hughes following Two Arabian Nights and The Racket; enlarged screen being installed for premiere. Terra Film of Berlin to release Love in the Ring, Max Schmeling's first talking film; dialogue mostly in German but some English, French, and Portuguese. Warner Bros. to release sound version of Moby Dick with John Barrymore.

[Advertisement: Howard Hughes' Hell's Angels is available on Amazon, as well as the fantabulous poster on the right - some acting and dialogue feel dated, but amazing aerial scenes, including my vote for the best Zeppelin scene ever, and a huge dogfight that still packs a wallop. Also includes a stupefying 19-year old Jean Harlow in her first major role, including the only surviving color footage of her in a short Technicolor party scene].

Assorted historical stuff:

China in crisis: Central government recognized by Western powers has in past month lost control of two of four provinces remaining to it; Nanking govt now in precarious position between Communists in South and generals in North. Rumors of Russian involvement appear doubtful. Likely outcome of current anarchy is division of China outside Manchuria between generals in North and victor among Nanking gov't and Southern rebels; "In Manchuria the son of Chang Tso-Lin will doubtless continue his now peaceful sway under the benevolent eye of Japan."

Manchester cotton market continues dull, little hope of improvement seen. Indian boycott seems more intense.

Binga State Bank [first state-chartered African-American owned bank in Chicago] closes due to "frozen assets and insufficient funds."

Mortality rates in Illinois have increased 10% in past 10 years in people over 40, even as life expectancy has increased about a full year, to 59 years due to improved child health; "too fast living is cutting it short at the other end."

Chrysler Building 71st floor observation deck opens to the public on Monday.

Several car dealers from leading brands reported dealing with sales slumps by replacing used car lots with miniature golf courses.

Market commentary:

Bears again attacked in morning, this time concentrating on utilities due to electricity rate cuts. Declines remained moderate with bears unsuccessful in bringing out more liquidation; volume dropped sharply, turnover for first five hours was 1.090M shares, lowest since Nov. 1, 1926. Afternoon activity while dull favored up-moves; strength in GE, American Can, US Steel, Vanadium.

Walter P. Chrysler sees improvement in auto industry, believes business generally on upturn; not overly optimistic about immediate future, but believes business in almost every line has hit bottom; also believes commodity prices at bottom. Pres. Grace of Bethlehem Steel confident bottom reached in steel demand and prices. Erie Rail Pres. C. Denney sees some signs of improvement.

Editorial: Some have blamed excessive installment selling for the business downturn; this isn't the case as seen by very low default rates. Four large auto finance companies reported less than 0.33% overdue more than 30 days as of June 30, vs. 0.20% in 1929. The system might be more severely tested when economically troubled buyers have exhausted savings; "possibly these reports will be less cheerful reading six months hence," but credit doesn't seem to have been excessive.

Pres. Grace of Bethlehem Steel, joined Pres. Farrell of US Steel and other prominent industrialists opposing wage cuts in current conditions.

Market considered stronger technically after repulsing bears; considered well positioned for another try at recent 240 resistance level; passing through this level on good volume would be considered very positive. Conservative observers cautious based on similar movements in May, followed by June break.

Cuts in electricity rates have sparked fears of a “revised rate-making orgy throughout the country.” However, rate cuts have happened regularly in the past; while they may temporarily reduce earnings, they have generally stimulated enough new use to more than make it up in the long run.

Economic news and individual company reports:

European automakers meet secretly in Paris to discuss plan for quota on American cars; would cause large loss to American industry.

US gasoline consumption in June was 1.197M barrels/day, increase of 20,000 over May and 79,000 over June 1929.

Banks reported $49M increase in "all other" (mostly commercial) loans to $2.464B, increase of $108M from June 11 low point.

Almost all auto companies expected to resume production by Aug 4. Large Ford supplier to recall 1,000 men on Monday.

New York Edison proposes electricity rate cut from 7 cents/KWHr to 5 cents. Boston and Philadelphia announce electricity rate cuts.

Companies reporting decent earnings: American Light & Traction, McGraw-Hill Publishing, Royal Typewriter.

Westinghouse stock about 146, yield 3.4%, earned $3.13/share in first half vs $4.92 in 1929. General Mills stock about 45, yield 6.7%, earned $4.83/share in year ended May 31 vs. $4.57 previous year.

+ The Boring Stuff:

Canada's population estimated at 9.935M, increase of 137,700 over 1929.

A. Woodcock, director of Prohibition enforcement, plans to add about 500 agents, ask Congress for about $2M more funds.

Lt. Settle of US Navy criticizes US failure to develop engine suitable for lighter-than-air craft.

Bellanca Aircraft tests new Airbus plane; with load of 10 passengers and 2 pilots, has cruising speed of 133 mph and range of 800 miles.

Henry Ford criticizes Farm Board's progam to restrict crop acreage; Farm Board member C. Denman replies citing Ford's current policy of cutting production.

Britain, Norway, and Denmark join International Paper in objecting to barring of Russian pulpwood shipments from the US due to alleged use of convict labor (shipments are in vessels from these countries). Decision by Treasury Dept. expected within two days.

Commodities mixed; wheat down, other grains up, cotton up. Bonds dull, generally steady except US Govt. slightly lower.

World consumption of American cotton 1229-30 season estimated 14.027M bales vs. 16.309M previous season.

United Aircraft [later became Boeing, United Technologies, and United Airlines] Q2 net was $0.51/share vs. $0.39 in Q1 and $1.52 in Q2 1929. Management stated expects improved sales and earnings in second half.

Fed Reserve Bank NY surveyed 118 member banks, found 2/3 had little or no security loans in excess of current market value; also noted that personal credit of borrowers was likely to enable full recovery in many cases where collateral was insufficient.

Total US life insurance payouts in US and Canada in 1929 were $2.197B - almost equal to total US corporate and individual income taxes of $2.331B.

Aircraft produced in Q2 by 58 major aircraft manufacturers was 785 valued at $6.476M vs. 630 valued at $4.570M in Q1; sales were 914, valued at $7.390M.

US copper consumption in first half was 224,500 short tons vs. 271,100 in 1929.

Steamship passenger traffic in Port of New York for first five months was 347,535 verses 331,725 in 1929.

AT&T spending $773,822 to sell 2,579,407 shares by subscription to current shareholders. Main expense is engraving of rights and new share certificates.

Montgomery-Ward June sales $18.669M, down 5.7% from 1929; hopeful about impact of price reductions and extended time payments plan. J.C. Penney first half net $1.14/share vs. $1.32 in 1929.

July 31, 2009

Friday, August 1, 1930: Dow 233.99 +2.91 (1.3%)

Assorted historical stuff:

Romance is replacing "realism and matter-of-factness" in both fashion and theater. "The post-war years of bobbed tresses and short skirts" were ones of "rude materialism." In theater, "the measured rhythms of poetic drama were muted in the hurdy-gurdy tunes of a quick-stepping generation." Now, theater managers travelling to Europe find fashion returning to "laces and ribbons and sweet old-fashioned flowers," and in theater a revival of "old-fashioned love stories or flaming medieval romances." Of course, romance never went out of style some places: "It is axiomatic among American showmen that, west of the Hudson, American audiences have always been frankly sentimental."

Editorial: Good terms obtained by Mexico in debt settlement "shows what a debtor can accomplish if his nerve and ability to procrastinate are sufficiently lasting." Also noted is Germany's success in cutting reparations to a fourth of original demands. However, Mexico is now in the penalty box; "Only after demonstrating her ability and disposition to meet obligations beyond question and quibble will it be worth her while to attempt further outside borrowing."

Met Life 1930 figures based on 19M policy holders in US and Canada show sharp drop in disease death rates among wage-earning population to record lows.

Romanian King Carol refuses to accept resignation of cabinet following antisemitic disturbances.

NY State Bureau of Securities summarizes reports turned in by 270 investment trusts [similar to mutual funds]. While investigations of those suspected of fraud and misrepresentation continue, “it is gratifying [that] ... no such practices have been found in any of the larger and more responsible companies.”

Atchison, Tokepa & Santa Fe Railroad exhibits "air-cooled by refrigeration" dining car to be placed on "crack train" between Chicago-Los Angeles.

For first time in history, a lighter than air craft landed on a ship's deck and boarded a passenger (blimp took Goodyear Pres. P.W. Litchfield off the Bremen).

Twelve leaders of industrials (incl. Studebaker, American Rolling Mill, Pillsbury, etc.) oppose wage cuts as aggravating business recession.

Market commentary:

Bears attack early, target Consolidated Gas (on possible lower NY City electric rates), and majors including GE, US Steel, GM, AT&T. After brief recover around 11AM, bears renewed attack. Resistance developed, as stocks were not sold on setbacks. Tuesday's positive report from Steel finance committee seen as (delayed?) factor in support. Broad rally then developed in active stocks.

Henry Ford says present depression is "of minor moment in onward sweep of industry," also defends modern civilization against charge it cramps the individual. Thomas Edison says the depression is largely psychological.

Walker Brothers point out strong similarities of current business and market conditions with 1921. Market pattern of break last fall, followed by recovery and second break in spring, almost identical to 1921 in both timing and percentage. Other indicators including commodity prices, freight loadings, and dividend yields also similar. First indicator improving in 1921 was construction, two months before stocks hit lows [followed by 8-year bull market]. Therefore encouraging that construction turned up in June.

Conservative observers still advise remaining mostly on sidelines until market breaks out of range, taking profits on rallies, and waiting for reactions to buy.

US Steel earnings report seen as encouraging; able to earn almost full years dividend requirement of $7 in first half, whereas in past depressions was unable to cover dividends. Improvement due to greater diversification and operating efficiency. Management optimism is significant considering their usual caution.

Economic news and individual company reports:

NYSE transactions in July totalled 47.745M shares vs. 93.372M in 1929; smallest monthly total since July 1928 (39.994M).

William Green, AFL Pres., reports trade unionist unemployment in 24 cities was 21% in July vs. 20% in June.

Almost all car manufacturers to restart production by August 4, including Ford, Packard, Oakland-Pontiac, Graham-Paige.

New construction contracts for 37 states east of Rockies July 1-25 was at rate of $14.146M/day vs. $25.094 in 1929.

Companies reporting good earnings: American Water Works, Corn Products, National Dairy Products, National Supply.

Shangai Telephone Co. of Brooklyn incorporated in Delaware.

Strangely modern Hollywood joke:

"'How do you like your new publicity agent?' asked the film star's friend.
'Oh, he's wonderful,' she cried, beaming with enthusiasm. 'We've been robbed twice, our house has been burned, our car has been wrecked, and I have had my life threatened by an anonymous enemy since we employed him.'"

+ The Boring Stuff:

New Canadian Conservative PM Bennet says expected Canadian tariff on US goods is not intended as hostile to US, but as recognition of tariff effectiveness. Canadian stocks higher after clear Conservative victory; big factor was a landslide in Quebec, where farm communities were affected by the US tariff.

Editorial against Commerce Commission's decision to benefit farmers by lowering rates on rail transport of grains. True that farmer is in distress, but “Should the railroads be assessed for his imagined benefit because supplies of wheat are almost as redundant as the Commission's verbiage?”

President Machado of Cuba considering decree to restrict immigration from Jamaica, Haiti, Poland, and China.

International Paper says it's been assured convict labor not used to produce pulpwood it's importing from Russia, says paying same price as for Canadian wood.

Cotton closed unchanged after touching new lows; wheat rallied from yesterday's season lows. Bonds irregular, particularly speculative and preferreds.

Bear success Wednesday discouraged traders, with a repeat feared of the June break that occured after similar failure to extend the rally past 50% of the previous decline. However, market fundamentals are stronger now; business in May was still declining vs. now seen flat to rising; stronger bond market also a good sign.

Resistance to bears attributed to stocks being in strong hands; public participation in July rally probably small as seen in low level of brokers' loans.

One copper selling agency's slogan: "Buy your copper while you can get it below cost of production."

National City Bank NY monthly bulletin says production in many industries below consumption, sees fall upturn in industrial activity. Also reports on installment credit extended by 4 large auto finance companies; percent past due 30 days is now 0.31% vs. 0.20% in 1929; 60 days is 0.19% vs. 0.12%.

Government officials unconcerned about 50% decline in customs receipts so far in July; attributed to pre-tariff import surge; cause for alarm if decline continues.

Agriculture Dept. estimates 1930-31 wheat season production about equal to 1929-30, considerably less than previously predicted (due to unfavorable weather).

Iowa's population increased 2.7% from 1920 to 2,647,900; Idaho increased 1.3% to 437,440.

Oil and oil products in storage were 690.9M barrels at end of June vs. 694.3M end of May and 661.0M end of June 1929. Decrease of 3.4M in June contrasts with increase of 5.5M in June 1929. Texas oil producers expected to cut production to 737,000 barrels/day from current 830,000.

US airports and landing strips numbered 1,657 as of July 15, up from 1,561 on Jan. 1. States with most were Calif. (164), Texas (115).

June wholesale confectionary sales were $19.774M vs. $20.049M in 1929.

Studebaker cuts quarterly dividend to $0.75 from $1.00 last quarter and $1.25 before that. Earnings in Q2 were only $0.41/share vs. $0.62 in Q1 and $3.02 in Q2 1929, but company is using large accumulated surplus to maintain the dividend this year.

Bethlehem Steel Q2 earnings $1.86/share vs. $2.60 in Q1 and $4.17 in Q2 1929.

Boston Edison ordered to cut general electric rates to maximum of 7.5 cents/KWHr.

July 30, 2009

Thursday, July 31, 1930: Dow 231.08 -7.32 (3.1%)

Assorted historical stuff:

Some interesting observations on concentration of wealth by L.M. Shaw, Treasury Sec. under Pres. T. Roosevelt: “Whether fortunes of a hundred millions or more are good or bad matters not. It is as idle to rage at them, as to rave over them. ... As I read history each civilization has been self-destroying, and he who does not discern the larvae of destruction in this fails to see the obvious. ... instead of Huns and Vandals, our destroyers will be those of our own people who have had no breakfast and do not expect dinner.”

16 years ago today (July 31, 1914) the New York Stock Exchange closed due to outbreak of World War. NYSE President Noble rang opening gong at 10 AM, rang it again immediately for closing. Reopened for bond trading on Nov. 28, for stock trading Dec. 12; trading restrictions completely removed April 1, 1915.

Editorial: Some have seen the sweeping upset Conservative victory in Canada as response to the US tariff. But in fact, both sides advocated tariffs, the difference being that the Conservatives campaigned for one protecting Canada, whereas Liberals favored Beaverbrook's proposal for a tariff wall around the British Empire and free trade within it. Conservatives probably won because they put Canada first; Canadian public wanted “a party more dependably Canadian than imperial.”

Chicago police official tells congressional committee investigating Communist activities that US has a total of 51,685 members of Communist organizations and 79,325 in sympathetic groups. On the other side are 1,089,107 in organizations actively opposed to Soviet system.

Persistent reports in Canadian wheat circles of heavy rains ruining Russian and Baltic states wheat crop, threatening starvation. Reports can't be confirmed due to Soviet censorship of weather reports. These reports have not as yet been reflected in local wheat markets.

Better Business Bureau distributes booklet "What An Investor Should Know," primer for inexperienced investors to help detect fraud before money is lost.

Primo Carnera [boxer, 6'6", 280 pounds] currently traveling in US, having difficulty finding suitably large beds. Several hotels have procured special beds for him.

Market commentary:

US Steel Q2 earnings were about the $3 expected, but finance committee issued optimistic statement expecting increased business through rest of year. Some disappointment extra dividend wasn't declared, though this had been predicted last week; the extra is considered likely later in year if business picks up.

Market opened firm; US Steel advanced early but was unable to hold gains; this discouraged bulls and was followed by profit-taking and aggressive bear pressure on leading industrials. Large declines followed in major industrials and trading favorites. Selling picked up in early afternoon on an unconfirmed report Ford might extend shutdown by another week. Some large buying by bullish interests in final hour; finish irregular. Banks, trusts sharply lower. First time in recent weeks that volume increased on decline.

Studebaker President A.R. Esrkine on the depression: Notes general pessimism, but buying power is still there; spending has gone down much more than incomes; “there are individuals in your territory who can and should buy a new or used car but have not done so. They have been hold outs, hoarding instead of spending normally and sensibly.” Recommends redoubled marketing efforts by businesses; Studebaker has done this through depressions for past 78 years.

Conservative observers more cautious, note profit-taking on rallies, difficulty getting prices to move up. Once again advise buying on reactions and selling rallies.

Editor: "I saw your paragraphs about Mr. Grace's salary in this morning's issue. Perhaps the world would be safe for democracy if it could be shown that a 'bonus system' of salaries for big executives would mean little or no bonus in a year when little or no earnings accrued to the common or garden variety of stockholders."

Currently, good stocks have dividend yields double the call money rate, reverse of the situation last year when call money rate was double dividend rate. This year's situation is unlikely to last, just as last year's didn't.

Economic news and individual company reports:

US electric output for past week was 1.660 GWHr, down 2% from 1929, an improvement over previous week's 3.3% decline.

Safeway Stores expects first half earnings about $2/share vs. $4.31 in 1929; sales are up 8.6%, but profit margins are down; consumers buying in bulk instead of "the higher grade commodity sold under trade names". Decline in purchase of "so-called luxury foodstuffs."

Axton Fisher, manufacturer of mentholated cigarettes under "Spud" brand, reports first half sales up 25%, earnings up 60%; stock yielding over 7%.


"He (bragging about ancestry) - Yes, my father sprang from a line of peers.
Bored Listener - Did he drown?"
[Get it? Peers ... piers ... ahh, never mind ... ]

+ The Boring Stuff:

Editorial in favor of Hoover's declaration that US won't discriminate against Russian goods. On particular question of Russian lumber possibly produced by forced labor, should be excluded until an investigation is done, but as for other goods, “It is not quite enough to say that under Communism all workers are conscripted; such a declaration would at once plunge a large part of our foreign commerce into the uncertainties of political and economic theory.”

Public Service Commission calls for lower electric rates in New York City; Chairman M.R. Maltbie points out that "a number of other cities have lower rates than New York City, and with the exception of areas having cheap hydroelectric power, New York companies ought to be in a position to serve their consumers at as low rates as any metropolitan area."

Turkish government orders foreigners residing in Turkey to spend or invest at least half their earnings within Turkish borders. Order affects several thousand German, Scandinavian and Hungarian workers employed in railroad construction.

Commodities sharply lower, widespread liquidation seen; new season lows in wheat ($0.835/bushel), cotton (12.67 cents/pound), sugar (1.11 cents/pound).

Bonds irregular; investment grade fairly steady, convertibles lower, US govt. dull and slightly lower.

Iron Age notes increased steel orders from railroads, sees no other definite clue on future trend; operations are now steady. Industry still optimistic, but based on current suspensions recovery may not happen until mid-August. Activity weakest in consumer lines; construction steel and pipelines remain strong.

Central Trust of Illinois reports business for first half of 1930 overall very little behind 1928. "When the 1930 figures are digested ... they cannot be made to spell 'business depression,' but show merely a receding of business volume from the highest point ever attained." Say business has to some extent been damaged by uncertainty over terror and naval treaty; with these out of the way, "there is more reason to expect the continuous, if somewhat unsteady, climb back to a position above the normal line."

Countries manufacturing synthetic nitrates holding conference to agree on production restrictions.

Bears apparently encouraged by repeated failure over past two weeks to rise above 240 level; hoping for repeat of break when the May rally faltered at 275. Gillette advanced against market trend on renewed merger rumors.

Almost all utilities reported improved sales and earnings so far this year; this probably accounts for their higher price/earnings multiples compared to other stocks.

Oil industry curtailment still holding; production down slightly in the week ended July 26. Gasoline storage also declined 1.186M barrels; total decline since June 28 is 4.949M barrels, to current total of 44.8M barrels.

Auto parts shipments in June: original equipment 119% of Jan. 1925 level vs. 153 in May, 175 in April, and 231 in June 1929; service parts 131% vs. 137, 150, and 150; accessories 71% vs. 78, 74, and 90.

Loose-Wiles Biscuit (second-largest cracker manufacturer) net for year ended June 30 was $2.553M vs. $2.334M in 1929.

July 29, 2009

Wednesday, July 30, 1930: Dow 238.40 -2.41 (1.0%)

Assorted historical stuff:

Leading feminist organizations in France campaign to eliminate use of guillotine in executions, supported by "practically all the radical newspapers."

Canadian Conservatives win sweeping election victory; some fear of resulting tariff measures since Conservative leader Bennett campaigned on policy of high tariffs to keep Canadian spending in Canada and relieve unemployment.

Administration announces it has no intention of discriminating against Russian goods even though Soviet govt. not officially recognized. Lumber industry expresses concern about competition, claims use of forced labor in Russian logging.

Editorial: Communist threat may be exaggerated; propaganda naturally causes counter-propaganda. “Every reasoning effort to estimate quantitatively the progress of Communism in this country forces the conclusion that as yet it has been pitifully small in comparison with the effort expended and the noise made on its behalf.”

Editor: "You have mentioned various reasons for the continued progress and prosperity of the US, but you have overlooked the main reason. Last year college students enrolled in the US numbered 1,237,000, exceeding the total of the rest of the world by 287,000. No further comment is necessary."

"A transpersian Railway, about 1000 miles long, is now being built by American contractors as a part of the modernization scheme sponsored by the Shah of Persia." Railway will extend from Persian Gulf to Caspian Sea, construction cost about $125M.

Captain L. Yancey talks by radio phone to Sydney, Australia from plane 5000 feet over Buenos Aires, total distance of 14,000 miles.

Daily plane service started between New York and Saratoga for racing season; fare is $30; flights leave daily at noon and return after the last race at 5:30.

Market commentary:

Market action generally not bad, but pronounced weak spots, particularly in rails on bad earnings news. Utilities and industrials relatively firm, including Standard Gas and GM. Steel industry encouraged by plans for higher auto production in August. Short covering seen through most of session; decline became more general in last hour. Bonds irregular - foreign governments strong, rails and preferred stock weak.

The Room Wit: "The one trouble of the trader who thinks his judgement infallible ... is that the margin man bothers him too much."

T.S. Holden, V.P. of F.W. Dodge Corp., reports on construction: public works and utilities up 40% over 1929, but residential down 47%, though improving since March. Blames “overproduction that started long before the fall stock market break.” However, says most surplus residential space has been liquidated, and sees easy money stimulating renewed residential building. Calls for improvement in house quality similar to that in autos, radios, etc.

Earnings in a number of sectors are being artificially depressed by very low inventories. This suggests increased earnings when purchasing returns to normal.

Some of the more optimistic steel producers expect production at over 80% before end of year; this should mean satisfactory earnings for the industry.

Favorable market factor seen in "absence of over-speculation" by both traders and investors; public has been slow to buy, traders are quick in taking profits, and brokers' loans are at lowest level for many years.

Conservative observers still advise caution until market demonstrates further recovery on good volume; advise taking profits on sharp upturns in individual stocks, and also "switching from stocks with doubtful prospects into those with a better outlook."

Economic news and individual company reports:

President Hoover asks Attorney General for major investigation of bankruptcy laws, to recommend needed reform legislation.

Undaunted by recent "hot" reception in Kansas, Farm Board Chair Legge to travel to Central and Northwest states to resume pleas for reduced wheat acreage.

Bank loans continue to decline; in past month, security loans down $26M to $8.398B and "all other" down $118M to $8.454B. With low demand for credit, banks have been investing heavily in government and other securities and paying off debt to Federal Reserve.

Department store sales for June in 266 cities were down 10% from 1929; first half sales down 5%.

Companies reporting good business: IBM, General Foods, Allis-Chalmers (farm and industrial equipment), Raybestos-Manhattan (asbestos), United Biscuit.

US Steel Q2 earnings $3.02/share vs. $3.44 in Q1 and $6.68 in Q2 1929.

Bible humor:

William Jennings Bryan asked John Baird to marry his daughter Mary E. Baird by quoting Solomon's proverb "Whosoever findeth a wife findeth a good thing and obtaineth favor of the Lord." Baird countered with Paul's observation that "While he that marrieth doeth well, he that marrieth not doeth better." Bryan won argument by pointing out that Solomon ought to be a better authority, having married a thousand times to Paul's zero.

+ The Boring Stuff:

President Hoover to appoint committee to establish better methods for measuring unemployment; to include representatives of labor, business, and economists.

British registered unemployed July 21 were 1.973M vs. 1.940M previous week and 1.123M in 1929.

French textile workers join iron and steel workers in strike demanding raise to compensate for new social insurance law.

Romanian oilfield workers set fire to plants to protest oil companies policy of cutting production and dismissing workers.

Brotherhood of Sleeping Car Porters seeks injunction preventing Pullman from operating "company union using coercion and intimidation."

Bank of England dispatches leading official Sir O. Niemeyer to Australia to discuss how to address serious financial situation. Large deficits anticipated, aggravated by lower incomes and tax collections due to business depression. Australian importers having difficulty obtaining credit abroad.

Mexican debt settlement wipes out $330M of overdue interest and $21M of principal, leaving about $492M in principal.

Commodities mostly lower. Wheat futures touch yearly lows below $0.86/bushel; sugar, rubber hit new lows.

Technical Analysis: Market has made three attempts in past two weeks to break through 240 level; success would point to substantial continued uptrend.

In all but one depression or recession since 1900, stock prices recovered before or at the same time as business conditions (exception was in 1921).

Some increase in short interest noted in past week, thought to account for some setbacks in market. Bears have apparently not given up on testing the market.

Bulls encouraged by lack of volume on declines, considered "good indication of better markets in the future."

Despite some reports, investigation finds bankers not actively supporting the market; most interests believe market should be allowed to stabilize itself.

Foreign bond sales have been encouraged by higher yields, averaging 1.66% higher than domestic, or a yield 35% higher.

Rail freight loadings for week ended July 19 were 928,256 cars, down 151,712 from 1929 and 95,587 from 1928, but up 12,271 from previous week.

Steel production in past week at 57.5% of capacity, unchanged from previous week.

Recent hot, dry weather has reduced corn crop by 200M bushels but increased value by $270M. Wheat now being used in large volume for animal feed.

IBM first half earnings $5.73/share vs. $5.29 in 1929.

Southern Railway first half earnings estimated $0.36/share vs. $5.74 in 1929. Union Pacific June operating income off 46% from 1929. Rock Island fails to cover preferred dividends for first half.

Procter & Gamble: following strong earnings for year ended June 30 (sales up 1%, earnings up 17%), looks to expand abroad; buys Britains largest independent soap mfr. Hedley & Co., going into competitor Lever Bros. home market. This seems to make earlier rumored merger of P&G with Lever unlikely.

July 28, 2009

Tuesday, July 29, 1930: Dow 240.81 +0.50 (0.2%)

Assorted historical stuff:

President Hoover is riding high, although Republicans are expected to lose Congressional seats in the November election (as usual for the presidential party in an off-year election). President has gotten his way on most major issues including naval arms treaty, flexible tariff, and farm relief, although in some cases he appeared to bungle the negotiations at the time. He's generally reported to be "in a more cheerful frame of mind than he has been for some time."

Editorial: settlement of Mexican government and National Railway debt represents "one more triumph of hope over experience," following previous two settlements attempted in 1922 and 1925; first of these lasted barely 6 months and the next two years. Regarding National Railway bonds, "it should not go unobserved that a mortgage on a national property adds nothing to the security of a loan, which remains wholly dependent upon the owning government's willingness and ability to pay." Mexican reaction is generally more positive, with the newspaper Excelsior's front page headline reading "Mexico has gained a great victory."

Association of unions affiliated with AFL launches movement to block all Soviet exports based on use of convict and forced labor.

Japan plans to deal with severe industrial depression by government aid and planning to eliminate unsound companies, amalgamate smaller ones, and arrange assistance of banks. Also arranging local government loans for unemployment relief

Governor Theodore Roosevelt, Jr. of Puerto Rico credited with improving finances there through economies and better collections [later became only general to land with troops in first wave of D-Day; survived but died one month later of heart attack].

Bethlehem Steel - Youngstown merger trial postponed a day due to heat.

National Broadcasting Co. receives about 200,000 so-called "fan letters" a month to its radio stars. Men write more letters than women, but women write longer ones. Companies encourage the practice to obtain valuable mailing lists.

AT&T announces price of New York-Buenos Aires call cut $6 to $30 for first 3 minutes, $10/each additional minute, equal to New York-London rate.

Market commentary:

Some nervousness at market open due to heavy selling in Warner Bros.; however, major stocks resumed advancing as the session progressed. GM continued advance as did major industrials including American Can, Westinghouse, GE; utilities and copper stocks also strong. Some weakness late, upon which volume again declined. Bonds dull but generally firm.

Increasing opinion that current market discounts the business situation and a rise is now likely. Goodbody & Co. "look for a continuation of general strength this week. Except where pool operations are pronounced, we think the higher prices will be gradual and we do not look for anything but an orderly progress to higher levels."

Some mixed opinion and wait-and-see attitude remains, reflected in continued short interest and large number of below-market buy orders.

Continued public buying power seen in demand for bonds, increases in number of corporate shareholders, and higher savings bank deposits.

New stock trading how-to book published - The Wall Street Stock Selector, sequel to Truth of the Stock Tape. Some rules: never over-trade; don't buck the trend; trade only in active stocks; use stop-loss orders; never average a loss; never let a profit run into a loss. Also lots about using charts to predict future action; author suggests sharp division between insiders and public who, without knowing insider plans, must use stock action to deduce said plans and profit from them.

Economic news and individual company reports:

First 60 railroads report June operating income $58.337M vs. $59.042M in May, $88.371M in June 1929, and $71.540M in June 1928.

Warner Bros. Pictures earnings for six months ended August 30 expected below $5M; previous six months was $10.1M. This will be below dividend requirement; attributed to unexpected decline in movie earnings in current summer.

Coca-Cola net for first half $7.182M vs. $6.492 in 1929.

Companies reporting increased earnings in 1930: Railway Signal, Shaw-Walker (office furniture), Beatrice Creamery.

Courtroom humor:

"Judge - The two men were fighting with chairs. Didn't you try to establish peace? Witness - No, there was not a third chair."

Judge - Did you know the defendant, Pearson? Witness - I had a logical acquaintance with him. Judge - what do you mean by logical acquaintance? Witness - Well, we both belong to the same lodge.

+ The Boring Stuff:

Editorial: Wheat market has been unsettled by reports of large Soviet sales. However these reports are seen as unreliable and partly generated for propaganda. Latest reliable figures are for 1927-28 crop, indicating production at 90% of prewar 1913 level, but fraction offered for sale by peasants over and above their needs only 40% of prewar level.

Aviation industry awaits details of implementation of the Watres bill, to effectively subsidise passenger air traffic (now operating with losses) by allowing air mail to be carried on regular passenger routes, and redistributing existing air mail routes among operators.

New York Mayor Walker receives report from Controller Berry calling for adding 3,893 acres to city parks over the next several years; would bring parks to 9% of total city area.

1,001 conventions held in New York City in year ending April 30.

Market has mostly done the unexpected this year, including recent rally when many expected a dull market until fall. If business improves in fall, market will not wait but should be much higher by then. Recent buying has been by those who should know; they may be wrong as with the rally earlier in the year, but chances are better this time based on historical length of depressions; fall will mark 15-month point since start.

Bonds generally continued quiet "creeping bull market" in past week.

May gasoline consumption in 43 states was 30.553M gallons, down 511,000 from April but up 1.302M from May 1929.

Lumber demand up in week ended July 19; new business from 881 leading mills was 94% of production, best in many weeks; previous week was 79%.

Low prices for eggs, poultry, and butter (down 30%-40% vs. 1929) are affecting farm income; many complaints that retailers aren't passing price declines along.

Canadian wheat acreage has increased from 10M acres in 1909 to 25M this year.

June car sales in Midwest: new down 29.7% from May, 50.9% from June 1929; used down 13.8% from May, 26.4% from June 1929.

June New York department store sales down 5% from 1929. First half sales up 1%. Chain stores down 5% in June, up 3% first half.

American Can strong based on well-sustained earnings, as well as rumors of a split; oils being bought based on success of curtailment efforts.

International Harvester to increase operations of local plants 50% within 30 days to meet large Russian order for tractors.

New York Life issued 187,758 policies for total of $538.1M in first half vs. 164,366 for $511.1M in 1929.

Western Union night cable rate New York-Switzerland is $1.90 for 20 words; total Western Union US-Switzerland cable traffic more than 10,000 per month.

July 27, 2009

Monday, July 28, 1930: Dow 240.31 +2.83 (1.2%)

Assorted historical stuff:

Contrary opinion from a subscriber regarding W. Grace's $1.5M bonus from Bethlehem Steel: “I don't believe there is any man worth $1M a year. Rather, I believe a man of high office in a corporation should be content with a reasonable salary and rely upon his interests as a stockholder for further compensation. I do not mean to detract from the all-important factor of management, but there must be a line drawn somewhere - if not, why shouldn't the heads of some companies like US Steel and AT&T receive $10M a year?”

Germany in crisis: von Hindenburg's dissolution of the Reichstag is climax of long series of financial crises. After a remarkable economic recovery in the past five years, Germany's access to foreign capital has been cut off by the financial crisis; they're now faced with severe unemployment and need to bridge large budget deficits. Temporary dictatorship is an opportunity for drastic measures, though there is some worry that after new elections Socialists and National Socialists will gain. Some positives in continued export growth and solid condition of Reichsbank.

French workers strike against government social insurance plan, demanding raise to compensate for 4% tax on earnings.

Canadian election result awaited; Liberal party expected to retain power, with smaller majority.

Agreement on Mexican debt reached; overdue interest reduced, term extended 45 years. Now awaiting ratification by Mexican Congress.

$50M “clearing house” to be formed in London to protect firms selling on credit (installment plans) by gathering information on customer's other credit obligations.

Dr. W. Goodwin of Columbia carries out 400-person study of happiness. Finds happiness unaffected by age, intelligence, or education. Men generally happier than women, married people happier than single, “although the survey did not show whether celibacy induced unhappiness or unhappiness resulted in celibacy.”

Annual numbers for US ice cream industry: 1.75 billion pounds produced, using 6 billion pounds milk, 243 million pounds sugar.

Most expensive chairs in public use in New York probably a set of five gold-leaf and red plush Louis XV chairs in lobby of St. Regis Hotel. Constructed about 1905 in Paris for about $1,500 each; “Even in these days of frenzied bidding for antiques it takes a rare Chippendale to bring $1,500 on the auction block.”

Market commentary:

Bulls were encouraged by Friday's action, particularly evaporating volume on declines and sharp rally in last few minutes. GM particularly strong; as was US Steel and AT&T. Trading favorites strong (Vanadium, Radio, United Aircraft). Market advanced broadly. Some public buying seen. Investment-grade bonds strong; speculative bonds and preferreds irregular.

Market encouraged by ability of US Steel and GM to earn almost all the full year's dividend requirement in first half. Many other companies have also reported earnings better than expected (“the reports of many corporations for the second quarter have been a disappointment to traders on the bear side”).

Some positive feeling from weekly business reviews expecting bottoming out and seasonal upturn, though this expectation so far “has been based on hopes rather than actual signs of increasing activity.” Many industries have consumption running ahead of production and low inventories; credit is also very easy. In particular, resumption of car production soon is seen as positive for steel and other industries.

Economic news and individual company reports:

Commodity news: Irving Fisher's index of 200 commodities 83.3 in week ended July 25 vs. 83.4 prev. week, 93.3 in Jan. 1930, 97.4 in Jan. 1929, 91.2 in Jan. 1922, and 167.2 in May 1920. Crude rubber prices lowest in many years in spite of record consumption in first half, 267% over 1921 level. Wheat market unsettled by Russian exports.

103 telephone companies operating earnings for May were $22.924M vs. $23.338M in 1929.

General Foods selling about 55, earned about $2 in first half, yields about 5.5%. American Ice: about 35, earned $4.22 in 1929, yields about 8.6%.

General Mills profit for year ended May 31 was $4.83/share vs. $4.57 previous year. Hershey Q2 net $2.16/share vs.$2.25 in 1929.

GM first half net $2.32/share vs. $3.28 in 1929. Earnings were 77% of $3 full year dividend.


“Father of the Bride - My daughter will have a dowry of $50,000, but of course I must make inquiries of your antecedents and prospects.
Suitor - Don't make any inquiries, and I will take her for $25,000.”

+ The Boring Stuff:

Editorial: London Naval Treaty is good in that it restricts navies to parity at a less expensive level. Question now is whether to spend the $1B required by 1936 to actually reach the parity allowed by the treaty. We should do this only if necessary for defensive security, not for vague diplomatic reasons.

Editorial praising Farm Board chairman Legge's stand against buying more wheat to support prices; “His present decision is right and the farmers will eventually commend him for it.

Dr. J. Klein, Assistant Commerce Sec., speculates that security interchanges “might sometime become the foremost settling item in America's international accounts, coming before even gold shipments.”

Stock market execution now so efficient that many reports to clients are received almost as soon as trade hits the tape.

Market action seen technically positive; Dow has been trading in a 10-point range since the 30-point rally from June 24 low; seen as period of consolidation.

Guaranty Trust Survey reports further business slowdown in past few weeks, attributed mainly to seasonality; some positive news from construction and rise in stock markets. Expects next month to continue slow, then gradual recovery. Sees most reliable indicator of recovery as rise in commodity prices.

State banking association reports banking system in healthy condition; as of March 27, there were 24,614 banks (17,298 state and 7,316 national), with capital, surplus, and undivided profits of $9.963B, and total deposits of $57.446B.

Customs collections first 23 days of July were $18.3M vs. $37.5M in 1929; decline blamed on efforts to import before tariff took effect June 18.

48 state highway departments spent $910.5M in 1929 to improve 32,522 miles of road.

Dept. of Agriculture reports wheat production in 15 countries this year 1.924B bushels vs. 1.861B previous year.

Manganese Producers Assoc. appeals for embargo on Soviet manganese, citing dumping and use of “slave labor” in production. Treasury department bars Soviet shipment of pulpwood citing use of convict labor to load.

Gillette advanced to new high on merger rumors.

Scott Paper (wood pulp, toilet paper, paper towels) first half net $2.64/share vs. $2.20 in 1929 and $1.91 in 1928.

Douglas sees record 1930 profit on military planes.

Caterpillar first half net $2.99/share vs. $2.80 in 1929.

Gannett (newspapers) first half net $988,341 vs. 1,290,416 in 1929.

Federal Trade Commission cites Pro-phy-lac-tic for toothbrush price-fixing.

Radio Corp. tests coast-Honolulu telephone service.

The Weekly Blather July 27, 1930

July 27, 1930 was a Sunday with no Journal, so again a little editorial commentary.

Administrative note: Starting this week, I've decided to cut down on the individual company earnings reports. These were becoming a little unmanageable in number. The original idea for including these was to give current investors a snapshot of which companies held up better then. I think there's probably been a good enough sample of that already, and in any case, there are enough differences with the current situation that the exercise, while helpful, is only moderately so. I also think this will let me include more interesting items day to day.

A short bit of blathering about blather.

First, let me define what I mean by blather, and its opposite, information.

Information is number of things produced, freight moved from one place to another, profits earned, money saved and spent.

Blather is opinion, speculation, pontification, and other -ions.

Of course, some things are part information and part blather; for example, a profit forecast given by a company is probably based on some real information (orders and sales already in hand), and on some blather (speculation on future trends).

One thing that I believe stands out when reading through a bunch of days in this blog is that (unlike in some other fields), in economics blather is often not worth much. I believe, therefore, that a useful filter to apply to any item of business news is to stand back and think carefully about what proportion of it is information, and what proportion blather. In fact, I believe this so strongly that while I try to give an representative summary of each day's paper in terms of optimistic and pessimistic stories, I do separate out the mostly-blather items into the market commentary section, while putting the information into the economic news section. I can't do this for your daily reading of the Wall Street Journal or watching of CNBC, but I believe if you do the results would be sobering and possibly beneficial. Not to mention maybe saving some blather-related time for more fruitful endeavours.

July 26, 2009

Favorites of the week July 21-26, 1930

No Journal was published July 27, 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.

July 26:

[Note: A depression is a depression, but the Waldorf is the Waldorf.] Largest and heaviest steel truss ever used in building construction is placed in Waldorf-Astoria; assembled unit is 312 tons, 90 feet long by 33 feet high, located above main ballroom, supporting part of hotel from 9th-46th floor; allows 10,000 sq foot ballroom to be free of supporting columns.

[Note: Well, I guess a maelstrom counts as a tidal impulse.] Bradstreet's weekly review reports sentiment improved although business still dull; "The trade situation at present might well be likened to that of a ship in a calm in slack water and waiting for a new tidal or aerial impulse to carry it in a new direction."

[Note: Strangely familiar #1.] J.A. Stransky Mfg. of Pukwana, SD prohibited by FTC from advertising their vaporizer device as enabling Ford cars to get 57 miles/gallon, start easier.

[Note: I swear I didn't make this one up department.] Annie Gamble of Atlantic City sued by broker for $3,279 loss incurred on margin account; Mrs. Gamble claims margin investment is a gambling debt, hence illegal.

July 25:

[Note: Strangely familiar #2.] Union Trust of Cleveland sees improving business sentiment, upturn starting soon. Positives include production generally below consumption, ample purchasing power as seen in bank deposits, strength in construction and public works, and easy credit. Cautions that recovery may not be quick and easy, but rather gradual over some months.

[Note: Strangely familiar #3.] Consensus that business will improve seasonally in fall, but while optimists expect improvement to continue through winter, conservative authorities expect another slowdown in winter, and sustained upturn not until spring of 1931, and therefore continue to advise selling stocks on rallies and waiting for breaks to buy.

July 24:

[Note: Strangely familiar #4.] Second-quarter earnings so far better than expected. Third-quarter predictions are difficult; current business is below second-quarter average; if seasonal pickup does not develop until September, as leading authorities expect, the improvement won't be reflected in third-quarter earnings.

[Note: Strangely familiar #5.] Deposits at member banks up $1.494B to $21.317B in past six months. Similar increase to 1924, which was soon followed by business revival; caused by easy money policies of Reserve banks. However use of the money has been different from 1924; banks then increased commercial loans, but now there's been a large decrease in commercial loans and large increase in security loans and investments; easier credit policy has so far failed to increase demand for business credit. However, if a recovery does come, the Fed would be reluctant to allow rates to rise; necessary expansion in Reserve credit could then lead to inflation.

[Note: I had the adder plus the points.] Mysteries of Nature. Film opens with scarab beetle rolling ball of camel dung; other details of beetle lifecycle; studies of plant life including the "uncanny fly-trap;" capture of large Nile crocodile; laboratory experiments with sound waves; large tropical spiders; and finally, "battle-to-death between the most poisonous tropical snake known and a non-poisonous adder," each more than 6 feet long (adder wins after terrific struggle).

July 23:

[Note: Strangely familiar #6.] Administration members reported telling Wall Street that business has turned corner, and should curve slowly upward until winter, becoming clearest in October. No forecast beyond that ventured. However, administration strenuously denies rumors of using "its influence to bring about organized support for the stock market."

July 22:

Dull trading attributed to large professionals extending weekend due to recent heat wave.

July 21:

[Note: Emphasis added to highlight the more-than-a-little-spooky part.] Governor R.A. Young of Fed. Reserve Bd. warns banks to be careful about the increasing amount of loans against securities. About the crash last fall, says: “there is food for serious thought in the fact that, under our excellent banking system ... we nevertheless came to the brink of a collapse, had to resort to heroic action to prevent a panic, and were not able to avoid ... severe liquidation and what appears to be a business depression. Is this unavoidable? Is it necessary for this country to go through periods of reckless exuberance, accompanied by enormous credit expansion and fantastic levels of money rates that profoundly disturb the financial structure not only here but all over the world?” The cost of these episodes is paid in unemployment and worldwide depression. Reminds banks that security loans are safe only if a liquid market exists for the security; large scale sales can cause a drop in value, “and there is no telling when such a drop may terminate and what catastrophe may follow ...” Calls on banks not to assume Fed will always be able to help them, since its resources are “not inexhaustible.”

[Note: Danger of historical analogies department.] Current conditions seem quite similar to postwar deflation in 1920-2. From peak in June 1920, business gradually declined until October, and sharply until April 1921. "At the bottom of the movement, pessimists were talking of the worldwide character of the depression, of the tremendous surplus of commodities, widespread unemployment, and even of the baneful influence of the tariff." Shortly afterward "a solid recovery set in, leading to nine years of unprecedented prosperity."

"Sitting in the broker's office, Wondering what in heck to do;
Watching, waiting, hoping, fearing, Praying all my dreams come true. ...
NPT is still a dairy; old VA has just gone by;
BMT is slowly mending; Radio is flying high.
Will I? Won't I? Hurry, Hurry; Down she wavers; up she goes.
'Buy,' I shout with great decision; Comes the answer - 'Market closed.'"