August 29, 2009

Saturday, August 30, 1930: Dow 240.42 +2.63 (1.1%)

Assorted historical stuff:

Editorial: Gov. Roosevelt's proposed state-supported unemployment insurance may be debatable, but he's at least called attention to a crucial problem. Workers make a majority of the national income (in 1928, 46.6M workers of a total population of 119M made $50B of a total income of $89.4B, the rest being interest, dividends, rents, etc). Therefore, business life depends on workers' income and consumption, and it's crucial that there be steady and well-paid work for all those willing and able. Automation and other factors have contributed to unemployment; solution “calls for deep study of experts and an economic, not a political cure.”

Pres. Hoover meets with heads of govt. building activities with view to accelerating programs.

Canada PM Bennett calls special session of Parliament for Sept. 8 to consider unemployment relief, possible new tariffs.

Buenos Aires remains calm, although Pres. Irigoyen remains under special guard, arranged on his insistence over cabinet objections. Pres. Irigoyen said to have become convinced he has “alienated the sympathy of the army” by recent actions. Some reports of “trouble of a rebellious character” in Brazil.

Canadian Natl. Railways facilities for Toronto-Vancouver train include mini-gym with “Swedish massage machines, vibrating apparatus, and foot and hand exercisers,” shower bath, ice cream parlor, barber shop, valet service. Windows in observation cars are of “vita glass” transparent to UV rays.

American Tree Assoc. says world's forests are concentrated in Russia, British empire, Brazil, and US; these four contain 2/3 of world forest land.

Market commentary:

Major stocks advanced vigorously in unexpectedly strong pre-holiday session; bulls encouraged by $26M decrease in brokers' loans, and by recent market action; buying support even on small declines is seen preventing even normal technical setbacks from developing. Volume lower due to upcoming holiday. US Steel reached May level; also strong were American Can, Union Carbide, GE. Utilities and rails; shorts in various trading favorites had “uncomfortable time.” Banks and trusts strong. Bond market mixed; Latin and South American bonds down sharply, but other govts. strong; high grade corp. steady; convertibles up sharply.

Bradstreet's and Dun's reviews note some seasonal upturn in business, better trade sentiment.

Market sentiment quite hopeful. Some reports of increased public buying. Most observers now recommend buying standard stocks on reactions.

Recent strength in banking stocks considered positive - this group suffered heavily in panic last fall; only recently has renewed accumulation been evident.

Some bears have been arguing that stocks are still selling at higher price-earnings multiples than at low point of previous depressions; optimists counter that the greater current financial strength of corporations justifies the higher multiple.

Treasury Sec. Mellon praises Federal Land Bank system as sound and useful, and bonds as sound investments; says present drought situation temporary and confined to certain areas; Land Banks are mutually responsible for each other's obligations; this strengthens the system due to diversity of conditions across the US.

Economic news and individual company reports:

Weekly bank reports mixed; “all other” (commercial) loans were down $39M, opposite of usual seasonal pattern; this was “not reassuring.” However, currency in circulation was up $6M, bringing increase for August up to $51M, a larger gain than recent years. Brokers' loans by Fed. Reserve member banks on Aug. 27 were $3.102B, down $999M over previous 12 weeks.

Money rates remained low in August: call money on the NYSE was at 2%-2.5%; prime commercial paper was at 3%.

Rails seen benefitting if business upturn arrives because of increased efficiency forced by depression; this increased efficiency is seen in July earnings reports, which had revenues down a higher percentage than June but net down 32% vs. 34% in June.

Class 1 rails reported record fuel efficiency in first half; avg. of 125 pounds fuel required to haul 1,000 tons one mile, 4 pounds below previous record.

New high speed tickers to go into operation just in time for rush after Labor Day holiday.

P. Boggs. chair of California oil curtailment committee, calls for meeting to decide if current 596,000 barrels/day limit needs to be cut due to lower sales.

Companies reporting decent earnings: Arundel Corp. (sand and gravel), Industrial Rayon Corp, Thatcher Mfg. (milk bottles).

Company reports since July 1: 174 companies reported increased earnings vs. 1929 and 418 decreased; 818 dividends unchanged, 14 new, 7 increased, 56 cut.

Household Finance Joke:

“The wife had been put on the budget plan. At the end of each month she and her husband would go over the accounts together. Every once in a while he would find an item, 'L.O.K. $3,' and a little further on 'L.O.K. $6.'
Finally he asked: 'My dear, what is that L.O.K?'
'Lord Only Knows,' she replied.”

Prohibition Joke:

“Visitor - My word, I am thirsty.
Hostess - Wait a moment, I'll get you some water.
Visitor - I said thirsty, not dirty.”

+ The Boring Stuff:

Minnesota Gov. T Christianson says doubts success of Farm Board campaign to reduce wheat acreage; approach should start at the smalller cooperative units and build up rather than working top down from national agency, and should be focused on substituting other crops such as flax for wheat. Requiring farmers to restrict output of all products would be strongly opposed as it “would permanently subordinate agriculture to industry,” since farmers wouldn't be able to produce a surplus to sell abroad as industry can.

Reports given to Pres. Hoover on available methods for drought relief: general approach proposed is use of existing credit facilities to lend through banks or marketing cooperatives, with little direct aid available; Fed. Reserve Gov. R. Young says Reserve banks will be lenient toward member banks in affected territories, but warns they “are not in a position to knowingly make poor loans under any conditions”; shippers of feed and livestock granted reduced rates in affected areas.

Effects of war and subsequent [hyper-]inflation in Germany were least on land owners, bankers, and industrialists.

Commodities mixed. Cotton down. Grains up, corn particularly strong. Cocoa touched new low at 6.33 cents but closed unchanged.

American Metal Co. chairman L. Vogelstein expects upturn in copper prices in next two months, substantial increase in demand in next year.

Oil stats for July: Consumption of gasoline was 43.950M barrels vs. 43.028M in June and 42.960M in July 1929; gasoline in storage at end of month was 46.077M barrels vs. 50.255M in June and 37.880M in July 1929; crude oil production was 76.743M barrels vs. 76.513M in June and 91.327M in July 1929; total storage of all oil (crude and refined) at end of month was 686.625M barrels vs. 690.916M in June and 666.962M in July 1929.

July net operating income for all class 1 rails was about $82.5M vs. $122.8M in 1929 and $95.2M in 1928, but was up about 19% over June.

July shipments of auto parts/accessories makers were 88% of Jan. 1925 base vs. 116% in June, 144% in May, and 188% in July 1929.

Cuban and US sugar producers meeting to agree on “program for the rehabilitation” of sugar industry; hope to then present united front to European and Java producers. Over past few years Cuba has been alone in restricting production, leading other producers to take up the slack. Five-year plan is contemplated to restrict production allowing demand to catch up and clean up current enormous surplus.

General Foods expected to benefit from introducing frozen foods; tests of frozen fish, meat, vegetables, and fruit in Springfield, Mass. very successful.

Friday, August 29, 1930: Dow 237.79 -0.14 (0.1%)

Assorted historical stuff:

Editorial: R.Young has resigned as Governor of Fed. Reserve Board to become head of Boston Reserve Bank for financial reasons (raise in salary from $12,000 to $30,000). This is example of “America's extravagant wastage of brains through underpayment of public officials.” Gov. Young was moderating influence on otherwise misguided Reserve Board who refused to follow some of the Reserve Bank's recommendations to raise rates last year until it was too late to help. Fed. Reserve act has “created a banking system of marvellous strength and stability,” but split structure between Board and 12 local Reserve banks is a weakness. Since the Reserve Board holds tremendous power, it's in the public interest to ensure it's staffed by the “best in brains and experience.”

Revolution in Peru apparently concluded with installation of new military junta headed by S. Cerro.

Rumors of “uprising or outbreak of some sort” in Argentina; govt. offices and presidential home under heavy guard; “Buenos Aires has always been filled with a number of belligerent political factions” so uprising does seem possible, but not full scale revolution as just happened in Peru.

State Dept. says Mexican immigration into US has been drastically reduced.

Farmers being encouraged to settle in Alaska; experimental farms have been operating successfully for several years.

Richard Whitney, NYSE Pres., to give opening address at NYSE Educational Institute on subject “Trade Depressions and Stock Panics.”

NY City has thriving trade in shops renting complete outfits for weddings, including bridal gowns, tuxedoes for groom and best man, gowns for bridesmaids, and outfits for family members. Larger shops have up to 300 gown selection; bridal outfits rent for $15-$25, grooms for $5 including stovepipe hat.

Market commentary:

Volume lower as many traders stayed away in advance of Monday Labor Day holiday. Most trading in narrow range, though some weakness in individual stocks including Goodyear (10% salary cut), Houston Oil (Texas oil curtailment), IT&T (reports of another revolution in Argentina). Bear attempts to spread selling across market were frustrated as market anticipated more activity, higher prices next week when major operators return from summer vacations. Banks and trusts gained. Bond market generally steady on lower volume.

Central Trust of Illinois says business now “marking time,” but sentiment improving and seasonal upturn is assured. Says current gold exports not a concern unless much higher, in fact may be stimulative to foreign economies. Market sentiment in July emphasized bad news and ignored the positive, but has recently become more favorable. Decrease in rail freight not a cause for concern, but due to drastic drawdown of inventories.

W. Storey, Pres. Atchison, Topeka rail, expects normal fall seasonal pickup in traffic, though loadings curve may remain under those for past few years.

First Natl. Bank of Boston reports on New England business: slump has been severe and long; industrial production in first 7 months 19% below 1929 level; index of activity in July at 81.7 vs. 109.4 in July 1929; decline for all of US has been similar. While depression may be lifting, recovery is likely to be slow and irregular. Crux of problem is general overproduction and lack of purchasing power; decline may be self-reinforcing. While depression has the benefit of forcing greater efficiency and removing waste, “something more than efficiency ... is necessary for good business. There must be effective demand, which in turn rests upon an equitable distribution of purchasing power.” One bright spot is “irresistable urge of the American people for continuance of the high standards of living.”

Economic news and individual company reports:

Brokers' loans by Fed. Reserve member banks decrease $26M in past week to $3.102B, lowest level since July 1927.

Dividends distributed in July turned down vs. previous year for first time in 92 months; decline was 3%.

Canada increases tariffs on fresh fruit and vegetables 50%-100%; US imports are most affected.

Companies reporting decent earnings: Woolworth, American Home Products, Engineers Public Service, Burns Bros. (coal and oil distribution).

Operating income of 101 telephone companies in June was $22.7M vs. $22.2M in 1929; first half was $136.9M vs. $138.2M.

Ongoing trial of lawsuit to block Bethlehem Steel - Youngstown Sheet & Tube merger seems to be wandering a bit - mothers of some executives to be called as witnesses, “though what light the maternal parents can shed on the merger is problematical.”


Main attraction at the Palace this week is radio star Floyd Gibbons, former war correspondent and current “headline hunter of the air.” During performance, “he sits at a desk in the middle of a darkened stage and rapidly relays to the audience, through a loudspeaker, information gleaned from a hurried perusal of the front pages of the latest editions of four local newspapers.” Afterwards, he chats with audience and relates anecdotes from his reporter days; however a weak aspect of this part is “his failure to select from his rich background anything really exciting to talk about.”

+ The Boring Stuff:

Chilean govt. departments instructed to reduce expenditures 25%, bringing 1931 budget to $125M.

British govt. to assist Cunard Line to build second huge ocean liner (about 70,000 tons, 1,000 feet long, cost $30M).

Census reports NY State had 160,120 farms at start of year, down 33,075 from 1920.

Strikes affecting local children's dressmakers (3,700 strikers) and raincoat industries (1,200 strikers).

Large shipments of gold to France attributed to old fashioned French central banking system; only way French banks can get cash out of the central bank is by depositing gold there, as opposed to rediscounting system in US and Britain; also illegal for French central bank to regulate rates by buying or selling investments in the open market.

C. Ellsworth suggests a new approach for investment trusts (similar to mutual funds) to enter “that virgin field which exists between the fixed type of investment trust [holding a fixed set of investments, similar to ETF], and the general management type [actively managed].” This should help address public loss of enthusiasm for inv. trusts following the crash. Approach would conservatively calculate value for stocks based on liquidating value plus reasonable expected earnings, buy when market price is below value, and sell if it rises significantly above value.

Commodities mostly dull, steady. Grains up slightly. Cotton almost unchanged. Copper continues very low volume sales, fluctuating between 10 3/4 and 11 cents with most sales at 10 3/4. Cocoa hits new record low at 6.40 cents/pound.

Market considered technically stronger after having recaptured practically all of most recent decline from peak of 240.81 on July 28; another good indication was the support in June holding above November panic lows, and then support in August holding above June lows.

Reduction in short interest in some stocks seen as reflected in reduced demand for stocks for loaning, but total short interest still seen large.

Farm Board chair A. Legge says believes overall farm income won't be reduced by drought; income reduced in most affected sections will be offset by increased prices obtained by other sections.

Farm Board says will no longer loan on cotton based on fixed price but based on percentage of market value. Board members feel cotton close to bottom.

Total of corp. bonds called for payment in Sept. in advance of maturity were $49.2M vs. $23.6M in Aug. and $30.2M in Sept. 1929; however, total for first 9 months was $308.8M, lowest since 1924, and compares with $637.3M in 1929, $1.616B in 1928, and $1.129B in 1927.

US electricity output for week ended Aug. 23 was 1,676 GWHr, up about 4.4 GWHr from previous week but down 2.8% from 1929.

Dow average of 8 iron and steel products at $45.52 vs. $45.80 previous week; new low for 1930. However, scrap steel prices have been advancing, and at least one producer plans to advance finished product prices in the middle of next month.

R. Campbell, Pres. Calumet & Arizona Mining Co., calls for tariff to protect US copper industry; notes US mines operating at 60%-70% and losing money, while foreign producers still expanding.

Sears selling about 65, annual dividend $2.50, stock dividend of 1%/quarter, 1929 net $6.62/share, but expected substantially lower this year.

Warner Bros. expects sharply lower earnings for 6 months ended Aug. 31, operated at loss in quarter ended Aug. 31 and has had to raise money in new stock offering. Disappointing earnings mainly attributed to poor film performance, particularly 5 “musical operetta-type films in color.” Optimistic on next year's films.

August 27, 2009

Thursday, August 28, 1930: Dow 237.93 +2.46 (1.0%)

Assorted historical stuff:

Editorial: Some have called for extension of branch banking by pointing to the 5,000 bank failures in the past 10 years, many of which were small independent banks in rural areas. In fairness, many of these failures were due to “extraordinary economic changes ... not likely to be witnessed again for a long time,” including deflation in agricultural prices and collapse of real estate boom. “When a bank fails it is the bank officials that must bear the blame ... but in the end the local community, carried away by the speculative fever, is not without ... responsibility.” Change in banking system should come naturally, not by scrapping old system.

Navy Dept. considers closing all but two navy yards on Atlantic Coast and selling expensive properties acquired during world war; would save millions annually.

Canada has largest amount of hydroelectric construction underway in its history, including 9 large projects.

Federal grand jury in Brooklyn proposes plan for reducing pollution in New York harbor by using modern incinerators for sewage disposal, inspecting ships thoroughly, and removing all sunken vessels.

Loose-Wiles Co. cashing in on aviation craze by producing biscuits in shape of airships.

Market commentary:

Market opened vigorously, with major industrials including US Steel, GE, Westinghouse, advancing to new rally highs. Irregularity developed toward noon as profit-taking came in; some nervousness also caused by another break in Vanadium on Peru revolution (main vanadium deposits located there). Volume was active early but dried up on the setback. Declines were moderate except for individual stocks including IT&T and Gillette. Banks and trusts strong, particularly City. Bond market strong on active trading; many new highs in high-grade utility and rail bonds; preferreds and convertibles rally; govts. firm.

There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

Fed. Reserve seen continuing easy credit policy pursued since start of year. Some concern that increased reserve credit “will flow into speculative channels,” but this doesn't seem to have happened much yet.

Recent market strength seen in strong response to good news, resistance to weakness in isolated spots, and declining volume on setbacks.

A large broker reports signs of important bank buying of leading stocks, notably American Can.

Intl. Nickel Co. of Canada reports survey of leading US and Canadian industrialists finds growing optimism that worst of the depression has passed and gradual upturn will start in the fall.

Economic news and individual company reports:

F.W. Dodge reports construction undertaken in 37 states east of Rockies was $3.285B in year up to Aug. 23, vs. $4.035B in 1929. Labor Dept. reports building permits in first half for 85 cities were $736.6M, vs $1.570B in 1929.

Govt. reports weather helps crops in past week; recent rains over much of US benefit corn, though drought conditions remain in substantial areas.

Weekly steel reviews said cautious but somewhat more hopeful; ingot production slowly increasing; scrap prices showing strength although finished products prices still weak; good demand from tinplate, structural steel, oil and gas industries.

National Park Service reports visitors through week ended Aug. 9 were 1,942,541, up 121,095 over 1929. Most of increase was automotive.

Companies reporting decent earnings: Coca Cola, Columbia Gramophone, Warren Bros. (pavement).

Company reports since July 1: 167 companies reported increased earnings vs. 1929 and 401 decreased; 770 dividends unchanged, 12 new, 5 increased, 50 cut.

First 54 rails report July earnings $57.7M, down 32.3% from 1929 but up 19.2% from June.

Atchison, Topeka & Santa Fe Railway reports July income up over 1929 in spite of decline in revenue; achieved by cutbacks in expenses including capital improvement and maintenance; considered hopeful sign that other rails can do the same.

Rudolph Guenther-Russell Law, Inc. (advertising agency) reports distinct revival of interest in advertising by financial corporations, utilities, and industrials.


“A blonde flapper called at the hospital the day after the accident.
'I want to see the young man who was injured in the auto wreck last night.'
'Are you the girl who was with him?' asked the nurse.
'Yes,' was the reply, 'and I thought it was only right to come and give him the kiss he was trying for.'”

+ The Boring Stuff:

AFL Pres. W. Green urges organized labor to back Gov. Roosevelt for reelection; says with Roosevelt's personal backing, “labor has very seldom secured the enactment of so many measures during a single session of a legislative body.” Says unemployment seems improved this month, though considers situation serious because 22% of union members have been unemployed through the whole summer.

Editorial: The “buy-a-bale-of-cotton” movement now promoted in Georgia would be another failed attempt to artificially support a commodity by taking it off the market, as previously tried unsuccessfully with coffee, cotton, and wheat. The “success” of the earlier buy-a-bale movement in 1914 is mythical; cotton prices didn't peak until 1917 due to heavy wartime demand and short crops.

New South Wales (Australian state) Labor party and affiliated unions repudiate Niemeyer austerity plan accepted by govt., demand repudiation of Australian war debt and moratorium on [payment of] loans from overseas.

City of Buffalo, NY is second largest in state with population of 572,913; has excellent credit position; is important railway and flour milling center and has major lake trade in iron ore, grain, and manufactured goods.

In spite of generally improved market sentiment, conservative observers still advise buying gradually on reactions, and discriminating toward “standard dividend paying stocks which are likely to show some betterment in trade conditions soon.”

Street veterans say it's first time they can recall that market isn't trying to anticipate business conditions but instead watching closely and reacting sharply to each incoming item of trade news, good or bad. Attempts to anticipate business improvement earlier in the year were disastrous. Current sentiment is improving; reports of slight business improvement in some industries in past few days are being followed closely.

US Steel considered technically strong since it has broken through July resistance level though the Dow is still a few points below July high.

Commodities weak. Grains down. Cotton practically unchanged. Copper markets in near-deadlock as producers are asking 11 cents but buyers are unwilling to even pay 10 3/4.

Farm Board Chair Legge says wheat sent to drought areas for emergency feed won't come from surplus held by Stabilization Corp. but will be bought on open market; policy is not to sell surplus until it can be sold at least at the price it was bought for.

Iron Age reports steel trade slightly improved, sentiment cautiously hopeful for at least some seasonal improvement. Hopeful factors include relief of drought, some increased interest by steel buyers, and stronger scrap prices, although finished steel prices still weak. Average ingot production 54% vs. 53% last week (American Metal Market reports production at 56.35%).

Heavy melting steel scrap sells at Pittsburgh for $16/ton, up $0.25.

World production of nitrogenous fertilizers year ended June 30, 1931 estimated at record 3.6M tons; unsold stocks on June 30, 1930 were 860,000 tons, expected to go up to 1.4M tons on June 30, 1931.

Agriculture Dept. summarizes world beef situation: smaller supplies in producing countries; lower prices; weaker demand in US and Europe.

Natl. Elec. Light Assoc. reports 68,532 farms were newly electrified in first half vs. about 48,000 in 1929.

Iron Age reports slightly better machine tool orders in most districts.

Goodyear cuts all sales,office employees, and executive salaries by 10% as of Sept. 1. Company is employing 20% fewer salaried workers than last year's peak.

Technicolor has recently been rallying after a long fall from 86 1/2 to 24 1/8 due to concerns about lasting popularity of color movies, competitive color processes, and poor prospects for early dividend action.

August 26, 2009

Wednesday, August 27, 1930: Dow 235.47 +3.95 (1.7%)

Assorted historical stuff:

Editorial decrying the 1930 election campaign being waged using the new mass medium of radio: “A practically new kind of artillery is used, known as the radio which is charged with political hot air and fired, not at the opposing side but at the people ... the contestants count on keeping up the bombardment until the November elections by which time the people will be gassed into submission to one side or the other.” Cause of current depression is that “this, the richest nation on earth, with millions of idle money is not giving employment to a large consuming class,” but neither side in the campaign is offering constructive solutions.

Entertainment plans announced for American Bankers' Assoc. convention in Cleveland. Events include a revue entitled Next to Nothing, a “presentation of women's fashions in a musical comedy setting ... while planned to be of interest to the wives of the delegates, has been designed with dramatic plot to interest the delegates themselves as well.” Also planned are “boxing matches and ring entertainments, interspersed with music,” indoor polo games, golf, and a grand ball.

Lady Simon cites League of Nations and Anti-Slavery Society estimate that at least 5M slaves remain in the world.

Spanish govt. shakes up cabinet, installs new Fin. Min. J. Wals in “economic dictatorship” to stabilize currency. Peseta declines near record low.

Television program transmitted from Jersey City to New York, about 6 miles; longest distance transmission so far in US. D. Sarnoff of Radio Corp. says active use in the average home still some years away.

Airplane successfully lowered with huge parachute; only damage was bent propeller.

Changes in women's dress styles have enabled Princeton to reduce width of stadium seats from 19 inches to 17.5, allowing 6,000 more seats in stadium.

Market commentary:

Bulls encouraged by good steel and rail freight news; buying spread throughout the market, finishing strong in final hour. Particularly strong were US Steel (passed through recent resistance levels to over 170), American Can, Standard Gas, major rails, banks and trusts, and many trading favorites including Air Reduction. Bond market substantially more active; Dow 40 bond avg. up to new 1930 high of 97.10; preferreds strong; foreign govts. firm, US slightly off.

Babson statistical organization makes first change in bearish stance taken before last fall's crash; advises clients to use 20% of liquid funds to buy selected stocks including US Steel, GE, du Pont, National Dairy, General Foods, Standard Oil NJ.

Lt. Gov. H. Lehman says personal opinion as business man is that decreasing wages would prolong depression; says prosperity based on public buying power.

Strength in bond market has recently spread to lower grade bonds; taken as second phase in advance which should spread to preferred, then common stocks.

Economists say unemployment is biggest factor keeping business down and delaying recovery; point to loss of 1.6M factory jobs since last September.

Conservative observers now anticipate somewhat higher prices in advance of seasonal business upturn, but advise buying gradually on reactions rather than chasing stocks up; also advise clients to stay away from Vanadium, as it has been a favorite target for manipulation on both the long and short side.

Commercial credit continues down slightly; this may not be significant, however, since corresponding weeks in previous years have also been down. Banks have also been reducing loans on securities, though they remain high. Banks have been pouring surplus funds into investments, now at highest level on record.

Economic news and individual company reports:

Dow Jones reports first large increase in steel production in several months; US Steel ingot production in week ended Monday was at 66% vs. 62% previous week; industry average was 58% vs. 54.5%.

Rail freight loadings in week ended Aug. 16 were 922,823 cars, up 18,666 over previous week but down 179,744 or 16.3% from 1929.

First 37 rails report July net down 32.6% from 1929, but up 13.9% over June.

July cigarette production of 11.859B was new record high, up 10.6% from 1929; July production has increased a similar percentage for previous 3 years. First 7 months production of 71.284B is also a record. Cigars declined, although 5-cent cigars increased; snuff increased.

Companies reporting decent earnings: Fox Film, Columbia Pictures, National Power & Light, American Ice, Lehigh Valley (rail, helped by expense cuts).

Nine of Canada's principal breweries to merge, forming the Brewing Corp. of Canada.

Movie review:

Abraham Lincoln, directed by D.W. Griffith. “An almost unbelievable number of historical characters are brought to life in almost photographic likenesses,” as are the settings of battles and the Lincoln-Douglass debate. Walter Huston impressive as Lincoln; “The changes wrought by time and experience in the face of Lincoln are admirably achieved; the changes in his character are as beautifully portrayed by Mr. Huston's acting.” Other characters faithfully reproduced include cigar-smoking Grant also “indulging freely in whisky”, Lee, Sheridan, Douglas, and John Wilkes Booth. [Note: this film is in the public domain and viewable on youtube, or for download here (can't vouch for the quality), or on DVD at Amazon.]

+ The Boring Stuff:

Editorial: The recent revolution in Peru is of concern to US investors considered they have about $200M of loans and other investments there, but the new Peruvian govt. doesn't seem threatening to US investments. US experience with Mexican oil nationalization doesn't inspire much confidence in US ability to protect capital invested abroad, but “Mexico's subsequent plight has been an object lesson” against that policy. State Dept. says deposed Peruvian Pres. Legula was friend of the US, but sees no current reason for US investors in Peru to worry; “At the same time, it was said this country would follow its traditional policy of protecting American property if events made that necessary.” Main US investments are bonds, minerals, and oil.

Commodities mixed: Grains down with wheat weaker than corn. Cotton up sharply on short-covering. Copper traded down to 10 3/4 cents.

Market sentiment said more optimistic based on expected seasonal upturn in business. Some public and foreign inquiries on stocks reported, though mood is anxious with regard to price movements.

Union Trust of Cleveland reports improved business sentiment across country, general opinion that trade has passed bottom. Cites current general level of production below consumption. Says wages have declined somewhat, as has cost of living; predicts commodity prices may stay low for some time; says process of adjustment of price structure is difficult, but in the long run doesn't necessarily mean low profits if business adjusts operations properly.

L. Wakefield, Pres. First National Bank, defends banking groups against charges they are driving independent country banks out of business.

Crude oil production in week ended Aug. 23 was 2.471M barrels/day, up 6,950 from previous week but down 495,850 from 1929; gasoline stocks at refiners were down 1.410M in week to 39.842M.

Canadian steel ingot and castings production in July was 68,424 tons vs. 95,321 in June and 129,827 in July 1929.

Sugar industry conference meets in NY to deal with “demoralized” industry; Cuba offers some export cuts in exchange for production restrictions by others.

Great Atlantic & Pacific now operates 15,000 about stores; sales volume has almost doubled over past 4 years to $1.1B, or a quarter of total US chain store business. Company has expanded sales by adding food departments, and by sharply cutting prices on some commodities including coffee.

I. Nelson's (300 share stockholder) suit to force Warner Bros. into receivership dismissed in Delaware Chancery Court.

Company reports since July 1: 160 companies reported increased earnings vs. 1929 and 390 decreased; 734 dividends unchanged, 4 increased, 49 cut.

August 25, 2009

Tuesday, August 26, 1930: Dow 231.52. -2.90 (1.2%)

Assorted historical stuff:

Dr. D. Laird of Colgate U. claims at least 5% of US payrolls is wasted due to inefficiency caused by noise. Tests of typists found up to 30% increase in output when noise was reduced; noise apparently harms nervous system even when workers are used to it and don't consciously find it disturbing; typists used 25% more energy in a noisy room “as a result of pounding the keys harder and of muscular tension.”

Editorial: Gov. Roosevelt is considered heir apparent to former Gov. Smith as Democratic standard bearer, but now faces a tough situation: needs support from NY City Democrats but faces a brewing scandal in the City govt. now controlled largely by Tammany Hall and Mayor Walker. He's trying to arrange a limited investigation by the courts rather than one by a Republican legislature that could “run amuck” - but this could backfire if he looks like he's covering up.

Enlistments in Navy in year ended June 30 were 94,778 vs. 81,815 previous year; in Marines were 45,190 vs. 32,395; attributed to unemployment situation.

Japanese airmail to Europe and Americas now available; leaves Japan by boat, transferred to plane for Europe on reaching Siberia.

Peru Pres. A. Legula flees country, govt. in hands of military committee.

Latin American representatives to meet in Washington to “devise means to limit manufacture of narcotics to medical needs.”

Market commentary:

Following early advances, bears renewed tests of leading stocks, resulting in moderate declines. Market grew more unsettled following bad break in Vanadium on news of July loss. Oils continued weak. Recent trading favorites (United Aircraft, Radio) had sizeable setbacks. Bulls, however, encouraged by evaporating volume as decline progressed. Bond market very dull, most prices firm except Peruvian govt.

Farm Board chair Legge denies Board is being “radical or socialistic” in suggesting farmers cut back production to market requirements.

J.S. Bache & Co. says current optimism has more sound foundation than the misplaced confidence of last spring. Bullish factors include recent gradual improvement in business news, easy credit, strong bond market, passing of drought scare, and declining margin loans. Stock buyers can also take heart from repeated ability of market to resist declining back to last year's lows. This seems a good time to deploy investment funds; if buyers wait until “every element of doubt is removed,” stock prices will be substantially higher; trying to pick exact bottoms is usually futile.

Bank of Nova Scotia points to general overproduction, says purchasing power not adequate to handle current production volume. This may be corrected by increased purchasing power, cutting production, or cutting prices. Current most important question is, at what price level will this happen (where will prices stabilize).

GM Pres. A. Sloan expects buildup of delayed car purchases due to depression, but sees little chance of improvement in second half. Thinks growing popularity of low-priced cars partly due to depression and partly to improvements in values offered. No plans for change in wage rates.

Economic news and individual company reports:

Fed. Reserve Bd. reports business activity down further in July; output of factories and mines (seasonally adjusted) down 6%; factory employment and wages down to lowest level since 1922; building contracts, freight loadings, and dept. store sales down; wholesale prices continued down sharply.

Census Bureau reports as of April 1 US has 2.508M unemployed, 2% of total population and 5.2% of estimated workers (those without jobs, able to work, and seeking work). Highest number of unemployed were in New York (364,617); highest percentage was in Michigan (8.2% of est. workers).

Internal Revenue collections for 1930 fiscal year ended June 30 were $3.040B; largest state was NY, $830.2M; cost of collection $1.13 per $100.

Fed. Reserve member banks report for week ended Aug. 20 shows loans on securities down $61M, all other loans (commercial) almost unchanged.

Agriculture Sec. Hyde committed $121.9M federal matching highway funds to be paid out to states on July 31, 1931; this should allow states to begin construction projects now to relieve unemployment, particularly in drought areas.

Companies reporting decent earnings: Autostrop Safety Razor (July earnings 60% ahead of 1929, heavy advertising this year).

Canadian Industrial Alcohol (whiskey) says sales held up well so far this year, but recent tightening of US border has severely curtailed them.

Movie review:

The Matrimonial Bed, an entertaining farce adapted from the French. Adolphe Noblet, a happily married man, suffers amnesia after a rail accident and is believed dead. He becomes a barber, remarries, and has 4 children. Five years later, his wife and old friends are marking the anniversary of his death, when his wife (now remarried) decides to change hairdressers and gets the shock of her life. “Innumerable complications” ensue. One friend hypnotizes the barber, causing him to wake as his former self and forget his current wife as well as “the ladies to whom he has shown more than ordinary attention as their hairdresser.” Finally, in order to free his former wife to be happy in her second marriage, he is hypnotized again and pretends to have a relapse and return contentedly to his second wife, although he does fail to recognize his children by name.

+ The Boring Stuff:

Aviation industry predicted to do better in 1931; while most will lose money this year, overproduction has been relieved, there have been fewer “unfortunate accidents” this year, and the new Watres airmail bill together with govt. buying should increase aircraft demand. Watres bill should also help loss-making passenger air business. Govt. is also developing 25,000 mile lighted airway system across country, and taking other steps to make travel safe and reliable.

Federal govt. spending $19,000 daily to fight forest fires in national forests.

US canned food production has increased almost 500% in past 25 years; attributed to large population shift to cities - from 40% in 1900 to 57% currently. Canners experimenting with new technology to counter frozen foods, including cans with glass sides.

Canadian govt. will reduce Soviet coal imports said to be partly produced with convict labor.

Some observers believe recovery may be slow, pointing out that in 3 previous depressions full recovery took 13-17 months. However, statistical dept. of a large utility department is more optimistic; predicts trade activity, now about 17% below normal, will recover to 5% below by next Feb. and normal levels by next July.

Recent rally has regained about 75% of the decline from July 28-Aug. 12, but has been on continued low volume under 2M shares/day.

Commodities mixed. Grains mostly slightly lower. Cotton up despite favorable crop weather. Buying of copper very low, with price deadlock continuing at 10.75 cents bid/ 11 cents asked. Cocoa breaks sharply to new record low at 6.5 cents (previous record 7 cents). Sugar also hits new low at 1.06 cents.

Standard Oil NJ's publication, The Lamp, warns oil refiners they must cut back operations to balance with lower seasonal demand in rest of year, criticizes past overproduction leading to long-term buildup of excessive inventories; calls for long-term rationalized program rather than emergency measures. However, E.B. Reeser, Pres. American Petroleum Institute, says industry is in best statistical condition of the year, with curtailment having been largely successful.

Agriculture Dept. estimates 1930 wheat production in 22 countries 2.287B bushels, up 4% from 1929. Believes wheat price decline near end.

Dept. of Commerce reports worldwide idle shipping tonnage on July 1 was 2.055M tons over 1929, increase of 60%; total tonnage was 66.441M. Index of full-cargo shipping rates was 83 in Q2, a new postwar low.

First 20 rails report July operating income down 30% from 1929 but up 17.8% from June. An small but increasing number of rails are not earning enough to cover dividends, and margin of safety is generally declining. Rails seen not offering much speculative opportunity due to increasing regulation of rates and earnings.

US auto production in July 262,363 vs. 335,477 in June and 500,840 in July 1929; first 7 months 2.481M vs. 3.726M.

Chicago territory steel demand improves; last week's sales best in month. Prices still seen too low for profitability.

British unemployment reported slightly improved in London and rural south, but still at crisis levels nationwide; up to 30% in manufacturing and mining sections.

Kreuger & Toll interests acquire control of large new Boliden copper mine in Sweden.

Pacific Gas & Elec. says spent $22.973M on new construction in first half, more than in 1929 first half; has added 3,000 to payroll in past year.

August 24, 2009

Monday, August 25, 1930: Dow 234.42 +1.79 (0.8%)

Assorted historical stuff:

US Dept. of Agriculture has extensive department producing educational films, including T.B or not T.B., Insect Allies, That Brush Fire, and Persimmon Harvesting and Storage in China.

Editorial: Administration is justified in waiting until December to decide on continuing 1% income tax rate reduction from last year, considering it was only enacted late last year as a temporary measure to encourage business shaken by the market crash. There are some possible measures that may allow the tax cut to be preserved. Even if a lean period forces an end to the cut, Treasury can look with pride to the past 9 years, in which a period of prosperity was used to improve national credit; in the year ended June 30, national debt was reduced $746M to $16.185B, bringing total reduction since 1919 to about $10B.

Editorial: Some have suggested banning short-selling as aid to business recovery. But recent market swings have not been due to short-selling but to public recognition of reduced earning power; similarly, farmland in corn belt has gone down by 2/3 from wartime level, though noone has been selling it short.

Alarmed by shrinking population, France budgets $45M to encourage large families; parents to receive $20 for second child, $30 for each additional.

German State Railways place $83.4M of contracts in cooperation with govt. in order to create 300,000 jobs.

Quebec Premier Taschereau dismisses threat of Soviet softwood, says small amount being sold below cost for propaganda purposes. Also notes imports of wood should be beneficial to US and Canada since fast disappearance of forests is causing concern to govts. and lumber and paper companies.

Illinois Republicans agree to abide by result of Prohibition referendum; Democrats have already voted for repeal.

Aircraft carrier to be built for Navy; capacity of 75-80 planes, to be ready in 3 years.

Market commentary:

Bulls encouraged by Pres. Hoover's statement tax cut may be continued, by some favorable business reviews, and by market action on Friday. Some unsettlement in oil group caused by decline in gasoline prices and high inventories in spite of recent reduction; however, weakness was moderate and didn't spread to other sectors. Major industrials and trading favorites strong, some reaching best levels since July peak. Tobaccos, banks and trusts, utilities strong. Bond market in Saturday session quiet but continued higher; most activity was in a few rails and industrials; Dow 40-bond avg. up to new 1930 high of 96.87.

Encouraging characteristic of rally has been ability of leading stocks to overcome isolated bad news and new lows in individual stocks and sectors.

Evidence of stocks passing to strong hands seen in decline of brokers' loans by $288M since June lows even as stocks have appreciated about 10%; also in the large increases in shareholder lists of many major stocks.

Former NY Stock Exchange Pres. S. Cromwell: “Investment has reached the proportions of a national habit ... Compared with the few hundred thousand who formerly constituted our investing class, there are today over 15M who own securities. ... Thus, the assumption that the corporate wealth of the country represents the entrenched power of a small class is a fallacy. Small investors in many cases are the principal owners of our industrial enterprises.”

Rep. S. Bloom (Dem. NY) returns from Europe, dismisses talk of tariff retaliation; says Europeans will buy wanted items in cheapest possible way. Says current business depression caused by fear or “bugaboo of hard times”; suggests increasing advertising to counter this.

Anticipated improvements in rail freight, steel operations, and commodity prices haven't come yet; figures for second half of August are awaited with interest.

Many companies in the recent boom diversified outside their main business; most didn't find success and some are now reversing the process.

Economic news and individual company reports:

Guaranty Trust seasonally adjusted index of business activity was 76.0 in July vs. 82.6 in June and 109.3 in July 1929; index hit new low for current depression, but still well above low points of 1921 depression. Improvement not yet seen in August; next few weeks will be examined with interest; recovery in near future likely to be weak; seasonal improvement expected Sept. and Oct. but full recovery may be delayed some months.

New car registrations in 23 states reporting for July were 75,386 vs. 74,253 in June and 126,815 in July 1929.

Companies reporting decent earnings: American Tobacco (Lucky Strike cigarettes), New England Power Assoc, Standard Gas & Electric.

Upcoming movie news:

Second Greta Garbo sound film released, Romance - her “deep sonorous voice” is no longer surprising, but another interesting facet of her screen presence. No actress in Hollywood photographs better; melodrama with fine cast stars her as Italian opera singer Rita Cavallini in ill-fated romance with Tom Armstrong.

Political joke:

“'Politics is very uncertain.'
'Very,' agreed Senator Sorghum. 'Even after a man succeeds in being elected, he doesn't know whether he's going to take credit for what happens or whether he's going to get the blame.'”

+ The Boring Stuff:

Post Office is revamping air mail contracts to help aviation industry [currently unprofitable]. Companies bidding for air mail contracts will be expected to have “sound and conservative financing” and refrain from “promiscuous sale of stock”; bidders must post $250,000 bond; Postmaster General may require adoption of any standard equipment considered necessary for safety or reliability; current requirements include 2-way radio and planes with avg. speed of at least 100 mph; carriers will be allowed to carry passengers on mail routes.

Indian boycott reportedly extended to British-owned banks in India.

Paris Metro has 72 miles of operating lines, carried 850M passengers last year.

Japanese liner Chichibu Maru has one of world's most powerful radio sets, with night range of 9,000 miles.

Commodities up. Cotton up slightly. Wheat, other grains up.

Market technical position considered best since April peak; downward swings have been progressively smaller, and August support came in at higher level than June; also, rallies in May and July only recovered 50% of previous decline, while August recovery has recovered about 66% of previous decline. This suggests current rally isn't just short-covering or rebound from oversold position, but accumulation based on anticipated fundamental improvement.

Irving Fisher's index of 200 commodities for week ended Aug. 22 was 82.8 vs. 83.8 in previous week.

Gasoline price in Chicago resale market down to 5 5/8 - 6 cents/gallon from 5 3/4 - 6 3/8 a week ago.

Youngstown district steel operations to advance to 57% of capacity this week from 56.5% avg. past week.

Heavy melting scrap steel up 50 cents/ton to $12.50-$13.00 in Chicago.

Uruguay first half exports $64.6M, up $11M over 1929; imports $44.0M, down $3M.

Mexico 1931 budget about 280M pesos vs. 293M in 1930; amount allocated to reducing public debt about 40M vs. 26M.

Class 1 rails installed 55,660 new freight cars in first 7 months of 1930 vs. 42,552 in 1929. Cars on order Aug. 1 were 19,627 vs. 36,335.

Lumber production in past 7 weeks has been about 290M feet, 30% below 1929 levels; production is about 6% above shipments and 10% above orders.

Commerce Dept. reports auto industry has wisely cut production in order to bring dealer inventories down into line with demand, both in US and abroad.

GE selling about 70, yield 2.3%, earnings in 1929 were $2.24.

Chicago Great Western Pres. V. Boatner says rail is continuing aggressive improvements in spite of lower revenues; says must prepare for business upturn.

American Tobacco reports Lucky Strike sales in first 7 months gained 3.539B, while total cigarette sales gained 2.031B. Expected net for 1930 is about $42.5M, vs. previous record of $30.6M in 1911 before trust was broken up.

Ford sells four 5-AT tri-motor all-metal planes to Army.

Drug, Inc. proprietary products include Bayers Aspirin, Sal Hepatica, Ipana Tooth Paste, Castoria, Cascarets, Life Savers, Vicks Vaporub.

August 23, 2009

Favorites of the week August 18-August 23, 1930

No Journal was published Sunday, August 24, 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.

August 23:

[Note: Behavioral finance before its time dept.] New book Why You Win or Lose, by F. Kelly, columnist, speculator, and “amateur psychologist.” Practical approach to psychology of stock market. An important principle is to be contrary (do opposite of what most are). Says most common mistake is vanity, leading to taking small profits and large losses. Next is greed; next is “will to believe.” Also believes it necessary for traders to be illogical, since everyone else is usually being logical. Finally, recommends being cautious.

[Note: Strangely unfamiliar dept.] Editorial: A bright spot in the depression is California, now in a strong financial situation by a number of measures. Bank deposits and life insurance are up; commercial and agricultural real estate is more active; securities issued are almost back up to first half 1929 level; department store sales are down, but Wells Fargo points out they're doing better than rest of the US. All in all, California “is carving out for itself a future prosperity that must in time rival that of the eastern seaboard.”

[Note: Insert joke about lotsa dough here.] Attorney General charges price of bread in New York controlled by racketeer ring with enormous profits.

[Note: Don't go long ... check ... don't go short ... check ... stand quietly in corner ... check.] Conservative observers still advise staying out of market until “next important move has been demonstrated by the action of leading stocks.” Also counsel against taking short positions due to range-bound market.

August 22:

[Note: Strangely familiar dept.] T. Thatcher, Solicitor General and selected by Pres. Hoover to investigate bankruptcy reform, says thousands of wage earners taking advantage of lax Bankruptcy Act to live above means, cheat creditors, and “pay their debts with postcards.” Estimated loss from bankruptcies $750M annually.

[Note: I'm pretty sure Da Vinci invented the sectional bookcase.] O. Wernicke, inventor of the sectional bookcase, dead in Florida.

August 21:

[Note: Yikes!] Actuarial Society of America survey reports death rate for passengers travelling on scheduled airlines is 1 in 5,000, or 200 times railroad death rate; safety increases by 63% after pilot has had 400 flight hours.

[Note: Sign this guy up dept.] E. Woollen, Pres. Fletcher Savings & Trust, catalogs some of the follies recently committed by businessmen: thinking rate of business in early 1929 could last; thinking the depression was caused by the market crash (the crash came 4 months after the depression had inexorably started); thinking the depression was caused by bad psychology; thinking our economy independent of the rest of the worlds'; “mortgaging future income for luxuries.”

[Note: Strangely familiar dept.] J. Barringer, National Cash Register GM, optimistic on foreign sales, and on general business outlook in Europe. “Germany, in my belief, is recovering from the world-wide depression, and France seems to be entirely over it.” Believes US depression has hit bottom and “we are slowly but surely on the upward trend.”

August 20:

[Note: Perils of trying to predict history dept.] Editorial: Gandhi's reported peace terms are due to his recognition of the inevitable collapse of his campaign for complete independence. “He has accomplished nothing for India, but has caused considerable bloodshed, much suffering, and has disrupted trade with Britain which has had a direct influence upon our business.” England is pledged to help prepare India for self-governing dominion status, but India too must do its part; movements like Gandhi's set back this goal.

August 19:

[Note: Perils of trying to make two good calls in a row dept.] R. Babson (economist, made good bearish call in fall 1929) calls drought damage overestimated, says Midwest farm and general business situation will improve markedly in final quarter. Also notes commodity production has declined about 30% vs. 10% decline in consumption; predicts shortages soon, restarting of production to supply demand. Doesn't yet recommend buying stocks, but feels “time is approaching when buying opportunities may appear.”

August 18:

[Note: Strangely familiar dept.] Financiers and economists “somewhat befuddled” by current business situation; economy has descended from “the heights of the greatest business prosperity the world has seen,” and it's difficult to “get their bearings in the new scheme of things.” Most are “watching and waiting rather than predicting.” Of course, things will eventually turn around, “and when the upturn does come it will be based on the most solid foundations in many years.” In the meantime, the market is marking time.

[Note: Strangely familiar dept.] External trade of foreign countries generally declines vs. 1929; Canada July trade down about 25%; Argentina exports first 7 months down 35.4%; France first half trade down about 10%, Italy July trade down about 30%,

[Note: Now testing doors that reopen slightly, then slam shut again twice as hard, then repeat until obstacle eliminated] NY City testing new subway cars with doors that just stop when something gets in the way instead of completely reopening.

[Note: The Zeppelin scene really is unforgettable - can anyone find it on online so I can link to it?] Howard Hughes presents Hell's Angels. “More spectacular scenes of fighting in the air probably have never been photographed, but the story around which these scenes are built is stupidly improbable. ... views of the huge Zeppelin plowing through the clouds toward London have been photographed with striking beauty. ... to escape the pursuing British planes, the captain of the airship ... commands about a dozen members of the crew to step off into the void - without parachutes - 'for Kaiser and for Fatherland.' Then ... the big Zeppelin is finally set aflame by a British plane ... [that] dives directly down upon it, crashing it in twain.”