September 19, 2009

Friday, September 19, 1930: Dow 234.18 -3.56 (1.5%)

Assorted historical stuff:

Editorial: August trade figures give some encouragement for the first time this year, and deserve the emphasis they were given at the White House. After steadily declining from $410M in Jan. to $266M in July, exports rose to $300M in Aug. Import figures did hit a new low at $217M, down from $310M in Jan., but part of this may be accounted for by commodity price declines - if these have bottomed as thought, both sides of trade figures might show improvement soon.

Editorial: Brazil is facing severe economic crisis. Almost 80% of export trade is coffee. However after many years of being almost the world's sole source, other countries have started raising competitive grades of coffee. The resulting oversupply has slashed coffee prices by more than half, resulting in huge losses for growers, labor discontent because of lowered wages, outflow of gold to pay for loans, and a huge surplus still to be disposed of. “Brazil must realize that it is now at the crossroads”; it must diversify into some other source of income.

Farm Board Chair. Legge dismisses proposed debenture plan to support wheat, calls for less acreage and consolidating small farms. Notes recent farm troubles, but says long-term record is good, and “difficulties will be surmounted.” Current farm mortgage debt is about $9B, mostly held by banks and insurance cos.

Dr. Frey, Dir. German Dept. of Health, reports on German alcohol consumption. Says current level is far below prewar years but has increased since 1916; alcohol-related diseases are much milder than at the turn of the century. Believes US mortality from alcohol is as large as German due to poorer available quality. Also believes number of brutal crimes in a country is directly proportional to rise or fall in alcohol consumption.

The NY City budget for 1931 may reach $625M; it wasn't too long ago that 100M people were criticizing the extravagant Federal budget of $1B.

Market commentary:

Market wrap: Stocks unsettled by series of bear drives, with leaders including US Steel, Westinghouse, American Can taking sizable declines. Volume again dried up and stocks traded in a very narrow range. Some pickup in activity and further decline in last hour, with sharp breaks in some trading favorites including Auburn Motor. Bond market active, generally higher; US govts. dull, slightly lower, foreign govts generally firm but German irregular on continued uncertainty.

Some observers were disturbed by increased volume on the late decline, by reduced volume on recent upturns, and by continued low call rates (taken as evidence of slack business demand for credit). Conservative observers advise staying on sidelines until “the market definitely has indicated its next important movement.”

Rep. Chindbloom (R. Ill.) returns from Europe, reports to Pres. Hoover. Says main criticism of tariff abroad is result of poor attitude of Americans abroad who disparage tariff, adding he is “thoroughly disgusted with such criticism.” Blames decline in foreign trade on reduced values. With regard to depression, says US doesn't have the unemployment that exists in Britain and Germany, and “our present depression would be considered prosperity in some parts of Europe.”

Rep. C. Kelly of Pennsylvania predicts continued price cutting over the next 10 years will bankrupt most manufacturers and almost eliminate independent retailers.

Trusteed Share News reviews history of severe market reactions in past 30 years, including those in 1903, '07, '17, '21, and '29. Points out that every market low was higher than the previous one, and therefore that buying after the market reaction “would have rewarded the investor in the highest degree.”

C. Caldwell, Pres. Interlake Iron, conservatively optimistic: “The consensus of opinion of men I have talked with from every branch of industry is that business has turned the corner and that the present pick up in business, even though it is slight, will be sustained.”

Swiss banks report large amount of idle funds due to slow economy and influx of foreign capital, particularly German and Spanish.

Economic news and individual company reports:

Fed. Reserve reports number of industrial and rail workers declined 1.5M in year ended July 1930; decrease in payroll was greater due to more part time workers. Level of all other (commercial) loans and demand for currency has been relatively low due to inactive condition of business.

First 77 days of fiscal year show Treasury revenue down $117.9M, expenditures up $41.7M.

Fed. Reserve member banks report brokers' loans up $79M in week ended Sept. 17, to $3.222B.

Of 52 major rail carriers, only 3 are expected to report increased Aug. revenues vs. 1929; overall revenue decline expected over 13%.

Companies reporting decent earnings: Freeport Texas Co. (sulphur), Arundel (sand and gravel), Fox Film, American Chicle (chewing gum).

Studebaker introduces new Dictator line of cars priced from $1,095-$1,250, vs. $1,195-1,415 for old Dictator line.


“A Scot was engaged in an argument with a conductor as to whether the fare was 5 or 10 cents. Finally the disgusted conductor picked up the Scotsman's suitcase and tossed it off the train, just as they passed over a bridge. It landed with a splash. 'Mon,' screamed the Scot, 'isn't it enough to try and overcharge me, but now you try to drown my little boy?'”

+ The Boring Stuff:

Krueger & Toll extends already diversified interests to another industry by taking control of L.M. Ericsson Co. Ericsson is a telephone company with rapidly growing earnings; it manufactures phone equipment and sets up and operates systems worldwide, with widespread operations in Europe and the Americas. Aside from their main business of Swedish Match and Int'l Match, K.&T. also controls or has interests in the largest Swedish bank, the largest owner of city real estate in Sweden, one of the world's largest iron producers, and banks and realty companies in France, Germany, Switzerland, and Poland.

Interior Sec. R. Lyman formally starts work on Boulder Dam, announces it will be known as Hoover Dam.

Announcement that some large industrial consumers have begun to buy raw materials ahead seen as significant. If this policy spread would lead to business improvement, but trade reviews indicate most consumers are still cautious.

Market seen in control of professionals, with most traders content to accept small, quick profits.

F. Newburger, Phila. Stock Exchange Pres., returns from Europe, reports bankers optimistic on business, looking to US for economic leadership; finds reputed ill-feeling regarding tariff to be exaggerated.

Some trading favorites including A&P and A.O. Smith, continue to sell at high earnings multiples, this comparative stability “indicates quiet confidence.”

Wall Street has changed its attitude in past year; last year all attention was focused on companies that were expanding, while earlier this week Kroger was favorably reviewed based on announcement that they have closed 391 stores in the past year.

One Broker's complaint: “Last year, prior to the break, a stock might advance or decline 10 ... points in a day without any of our clients making any enquiry ... Now a stock [changes even] a fraction of a point, and we are inundated with enquiries even to giving the history of the company in question for many years back.”

D. Alexander, Singer Mfg. (sewing machines) Chairman, says company feeling the effects of depression and foreign taxes, with sales down about 30% this year. Blames depression on artificial stimulus given to business for many years after 1918, says it was only a matter of time until this condition adjusted itself. Doesn't see quick recovery, but slight and gradual improvement “if there is no recurrence of unfavorable conditions”; much also depends on crop yields.

Austrian economy reported declining; Economic Research Inst. there has given up on anticipated fall improvement, now has “fallen back on the modest hope that in the near future the rate at which activity has been declining will slow down.”

Commodities weak. Grains down moderately. Cotton almost unchanged after early strength. Copper remains at 10 1/2 - 10-3/4 cents; some large consumers are trying to buy ahead for 1931 at 10 cents, but so far producers are holding out. Cocoa hit new record low of 5.64 cents/pound.

IRT management protests removal of 6th Avenue Elevated, tells NY Board of Transportation this could drive it into bankruptcy.

M. Maltbie, NY Public Service Commission Chair., criticizes illegal secret contracts between utilities and customers, calls for simple and uniform rates.

Suit brought against oil proration (limiting production) in Federal court following upholding of proration by state court in Oklahoma.

Farm Board announces current $250M appropriation almost exhausted, will request more funds out of $500M total authorized when Congress meets in winter.

F.W. Dodge report construction contracts awarded in 37 states east of the Rockies for Sept. 1-12 was factory of $13.537M/day vs. $13.893M in August and $17.776M in Sept. 1929. Proportion of residential construction was higher than in August; seen as indicating return to more normal business conditions.

Scrap steel prices continue firm although purchasing by mills isn't large; Dow average of finished steel and iron products unchanged at 1930 low.

NYSE seat sold for $325,000 down $25,000 from last sale.

Fixed investment trusts (similar to ETF's - hold a fixed portfolio with no active management) have become much more popular at expense of management trusts (similar to actively managed mutual funds).

September 18, 2009

Thursday, September 18, 1930: Dow 237.74 +0.52 (0.2%)

Assorted historical stuff:

German political situation seen much improved; good prospects that current Bruening cabinet can arrive at coalition with Social Democrats. If this doesn't happen Pres. von Hindenburg would have to either ask National Socialists to form cabinet or dissolve Reichstag again; both of these would be undesirable to the Social Democrats. German bonds and foreign exchange have recovered to last week's levels.

NJ State Federation of Labor urges US govt. to declare embargo on all Russian products to keep US wages and living standard best in the world.

Wild gorillas are becoming so rare that a sanctuary has been declared in southwest Uganda.

New plane being tested by British for Schneider cup races reportedly attains speed of 400 mph.

Largest garage in the world recently opened in Boston to provide parking for people shopping in the city. Building is 8 floors high, with room for 2,000 cars; ingenious lighting system on each floor tells what stalls are available; clubroom is provided for chauffeurs.

New Waldorf-Astoria hotel to have phone switchboard with 2,535 lines, 84 operators, and 24 supervisors.

Downtown Athletic Club opens Tues.; world's tallest clubhouse, 531 feet and 35 stories; includes swimming pool, members' hotel, 18 floors of recreation rooms.

Market commentary:

Bears received no encouragement from market action. Rallying tendency that developed late Tuesday continued; bears maintained their efforts, but volume again dried up on recessions, this time to the lowest levels of the year. Business optimism was fueled by US Steel and Western Electric news. Major shares including US Steel, GE, Westinghouse reached best levels in late afternoon. Retail shares and utilities strong. Bond market active, higher; Dow 40-bond avg at new 1930 high.

Arthur Lehman of Lehman Brothers: “improvement in business is slow but is nevertheless gaining; recent trends indicate no lines of business are getting worse, while a few are getting better.”

L. Miller, Pres. Willys-Overland, sees signs of improvement in auto industry including lower inventories, higher mileage driven. These signs suggests “that the automobile industry may again become the leader in the revival of industry and and provide a powerful stimulus to the entire business world.”

One large broker's opinion: “Several eminent economists hold the view that the worst of the business situation has already been reached.” The business picture will be irregular for a while before improvement becomes unquestionable. During this stage, while security prices are still reasonable, “prudent accumulation” can progress, though investors “must be prepared to exercise a good deal of patience.”

No one can say whether the market and business have turned or not, but everyone seems convinced that many good stocks are selling below intrinsic value, and can be bought with assurance of profit later on.”

A certain NYSE-listed stock has become a trading favorite; price fluctuations are wide, and volume very high (several times the entire amount of stock outstanding has been turned over in a few days). Strangely, in spite of company officers waiting an hour, not a single stockholder showed up at the recent annual meeting.

Economic news and individual company reports:

Canada announces 200 emergency tariff changes affecting Britain, US, other foreign countries; “key industries” protected include textiles, iron and steel, agricultural products and tools, auto engines, electrical appliances, etc.

BLS reports wholesale prices unchanged in Aug. vs. July; first time in a year prices didn't decline. Price index was 84.0 vs. 97.7 in Aug. 1929.

US Steel ingot production in week ended Sept. 15 at 65% vs. 63% in Labor Day week and 88% in 1929. Production industrywide was 58% vs. 56%.

Iron Age reports some evidence of “breaking away from hand-to-mouth buying,” forward buying of steel and iron; attributed to belief prices have hit bottom.

Western Electric Pres. E. Bloom says company, has bought enough copper for remainder of 1930; estimated at 100M pounds. Seen as important indication price may have bottomed since company is probably world's largest user of copper.

GM August sales by dealers 86,426 cars vs. 80,147 in July and 151,722 in 1929. First eight months 824,402 vs. 1,146,552.

Companies reporting decent earnings: Coca-Cola, Spalding (sporting goods, including football, basketball), Wesson Oil.


Mulligan was proud of his new American citizenship, but some of his friends boasted they were better Americans because they were native born. He replied: “The devil take the lot of you! I'm a better American than any of you! At least I had my pants on and ten dollars in my pocket when I got here!”

+ The Boring Stuff:

Editorial: Mayor Reeder of Miami proposes a constitutional amendment allowing the state of Florida to assume municipal debts, issuing $600M in bonds to do so. The Florida Bondholders Adjustment Committee declares this impossible and says debtors must compromise based on ability of cities to pay. Committee says Florida will face catastrophe if this isn't done, and implies much of the debt was created because of high pressure by outsiders who then left Florida holding the bag. They also imply that “certain financial interests” deliberately caused collapse of the boom. These arguments are unconvincing; the boom collapsed of its own weight, and in spite of Florida having more of its share of catastrophes, municipalities still have a large degree of responsibility to investors.

Editorial: Problem of agricultural depression has led to some misconceptions. The idea that “gambling in futures” is to blame is thankfully not heard much anymore. Now however a popular idea is to make railroads provide relief to farmers by lowering freight rates. This may temporarily leave farmers with more money, but because agricultural products are in a buyers market now, the saving is quickly passed on to the buyer. While the average politician may think that it's desirable to take money from the railways no matter where it goes, there's not much point in doing this for farm relief.

British and US govts. reportedly to recognize new Uriburu govt. in Argentina; new govt. likely to form financial commission composed mostly of Americans to survey Argentina's currency and fiscal problems.

New Spanish program to stabilize currency unsuccessful; peseta continues decline.

Technical analysis: recent Dow movements have strengthened parallel with 1921 market. Recovery from August lows in 1921 peaked on Sept. 10, exact date that 1930 August rally encountered resistance. There followed a slow decline to Oct. 17, then an uptrend to Dec. 15. However, the Aug. 1930 break wasn't as severe as in 1921, so Dow theory students believe current Sept. setback is likely to be a more minor interruption of a gradual uptrend into Dec. Confidence in this interpretation is strengthened “since the action of the market has closely conformed to speculative theory.” While better business developments would be necessary to make for a strong uptrend, “it is felt that the obvious absence of liquidation on recessions affords an effective safeguard against a serious break.”

Some increase in short interest seen recently, by borrowing through individual firms. This could set the stage technically for rally.

Some observers point to steady upward trend in the bond market as encouraging for stocks, though investors may need to think long-term.

Conservative observers still favor taking profits on long positions on any further recovery, and only buying stocks gradually during sharp setbacks.

Commodities firm. Grains up moderately. Cotton almost unchanged after early strength. Copper still at 10 1/2 - 10 3/4 cents, though large bids for 1931 delivery at 10 cents have appeared.

Total number of NYSE-listed shares is now 1.282B, almost 3 times the number on Jan. 1, 1925, while brokers' loans are not much higher. It's evident from this that the position of brokers in terms of the ratio of margin loans to stocks owned by customers is now the strongest ever.

US electricity output in week ended Sept. 13 was 1,700 GWHr, down 3.9% from 1929.

Greater NY savings banks report deposits in August up $18.7M to $3.559B, vs. decline of $3.4M in 1929; deposits have gained $261.4M since Nov. 30, 1929.

North Carolina Gov. Gardner advised tobacco farmers to pledge to cut production 20% and form a cooperative organization to market crop.

British registered unemployed on Sept. 8 were 2.140M vs. 2.060M on Sept. 1 and 1.148M on Sept. 9, 1929.

US Aug. silver output 3.749M ounces vs. 3.551M in July and 5.006 in Aug. 1929; world June output 18.607M vs. 18.237M in May and 17.802M in June 1929.

Ford had 41.6% of all new cars registered in the US in the first 7 months.

Spalding stock about 43, yield 4.6%, earnings for year to Oct. 31 about $5/share.

Those who point to tobacco stocks as depression proof can take evidence from the case of Reynolds Tobacco; in 1921 when total corporate income reported to the Bureau of Internal Revenue was down 47.4%, Reynolds showed a gain of 52%. Some are also recommending Borden, pointing out that dairy consumption has been increasing for years and “ice cream now is considered a nutritious food rather than a luxury.”

September 17, 2009

Wednesday, September 17, 1930: Dow 237.22 +0.60 (0.3%)

Assorted historical stuff:

Editorial: Today is the anniversary of the US Constitution's completed drafting in 1787. This formed the foundation of our government, one so stable that we take it for granted even as many others around the world have been overturned or are trembling. A simple look at the prices of some government bonds shows some of the consequences of instability; even in Germany bond prices declined after the election although “the well-informed felt confident that the good sense of a majority of the people would prevail, and the government live.” Many other countries that should be among the richest in the world are instead among the poorest due to instability. The US has the best credit in the world because of the faith that, while the government may be adapted or changed it is fundamentally secure.

Although women head some sizeable companies, they are nonexistent on boards of directors of largest (NYSE-listed) corporations - this despite the fact that women form a majority of shareholders of many of them, including the Standard Oils and Penn. Rail, and that unlike US elections where women only got the vote 10 years ago, they've always been able to vote their shares. “Mrs. A. Barton Hepburn” has now become the first woman director of a Wall Street bank (the Industrial Banking Corp. of America). She plans to start a Women's Bank, with board and executives exclusively women, not as “poseurs” or “wonder objects,” but “practicing banking in the straightest and strictest ... sense.” This recalls a previous exchange between Henry Clews who said women could never approach the “efficiencies” of Jay Gould, to which Carrie Chapman Catt retorted “Mr. Clews heroes are safe ... Women, on their own initiative, are investors, not gamblers.”

O. Caldwell, Electronics editor, says “vacuum or electron tube” will be third great electric revolution following Edison's incandescent lamp and Westinghouse's introduction of alternating current. Greatest benefit to utility industry will be transmission of direct current over existing high tension lines, allowing 3 - 6 times as much power. Use of tubes also greatly reduces size of equipment; “a vacuum tube switch the size of a gallon bottle” can replace a 2 - 3 ton oil switch the size of a room.

British Columbia forests have yielded some impressive flagpoles in the past few years, including a 177-foot pole cut from a 236-year old Douglas fir, tapering from 31 inches at the base to 9 3/4 inches on top, and a 241-foot pole shipped to the Kew Gardens in London.

Market commentary:

Market wrap: Bears, encouraged by 5-day downtrend, continued attacks. Large offerings of major industrials thrown on the market, including US Steel, American Can, Westinghouse. However, good support came in on declines, and attempts to bring out liquidation failed. Short covering and some intermittent rallying began after noon on announcement of gain in exports, and rally intensified in last hour after sharp upturn in grain markets. Technicolor down again on weakening of trend to color films. Bond market moderately active; foreign govts. higher, particularly German; US govt. down slightly; high-grade corp. strong.

E. Grace, Pres. Bethlehem Steel, sees steel prices “slowly but definitely turning upward.” Reports indicate larger steel companies are making a determined effort to stabilize prices and end discounting. Companies have discussed the price situation informally, and it's believed that if one large company took the lead in raising prices the others would follow. Much will depend on whether orders show expected seasonal improvement in the coming weeks.

There has been disappointment about slowness of the business recovery, but economists point out this is typical of previous recoveries from severe depressions.

Many are now watching unemployment closely, including BLS Aug. report of 1.6% decline in industrial employment and 2.6% in wages. Reversal in this trend would be considered very encouraging.

Recent banking trend has been to higher deposits, higher investments and flat to lower loans (commercial and on securities).

Economic news and individual company reports:

Freight loadings for week ended Sept. 6 were 856,637 cars, down 15.8% from 1929 and down 127,867 from previous week due to Labor Day.

Pres. Hoover reports exports in Aug. were about $300M, up $38M from July; imports were about $217M, down $3M.

Canada Premier Bennett announces extensive new tariffs; industries protected pledge to hire 25,000 workers and not raise prices. Duties on agricultural products greatly increased; also affected are textiles, autos, and farm implements. Revenue Min. Ryckman attacks US govt. for helping producers to dump products, says duties will be based on cost of production of similar goods plus a reasonable profit margin.

Sarasota, Florida sued by holders of defaulted bonds seeking court control of city finances. Miami Mayor Reeder proposes state takeover of local obligations.


Call of the Flesh, with Ramon Novarro. Story is more interesting than Novarro's last film In Gay Madrid, though “title is just as ridiculous.” Plot concerns efforts of cabaret singer Juan de Dios to enter grand opera, and to leave old sweetheart “for a charming runaway from a convent.” Film mixes light comedy with pathos, culminates with hero singing the refrain from Pagliacci.

+ The Boring Stuff:

Berlin market firm, mark improved. Bankers generally optimistic on formation of new govt., believe earlier Berlin market decline “a useful warning.” Germans in NY warn that Fascists must not gain control of govt. as “their program would probably set Germany back several years in her economic recovery.”

Colombia Pres. says American banks ready to lend $20M based on financial reforms including balanced budget; urges law permitting foreign exploitation of oil.

Henry Ford leaves Paris for Germany by car, says plans to manufacture cars in Europe “as far as possible.”

Editorial: Public utility corporations provide services that can best be performed by noncompetitive entities, and are therefore regulated to prevent unreasonable rates because of monopoly. Regulation should take into account the rights of the entire public including the utility owners as well as the customers. However, many including Gov. Roosevelt see the sole purpose of regulation as protection of consumers, and even favor publicly run competition with utilities. It seems a bit dishonest for the government to regulate utility rates because of their noncompetitive character, and at the same time to compete with them; “The ways, however of the so-called 'liberal' mind are not those of the common man.” If we do have publicly run utilities, we should at least require that all the financial information be audited annually by an independent accountant and published in full, so the public can see what it's getting for the money.

Some interests have said another bull market won't start until yields are higher; for example, in 1921 (before the 20's bull) US Steel preferred yield was over 6%, whereas now it's 4.7%. “However, the tremendous expansion in natural wealth over the last decade makes it reasonable to suppose that the returns obtainable following the postwar deflation era are not likely to be offered again while so much money is seeking employment.”

Dominick & Dominick: fundamentals (interest rates and deflation) favor continued strong bond prices; this should help businesses reduce borrowing costs.

Public participation in trading continues small, with action largely professional.

Some large companies have dipped into surplus to maintain dividends; this is causing close attention to future earnings prospects.

Conservative interests advise safest course is waiting for market to show ability to move through previous resistance levels.

Textile industry is world's largest; production has gone up year after year, but earnings have gone down. Someday the industry will again give a decent return to shareholders, but not until it's “thoroughly stabilized by cooperation of the kind that now governs ... prosperous industries.”

Commodities mixed. Wheat up sharply late on short squeeze after again coming near 16 year lows below 80 cents/bushel. Other grains also up. Cotton up slightly. Copper offered at 10 1/2 cents/pound, still few buyers. Raw silk hits new lows.

Oil refineries operated at 69.4% in week ended Sept. 13, up from 67% prev. week; however, gasoline in storage declined 741,000 barrels.

California cuts statewide allowable oil production to 550,000 barrels from 596,000.

San Francisco independent gasoline dealers refuse to agree to 1 cent/gallon price increase, endangering West Coast price increase plan by oil majors. A previous price-fixing case charging violation of Sherman (antitrust) law by Standard of California, Richfield, and 16 other companies is settled by consent degree.

F.W. Dodge reports NY metro area contracts for new construction Sept. 2-12 were $2.870M/day vs. $2.950M in Aug. and $2.311M in Sept. 1929. Contracts year to date were $686.8M vs. $871.8M in 1929.

Bethlehem Steel - Youngstown merger trial to be prolonged for additional witnesses.

American Machinist reports increased inquiries for machine tools, although sales are still lagging. Feeling among dealers is optimistic.

GM second-half net seen 55% under 1929 level; should earn $3 dividend for the year. Business reported improving since mid-Aug. for first time in several months.

IBM stock about 175, annual div. $6, 1929 earnings $11.03/share, earnings for 1930 are running higher due to census equipment.

September 16, 2009

Tuesday, September 16, 1930: Dow 236.62 -3.72 (1.5%)

Assorted historical stuff:

Today is 10th anniversary of deadly bombing at Wall and Broad Streets; bomb exploded 12:01PM, closing Stock Exchange and almost all financial operations.

German elections result in National Socialist (Fascist) party gaining sharply to 107 seats vs. 12 formerly, and Communists 76 vs. 54 (total seats in Reichstag are about 576, and largest party is Social Democrats with 143). German observers were pleased Communist gains relatively modest. Gain in radical parties seen as result of depression. Communist party is affiliated with Moscow, while National Socialists are “anti-Republican, anti-Parliament, anti-Young Plan, ... anti-League of Nations, anti-Semitic, and anti-capital,” advocating establishment of “extreme dictatorship with socialist features.”

Editorial: Result of German election is hopeful. Two radical parties have made gains; if they took power, parliamentary rule could end, as well as reparations; this would create worldwide business unsettlement. However, radical parties are still in minority, and strongly oppose each other. There are several moderate parties that could form a coalition to continue the present govt.; this would ensure business has no cause for fear.

W. Graham, Pres. British Bd. of Trade, warns League of Nations Britain may withdraw from tariff truce in March; blames current economic crisis on US.

American Motorists Assoc. estimates car accident deaths for 1930 at 36,000, vs. 33,060 in 1929.

First Japanese sound film being made in Hollywood; to be shown in Japan and in the many Japanese areas in California.

623-year old lawsuit between Romanian cities of Feldioara and Sorkutza over possession of grazing land adjourned for new testimony.

Market commentary:

Market wrap: Weakness in wheat market translated to pressure on farm-related stocks including J.I. Case, Sears, Woolworth. Weakness spread to the leading industrials including US Steel, Westinghouse. Volume again dried up on declines, and liquidation wasn't apparent. Banks weak, insurance stocks firmer. Technicolor and Diamond Match hit new yearly lows. Some late rallying took place off the day's lows. Bond market very dull; US govt. higher, foreign govts. firm except for substantial declines in German issues; convertibles weak.

Aside from commodity price weakness, business outlook continues encouraging; recent merchandising and transportation conditions point to further improvement in coming weeks, and steel industry reportedly will make a concerted effort to raise product prices. Aside from technical setbacks, market recovery is seen continuing at least another month, until it's apparent how strong the seasonal recovery is.

A large number of market students are “watching the trading for a sign that a turn has come.”

Reports of depression are difficult to square with ever-increasing numbers of stockholders, strong bond prices, and last but not least “the unabated rush in the subway. ... Business has fallen off, but the country is now so rich that 1930 will probably go down in history as a 'good bad year.'”

Recent renewed confidence in market outlook has brought back some of the operators who sponsored stocks during the Coolidge (1920's) bull market; among the stocks they have been quietly accumulating are Radio, Vanadium, Montgomery Ward, National Cash Register.

A. Robertson, Westinghouse Chair., sees slow, orderly return to normal conditions in business.

Economic news and individual company reports:

Fed. Reserve member banks weekly report Sept. 10 shows “all other” (commercial) loans up $16M to $8.462B, loans on securities down $32M to $8.351B.

Call money dropped back to 2% from 2 1/2%; prime commercial paper is at 3%; bankers' acceptances are at 2 - 2 3/8%.

Bond market showed strength in all classes in August; Dow Jones combined bond index closed Aug. at 82.93, highest since Nov. 1928. Low point for the past several years of 77.23 was reached in Sept. 1929.

New life insurance purchases in Aug. were down 8.7% vs. 1929; first 8 months were up 0.3%. Number of $1M policies was 357, up 45 from 1929.

Automotive exports in July were $19.0M, down 17% from June and 62% from 1929; first 7 months were $215.1M, down 46% from 1929.

Companies reporting decent earnings: General Foods, Jewel Tea (careful buying of coffee inventory).

Company reports since July 1: 221 companies reported higher earnings vs. 1929 and 477 lower; 1044 dividends unchanged, 50 increased, 89 cut.


Storm over Asia, directed by Pudovkin. “Another striking example of the Russian film producers' brilliant knowledge of the peculiar art of the cinema.” Sweeping film with beautiful photography”; story concerns Mongolian revolt against army of intervention; “the bourgeoisie are again bitterly lampooned”; film closes with wave of revolt symbolized by storm sweeping over Asia.

+ The Boring Stuff:

Former French Pres. Poincare says regardless of German election outcome revision of the peace treaty is out of the question.

Berlin market opened sharply lower, with some recovery during the day; other European markets were generally lower. However, there was no panic selling and marks held up well - seen as signs of belief in German stability in informed circles.

W. Graham of Graham Engineering accuses British oil interests of overthrowing Pres. Legula of Peru to prevent granting of oil concession to 3 US companies.

B. Delgass, former VP Amtorg Trading, charges Amtorg with diverting Russian trade from US to force recognition of Soviet govt.

Editorial: United Textile Workers proposal of a 30-hour workweek to combat unemployment would increase production costs and ultimately reduce employment.

State Farmers Convention in North Carolina attended by 1,200, of which 70% were women.

Never before in history has the country emerged from a period of depression with its banking resources not only showing no signs of impairment, but in a position of impressive strength. For this reason, experienced economists are gradually veering around to the view that the recovery in stock prices may set a more rapid pace in the autumn and winter than the revival in trade.”

Col. L. Ayres of Cleveland Trust says low point of depression so far seems to have been reached at end of July. There have been gains since in most important industrial activities, including freight loadings, construction, and steel output. This advance may ultimately be “disappointing, like that of last spring, but there are reasons for believing that it is not likely to”; other economic indicators are also signalling recovery, including the stock and bond markets.

Conservative observers continue to advise staying out of the market and using rallies to take profits.

Commodities weak. Grains generally down; wheat touches 16-year low below 80 cents/bushel, closes about 80. Cotton little changed. Some copper sales at 10 1/2 cents, major producers asking 10 3/4 cents, but with no takers.

Production of wheat in 1930 in 27 countries was 2.778B bushels, up 6.6% from 1929; corn in 9 countries was 2.306B bushels, down 24.6%.

Canadian news: July imports were $84.5M vs. 114.2M in 1929, and exports $77.9M vs. $98.3M. July average daily output of central electric stations was 45.630 GWHr vs. 47.481 in June and 45.506 in July 1929. Total net debt Aug. 31 was $2.145B, down $4M from 1929. Royal Bank of Canada, in Sept. letter, says Canadian business is generally down as a result of the depression, but “there are few countries which have come through this trade reaction as well as Canada.”

International Steel Cartel extended to end of year with further production decrease of 15%, making total of 25% for the last quarter.

Gasoline in Chicago wholesale market was 6 3/8 - 6 1/2 cents, up from 6 1/4 - 6 3/8.

California expected to cut allowable oil production to 550,000 barrels/day from current 608,800.

Shell Oil matches 1-cent/gallon increase by Standard of Calif.; Union Oil and Rio Grande Oil will also match the increase.

Nelson, Hunt, & Co. report new realty financing in first 8 months was $144.7M vs. $428.6M in 1929, decrease of 66%.

Exports of machinery in July were $38.0M vs. $56.8M in 1929; first 7 months were $352.0M vs. $361.6M. Largest category is agricultural machinery.

Conferences are ongoing concerning merging NY City transit lines with the BMT; valuation is a problem, with a wide range of suggested offers. Recently a BMT-affiliated group has gained some seats on the IRT board; this has raised hopes for IRT joining unification, and stimulated traction (mass transit) shares generally.

September 14, 2009

Monday, September 15, 1930: Dow 240.34 -0.83 (0.3%)

Assorted historical stuff:

A small group of industrial leaders met secretly with high US officials including Commerce Sec. Lamont; the meeting was probably initiated by Pres. Hoover. Agreement was reached on the wisdom of making long-term commitments to buy raw materials at current prices. Objective is to stabilize wholesale commodity prices and help revive business. Govt. sources say the industries concerned have already begun to act.

Standard Oil of California calls for cooperation of industry and public in conservation of oil resources aiming at “a stabilized ... price over a long period of years rather than low prices during the periods of excessive production with high prices when the time of shortage arrives.” Cites President Coolidge letter from 1924 to Oil Conservation Board: “overproduction in itself encourages cheapness ... wastefulness and disregard of essential values.”

American Bankers Assoc. to meet in Cleveland Sept. 29. Topics of first three general sessions are “Problems We Bankers Must Meet” (expected to cover branch and group banking developments), controversial topics in bank taxation, and “The World Today.” President Hoover to address fourth session.

New uses for agricultural waste under development, converting corn stalks into “maizewood” insulating board or textiles, and cotton bran into plastic resins.

A piece of a 12-million year old sequoia tree was found embedded in basalt 150 feet below the Yakima river in Washington.

Market commentary:

In spite of favorable week-end trade reviews, bears renewed operations early Saturday. Past month's rally has had strong Friday action; bears may therefore have been encouraged by the late weakness on Friday. Leaders were down early in the short session, including US Steel, American Can, GE, Radio. Further disturbance caused by rumor of Baltimore & Ohio Railway suspending dividend. Market steadied in second hour with some recovery in individual stocks. American Cyanamid down to new lows on surprise dividend cut. Bond market quiet, irregular; govts. and investment grade firm, convertibles down.

The great debate: Bears argue that past month's rally has already discounted the mild improvement in business, and that decline in steel production in past week indicates weakness. Bulls counter that steel decline was due to Labor Day, that August steel and car loading figures show more than seasonal improvement, and that recent retail figures and company outlooks have been improved. On the technical side, bulls believe the recent rally has “definitely broken” the downtrend since last Sept., indicating future support should come in well above the June bottom of 212.

While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.”

T. Watson, Pres. IBM, returns from 3-month trip abroad, says IBM's European business doing well, sees European economy improving. Regarding tariffs, sees all countries considering protecting industries where necessary and on products that can be manufactured to “better advantage” than buying abroad.

Economic news and individual company reports:

Low money rates seen continuing for some time; call money seems headed back down, and govt. financing has been at lower rates. Expected seasonal rise in business demand for funds hasn't materialized, while supply of loanable funds remains high (total net deposits at member banks on Sept. 3 were $21.1B vs year's peak of $21.3B). Demand for currency is also moderate.

Employment Service of Labor Dept. reports employment situation throughout US little improved in August; textiles and automotive remained unsatisfactory; slight improvement in shipbuilding, shoes, and, towards end of Aug., in steel and iron.

Illinois Mfgr. Assoc. reports confident consensus on future industrial situation, distinct signs of improvement in many lines of business; sees gradual and steady improvement from now on. Several prominent Chicago executives issue optimistic statements, including M. Cresap (Hart, Schaffner & Marx Chair.), F. Sargent (Chicago & North Western Rwy. Pres.), W. Abbott (Illinois Bell Telephone Chair.).

Reports of 9 drug companies shows first half earnings 10.4% over 1929; this contrasts with 550 industrials showing earnings down 30.4%.

Companies reporting decent earnings: Middle West Utilities, Drug Inc.


“'Do you prefer beer or wine?' 'Well, that depends.' 'On what?' 'On who's paying.'”

+ The Boring Stuff:

European rubber producers adopt new rescue plan for industry to replace ill-fated previous schemes that tried to support prices by restricting production or exports. Rubber market will now be free, but major European planters will aim for getting their production efficient enough to make a profit at price under 17 cents/pound; this should discourage Asian production that has so far been uncontrollable. It may be problematical how long this discouragement will take to work, considering that price of rubber has already declined from 22 cents to 8 cents/pound this year and there is still excess production.

Paris and Berlin stock markets generally higher in past week, though volume was low.

There's “considerable speculation” about how far the current rally will go. It's believed that the past month's rally “has been handled in intelligent fashion, reflecting the guiding hand of interests determined not to allow ... speculative excesses.” Basic strength of market is seen in pattern of rising volume on rallies and dullness on breaks, indicating absense of weak hands. Authorities who called the rally correctly predict the upswing will continue until early November before any major setbacks. “Speculative theory” predicts gradually rising prices, next serious resistance level at 255-258; hopes for “determined assault” in coming weeks.

Conservative observers continue to advise buying only gradually when sharp reactions are in progress, and taking profits on recoveries.

An active pool is operating in Vanadium. The group has been working its favorite higher at every opportunity.”

Municipal bond prices remain firm, with highest-rates bonds yielding 4% or less.

Commodities continued weak. Grains generally down sharply; some alarm over reported large scale dumping of Russian wheat in European markets. Cotton off slightly. Rubber and cocoa both traded down to record lows in past week before recovering slightly (cocoa futures hit 5.84 cents vs. 10-11 cents a year ago).

Irving Fisher's index of 200 commodities for week ended Sept. 12 was 83.4 vs. 83.5 in previous week and 96.3 in 1929.

Recent rise in steel scrap may be due to speculative buying by dealers. Steel interests say there has been no increase in buying by steel companies.

USDA's agricultural export index for July was 57, a record low for July but up slightly from May and June.

US trade with Canada and Britain down sharply in July vs. 1929. US exports to Canada were $55.1M vs. $79.6M in 1929 and imports $30.9M vs. $44.1M; first 7 months exports were $426.8M vs. $582.2M and imports $249.9M vs. $292.1M. US exports to Britain were $40.6M vs. $56.9M and imports $13.9M vs. $28.0M; first 7 months exports were $379.2M vs. $459.1M and imports $134.6M vs. $197.6M.

European nitrate cartel formed after long negotiations; 98% of European synthetic producers included. Together with agreement of Chilean producers, 88% of world's total nitrate production is cooperating, with only US outside the cartel. Also formed was European cartel for producers of rail passenger and freight cars.

Standard Oil of California will raise price of gasoline 1 cent/gallon and reduce price of refinable oil 8-12 cents/barrel following complaints by independent refiners of impossibility of profitable operations.

US cotton consumption in Aug. was 352,335 bales vs 378,385 in July and 558,754 in Aug. 1929.

July tire casing shipments were 5.810M, up 2.9% over June but down 26% from 1929. Production was 4.257M, down 22% from June and 34% from 1929.

Anthracite shipments in Aug. were 4.822M tons, up 475,949 from July and up 257,364 from 1929.

New York State mortgages recorded in fiscal year ended June 30 were 164,341, down 69,861 from 1929 and down 113,790 from 1928.

Los Angeles Chamber of Commerce reports Aug. business activity in Southwest showed steady increase. Employment was steady to up slightly; construction strengthened; movie companies were busy; apparel and furniture production was up; oil and agriculture were steady; wholesale sales were steady but retail down.

Long running lawsuit by Eaton-Otis interests to block Bethlehem Steel - Youngstown Sheet & Tube merger seen ending in a few weeks.

A dozen leading shoe companies report “some improvement, and more expected.” Stores are stocking up for fall, but cautiously and with price pressure.

Employment in Camden, NJ radio industry expected to increase from 18,000 to 25,000 by Sept. 19.

Sears-Roebuck marks 44'th anniversary of founding by Richard W. Sears.

Bangor & Aroostook Railroad stock about 75, yield about 4.7%, expects 1930 net about $10.60/share.

Favorites of the week Sept. 8-Sept. 13, 1930

No Journal was published Sunday, Sept. 14, 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.

Sept. 13:

[Note: For those keeping score at home, the US population in 1930 was about 123M, or a little over a third of the current population, so per capita car sales in 1929 and 1930 were surprisingly close to the current level.] Car production for 1930 now seems likely to be about 3.75M, well short of the expected 4M. This will mean lower earnings for auto companies and for the industries supplying them. On the bright side, this should cause large deferred demand when economic conditions return to normal; there is “little question but that the automobile market normally will absorb upwards of 4.5M units a year.” In the meantime, the industry continues to operate profitably as a whole, and is increasing efficiency and cutting costs, which should further improve profitability when normal conditions do return.

[Note: Not too many people know that Al Capone got his start dealing Nova lox. ] W. Groat, Assistant Atty. Gen., brings suit to dissolve Manhattan & Bronx Smoked Fish Dealers Association due to alleged food racketeering.

[Note: Could the first shiv fight over which of the two existing radio programs to listen to be far behind?] Prisons are finding radio helpful as a diversion for inmates. Radios have been installed at Ohio and Iowa State Penitentiaries.

[Note: Strangely familiar dept.] Offering of $334.2M in 2 3/8% one-year Treasury certificates is oversubscribed by almost 4:1.

Sept. 12:

[Note: Strangely familiar dept.] Brokers, businessmen, and even the general public more optimistic; over 75% of brokerage houses now advise buying stocks.

[Note: Strangely familiar dept.] B. Anderson, Chase Natl. Bank economist, says Fed policy of easy money will not be sustainable when business revives; suggests moderate tightening now to avoid shock of a sudden severe tightening later.

[Note: Hopefully not soon to be strangely familiar dept.] Florida Bondholder's Adjustment Committee calls on owners of defaulted local bonds to accept arbitration with principle that local govt. should “pay to the full extent of its ability to pay” when fairly determined, and no more. Says full payment in many cases impossible due to string of problems in past few years including collapse of real estate boom, bank failures, storms, and Med. fly scare; local feeling is that many bonds were voted in due to high-pressure tactics by outsiders.

[Note: I can't believe that didn't work dept.] Group of executives headed by advertising man Frank Kiernan sends 15,000 blue buttons with slogan “Business is Good” to officers of all important corporations.

[Note: No, it wasn't that William Holden. I like his character's name, though - if he were a banking executive he'd be Jamie Pandit. ] Three Faces East, a fast-moving spy film; Erich von Stroheim as Valdar, German agent, William Holden as Sir Winston Chamberlain, First Lord of the Admiralty.

Sept. 11:

[Note: Strangely familiar dept.] Market considered stronger technically from recent period of consolidation, move upward on higher volume; declines of June and early August are seen as having shaken out weak hands, as indicated by shrinkage in brokers' loans. Recent economic news has also been encouraging, including steel production, retail and mail order sales. Roger Babson's switch to bullish stance has also attracted attention. All indications point to good sized gains in stocks in the near future, though third-quarter earnings reports in a few weeks may change the trend.

[Note: It's funny because it's true.] An out-of-work broker asked a friend who owned a circus for work. His friend said the circus gorilla had recently died, and if the broker wanted to get into the gorilla's skin, swing around, growl, and amuse the children, he could have the job. Things went well until one day the rope the “gorilla” was swinging on snapped and catapulted him into the lions cage. The lion let out a roar, which the “gorilla” answered with a timid yelp. The lion roared louder, and the “gorilla” lost his nerve and started screaming for help. The lion came closer and whispered “Shut up, you damned fool, you're not the only broker out of a job.”

Sept. 10:

[Note: And I thought we invented dumb alcohol-gasoline subsidies.] Germany requires gasoline to be blended with 2.5% alcohol to benefit potato farmers.

[Note: Perils of trying to make two good calls in a row dept.] Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible “stampede of orders” due to underproduction; says it's as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.

[Note: Sheer Genius dept.]
“A clever contraption within its black box -
Its figures flash out swift and sure on all stocks;
No matter how hectic the trading may get,
what millions it mounts to, its pace shall be met.
Ah, had we but had it last fall 'neath glass bell -
Twelve million, sixteen - whole world wanting to sell -
those agonized hours when the truth none could know -
the old ticker smothered because 'twas too slow.
This dainty swift prodigy, blithely abreast
of any big market, such fears sets at rest.
And yet this great boon - human nature is such -
at moment of getting it doesn't seem much.
Like Flora McFlimsy of Washington Square,
(that worthy young lady with nothing to wear)
this nifty speed marvel that's just come on view,
has cause for complaint - it has nothing to do.”

Sept. 9:

[Note: One of my all-time favorites. An almost hypnotic series of ever-increasing stupidities, a little like reading a history of mortgage banking over the past 10 years.] Canadian railway board reports on 1,791 rail crossing accidents caused by “inexplicable negligence.” Of these, 77 drivers drove under crossing gates while they were being lowered; one left his car and raised the gates after they had been lowered; 69 drove into the side of moving trains; 43 drove into trains that were standing still; 8 used the railway tracks as a highway; one stopped on the tracks and fell asleep; one stopped his wagon in path of approaching train to adjust load.

[Note: Perils of interpreting market technicals dept.] Dow considered to have given “highly bullish signal” by closing Saturday above the 241 resistance level where selling was repeatedly encountered in summer. This “reflected powerful buying based on growing optimism regarding autumn trade prospects.” Major investors reported to have participated in buying after being “persistently bearish since the early part of the year” and making “huge profits on the short side.”

[Note: Perils of interpreting market fundamentals dept.] Some of “the shrewdest market traders” now see “definite turning point” in stocks. Conclusion isn't based on “chart theories such as double or triple tops” but on fundamentals. Believe long side will be the safe one from now on, and “standard stocks can be bought with assurance of profit. The corporations, the country, and the people are very rich, richer than after any previous panic, ... industry and the market are in a strong position to stage a comeback.”

[Note: Strangely disturbing dept.] M. McCavran, Pres. American Assoc. of Cosmeticians and Hair Artists, estimates there are about 40M women in US; total annual usage of make-ups and creams is 316M pounds, or about 7.9 pounds/woman annually, or about 348 pounds/woman between ages of 16 and 60.

Sept. 8:

[Note: Strangely familiar dept.] Editorial: Last fall, Fed. Reserve failed to heed urgent warnings for months before the crash; New York Reserve bank and others were noting “orgy of speculation” and urging increase in rates, but Fed “followed schoolteacher tactics of issuing admonitions and warnings.” If new Fed appointments are more “aggressive and forceful,” a great deal will have been gained.

[Note: Strangely familiar dept.] Good business news has started to accumulate over the past week, including better wholesale and retail reports (ex. Woolworth), good steel news (increase in production and some indications of price improvement), increase in freight loadings for second week in a row (although still well under 1929 level), some increase in gasoline prices.