October 3, 2009

Friday, October 3, 1930: Dow 211.04 -3.10 (1.4%)

Major presidential speech:

Pres. Hoover's address to American Bankers' Assoc.:

Past year has been a severe shock to economic system, disorganizing it and slowing consumption to 85%-90% of normal. This has caused “a great human problem ... unemployment, privation, and fear”; however, it's not a new experience but typical of recurrent crises in the past.

Main cause of most of these crises is an inflationary boom leading to destructive results, in this case in our stock markets and in worldwide overproduction of many commodities. Some fatalists believe these crises are inevitable, but the same was once said about typhoid or cholera. Govt., economic and business leaders have already accomplished much in past decade; as a result, “the period of stable prosperity between storms is longer, the period of the storm is shorter, and the relief work far more effective.”

Unprecedented cooperative measures so far by business, bankers, labor, and govt. have been effective at maintaining demand to some extent, but we should also think of prevention. The banking system can play an important role due to its large influence in directing credit, both by restraining unwise expansion and speculation during booms and by instilling confidence and making credit accessible during recovery. Rails and utilities could also act as “balance wheel” through public works and construction.

While depression is worldwide, US doesn't need to wait upon recovery in rest of the world but can lead the way as it did in 1922. Our resources, people, and scientific discovery are unimpaired. Depression is “but a temporary halt in the prosperity of a great people.”

Assorted historical stuff:

F. Kent, Bankers Trust NY director, deplores tendency of the masses to follow unscrupulous politicians in adopting economic remedies contrary to experience. “The record of laws passed to accomplish the impossible is amazing ... and yet so alluring is the word 'government' that many who demand less law usually end up by asking for more law to meet their intent ... It is more spectacular to 'get men' than to correct abuses and therefore the politician is out to get men.”

AFL to be asked to adopt policy of 5 hour day and 5 day week, with pay at 8 hour rate or higher, in Boston convention next week.

British Imperial Conference hopes to solve problems of empire free trade, India, and Palestine, knitting empire into an “economic and imperial whole.”

Mexican govt. instructs high vigilance against gold smuggling to US; cars said to be smuggling gold in gas tanks.

Transcontinental 24-hour air mail and passenger service between NY and California to be inaugurated as soon as night-flying facilities installed along route.

To make up for Hawaii's shortage of native birds, the Outdoor Circle, a Honolulu women's society, has been actively introducing birds from abroad.

Penstate Homestead Jessie, world-famous cow, dies after devoting 4 years to science; had window installed in stomach to enable observing digestive processes.

NY City Community Council recommends construction of world's largest airport on artificial island just south of Governors Island in New York Bay, and construction of subway from Manhattan to Staten Island and on to Brooklyn, with stations on Governors Island and the airport.

New Lincoln building on E. 42nd St. to have unique dining room named the Dungeon, “hewn out of the virgin rock 35 feet below street level” and decorated in medieval Viking style. Difficulty providing satisfactory ventilation was overcome by construction of air intakes near top of the building.

Market commentary:

Market wrap: Following sharp technical rally on Wednesday, bears resumed “hammering tactics” on major stocks, succeeding in forcing major setbacks from Wed. highs. Volume was sluggish, possibly due to Jewish holidays, but selling was persistent and prices worked gradually down most of the day. Trading favorites including J. I. Case and Worthington Pump broke badly on light volume. Improved grain markets didn't affect stocks until late afternoon, when a rally lifted prices above the day's lows. Bond market active, prices mixed but trading in narrow range; foreign issues mostly lower.

Goodbody & Co.: “From the data on hand, it is our belief that the chain stores have definitely turned the corner”; see continued improvement from now on.

F. Sargent, Pres. Chicago & North Western Rwy., says rail profits being seriously reduced by constant rate reductions, and by what amounts to govt. competition.

Some prominent govt. officials reportedly considering arrangement of large-scale commodity buying, internationally coordinated between producing and consuming nations. Farm Bd. Chair Legge says time may have come for purchase of commodities as investment.

Economic news and individual company reports:

Fed. Reserve reports money in circulation Oct. 1 was $4.494B, up $58M from prev. week; NY City member banks reported loans on securities $3.796B, up $177M and “all other” (commercial) loans $2.448B, up $34M.

NYSE reports brokerage loans to members Sept. 30 were $3.481B, vs. $3.599B Aug. 29, and the record high of $8.549B on Sept. 30, 1929.

Income tax receipts for fiscal Q1 (July 1 - Sept. 30) were $554.4M vs. $609.4M in 1930, total ordinary receipts were $868.9M vs. $1.015B, and total ordinary expenditures were $715.6M vs. $722.7M. Gross public debt on Sept. 30 was $16.081B vs. $16.720B in 1929.

US electric output for week ended Sept. 27 was 1,704 GWHr, down 3.2% from 1929 but up 5% over 1928.

26th annual auto show to run in Chicago Nov. 8-15; number of exhibits is within 5% of last year's record.

Bradstreet's commodity index for Oct. 1 was down 1.2% from Sept. 1 and 18.9% from Oct. 1, 1929.

Steel price picture mixed; scrap prices showing some declines, but Dow avg. of 8 finished products up $0.14 to $45.60/ton, first increase since July 1929.

Panama Canal tolls for Sept. totaled $2.057M by 458 ships, lowest number of transits in a month since June 1927.

Diversification: American Radiator now producing metal caskets; MacAndrews & Forbes now producing Maftex insulating board from licorice root.


“Moll - And what did your poet do when you turned him down? Doll - Oh, the poor dear threw himself into the waste paper basket.”

+ The Boring Stuff:

Assoc. Against Prohibition Amendment estimates US spends $2.848B on alcoholic drinks, up over $1B from 1913.

Editorial: State and municipally owned ports should be under jurisdiction of the Interstate Commerce Commission just as privately owned ports are. Main interest of the ICC in regulating ports is to ensure that rails serving more than one port don't discriminate between them by charging “unduly” preferential rates.

British Imperial Conference considers two schemes for improving economic conditions in empire: import board in Britain to negotiate large and long term purchases with cereal producers in dominions, and formation of large utility companies to develop tracts of land in dominions, creating self-supporting communities.

British and Soviet govts. negotiating for settlement of about $6B in British claims arising from 1917 revolution; Soviets expected to bring huge counterclaims based on British involvement in White Russian movement.

Dr. H Schacht, former Reichsbank Pres., arrives in US, will make a number of speeches during visit. Won't discuss political or financial conditions in Germany since he's now a private citizen, but states he believes conditions are much less severe than pictured.

State Dept. watching Cuban situation closely; Pres. Machado reportedly has requested suspension of constitution, though Nov. 1 elections will go ahead.

More odd-lot (small) buying reported in last few sessions.

Many bear operators reportedly covered shorts earlier in week.

Conservative observers still favor staying on sidelines until “market has demonstrated definitely its ability to hold on rallies.” Stop-loss orders favored.

R. Lyons, exec. VP National Chain Store Assoc., warns depression and distress in farm areas likely to lead to attempts at higher taxes against chain stores.

Sir R. Horne, Imperial Smelting Corp. Chair., says commodity price fall has now been overdone. Expects large gap between selling prices and production costs to be bridged by combination of lower costs and price increases, but doesn't see much prospect of rapid recovery.

Commodities continue strong. Grains generally substantially higher. Cotton up slightly on late rally. Copper buying continued strong, but thought to be mostly for averaging down on inventory price.

Fed. Reserve member banks report for week ended Oct. 1: brokers' loans down $159M to $3.063M, vs. record high of $6.804M on Oct. 2, 1929; total is lowest since July 20, 1927.

US shippers estimate carload shipments of 29 main commodities will be down 7.3% in Q4 vs. 1929.

German marks continue stronger, flight of capital decreasing.

Canada to spend about $90M to relieve unemployment.

NY city banks and trusts generally report lower resources as of Sept. 24 due to lower deposits and earnings.

Some NY City savings banks cut interest on deposits to 4%, while some will maintain the current 4 1/2%.

Gasoline in Chicago wholesale market down to 5 7/8 - 6 1/4 cents vs. 6 - 6 3/8 previously.

F.W. Dodge reports NY metro area construction contracts awarded in Sept. were $81.6M vs. $76.7M in Aug. and $57.8M in Sept. 1929; first 9 months was $739.6M vs. $904.7M.

Detroit considers coordinating with industrial companies to modify schedules to create additional 25,000 jobs.

Utility company profits said benefiting from miniature golf craze; some 500 courses have been established since May in PSE&G of New Jersey's territory, all outfitted for night play.

IT&T reportedly will not reduce dividend except as a last resort; business in many departments said improving in past month.

United Fruit Company plunges after reporting Q3 earnings of $.46/share vs. $2.26 in 1929.

Restrictions on shipping fruits from Florida requiring sterilization due to infestation were removed by Agriculture Dept.

NYSE seat sold for $260,000, up $5,000 from previous sale.

Transcont. Air Transport has gained on govt. mail contract; now operating passenger service at a loss, but mail contract is expected to let it reach profitability.

Companies reporting decent earnings: Cudahy (meat packing), United Light & Power, American Ice.

October 2, 2009

Thursday, October 2, 1930: Dow 214.14 +9.24 (4.5%)

Assorted historical stuff:

Editorial: Chancellor Breuning's plan for German economy calls for drastic cuts saving about 1B marks/year. If adopted, “one obstruction in the way of a geneal recovery of world business will be removed.” Adoption seems likely since Pres. Von Hindenburg backs it, and apparently has authority to declare a dictatorship to carry it out if parliament can't agree. While it would be preferable for moderate parties to put politics aside and agree on a govt., we can't find fault if a dictatorship is necessary - this would be similar to Lincoln's Civil War statement that he would save the country with the Constitution if possible, but without it if necessary.

Dr. Nicholas M. Butler: unemployment no passing ill but danger to social organization; desperation of millions of jobless may lead them to try “something new.”

Dr. K. Vaugoin forms Austrian minority cabinet to hold office until Nov. elections; first ministry in which Heimwehr (Fascists) are represented as separate party.

British bankers including Sir O. Niemeyer of Bank of England arrive in Australia to discuss solution to financial difficulties; Australia has about $180M of floating obligations coming due in London shortly with no clear way to settle them.

Amer. Beauty Congress told women spend almost $750M/year on cosmetics with no decline this year; 30% spend over $150/year.

Fabian Society celebrates 46 years of “street corner debating, soap box oratory, and parlor socialism.” Now 2,000 strong, members include George Bernard Shaw and 8 British cabinet ministers; Prime Minister is former member.

Market commentary:

Market wrap: “Remorseless” drop in market that had run for six consecutive days was broken by strong rally, attributed to support finally coming in for main trading shares and to short covering. Market improved from the bell, opening at 206.16, up from 204.90 at Tuesday's close. Rally gained breadth as session wore on; US Steel and American Can led the rally; GE, Westinghouse, Allied Chemical, other majors also participated vigorously. Oils strong with Standard of NJ leading; trading favorites including Gillette, Worthington Pump, J. I. Case sharply higher. Volume moderately heavy but lower than Tuesday and fell off in afternoon; major stocks maintained gains and rose to day's highs in final hour. Bond market opened down but improved to close generally higher; foreign markedly stronger, convertibles up, corp. up narrowly; Dow 40 corp. bond avg. at new 1930 high of 97.70.

Rally considered influenced by technical factors; Dow had declined over 40 points since Sept. 10, and had declined 9 of the last 11 sessions. Increased volume of 4.497M shares also thought to indicate selling climax, since trading for two weeks ended September 23 averaged less than 2M shares.

On Tuesday, 54% of NYSE stocks traded below fall 1929 panic levels; taken as indicating liquidation has been more thorough than indicated by Dow averages (since leading stocks have held up better). Group that held up best was utilities, with 26 of 29 above 1929 low.

Some margin calls have gone out in the recent decline, but they've been relatively light compared to the fall panic when many traders were wiped out overnight.

Many bull pools reported to have accepted their losses and disbanded.

Call money is at 1 1/2% and going begging; stocks are at lows with no takers; commodities are at record lows with little demand.

Experts say some seasonal increase in business may have been delayed by unusually warm Sept. weather.

Many estimates for third quarter earnings lowered due to slower than expected Sept. business.

F. Lisman & Co. see bull market in “seasoned, dividend-paying” rail stocks due to low money rates: “The present generation in Wall Street has never seen the powerful lever which easy money exerts to raise the price of high grade stocks.” Sees prices discounting much adversity, says rails have adjusted to hard conditions.

Economic news and individual company reports:

Railcar loadings for week ended Sept. 20 were down 18.4% vs. 1929 and 16.7% vs. 1928; considered disappointing, largest percentage drop this year.

Fed. Reserve reports department store daily avg. sales in Aug. down 8% from 1929; first 7 months down 6%.

US Steel ingot production for week ended Sept 29 at about 65% vs. almost 66% prev. week; industry at 60%, down slightly from prev. week.

Federal circuit court in Oklahoma allows oil proration to continue until federal trial, expected soon. State Supreme Court decision on the issue expected Tuesday.

Companies reporting decent earnings: Fox Film, Amer. Water Works & Elec., Amer. Tank Car, Chicago Great Western Rwy., Jantzen Knitting Mills.

Western rails arrange conference with ICC requesting reconsideration of large cuts in grain freight rates; say cuts are unaffordable and deny them lawful return.

Estimates of grain crops as of Oct. 1 are somewhat improved over Sept. 1 due to rainfall relieving some drought areas; corn still about 20% below last year.


“The owner of a cheap watch brought it in to the jeweler's shop to see what could be done with it. 'The mistake I made, of course,' he admitted, 'was in dropping it.' 'Well, I don't suppose you could help that,' the jeweler remarked. 'The mistake you made was picking it up.'”

+ The Boring Stuff:

Editorial: Russian dumping of commodities on world market has an “atmosphere of malefic mystery and diabolic ingenuity,” since it supplies them with funds to industrialize while also intensifying depression in “capitalist” world. Looked at calmly, it's not that mysterious. Any govt. with the necessary raw materials and ability to persuade or compel its labor to work for less can take over markets if it wishes. Theoretically the world could boycott Russian products, but this isn't really practical, and “if a people deliberately desires to play helot for other people, why not let it do so?” Soviet govt. is unique historically in that it's put us on notice that it aims to destroy Western civilization, and that its word is worthless, even in business. “Even the Hottentot and the Bushman have a code by which they will live but the Soviet has none ... It is about as complete a characterization as one could make of the modern 'liberal' mind today that it seems to think well of all this.”

IRT news: G. Dahl, chairman of BMT and advocate of unification with city transit lines, elected chairman of IRT, which had previously been putting off unification talks until other issues were settled. Some talk of quasi-public company to run all transit lines. IRT comptroller H. Berry testifies that removal of 6th Ave Elevated line without prompt compensation would put IRT into bankruptcy.

Rally partly attributed to long-term investment buying by insurance cos., banking interests, and investors, brought in by attractive prices and yields; bears may also have felt that a reversal was near and therefore covered shorts on a large scale.

Market value of 100 representative stocks was down 13.3% in Sept. to $25.9B; worst group was amusements, down 24.9%, best was rails, down 7.1%; value was down 41% from peak on Aug. 29, 1929, but 7.7% above lows of Nov. 13.

Conservative observers advise against following rally until it's maintained for more than a day or two; recommend stop loss orders to protect any long positions.

Fed. Reserve Bank of NY notes unusually small seasonal demand for credit and currency in Sept., resulting continued ease in money market.

Col. L. Ayres, VP Cleveland Trust, predicts large increase in savings in 1931 as business starts to recover from depression.

Commodities up strongly. Cotton continued recovery, closing up substantially though off day's highs. Wheat, most other grains up sharply. Copper buying was very active at 10 cents, with some producers no longer willing to sell at that price; 10 cents seen as possible long-term bottom. Rubber at new low.

Index of farm prices Sept. 15 was 111% of prewar level, up 3% from Aug. 15 but down 30% from Sept. 15, 1929, and lowest Sept. level since 1915.

Iron Age and American Metal Market reports: demand holding recent seasonal gains but not showing further improvement as would normally be expected at this time. Price picture mixed, with scrap and pig iron prices weaker but finished product prices showing some increases.

Dun reports 1,963 commercial failures in Sept., up 2.6% from Aug. and 25% from 1929; liabilities $46.947M, down 4.5% from Aug. and up 37.6% from 1929.

German index of industrial production for June was 85.7 vs. 109.8 in 1929 and 100 in 1928.

German marks stronger, stocks up, flight of capital reported down; attributed to relief over financial program.

US-Soviet trade for 1929-30 fiscal year was $177M, up 28% from previous year, of which US imports were $32M, up 3.5%.

Chicago wholesale gasoline prices continue to decline to 6 - 6 3/8 cents vs. 6 - 6 1/2 previously.

S.W. Straus reports building permits issued in Chicago for Sept. were $13.382M vs. $11.316M in Sept. 1929, and highest level of the year.

NY City property assessment for 1931 fiscal year is $19.791B, up $769.6M from 1930. Buildings started or completed were 8,416 vs. 16,515.

NY State in Sept. chartered 1,899 stock and no-par-value corporations with capital of $22.5M vs. 1,704 with $21.4M in Aug. and 1,708 with $68.9M in 1929.

IT&T was exception to the rally, declining to new yearly low on international political trouble.

NYSE seat sold for $260,000, down $5,000 from previous sale.

National City Bank adds $20M to reserves for unforeseen contingencies due to “world wide economic disturbances”; says has not experienced undue losses so far and is making good earnings. Action is praised as “ultra-conservative” in banking circles.

About 60% of all raw materials, fuel, and supplies are used in 1% of the US made up of about 80 highly industrialized counties. Largest are New York county (22 square miles), Hudson, NJ (43 sq.m.), and St. Louis (61 sq.m.).

US rayon production for 1930 about 130.4M pounds, up from 123.1M in 1929 but down 20% from estimate at start of year; world production about 420M.

US flour production in 4 weeks ended Sept. 30 was 6.985M barrels, up 140,000 from 1929; Q3 production was 20.933M vs. 20.821M.

October 1, 2009

Wednesday, October 1, 1930: Dow 204.90 -3.24 (1.6%)

Assorted historical stuff:

Editorial: Wheat futures have plunged from 99 cents/bushel to below 73 cents in less than two months. This is sheer panic: “Wheat is selling below its worth and there is nothing behind this drive but unreasoning and unreasoned fear.” There has been one story after another advanced to justify the decline, from depression to German elections to Russian short-sales; none of these hold up to examination. World wheat supply is larger, but this should be countered by use of wheat as feed due to shortage of corn. “Sometimes an elephant will take fright at a mouse and create a stampede in the herd. Market psychology seems about on the same order.”

One man's opinion on why wheat prices are down: “some people consider it a disgrace to be fat. It is a hipless, thin limbed age, and that means a big falling off in the consumption of wheat.”

French Foreign Min. Briand advocates aid to Germany; predicts 4M German unemployed this winter; “It is an inevitable law that misery and suffering push people toward extremes. ... Germany crushed is a danger for peace.”

Breuning cabinet in Germany proposes drastic budget cuts along lines advised by S. Gilbert, former Amer. Agent-General for Reparations; calls on the people to subordinate party politics to good of the nation. Plan approved by Pres. Von Hindenburg; Fascist leader Hitler attacks Von Hindenburg, demands his indictment if he establishes a dictatorship to force the reform package through. German stocks up following plan.

Japanese income tax returns show 11 individuals earning income of $500,000 or more; top income is Baron Hachoroemon Mitui with $1.403M.

M. Blondeau, dir. French tobacco monopoly, authorizes production of cigar specialized for feminine demand.

Market commentary:

Market wrap: In spite of good rally in grain markets, stocks continued to plunge for the fifth consecutive day, making the longest streak since the collapse last fall. Many margin accounts forced to sell. Monday's decline had taken leading industrials to new yearly lows, and rails below the panic lows of last fall. This encouraged bears to launch further aggressive drives across the list. Two attempted rallies in the morning gave way to renewed pressure. Volume increased to highest level since June. Bad breaks in trading favorites; whole market showed weak tone, was irregular at close. Bond market unsettled, moderately lower.

National City Bank monthly business review: Thus far business in Sept. has shown some improvement, but not strongly enough to convince that the uptrend is here to stay. However, without minimizing the depression, which is caused by serious and fundamental maladjustments, we also shouldn't “magnify the difficulties out of all due proportion.” While it's true no two depressions are identical, they have been studied for many years and general characteristics are fairly well understood; business activity indexes in July and Aug. touched lows of 1921, “warranting the assumption that the decline must have nearly, if not entirely, run its course.”

Broad Street Gossip: “It is a very wealthy country, and remarkable in the fact that the consuming power is still large notwithstanding a severe contraction in business. In time the country will emerge ... stronger and healthier than ever, and that means [good stocks] will soar to levels above the peak prices of last year.”

G.M.P Murphy & Co. point out year-over-year comparisons should start looking better in the fourth quarter since this is when the business slump intensified in 1929. Point to a series of unlucky events as delaying recovery, including drought, tariffs, political unsettlement, and unusually hot weather in September.

Oil industry seen facing test of continuing to balance production with consumption in seasonally period now starting.

Dow closed at a new yearly low, and within 6.21 points of the Nov. 13 panic low of 198.69. There were 5 stocks at new yearly highs and 312 new lows.

Economic news and individual company reports:

Aug. exports were $293.9M vs. $381.4M in 1929; imports $218.4M vs. $369.5M.

NYSE transactions in Sept. totaled 53.544M shares vs. 100.135M in 1929 and 90.232M in 1928.

J.A. Sisto suspended from NYSE due to insolvency; stocks they sponsored fluctuated wildly, for example Cuneo Press went from 31 1/2, to 16, back to 23 1/4.

Rail freight loadings for week ended Sept. 20 were 952,512 cars, down 13,201 from previous week, down 18.4% from 1929, and down 16.7% from 1928.

Wholesale gasoline in Chicago market down to 6 - 6 1/2 cents/gallon from 6 1/8 - 6 1/2 cents previously.

World crude oil production for 1930 estimated 1.444B barrels, down 44M from 1929; US about 937M, down 69M.

Companies reporting decent earnings: American Machine & Foundry (machinery for producing 5-cent cigars).


“'What time do you get up in summer?' 'As soon as the first ray of sun comes in my window.' 'Isn't that rather early?' 'No. My room faces west.'”

+ The Boring Stuff:

Editorial: Current system has Treasury Sec. as chair of the Fed. Reserve Board. This makes the Fed's decisions subject to political criticism; for example, Sen. Wagner is accusing Sec. Mellon of preventing the Fed from applying the brakes in 1929, as the New York Fed wanted. Regardless of whether Sen. Wagner's accusation is true, the fact it can made is bad for the banking system. Considering the immense power the modern Fed wields, they must be as immune from political attack as the Supreme Court; this should be ensured by ending the Treasury Sec.'s influence over the Fed.

Treasury Sec. Mellon rumored to have bought “The Annunciation” by Van Eyck from the Hermitage collection for $800,000.

Esperanto slowly gaining adherents; seen benefitting from talking pictures and wide dicussion of Briand's plan for United States of Europe.

J. Lonsdale, Amer. Bankers' Assoc. Pres., addresses annual convention. Sees signs of business improvement including better buying, increase in employment, and higher savings; speed of recovery in hands of bankers who control flow of credit; largest obstacle to business progress is high taxes. Suggests it may be time to modify Sherman (antitrust) law; says present business conditions are result of wartime and postwar overproduction without developing markets sufficiently.

Caldwell & Co. note increasing amount of bank buying of bonds due to weak credit demand from business; a year ago leading banks had 41.7% of outstanding credits in business loans and this has declined to 36.5%; Fed borrowings at these banks have gone from $761M to $79M. This is believed a large factor in current and expected future bond market strength.

Bears reportedly successful at short covering in recent sessions due to extensive liquidation; at times, only buying has been from shorts.

Conservative observers still advise against going long; believe stocks not yet at attractive buying levels.

Rumors that Fed. Reserve was forcing banks to liquidate security loans dismissed; no evidence of liquidation seen, and this would be against recent Fed policy.

American Can finally succumbed to market weakness in spite of good earnings and yesterday's announcement of extra $1 dividend in addition to regular $1 div.

Woolworth has been finding support on theory that lower merchandise cost and cheaper items should benefit it in times of depression.

J.C. Penney said planning to place large orders in next month for staples for early spring delivery; seen as reflecting confidence in next year's business prospects.

Hudson Motor Car said planning aggressive campaign for 1931 model year, after having cleared decks this year by slashing inventories from $16M to $6.4M.

Corn Belt Farm Daily says only serious farm problem currently is wheat, but says crisis is overblown; points out it only accounts for 10% of farm income, with livestock alone at least 5 times as valuable.

S. McKelvie, Farm Board member, says main goal of the Board is an efficient private distribution and marketing system controlled by farmers, reducing the current large spread between producer and ultimate consumer.

Commodities mixed. Grains up, corn and wheat rallied sharply. Cotton touched new lows below 10 cents but rallied to close up. Copper reduced 1/2 cent to 10 cents/pound, with some producers withdrawing from the market for the present. New lows were hit in sugar and rubber.

More trade stats: First 8 months exports were $2.596B vs. $3.407B; imports $2.175B vs. $3.009B. First half exports increased to only 7 of 69 major markets; imports from only 13 of 68. Automotive exports in Aug. were $18.559M vs. $18.977M in July and $39.922M in Aug. 1929; first 8 months were $233.6M vs. $440.1M.. Grain exports in Aug. were $26.4M vs. $30.7M in 1929.

Amer. Petroleum Inst. weekly report for Sept. 27: refineries at 71%, up from 69.2% prev. week; gasoline in storage 37.222M barrels vs. 37.260M prev. week and lowest since Nov. 1929; crude oil production 2.390M barrels/day, down 32,050 from prev. week and down 510,650 from 1929.

US Bureau of Mines reports storage of crude and refined oil in Aug. declined 7.0M barrels vs. decline of 4.4M in July and increase of 4.9M in 1929; amount in storage at end of Aug. was 685.9M barrels, up 7.2M from 1929.

Independent US oil producers call for oil tariff; several Senators pledge support.

German exports in first 8 months were 8.025B marks; imports were 7.405B. Aug. showed a surplus of 175M marks vs. a deficit of 116M in 1929.

British registered unemployed on Sept. 22 were 2.110M vs. 2.103M on Sept. 15 and 1.175M on Sept. 23, 1929.

European wheat crop estimated down sharply from last year, and of lower quality; France down from 320M bushels to 209M-239M; Italy from 261M to 213M.

London Rubber Growers' Assoc. calls for cutting production as much as possible to expedite balancing supply and demand.

Net indebtedness of 250 cities with more than 30,000 pop. in 1928 was $5.828B, or $134.07 per capita.

Detroit making effort to relieve unemployment by construction of public buildings; Fisher Bros. also proceeding early with construction of large office building.

Locomotive orders down sharply, with little prospect seen of improvement until spring 1931; may be problem since manufacturers have large factory investments.

198 commercial airplanes were produced in Aug. by 61 major aircraft manufacturers; 217 were delivered, with total value of $945,719 not including motors.

NYSE seat sold for $260,000, down $5,000 from previous sale.

September 30, 2009

Sept. 30, 2009 - Another singoff!

I think this song is really from 1931, but what the heck – it's a slow Wednesday. The song is Brother, can you spare a Dime? As sung by:
1) Al Jolson,
2) Rudy Valee,
3) Charlie Palloy,
and, for good measure, a modern performance by
4) Mandy Patinkin.
Lord help me, I think I actually like the ridiculously overacted Patinkin version.

And, once again, for your convenience, a modern translation:

Once I programmed software, made it run
made it really not suck.
Once I wrote a program, now it's done.
Brother, can you spare a buck?

Once I wrote a mortgage, for a bond
toxic triple-A muck.
Once I wrote a mortgage, now it's gone
Brother, can you spare a buck?

Tuesday, September 30, 1930: Dow 208.14. -4.38 (2.1%)

Assorted historical stuff:

Editorial: “New economics” statements that consumers are now buying too little and saving too much have just enough truth to be “dangerous pabulum for the popular mind.” Consider the savings people have in banks and life insurance. “Is it conceivable that it can be for the general good ... that these savings should not be made and that the money should be spent in consumption? Will the country be better off as a whole if the mortgage on the home is allowed to remain and instead a second car placed in the garage? The question answers itself. ... Thrift and extravagance succeed each other as do the tides, and the wheel invariably comes full turn. ... A little patience is all that is necessary ...”

Spanish political situation clouded after 20,000 people rallied in Madrid's old bullring Sunday, condemning dictatorship and monarchy and calling for resignation of the king. Rally was orderly but “promises of revolution were frequently made” and Army was asked for aid in carrying out program. Currency plunged.

Cuban banking crisis reportedly averted by shipment of $25M to Havana over the weekend.

More than 50 countries now have airmail service.

British bank devises ingenious method to prevent check forgery - stamps bearing portrait of depositor to be pasted on signed checks.

Daniel Guggenheim, leader of the Guggenheim family, mining man, capitalist, philanthropist, and sponsor of Goddard's rocketry experiments, dead at 74.

Market commentary:

Market wrap: Following “a brave attempt to rally” led by US Steel and American Can, stocks gave way to another deluge of selling around mid-day. Pressure began in oils, including Standard of NJ; attributed to weakness in gasoline prices. Some stocks declined on dividend concerns including IT&T and Montgomery Ward; also weak were trading favorites including Vanadium and Radio. Weakness spread to the major industrials; utilities also broadly down including AT&T and Consolidated Gas; insurance weak. Selling picked up increasing momentum in the last hour, with bad breaks in active stocks throughout the list. Bond market generally weak, though US govt. and rails were strong, with Dow 40 corp. bond avg. up to new 1930 high of 97.68. Foreign govts. and convertibles down.

Conservative observers say it's useless to try for technical rallies in this market; advise waiting until stocks “can hold their advances for more than a few hours.”

One visitor from Utah's opinion: “Utah people are not excessively optimistic … but they are convinced conditions will mend. Here in New York, you might get the impression that we were all headed for bankruptcy.”

US Steel policy of keeping as many workers as possible and distributing available work among them has been favorably commented on in many quarters; “the recommendation is made in the financial district that the adoption of such a policy by other large employers ... would do much to alleviate unemployment this winter.”

Broad Street Gossip: “On the basis of present prices, wise is the investor who buys and holds on.”

No evidence yet of organized market support as came in during declines in June and August.

Baar, Cohen, & Co. contrast current stock market with debacle last fall. Back then, business had been declining since June but the market kept rallying; now business has hit bottom and should improve, but the market “ignores this condition just as it ignored the business decline ... A year ago the public was in the market up to its neck - in fact, in some cases, above its head. Today the public is afraid to own stocks. We know of no better indication that a turn for the better is near.”

Ambassador C. Dawes, speaking in Belfast Ireland, sees return of world business to normal by summer or fall of 1931.

H.K. McCann, Pres. McCann-Erickson, says newspaper advertising is an excellent business barometer, is encouraged by increase in advertising contracted for by clients in first half of 1931 vs. last half of 1930.

Dow closed at a new yearly low. There were 11 stocks at new yearly highs and 210 new lows.

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Sept. 24: loans on securities up $57M to $8.461B, “all other” (commercial) loans down $24M to $8.453B.

Call money renewed at 1 1/2%, lowest rate since 1915; attributed to heavy margin selling, possibly also to weak commercial credit demand.

August net operating income for all class 1 rails estimated at $96.8M vs. $141.4M in 1929 and $128.4M in 1928.

US crude oil production in 1929 was 1.007B barrels, up 12% from 1928; motor fuel production was 439.4M barrels, up 15%.

Companies reporting decent earnings: National Dairy, Metro-Goldwyn Pictures.


“'And there, son, you have the story of your dad and the Great War.' 'Yes, Dad, but why did they need all the other soldiers?'”

+ The Boring Stuff:

Home planning conference created by Pres. Hoover to be composed of about 20 committees and involve about 1,000 people throughout the country. Chair is Commerce Sec. Lamont, who estimates that $50B will be spent on new residential construction in next 20 years, with $500M now spent annually on maintenance. Conditions now called favorable for homebuilders, including lower prices of raw materials, ample number of skilled workers, and first mortgages at reasonable rates.

Editorial: Due to large wheat crops in many countries, US faces possible “insurmountable oversupply, as Cuba has found in sugar and Brazil in coffee.”

German update: stocks rose due to rumors Reichstag will not convene until January, rather then expected Oct. 13, giving Chancellor Breuning's cabinet more time to find support; large outflow of gold and foreign-exchange continues from Germany.

Stanley Baldwin's committee of economic experts plans wheat quota for Britain specifying 25% homegrown, 66% Dominions, and 9% from all other countries.

G. Baumeister, Ulen & Co. VP, reports revolutionary movement in Chile has no important backing and should cause no concern for US business operating there.

J. Bunnell, CBOT Pres., tells Congress he gave govt. first information on Russian short sales of wheat. CBOT has decided to bar all foreign govts. from shorting.

In heavy declines during the final hour, many stocks broke through their lows on the reactions of the past few months.

Several statements were made last week that the market appeared technically oversold, but it continued to drop through theoretical resistance levels.

Some amusement stocks disappointingly weak, including Technicolor and Fox Film; attributed to excess speculative interest that came in during the spring rally.

Some observers looking for a day or two of heavy liquidation to mark climax to selling and set stage for a technical rally.

Some favorable factors seen for stocks, including strength in bonds and preferreds, larger short interest, deflation of overpriced stocks, and easy credit. Some dispute the last point, saying easy credit is a reflection of slack business demand.

New Canadian tariffs potentially shift hundreds of millions in production to Canada, but some of this might not materialize due to lack of manufacturing experience.

Colonel W. Procter, Pres. Procter & Gamble, says bottom of depression probably reached in July, sees gradual return to normal business sometime in 1931, although we may have an intermediate dip in January or February. Cautions against forcing recovery, saying it must come naturally when inventories are exhausted. Urges industries to study markets carefully and “see if operations can be regularized” so as not to be forced into large layoffs in dull periods. P&G for the past 7 years has guaranteed 48 weeks of work a year to all employees of more than 6 months service.

Harvard Economics Society notes recent renewed decline in commodity prices; while they have still not broken out of the range prevailing since July, “in view of recent declines, a conclusion that the stabilization of prices will take place at these levels is not yet justified.”

Commodities very weak. Wheat declined again, hitting new lows; Sept. contract was 72 3/4, lowest since Jan. 1907; other grains mixed. Cotton was down again to new lows, reaching lowest prices since Sept. 1915. Copper market nominally holding at 10 1/4 - 10 1/2 cents, but with little buying and further weakness anticipated. Rubber, raw sugar, and silk reached new low prices in the history of their exchanges.

Rails and public utilities obtained $2.689B in new capital in first 8 months of 1930, a new record, $900M over 1929 and $1.346B over 1928. State and local governments obtained $941M, up $114M from 1929; foreign govts. obtained $411M vs. $57M in 1929.

Supply of money for first mortgages reported adequate; prevailing rates at 5.5% - 6%; foreclosures and delinquencies reported decreasing.

US loans and investments in Canada are now about $3.7B of a total $15B invested abroad, about twice as large as next-largest borrower (Germany). US has replaced Britain as Canada's largest creditor; since 1913 US total is up 900% while Britain's is almost unchanged.

Canadian employment at 7,334 firms was 1.024M on Sept. 1 vs. 1.042M on Aug. 1.

California daily oil output in week ended Sept. 27 down 20,900 barrels to 590,000; making progress towards new production ceiling of 550,000.

NYSE seat sells for $265,000, down $10,000 from last sale.

August meatpacking sales were up 1% from July but down 17% vs. 1929; this was improved from July's 20% decline vs. 1929.

Exports of leaf tobacco in first 8 months were 327.4M pounds, up 12.5% from 1929; average price 21.6 cents/pound vs. 23.6 in 1929.

Gillette - Autostrop merger negotiations continuing; nothing definite decided yet.

Westinghouse Elec. bookings and net income expected down for Q3 vs. Q2, which was already down substantially from 1929. Backlog remains at record level.

September 29, 2009

Monday, September 29, 1930: Dow 212.52 -0.75 (0.4%)

Assorted historical stuff:

Editorial: Market reaction to Hitler's tirade in court was a crying shame: “It is a wonder, as well as a pity, that good securities must be made a football of a bombastic radical who since [1919] has succeeded in making an ass of himself.” Germany has had a hard time since the war; Hitler has taken advantage for his own selfish purpose. He formed his present party in 1921 with no platform but opposition: to Parliament, to capitalism, to rights of the Jews, and now to the Young plan. Four months later he tried to march on Berlin to “save” Germany, which showed no interest. They are even less likely to adopt his program now that much progress has been made toward reconstruction. Hitler's testimony showed his true colors. “The almost certain reaction will be a wave of disgust that will line up the people against any further progress of his party ... it is likely that his career will prove like a glass of soda water now frothing but quickly simmering down to nothing.”

Denial of use of convict labor in Russian lumber production called absurd by Aaron Kopman, who spent 2 years in Russian prison camps from 1924-26.

W. Graham, Pres. Great Britain Bd. of Trade, notes British spend $325M/year on drinking, smoking, and betting; suggests unemployment would be much improved if they used the money to buy commodities instead.

To relieve Mexican unemployment, governors of Vera Cruz and Tobasco offer state-owned lands for colonization by jobless.

Air travel record set at Newark Airport when 114 passengers landed or departed within 2 hours.

Veteran Pony Express riders recall carrying mail between St. Louis and Sacramento in 10 days at $12/letter; now airmail takes 14 hours and costs 5 cents.

Knute Rockne, Notre Dame head coach, to join R. H. Gibson & Co. as special partner; will devote his time to brokerage business except during football season.

Market commentary:

Market wrap: Bears, encouraged by Friday's decline below Aug. resistance level at 217, launch further drives hoping to penetrate June bottom at 211 and thereby provoke extensive liquidation. Pressure directed against coppers and rails, majors including US Steel and AT&T, and stocks displaying recent weakness including Radio, Vanadium, and GM. Traction shares continued strong. Bear operations may have been further helped by weakness in the grain markets. Some short covering and unimpressive rallying towards the close. Bond market active - high grade corp. strong; convertibles weak; govts. irregular with German and Italian down.

Week in review: stock and commodity markets very weak; bond market strong; general business shows some improvement; short term money extraordinarily easy; commercial loans and money in circulation down; foreign markets nervous.

Stop-loss orders have been popular; the resulting automatic selling has been a factor in recent market breaks.

Some banks in last few days rumored to be buying “stocks sponsored by them”, though not on large scale.

Bears are targeting GE because it has a high price-earnings ratio, but it's always sold too high on that basis and noone has ever made money shorting it long-term.

Dr. B. Anderson of Chase Nat'l. Bank criticizes Fed. Reserve use of open market operations; allows they may have been necessary to arrange war financing at low rates, but use has increased greatly since, mainly to lower rates; doing this “can generate almost incredible abnormalities in the monetary picture.”

Dr. J. Klein, Asst. Commerce Sec., predicts greatly improved business conditions by end of Oct., prices back to 1928 level by end of the year. Notes history of depressions in past 50 years; average length has been 13 months and drop in price 15% (current price drop is 11%, drop in 1921 was 25%). Says US financial position stronger than ever; savings up tremendously over past 10 years, as is purchasing power (wages up 2.1% annually while cost of living hasn't increased).

Economic news and individual company reports:

European unemployment much worse in summer of 1930 than 1929; almost all countries showed large increases in unemployed, many more than doubling.

F.W. Dodge report construction at low ebb country-wide in Aug., though NY metro area improved; slight uptrend seen first 3 weeks in Sept. Sees “slow and steady upward movement” rest of year, followed by year of moderate activity in 1931 possibly gaining momentum toward end.

Irving Fisher's index of 200 wholesale commodities for weekend ended Sept. 26 was 83.1 vs. 83.6 previous week and 96.0 average for Sept. 1929.

Wheat production in 30 countries for 1930 estimated at 2.804B bushels, up 6% over 1929.

Standard Oil of Indiana cuts retail gasoline prices 2 cents/gallon in all its territory, says due to long-term unsound condition in oil industry; Texas Co. matches cut.

Companies reporting decent earnings: International Cement, Caterpillar Tractor, Gaumont British films.


“Motorist's Wife - What lovely, fleecy clouds. I'd just like to be up there sitting on one of them. Motorist - All right: you drive ...”

+ The Boring Stuff:

Editorial: Modern medicine is practiced very differently from 50 years ago, when the doctor carried all his instruments in a small bag, had no modern diagnostics like x-rays or cardiagraphs, and told the patient whatever he chose to. Nowadays patients know their temperature, pulse, blood pressure, etc., and usually manage to see their charts though they're not supposed to. Similarly, in modern business, the “patient” is kept continuously informed of much more information than ever before. But, as in the case of medical patients, you can't help wondering whether “an intense preoccupation with symptoms ... really conduces to an earlier and more thorough convalescence.” Further, in business we have that one particular violently fluctuating indicator with no medical analogy: the stock ticker, which may outweigh in the business “patient's” mind more fundamental information, “causing him to alternate too frequently between despondency and hope.”

Fish Congressional committee continues investigation of Russian short-selling of wheat; J.S. Bache and others describe sales of over 8M bushels on Sept. 9-11, but deny sales depressed market; All-Russian Textile Syndicate dir. Belitzky says sales were for hedging purposes.

Monthly Labor Review publishes study of 543 unemployed men who applied to a Boston employment agency. About half were unemployed due to seasonal or business depression; 38% were foreign born but 75% had been in Boston at least 15 years. About half were heads of families, with average of 3.2 children.

Rail crossing accidents in first half were 2,335 with 962 deaths, lowest since 2,276 with 914 deaths in 1925; cars on road have increased 33% in that time.

Ninth annual convention of Assoc. of Bank Women to be held in Cleveland Sept. 29 - Oct. 1 as part of American Bankers Assoc. convention.

New York Cocoa Exchange celebrates 5th anniversary; has replaced London Exchange as world's largest cocoa market.

Guaranty Trust of NY sees mild seasonal upturn in business over past few weeks, leading to better sentiment. Recognize seriousness of worldwide depression, but see some signs of bottoming and don't see justification for “exaggerated pessimism that has been visible in some quarters.”

Bond market strength attributed to low short term rates, abundance of funds seeking investment, switch from stocks.

Some believe short interest is at highest level of the year.

Conservative observers continue to advise staying on sidelines, though some outsiders have been tempted by current prices.

German bonds sold at 90 as part of the Young plan in June have declined to 80 since. Rumors of revolt have been discounted, and Commerce Dept. reports the German economy has been quite resistant to depression; however, it can't be denied that in a time of unemployment some discontent will arise about foreign debts.

While some stress European conditions as contributing to the market decline, there is the case of the depression 10 years ago when European conditions were much worse, yet the US recovered independently for several years before Europe began to. Probably a larger factor in the market decline has been overproduction in commodity and other industries. However this has gone a long way toward correcting itself, and many noted economists feel the bottom has been seen.

Rails and oils have been disappointingly weak after being recently recommended by some market observers.

Winthrop, Mitchell & Co. note oils are close to yearly lows, believe they are attractive in long term though quick recovery isn't expected due to seasonal factors.

Nothing seen to account for sharp wheat decline except for rumors of increased Russian selling; G. Milnor, Farmers National Grain Corp. GM, predict wheat surplus will be absorbed due to large-scale use as animal feed to make up shortages of feed grains such as corn.

Commodities weak. Grains suffer liquidation; wheat hits lowest level since 1907, other grains down sharply. Cotton prices again down moderately to new low.

First 57 rails report Aug. operating income $77.907M, down 31.6% from 1929 and 22.8% from 1928.

Copper production continues to run ahead of consumption; increase in inventories expected for Sept.

Uptrend in cigarette production has slowed in 1930; first 8 months production was 81.9B, gain of 2.09% over 1929, vs. gain of 13.23% in 1929 over 1928.

Furniture production in August was at 52% of capacity vs. 48% in July, the first increase this year. Production is down about 40% from 1929.

881 leading lumber mills reported new orders 101% and shipments 95% of total production of 273.6M feet.

German unemployed on Sept. 15 were 2.983M vs. 2.873M at end of Aug.

Youngstown district steel operations down 3% this week to 54 1/2%.

Detroit employment index was 80.8 on Sept. 15 vs. 83 on Aug. 31 and 127 on Sept. 15, 1929.

Wells Fargo reports Calif. life insurance sales in first 7 months up 10%, though general business somewhat depressed; retail sales in first 8 months down 4.3%.

September 28, 2009

Favorites of the week Sept. 22-Sept. 27, 1930

No Journal was published Sunday, Sept. 28, 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. 27:

Historical Joke:
“'Did you read about those folks who were paralyzed from drinking Jamaica?' inquired Colonel Bozeman of the storekeeper recently. 'Yes. Terrible, wasn't it?' 'Terrible, indeed,' replied the Colonel. 'I suppose,' he added wearily, 'that I'll have to reform and go to drinking vanilla'.”
[Note: OK, this one is so obscure it probably requires a commentary. This is a joke about the practice of using alcoholic flavor extracts as cheap drinks during Prohibition, in particular about a tragic episode involving Jamaican ginger extract adulterated to meet Prohibition requirements that caused many cases of paralysis. This episode is where the slang expressions “jake leg” and “he's jakin' it” originated. For more on this, see Dan Baum's fascinating New Yorker article. ]

[Note: Ay Chihuahua! dept.] Banks seen in strongest shape since Fed. Reserve system began functioning in 1917; extending near-record level of credit, and borrowing lowest amount from Fed. Reserve since 1917 (currently about $1B vs. $1.4B a year ago). Reasons for low Fed borrowings include low level of currency in circulation, low credit demand, both due to depression. US gold holdings have been increasing due to favorable trade balance. Some observers are, however, warning that banks are placing too many assets in securities and security loans; these total $14.666B, up $1.6B in past year, while commercial loans are at $8.462B, down $928M.

[Note: Strangely familiar dept., though I think “shadow banking system” sounds more appropriately sinister.] While total banking credit including loans and investments hasn't declined much off the peak, there has been a large decline in credit extended by an “invisible banking system”; brokers loans extended by “others” (not banks) are down $2.5B in past year, and this credit reached business indirectly.

Sept. 26:

[Note: Theater was much more interesting then dept.] A scene from Fine and Dandy, a musical starring Joe Cook: “A life-size steam shovel is in the center of the stage. Behind it on a platform is Joe with a saxophone. When he begins to play the saxophone ... a chimpanzee in a palm tree hits a man on the head with a cocoanut, an Indian shoots the steam shovel operator with an arrow, and the steam shovel operator drops the theatrical equivalent of a ton of ashes and crockery on the head of ... Dave Chasen, who completes the concordance ... with a sweet tinkle of his triangle.”

[Note: Ay Chihuahua! dept.] Sec. Of State H. Stimson addresses NY State Republicans, says Hoover administration is most effective of any president in recent years, having fulfilled 34 of 35 campaign pledges. Says Hoover not responsible for depression, which has worldwide and and deep rooted causes; calls Hoover administration's actions in response “prompt, scientific, and courageous,” and serving to “greatly palliate what might otherwise have been a most disastrous situation.” Praises flexible tariff provision as eliminating politics and lobbying in tariff making. Also commends London Naval Treaty and Farm Board.

[Note: Strangely familiar dept.] T. Woodlock on rail regulation: “We cannot have a successful hybrid between private enterprise and governmental operation – it must be one thing or the other.”

[Note: This guy's good! dept. Not commenting on Keynesian economics, but hard to deny he was a good investor.] J.M. Keynes: “Course of interest rates will be steadily downwards and prices of first-class bonds steadily upwards.”

Sept. 25:

[Note: Well, as long as the program just offers some moderate and temporary incentives, what could possibly go wrong?] Pres. Hoover calls for program to stimulate homeownership; says finances of homebuilding are inadequate, easier to borrow 85% on a car than a home, and home loan generally is at higher interest rate; also needed is safeguarding of home areas from “commercial invasion and destruction.” Doesn't want federal govt. to build homes directly, but believes adequate home-building program would be very valuable.

[Note: Strangely familiar dept.] Dr. F. Parker of Wharton School addresses Amer. Assoc. of Personal Finance Cos., says they have a chance for public service in the current trying times: “To reply that ... lack of current earnings power on the part of a prospective borrower immediately makes him a bad risk for personal finance companies is not a satisfactory rejoinder, for a credit policy worthy of the name should provide credit when credit is needed by the borrower not when it is deemed most profitable and expedient to be extended by the lender.”

Appearing at the Palace (vaudeville):
[Note: Yes, it was that Buddy Ebsen, and this seems to have been his big break.]
Marion Sunshine does impressions of Broadway people ranging from “temperament of Lenore Ulric to the boop-boop-a-dooping of Helen Kane,” also does a good Maurice Chevalier. Also appearing are some of “Broadway's stars of the future” including Southern dancing pair Vilma and Buddy Ebsen.

Sept. 24:

[Note: OK, I couldn't find the 1930 version, but here's a remake from 1942 with a great cast including Marlene Dietrich and John Wayne.] The Spoilers, with Gary Cooper - story of corrupt officials in Nome, Alaska gold mining country; sentimental melodrama, but excellent acting and good production “represents a return to the best elements of the silent pictures... climax ... is the most vigorous and thoroughly realistic [fistfight] the talkies have yet shown.”

[Note: Speaking of which, I wonder why they never made a movie about this – it's a good story.] Today is the 61st anniversary of Black Friday, on which Jay Gould and Jim Fisk engineered a corner of the gold market that the government had to break by releasing $4M of gold from its stockpiles. That number makes an interesting contrast with the $26B decline in security values in the fall of 1929.

[Note: I warned him about the name.] James Boring Travel Service files for bankruptcy.

Sept. 23:

[Note: Strangely familiar dept.] Commerce Sec. Lamont reports some encouraging business news including gain in exports in August that was broad-based and higher than usual seasonal pattern; gains in retail trade together with low inventories; and increased buying ahead of raw materials by industry.

[Note: Strangely familiar dept.] Chicago Society of Commerce reports wholesale and retail buying improved in past week, with moderately priced goods doing better. Inventories low, with active restocking by merchants country-wide. General opinion that business will continue to improve up to and including holidays.

Sept. 22:

[Note: Nothing makes people spring into action faster than sinister short-sellers during a market crash.] Agriculture Sec. Hyde charges Russia with short-selling wheat to drive prices down, prompting blizzard of activity. CBOT Pres. Bunnell asks for evidence; CBOT member Bennett ridicules idea that Russia would do this since they have wheat to sell; Iowa Sen Brookhart looks into closing the CBOT; Farm Board member McKelvie says believes the CBOT could stop short-selling by Russia; Russian Rep. Belitsky denies large-scale short-selling.

[Note: Hopefully not soon to be strangely familiar dept.] Market has continued to confound the majority; less than two weeks ago vast majority of brokers were bullish on both technical and fundamental grounds following advance past 241 resistance level, but between Sept. 10-19 Dow has declined from 245.09 to 229.02.

[Note: Market blatherers had better vocabularies then dept.] Week in review: “Recrudescence of gloom” blamed on disappointment over pace of recovery, anticipated poor Q3 earnings, German rumors, and renewed bear pressure. Still uncertain if correction is merely technical. Credit remains easy. Some improved steel buying. Wheat hits new post-1914 lows.

[Note: A marketing approach to securities – that's crazy talk!] P. Cherington, of J. Walter Thompson, addresses Financial Advertisers Association meeting: “The banker has only recently come to realize that he has marketing problems as pressing as those of the manufacturer or distributor of merchandise.” Calls for application of marketing approach to selling of securities.

Experimental secure wireless telephone tested; device transforms spoken words into unintelligible state and retransforms them on receipt.
[Note: This could be the first mention of the cellphone, except the cellphone doesn't do the retransforming part.]

September 27, 2009

Saturday, September 27, 1930: Dow 213.27 -4.48 (2.1%)

Assorted historical stuff:

Following a spectacular political victory, Louisiana Gov. Huey Long is pushing a huge public works program through the legislature [Long ran in the Democratic Senatorial primary as an unofficial referendum on his program after the legislature blocked it, promising to resign if he lost.]

Andrew Carnegie on charity: “Those who have surplus wealth give millions every year that do more evil than good, and really retard the progress of the people; for most of the forms in vogue for benefiting mankind only tend to spread among the poor a spirit of dependence upon alms when what is essential for progress is that they should be inspired to depend upon their own exertions. As I know them there are few millionaires, ... who are clear of the sin of making beggars.”

R. Lamont, Commerce Sec., says citizens now have a responsibility: “The most important single thing that can be done now is for each one of us to continue normal, reasonable buying.” Everyone should buy their normal needs, “put aside a small percentage for savings, and buy [as] much of the additional articles which contribute to general comfort and enjoyment as can be properly afforded”; this will lead to improved business.

NY State Republicans switch from dry to wet, nominate C. Tuttle, US Attorney for NY, as candidate for Governor on platform demanding repeal of Prohibition.

Market commentary:

Market wrap: With the Dow opening about at the August support level of 217, bears renewed “hammering” attacks, sensing they could cause extensive liquidation if this level was penetrated. Pressure was applied first to motor shares on expected bad earnings. Majors including US Steel and American Can remained steady in the morning but broke sharply in the afternoon. Heavy selling spread through the list. Volume so heavy in final hour that new high-speed ticker fell a few minutes behind. Some rebound near the close. Bond market active and strong; US govts. up sharply, foreign govts. generally steady; corp. bonds strong, particularly high grade, Dow 40 corp. bond average at new yearly high of 97.66; convertibles irregular.

Rumors of banking support for market continue, though so far they apparently have remained on the sidelines and let bears have their way.

Some increase in public liquidation seen this week, with reports of “stocks being taken out of strong boxes.”

Conservative observers continue on sidelines, now don't even advise buying on declines; believe stocks “can be replaced later on at somewhat lower levels.”

Conditions seen ripe for rally; strength in bonds and preferred stocks and low rates indicates plentiful money seeking investment; many stocks show increase in shareholders and reduction in floating supply; short interest has been growing. These conditions historically have led to rising stocks.

Banks seen in strongest shape since Fed. Reserve system began functioning in 1917; extending near-record level of credit, and borrowing lowest amount from Fed. Reserve since 1917 (currently about $1B vs. $1.4B a year ago). Reasons for low Fed borrowings include low level of currency in circulation, low credit demand, both due to depression. US gold holdings have been increasing due to favorable trade balance. Some observers are, however, warning that banks are placing too many assets in securities and security loans; these total $14.666B, up $1.6B in past year, while commercial loans are at $8.462B, down $928M.

While total banking credit including loans and investments hasn't declined much off the peak, there has been a large decline in credit extended by an “invisible banking system”; brokers loans extended by “others” (not banks) are down $2.5B in past year, and this credit reached business indirectly.

At the close, the Dow was within 1.43 points of the yearly low. There were 3 stocks at new yearly highs and 153 new lows.

Economic news and individual company reports:

Bradstreet's and Dun's weekly reviews see some confusion and cross-currents, but overall continued moderate improvement in fall trade.

Corporate balance sheets are sound: 75 leading corps. as of June 30 report cash down 2.5% vs. 1929, inventories down 10.6%, working capital up slightly.

Dominick & Dominick report food manufacturers have been quite resistant to depression; 17 companies had first-half profits up 3.5%, compared to decline of 24.4% in 275 industrials. Production and preparation of food is largest industry in the US, with $22B in annual sales, 50,000 plants, and 450,000 retail outlets.

Second half net for 6 large car cos. estimated at $43M, down 60% vs. 1929; some car cos. now losing money. However, observers gratified industry could adjust from record conditions to lowest sales in 10 years while staying profitable overall. Total stock market value of the 6 companies down about 50% in past year.

July net for 95 utilities excluding telephone and telegraph were $70.6M vs. $83M in June and $71M in July 1929. First 7 months were $559.1M vs. $578.5M.

Ford Motor cuts workweek to 3 days from 4 days to maintain current workforce.


Once in a Lifetime, a comedy by Moss Hart and George S. Kaufman; scathing satire of Hollywood, set in film production studio run by Herman Glogauer with liveried attendants, illuminated placards announcing which room he's in, and large shipments of writers from New York.

Historical Joke:

“'Did you read about those folks who were paralyzed from drinking Jamaica?' inquired Colonel Bozeman of the storekeeper recently. 'Yes. Terrible, wasn't it?' 'Terrible, indeed,' replied the Colonel. 'I suppose,' he added wearily, 'that I'll have to reform and go to drinking vanilla'.”

+ The Boring Stuff:

CBOT board says will take “vigorous measures” to counter “bear raids and manipulation of prices” in wheat market; will look out for “unduly large short selling as distinguished from hedging”, sees foreign government selling of futures as “seriously objectionable.”

Editorial: Use of railroads for short distance passenger transportation has been declining steadily for 10 years. About 40% of that business has gone to cars and buses; with the exception of commuter and Pullman service, passenger rail now operates at heavy losses. Rails should experiment by cutting passenger rates to try to increase traffic, and thereby test once and for all whether there's still a viable business there.

Harbor experts in Turkey predict the famed Golden Horn (Constantinople Harbor) will cease to exist within 20 years due to refuse and lack of dredging.

New York City 1931 budget estimated at $630M - $635M, vs. previous record of $567.8M in 1930; basic tax rate may rise from 2.53% to 2.74%.

European stock markets generally lower, German bonds particularly weak, following publicity given Hitler's remarks on Thursday. Fascist threat is not regarded seriously in best informed circles, but there is increasing disappointment in Berlin over delay in formation of the government, with some talk of “semi-dictatorship.”

Banks seem reluctant to commit to long-term loans or investments; long-term rates have gone down at a moderate pace compared to short-term.

Money market (short term rates) extraordinarily easy; call money went begging at 1% and federal funds sold at a fraction of 1%. This surprised bankers who had expected at least a seasonal firming in rates; so far seasonal increase in demand for credit and currency has not appeared, though bankers now expect it by mid-Oct.

R. Ballard, Pres. So. Cal. Edison, says business in Southern California has turned corner; electric output, real estate, and industry all improving.

Breakdown of Newsprint Institute of Canada expected to lead to intensified competition in newsprint industry, followed by consolidation of weaker units.

Japan's silk interests now seen ready to allow drastic price decline to be more competitive with (synthetic) rayon. Standard rayon is $.95 a pound, but the finer grades competitive with silk are $2.15 - $3.00/pound; raw silk has declined to a new low of $2.30.

J. Stone, Farm Board member, says statement about long-term trend in wheat prices being downward was misunderstood; meant to say that trend would be down from the five year average price, not from current level which is generally considered to be scraping bottom. J. Bennet, third-generation head of Bennett trading firm on CBOT, says long-term wheat outlook uncertain due to return of Russia as major exporter. Russia is also starting to grow cotton.

Commodities weak. Wheat dropped sharply in final half-hour to new season low, other grains also off sharply. Cotton market continued gradual decline, hitting another season low. Copper prices unchanged at 10 1/4 - 10 1/2 cents. Tin futures trade at new low.

Corn production by 11 countries in 1930 was 2.444B bushels, down 24.2% from 1929.

First 44 rails report Aug. earnings $44.828M, down 27.4% from 1929.

Tire sales in first 7 months were 36.657M, down 24% from 1929 and 15.6% from 1928, worse than expected. While it was apparent car sales would be down this year, replacement sales were lower than expected and will be down for the second year in a row; attributed to better tire quality and road conditions. Tire industry may be due for consolidation considering large number of companies and difficult conditions.

US exports of footwear in Aug. were 329,916 pairs vs. 295,415 in July and 356,649 in Aug. 1929.

International Nickel of Canada controls 90% of world's known nickel deposits and produced 92% of nickel consumed in 1929.

Winnipeg Grain Exchange offers $1,000 to identify sender of fake telegram seeking to upset US grain markets.

Companies reporting decent earnings: Bulova Watch.