Friday, October 17, 1930: Dow 196.62 -3.64 (1.8%)

Assorted historical stuff:

Editorial: Gov. Black of the Atlanta Fed. takes a defeatist attitude in saying that the US must accept a lower standard of living and that the “load of debt around our necks” is the root of the problem. Contrast this with President Hoover's optimism: “Any retreat from our American philosophy of constantly increasing standards of living becomes a retreat into perpetual unemployment and the acceptance of a cesspool of poverty for some large part of our people.” Can Gov. Black really say going into debt has been a net negative for the American people? “Has there been any greater blessing than the building and loan associations which have lent billions of dollars to millions who would never otherwise have had the means to build.” Homeownership has stimulated people's desire for the other comforts of life, resulting in activity and progress; the fact that some excesses have taken place doesn't negate our whole course. “Governor Black says that what is needed in American business today is not confidence but courage. But surely courage lies in going forward, not backward. The American emblem is an eagle not a crab.”

Two Farm Board members say will concentrate on controlled production and cooperative marketing by producers as “sole salvation for American farm industry.”

Meeting of central bankers in Basel adjourns without joint policy on world crisis. Most said to believe general outlook is dark, end of depression not yet in sight.

Population of County of London in 1929 census was 4.430M, down 54,000 in last 8 years; birthrate in 1929 was lowest ever recorded, totaling 70,089.

Italy to send formation of 12 planes across the Atlantic to Brazil in December; planes will be Savoia-Marchetti flying boats with Isotta-Fraschini motors.

It has recently been found that only 20% of people in the US “avail themselves of any form of dental service.” Of those who do, most visit the dentist only to extract or fill a tooth. “This condition is deplorable, when it is recognized that teeth play a very important part in one's general health. Defective teeth have been the ultimate cause of numerous deep-seated ailments.” Doctors and dentists urge everyone to visit a dentist once or twice a year for a thorough examination.

Newest use for crude oil: “the most modern sky-writing apparatus uses crude oil which is ejected onto a heated steel plate ... it is simpler to use and makes a heavier cloud that is less likely be destroyed by wind.”

Market commentary:

Market wrap: Selling began in isolated stocks including GM, Colorado Fuel & Iron, and GE, then spread to other industrial leaders including US Steel, American Can, and Westinghouse. Banks and trust weak. Trading of leading stocks remained orderly, with good support on dips. Encouraging feature for bulls was market drop in volume on declines; this fit with prediction of dull, range bound period of trading marking a bottom. Bond market staged good recovery, with “buoyant tone” in many parts of the list; foreign govts. improved with many sharply higher; US govts. more active and higher; corp. higher, including lower grade and convertible.

Bonds have generally advanced over the past year from a low hit in Sept. 1929, with a strong rally in the 3 months up to Sept.

Agriculture Dept. sees downward trend in business nearing end; positive indications noted in machine tool orders, in textile and shoe trades, and in residential construction; usual length of business recessions is 12 to 18 months, and current one has been in progress for about 15.

Recent record buying of Std. Amer. Trust Shares (investment trust, similar to mutual fund) noted by J. Newey, Exec. VP; says foresight to buy “a cross-section investment of good common stocks” when prices are falling indicates “a rapidly increasing degree of financial intelligence ... on the part of American investors.”

Nat'l. Industrial Conf. Bd. sees future Russian oil production and expansion as important factor in oil situation.

Economic news and individual company reports:

US Employment Service reports seasonal increases in employment in some sections of the country during Sept., but surplus of labor apparent in many places.

Fed. Reserve reports money in circulation Oct. 15 up $10M to $4.497B, total Reserve Bank credit outstanding up $32M to $1.044B. Fed. Reserve member banks in NY city report brokers' loans down $152M to $2.752B vs. $6.801B in 1929, “all other” (commercial) loans up $69M to $2.535B.

Public utilities (gas, electric, heat, mass transit, water) had sales and operating earnings up vs. 1929 both for Aug. and for the first 8 months.

Electric output by US light and power industry for week ended Oct. 11 was 1,704 GWHr vs. 1,695 in prev. week and 1,782 in 1929.

World rubber industry facing crisis with even most efficient producers selling at loss; opinion divided on how to proceed.

Raw sugar prices have advanced 0.39 cents in the past two weeks to 1.39 cents/pound on brighter prospects for Cuban participation in stabilization plan.

Commerce Dept. estimates number of radios in use in the US as of July 1 at 13.479M; states with the most are NY with 1.752M, and Calif. with 1.470M.

Companies reporting decent earnings: Foster Wheeler (engineering/power), Bickford's (low priced restaurants), D. Emil Klein (cigars).

Musical theater:

Girl Crazy, a comedy with music by George Gershwin, starring Willie Howard, Ethel Merman, and Ginger Rogers; also appearing are specialty dancers including “Olive Brady, with her cart-wheel tap dance.” Set in “America's western and wide open spaces ... a rough villain in the vicinity has a habit of shooting each incumbent of the sheriff's office, one by one, hoping in time to be elected to the post by elimination. ... So Glieber Goldfarb [taxi driver, played by Howard] is selected to run for sheriff.” A highlight is Miss Merman's “barroom ballad about Samson and Delilah, instead of Frankie and Johnny, ... The number is executed in vigorous crescendo, rising to strident heights to the sound of blaring trumpets. Miss Merman has a voice, and for this type of singing she may well have no superior.”

Joke:

“An old farmer was complaining bitterly to the minister of the terribly bad weather for the crops, when the latter reminded him that he had much to be grateful for all the same. 'And remember,' said the good man, 'Providence cares for all. Even the birds of the air are fed every day.' 'Aye,' replied the farmer, darkly. 'Off my corn.'”

+ The Boring Stuff:

German report: Chancellor Breuning delivers ultimatum to Reichstag; Speaking for 40 minutes, presents “extraordinary” economic austerity program, hints government prepared to resort to dictatorship to cope with crisis. Communists shout “starvation dictator”; climax of speech reached amid disorder with fascists “thundering denunciations” and demanding government's resignation. Fascist party introduces bills calling for nationalization of Reich's bank and private banks, regulation of stock market, limitation of interest to 5%, and control of all capital invested abroad. Proposal ridiculed by banking circles, welcomed as showing impossibility of Fascist govt. Berlin authorities optimistic; stock market continued strong, capital flight appears smaller.

British Chancellor of the Exchequer Snowden says depression not as bad as pessimists believe; reports Britain has maintained a larger proportion of production than the US or Germany; estimates unemployment cost to government at 100M pounds annually.

Group of NY City executives organizes program for winter employment relief; seeks to contribute at least $150,000 weekly to provide work for unemployed heads of families in Manhattan and the Bronx; asks for government authorities to carry out program of new public works to increase employment, companies to maintain employment as much as possible.

J. Macy, Jr. creates fellowship to provide collaborator for Dr. A. Einstein in scientific research; foundation set up with initial endowment of $5M.

Dr. H. Dow, Pres. of Dow Chemical, dead at 64.

NYSE notes since 1924 international transfer of securities has been much larger than that of gold or bank credit (all of these are used to balance international trade).

Washington authorities minimize possibility raised in League of Nations reports that supply of new gold for monetary purposes may be inadequate by 1933; say current reserves are adequate and measures could be taken to prevent any future shortage.

14 investment trusts (similar to mutual funds) with investments in a wide variety of fields are now selling at an average discount over 33% from their net asset value; the largest discount is 69.6%. This reverses the situation last year when many managed investment trusts sold at a premium above their net value; at the time this premium was said to represent “the value of superior management contrasted with individual judgment.” In the past 10 days investment trusts have bought a substantial amount of stock estimated at $50M-$60M, said to be mostly for the “long pull.”

Broad Street Gossip: After the worst market decline in a long time, few look for a sustained recovery and many traders will be satisfied if the market fluctuates in a narrow range over the next several weeks. A big rise wouldn't be indicated by business conditions, while many consider prices too low to warrant another big break.

Some weakness yesterday attributed to extensive short covering in the previous few sessions; while stock loans continued to be difficult, this was now attributed to reluctance of large Exchange houses to make stocks available to bears rather than to an overcrowded short position.

Conservative observers still keeping customers out of market; recommend selling long holdings on rallies on theory market is not likely to move ahead in a straight line, and stocks can therefore be rebought during subsequent reactions.

Odd lot buying by small investors said to have increased sharply around the country during last week's declines.

Commodities weak. Grains down; wheat and corn particularly weak. Cotton down. Copper buying remains small, price unchanged but future trend seen uncertain. Zinc down to new multiyear low at 3.95 cents/pound.

Dow average of eight finished iron and steel products unchanged from previous week at $44.76/ton, low for 1930. Scrap continues down in major markets.

New life insurance in Sept. was 1.2% below 1929; Aug. was 8.7% below 1929; first 9 months were 0.2% above 1929.

In 1929, almost 7M pounds of fresh cut flowers raised in the San Francisco Bay region were sent by refrigerated rail cars to Eastern markets.

Vacuum Oil and Standard Oil of Indiana are selling to yield about 6% recently, the highest yields available for several years on better-grade oil stocks.

Recent pressure on GE reflects concern about price earnings multiple of about 27; management said very confident on earnings for next several years. Pressure on GM said to be based on premium compared with other automotive stocks and concern about safety of dividend (current yield is over 8%, and company is expected to earn its dividend in 1930).

Gillette recovered vigorously after announcement of Autostrop merger, up more than 10 points from recent low of 35.

G. Verity, American Rolling Mill Chair., says company has maintained dividends and wages through recent period of lessened business in belief stability in every phase of industrial life is the thing most needed to ensure continuous employment and prosperity. “Many outstanding leaders in commerce, finance and industry are of the opinion that the worst of the drastic depression ... is now over, and that a gradual improvement may reasonably be expected. An increase in our bookings during the past few weeks lends support to that view of the situation.”

Thursday, October 16, 1930: Dow 200.26 +3.56 (1.8%)

Assorted historical stuff:

Editorial by T. Woodlock: Farm problem is not one of traditional farms that work year-round and raise most of their own food, but of the modern “money-croppers” who put all their land into single crops they must sell in markets they have no control over.

AFL Pres. Green predicts serious winter, economic distress in all big cities; calls on city authorities, business and labor groups to prepare to relieve distress.

Dr. M. Winkler of Bertron, Griscom, & Co. calls for US to use its “still enormous reservoir of credit” to help South America recover, pointing to “fountain of credit” that was extended for 8 years, only to “suddenly and without warning” dry up due to the depression.

White House is maintained by staff of 77, at cost of about $135,000 last year; cost of furniture was $5,000, coal $3,575, electricity $215.

Pres. Hoover reported in excellent heath by his doctor; weight stable at 188 pounds, contrary to rumors of recent 15 pound loss.

Dr. Y. Henderson, Prof. of Applied Physiology at Yale, says beer and ale with 4% alcohol content not intoxicating from scientific standpoint.

Device for muffling airplane engine noise invented by Miss Eldorado Jones successfully tested at Roosevelt Field.

Telephone operators in Paris start using new innovation: callers are switched to “phonograph-like disc” repeating appropriate messages such as “that line is busy.”

Market commentary:

Market wrap: Stocks opened strong; bulls encouraged by large short position and increases in imports and rail freight loadings. Rally paused at the end of first hour on bad steel news, but was resumed in “vigorous style” about noon. Short covering grew more urgent as rally progressed; recently oversold stocks including Westinghouse and rails were up sharply. Bears made some afternoon efforts, but volume slackened on declines and market maintained good tone. Bond market higher; sharp rally in foreign govts., led by Brazil; US govt. very quiet, steady; corp. bonds rallied, including convertibles and second grade.

Broad Street Gossip: “A real bullish development is the ability of people to forget. The hardest thing to forget was the 1929 smash. More talk about the recent drop is now heard than about the November, 1929 decline.”

T. Callaway, Invest. Bankers Assoc. Pres. gives keynote address at convention: business doesn't need artificial respiration; wealth producing power of country hasn't been essentially hurt; industrial management and equipment have never been more efficient; credit structure is sound and savings increasing. Sees end to “orgy of speculation,” return to old fashioned value standards.

Some observers talking of return of old-time value standard of 10 times earnings and 5% yield.

F. Purnell, Youngstown Sheet & Tube Pres.: “There are plenty of evidences that the steel industry is looking up. We have passed through many months of depression but that is all behind us. ... Industries consuming steel are increasing activities.”

Commerce Dept. foreign news report assembled from its foreign representatives: trend to economic improvement in many European and Far East countries.

Concerns that recent stock declines have weakened banks with high levels of loans on securities called absurd by “responsible New York banking circles”; most country banks reportedly more concerned with employing surplus funds than with their liquidity. While it's true security loans are close to record level, liquid assets are so enormous that freezing even a large number of security loans wouldn't imperil banks positions; banks also have large capacity to borrow from Fed.

Economic news and individual company reports:

BLS reports Sept. employment in 13 industrial groups was up 1% over Aug., with payrolls up 1.4%; first increase this year.

Commerce Dept. reports Sept. merchandise exports were $318M vs. $300M in Aug. and $437.7M in 1929; imports were $227M vs. $217M and $351.4M; second consecutive monthly gain for exports, and first increase in imports from Aug. to Sept. since 1926.

S.W. Straus reports Sept. building permits in 577 cities were $168.3M, up 4% from Aug. but down 23% from 1929; reverse of usual seasonal decline.

Steel ingot production for week ended last Monday was at 55% vs.56.5% prev.week and 60% two weeks ago; US Steel was at 60% vs. 61% and 62%. Iron Age reports iron and steel buyers again very cautious, reducing inventories and doing less forward buying.

US cotton mills consumed 394,321 bales in Sept. vs. 352,335 in Aug. and 545,634 in Sept. 1929.

Supreme Court to consider whether West Palm Beach should be forced to levy taxes sufficient to meet its bond obligations; bondholders are calling for this, while city officials say they are doing everything in their power to meet obligations and collecting new tax would be “physically impossible.”

Companies reporting decent earnings: International Shoe (expense cuts produce better earnings on lower sales), Wm. Wrigley, Federal Water Service.

Joke:

“' I want to get my advertisement into the hands of every farmer in the county,' a patent medicine spieler in a small town told the crowd around his stand preparatory to selling them his medicine at 'a special advertising price.' 'I'll tell ye a good way to do that,' announced a farmer in the crowd. 'Jest have it printed on the backs of mortgage blanks.'”

Appearing at the Palace (vaudeville):

The Marx Brothers present “bits of nonsense” from their recent picture Animal Crackers; also featured are Cab Calloway's orchestra and magic by Cardini.

+ The Boring Stuff:

Editorial: Many conferences are now being held on unemployment; this means there will be many proposals this winter “to legislate this outstanding economic problem out of existence.” Most will involve “some degree of compulsion of employers and employes,” together with use of Federal funds. It's noteworthy that the AFL has so far come out against these schemes, identifying them with the dole; this is somewhat unfair in theory, but accurate in practice. While voluntary insurance between workers and employers against irregularity of work may be worthwhile, it can't come close to solving unemployment; “the crying need is for the opportunity to work for a good wage, not the right to draw a pittance in lieu of making a living”; this may explain “the attitude of enlightened labor toward happy-thought inventions of politicians or scholastics ... The times can and will be righted. The less that task is assigned to legislative bodies the sooner will it be accomplished.”

Editorial: The Supreme Court will rule this session on 6 cases involving the ICC (regulator for rails); over 30 ICC-related cases are probably on their way there. The ICC “batting average” with the Court has historically been good, though it has suffered a couple of important reversals recently. Some think the Court is reluctant to upset orders of the ICC except in clear cases; if so, this places a high responsibility on the ICC considering their “tremendous powers.”

US farms counted in 1930 Census were 6.298M, down 150,466 from 1920.

Brazil govt. takes control of coffee exports, sends naval and military units against rebels.

Federal Prohibition enforcement div. sends 3,000 inquiries to editors seeking data on attitudes of newspapers to dry laws.

Radio Corp. transmitted 58M paid words over its worldwide system in 1929.

Scarcity of stocks for short sellers to borrow continued Wed., particularly in US Steel and several other majors; some houses reported to have stopped loaning.

Bears may have grown nervous due to recent “agitation against short selling” and evidence of overcrowded short side.

White House officials say NYSE heads' Sunday meeting with Hoover was on short selling; Washington said concerned “raiding” tactics are “unduly and artificially” depressing prices, and that if bear tactics aren't kept within legitimate bounds “hasty and perhaps radical” laws may result. Direct action possible is limited.

While some short covering was evident, it was believed much of the basis for the recent rally was buying by long-term investors and “for the accounts of interest sponsoring their markets.” A rally of several weeks duration was seen as likely, “unless last week's lows are violated in the near future.”

Industrials trading on the Curb Exchange (later became the Amex; smaller companies) haven't taken much part in the sharp decline over the past month, although the low volume of trading can result in big moves; for example Dow Chemical was down 6 points to 50 on Tuesday on 700 share volume.

BMT and IRT (NY mass transit) shares were strong on prospects for unification with city; seen as desirable for city since it would allow replacing high interest bonds of the two companies with low-interest city securities, would also allow the unified company to operate the new 8th Ave subway.

Conservative observers still on sidelines; advise waiting until it's clear recent lows will be support levels on declines.

A. Corey Jr., Vanadium Pres.: “As near as we can determine business is turning for the better, as reflected in inquiries.”

G. Woodruff, Nat'l. Bank of the Republic Chair.: “This depression is the first one I have experienced during which banks that I know of have had no losses.”

Commodities mixed. Cotton up slightly. Corn down substantially, wheat and other grains mixed, little changed. Copper buying still quiet at 10 cents; some concern over increased production by one large foreign producer. Zinc down to 4 cents/pound, lowest price for many years.

NY State Att'y General took 157 actions against 526 individuals and companies for security fraud in first 9 months vs. 104 against 342 in all of 1929; total loss to customers was about $39.3M.

Farm Board Chair. Legge refuses to release specific information on loans to co-op marketing organizations; willing to release total of loans outstanding, but says co-ops don't want specific loans divulged for competitive reasons. Co-ops get low interest loans from Farm Board and relend to members. Rep. Cellar (D., NY) had demanded to know if co-ops were overcharging members on interest rates.

Natural gas sales by 80% of utilities in first 8 months were almost 340B cubic feet, down 0.5% from 1929; revenues were $171M vs. $172M.

Iron Age reports seasonal improvement in machine tool business since Sept. 1 has been very small.

Independent Petroleum Assoc. of Texas will resume agitation “with vigor” for oil tariff.

German report: Breuning financial program sees large spending cuts, increase in tobacco tax and unemployment insurance levy. Reichsbank says will again raise discount rate if capital flight continues. Many German cities are in difficult financial position due to large spending on unemployment relief; large cities have raised taxes and taken out short-term loans at 8%-9% rates. 120,000 workers have gone on strike; companies stopping production include Siemens & Halske and German GE subsidiary. Trade surplus for first nine months was over 1B marks. Stocks hold yesterday's rally.

Lloyd's Register reports ships under construction worldwide in Q3 were 2.569M gross tons vs. 3.057M in 1929.

Canada to suspend Soviet coal imports for fall and winter.

Cuban Pres. Machado says sugar industry in crisis, urges cooperation with Chadbourne plan to withdraw 1.5M tons from existing 2.2M tons sugar in storage.

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

Portland cement production in Sept. was 16.1M barrels vs. 17.8M in Aug. and 17.2M in 1929. First 9 months was 126.9M vs. 128.2M.

US manufacturers consumed 25,288 tons of rubber in Sept. vs. 30,575 in Aug. and 34,363 in Sept. 1929.

Tire shipments by US makers in Aug. were 5.520M vs. 5.810M in July and 7.845M in 1929; Production was 4.443M vs. 4.257M and 5.806M.

Goodyear places factory workers on 24 hour work week; hopes to resume full-time schedule in Dec.

Wednesday, October 15, 1930: Dow 196.70 +3.65 (1.9%)

Assorted historical stuff:

Editorial: R. Kelley of the Denver land office has accused the Interior Dept. of favoring large oil companies with leases on Western oil shale lands worth $40B. While the charges have yet to be decided, the $40B figure is absurd; the present value of this land is much smaller since extraction of oil is more costly than from present oil fields, and it's unlikely the reserves will be needed in the lifetime of anyone now living in the US.

Editorial: Experts in NY not disturbed by Fascist riots on Reichstag reopening; say mostly by irresponsible young men; even Hitler has called them “inopportune.”

Spanish situation reportedly “feverish following rumors and false reports of public unrest”; “strikes and political uncertainty have produced a state of chaos.”

Chiang-Kai-Shek, Chinese Nanking govt. Pres., estimates casualties of last 7 months of civil war at 300,000.

Marie Harriman Gallery opens with exhibit of paintings by Cezanne, Renoir, Gauguin, Matisse, Van Gogh, and Picasso, “all secured last year and all accepted as perfect examples of that group of masters. A short time ago these paintings would have been called extremely modern. Today they seem slightly conservative in comparison to Chagall and Soutine. Ten years ago an uproar would have been provoked; today they are ... a matter of course.”

Telephones per 100 people in various countries: US 16.3, Canada 13.7, New Zealand 10.2, Sweden 9.4, Germany 4.6, Britain 3.8, France 2.3.

Ford now salvaging 600 cars/day in experimental plant; “everything in them is reclaimed to serve some useful purpose.”

N. Smith of Bureau of Mines believes some of the fractions refined from crude oil may eventually be used as shortening and cooking oils.

Pabst Brewing installs almost $1M worth of beer-producing equipment in anticipation of legalized beer “in the not far distant future.”

Market commentary:

Market wrap: Market opened with a flood of early selling accumulated over the long weekend; sizable breaks occurred in majors including US Steel, American Can, and AT&T. However, this appeared to exhaust “liquidation of distressed holdings” blamed for last week's collapse, and was “absorbed in noteworthy fashion.” General list then rallied in orderly but impressive fashion, most vigorously in issues that had recently been under pressure. Amusement stocks particularly strong including Fox film and Loews. Market closed firm. Rally may have been helped by recovery in wheat market and short covering. Bond market improved; distress selling absent; corp. high grade steady, some rallies in lower grade; rails weak; US govt. dull, firm; foreign govts. firm, South American stronger.

“Intimations [came] from responsible banking sources that some of the sore spots in the speculative structure were rapidly being healed.”

Broad Street Gossip: Although most market letters now are cautious (as usual during declines), many stocks are clearly very cheap if bought for “a long pull.” For example, many companies are selling at market caps below the cash they've put into property and plant over the past 5-10 years. While a long-pull view may be needed since these companies' earnings are currently below normal, “the big fortunes of Rockefeller, Mellon, ... and others were made buying and holding stocks.”

Outsiders recently looking to enter the market have been advised by brokers “to give more than the usual amount of study to intrinsic values and earning power.”

Brokers report number of recent margin calls, while large, was far short of the number sent out during last fall's panic.

While the $7.578B shrinkage in stock values last month was sizeable, it's just 10% of annual US earning power and 2% of estimated total US wealth of $400B.

K. Fulton, General Outdoor Advertising Pres., announces Sept. contracts best in co. history, says fluctuations in sales have generally foretold changes in general business several months out; “It will be surprising if the sharp upturn in sales ... [doesn't fortell] a substantial improvement in general business ... in the near future.”

M. Traylor, First Nat'l. Bank of Chicago Pres., says prosperity won't return because of “a great increase in spending,” but because of “hard work, thrift, and wise investment”; says spending without saving was one of main causes of current depression.

Economic news and individual company reports:

Fed. Reserve member banks weekly report for Oct. 8: loans on securities down $215M to $8.268B, “all other” (commercial) loans up $15M to $8.545B; considered to reflect “further strengthening of an already strong nationwide banking condition.”

Rail freight loadings for week ended Oct. 4 were 972,492 cars, up 22,111 from prev. week, but down 207,455 or 17.6% from 1929 week. Canadian loadings were 70,897 cars, up 100 from prev. week but down 8,535 from 1929.

Some major Q3 earnings somewhat down but still decent: AT&T $2.55/share vs. $2.77 in 1929; GE $.46 vs. $.59; Western Union $2.22 vs. $3.89.

Number of large power laundries in US was 5,962 in 1927; about 2/3 of operatives were women, about half working 48 hours/week or less, almost all working day shift; median week's wage for white women was $16.10, for black women $8.85.

Joke:

“Cautious Father - My dear, if you want a truly good husband, marry Mr. Easie. He really and truly loves you. Daughter - How do you know that? Cautious Father - Because I've been borrowing money off him for six months, and still he keeps coming.”

Movie:

Half Shot at Sunrise - Comedy about two privates AWOL from US Expeditionary Force during the World War.

+ The Boring Stuff:

Editorial by T. Woodlock: Current to-do over short selling has “something of an ancient and fishlike smell.” Most arguments have been made many times before, often in the same words. However, we should clear up one misconception about short selling - the idea advanced by its defenders that it acts to stabilize the market by restraining it during advances and providing some support during declines. It's well established by margin loan figures that bull traders are most active at the top; it's therefore almost inescapable by symmetry that traders on the opposite (bear) side are least active at the top (the NYSE stated this was the case last Sept.), and grow more enthusiastic as prices decline; “panics are bred by the 'bull,' not by the 'bear.'” Rather than defend short selling by inaccurate argument, “if we are to have a market at all it must be a free market and a free market must be open to 'short selling,' and that seems to be the 'long' and the 'short' of it.”

Advertorial placed by Imperial Smelting Corp. Chair. R. Horne: Cause of current trouble is appreciation of gold; “nothing is worse for trade than wide fluctuations in the value of gold”; demand for gold should be coordinated to avoid fluctuation in purchasing power due to competitive efforts by countries to secure reserves.

Germany report: New $125M loan two-year loan at 6% arranged with US, Swedish, Dutch, and German banks; Britain and France refused to participate; France demanded passage of financial program first, but Germany refused this condition. Stocks were up on new loan, while marks hit a new yearly low. Reichsbank reportedly has lost $125M in gold and foreign currency since the election, is considering another discount rate hike. Berlin “referee” decided on 8% wage reduction for 140,000 factory workers; large majority of workers have resolved to strike. Unions ask abolition of reparation payments. Reich now enters critical period; for stability of Breuning cabinet, support of Social Democrats is essential. While prospects for parliamentary majority are doubtful, statement of P. Loebe, Social Dem. and Reichstag Pres., is reassuring: “We [will] oppose the Nazis ... with our iron will, but if necessary, with our iron fists also. Germany cannot afford to let herself be ruined ... by a gang of irresponsible brawlers.”

A. Tsikhon, USSR Commissar of Labor, says currently no Soviet unemployment due to growth of socialized industry and agriculture; national shortage of 500,000 workers; plans drafting of all unemployed.

New York Central says carried 13.94% of US passenger rail traffic in 1929, has had no accidental passenger deaths in past 3 years, or over 13B passenger miles.

Daily “loan crowd” session for loaning stocks to short sellers was “one of the most excited ... ever witnessed,” with some leading issues loaning at a premium (borrowing fee), including US Steel.

Study of historical bear markets in 1903, 1907, 1910, 1917, and 1921 shows current bear market has now declined about as much from the highs as in those major downward swings. This has brought extensive investment buying of high-grade stocks on theory prices are somewhat near bottom even though “further moderate declines may be seen.” Technically, end of these bear markets has usually been marked by several weeks of sluggish trading in a narrow range.

Conservative observers still don't advise buying stocks; this might change if leading stocks showed definite resistance above previous lows.

A large number of professional traders continue pessimistic on the immediate future; this may indicate a secondary tests of market strength is coming.

“In certain quarters” it's pointed out that price swings habitually overshoot on Wall Street, perhaps as much on the downside this year as on the upside in 1929.

Col. L. Ayres of Cleveland Trust notes seasonal business improvement in past month; believes it's probable depression has hit bottom, but no sure way of estimating how long bottom will last.

GM shares traded as low as 34 1/4 on rumors $3 annual dividend may be cut, closed at 36 1/2.

South American bonds have plunged recently, many trading 40 points below their 1930 highs and with yields in the mid-teens. Brazil revolution has affected bonds much more than other recent political upheaval in Bolivia, Peru, Argentina, and Chile; bonds in other South Am. countries have also sold off. Effect of depression being acutely felt in lower commodity prices, resulting in trade imbalances and loss of gold to US.

Canadian Bank of Commerce reports moderate and uneven seasonal recovery in Canadian business, says future depends on conditions elsewhere since export markets account for large share of Canadian production (40% of grain, 80% of lumber and paper, 60% of metal).

Commodities mixed. Grains down early, with wheat hitting new season lows, but rallied sharply to close with substantial gains. Cotton fluctuated, closing down moderately. Copper buying remains dull; small amounts reportedly offered at 9 3/4 cents. Cocoa sharply lower after reports Brazil revolution had not yet interfered with crop movement.

R. Whitney, NYSE Pres., visits Pres. Hoover; White House “would neither confirm nor deny that the subject of short selling was discussed.”

Gasoline stocks at refineries Oct. 11 were 367.125M barrels, up 684,000 in week; refineries operated at 66.5% vs. 67.2% prev. week; oil production was 2.367M barrels/day, down 20,150 from prev. week and down 471,300 from 1929.

Oklahoma Supreme Court upholds state's oil proration (production control) law, deciding against Julian Oil.

Natural gas produced and marketed in US in 1929 was 1,918B cubic feet, up 22% from 1928; avg. increase in past 10 years was 10%.

Aliens admitted to US in Aug. were 34,540 and leaving 34,411 vs. 41,785 and 29,294 in 1929; US citizens arriving were 69,957 and leaving 88,372 vs. 70,783 and 70,551 in 1929. Of arriving aliens 14,816 were classified as immigrants; most popular countries of origin were Britain, Germany, Italy, and Ireland.

Mexican Chamber of Deputies presented with bill suspending payments on De Oca debt plan for 5 years; De Oca plan has not yet been approved by Chamber.

British registered unemployed Oct. 6 were 2.176M vs. 2.162M prev. week and 1.207M in 1929.

Newsprint produced by Canadian mills in Sept. was 195,490 tons vs. 202,043 in Aug. and 227,665 in 1929; US produced 95,261 vs. 101,601 and 108,155.

Gasoline in Chicago wholesale market is 5 3/8 - 6 cents vs. 5 1/2 - 6 1/4 previously.

Gillette and Autostrop Safety Razor directors meet all day Tuesday regarding merger, hope to sign agreement today.

Companies reporting decent earnings: Chesapeake, Industrial Rayon, Congress Cigar.

Wrigley (largest chewing gum mfgr.) stock about 69, yield 5.8%; earnings have tripled in past 10 years; 1929 net was $5.80/share, 1930 expected to be higher.

The Irregular Blather Oct. 14, 2009

No Journal was published Tuesday, Oct. 14, 1930 following Columbus Day. Since I've been doing this blog for a while now, I thought I'd blather on a bit about some of my random thoughts and tentative conclusions from it all. Hopefully this won't wind up too much like one of those late lamented Larry King stream of consciousness columns for USA Today. (Note: That link is not an actual Larry King column but an Onion homage that I think captures the flavor even better than the original – contains some bad language).

First, a bitter rant against some unjustified criticism: Some have said that I'm implying we're in for a replay of the 1930's. I do not think that, as I made clear in the first paragraph of the first post on the blog:
Q. Okay, why are you doing this blog? Are you saying we're in for a replay of the 30's?
A. How did I know you were going to ask me that? No, I don't think things are going to get as bad as in the 30's.

Since there does seem to be some confusion about this, I think some more blathering is in order on what I do think will happen, what I think the usefulness of the blog is, and the similarities and differences I'm seeing with the 1930's.

Not to pussyfoot around too much, I see the most likely path for the US as something like Japan over the past 20 years: a pretty long period of going sideways and down overall, but with some optimistic periods where stocks and the economy rally quite vigorously. Note that the time scale here is years and decades, not months. For example, as David Rosenberg noted, the Nikkei has had four 50% rallies since the bubble burst about 20 years ago, yet is down about 70% over that period. This does beg the question of why I'm doing this blog about the 1930's US instead of 1990's Japan. To this I can only say A) I don't read Japanese, and B) the 1930's are more fun. I also do see a possibility, though unlikely, of a relatively happy ending, which I hope to expound on more later.

As for the usefulness of the blog, I do not believe it's very useful in predicting complex macro-type things like quarter-to-quarter GDP changes or stock market movements. This is because these things are the result of the chaotic interaction of several very large factors, which will probably not all line up the same between the two periods. As a particular example, while I think the dshort.com website in general is great, I don't think comparative bear market charts like this one on that site are that useful as predictors of future stock movements. As another example, in my Aug. 1 post, I quote a really uncanny 1930 analysis doing a comparison with the 1921 market:
Walker Brothers point out strong similarities of current business and market conditions with 1921. Market pattern of break last fall, followed by recovery and second break in spring, almost identical to 1921 in both timing and percentage. Other indicators including commodity prices, freight loadings, and dividend yields also similar. First indicator improving in 1921 was construction, two months before stocks hit lows [followed by 8-year bull market]. Therefore encouraging that construction turned up in June.
I don't know about you, but that one sounded better than any of the comparisons of market movements I've heard recently – yet it turned out to have less than stellar predictive power.

In fact, upon reflection I'd go further and say trying too hard to draw analogies of this kind is dangerous and to be actively resisted, because finding predictive patterns is a basic human survival drive (I'd put it up there with food and sex), so we tend to find them whether or not they're really there.

So, if the blog isn't useful as a predictor of short term macro twists and turns, what good is it? For one thing, I do think macro examples are useful, but as counter-examples, not as predictors. It's useful to see that large market rallies, as in the 1930 US market or Japan over the past 20 years, don't necessarily anticipate a sustained economic recovery. It's useful to see that clusters of quite encouraging reports of business improvement, as we're seeing in the past few weeks from 1930, aren't conclusive proof that the upswing will be maintained until we're back to normal.

What else? While I think macro stuff is too complex to compare directly, I do think some individual factors can be usefully compared between 1930 and today. One example that I'm really struck by frequently is the banking picture. This does seem to be playing out in interestingly similar fashion to 1930, although I believe things diverge later in 1930 when large banks start collapsing. We have theoretically easy credit, with interest rates low and banks having lots of money available to lend. However, credit outstanding is gradually going down, while banks pile money into securities and investments. This seems to be a combination of the pushing on a string problem (with too much debt already, spooked borrowers don't want to take on more) and the zombie bank problem (banks nervous about impaired investments are pulling back on extending credit).

Another particular similarity that I was surprised by was the extent of stimulus applied in 1929-1930, since the popular historical image is of Hoover as standing by and doing nothing; much of this stimulus was applied by “volunteering” industry, particularly rails and utilities, rather than by government spending.

One more useful thing I think can be gleaned from looking at day-to-day reports is a better feeling for what individual economic statistics do better as tell-tale signs of how things are going. I'll leave most of this as an exercise for the reader, but some particular examples of how good some stats are as signs (my opinion only): asset price movements – poor; rail freight loadings – good; government tax revenues – good.

I'm out of time for today, so I will have to continue the discussion of similarities and differences with 1930 at a later date …

Monday, October 13, 1930: Dow 193.05. -5.45 (2.7%)

Assorted historical stuff:

Editorial: Alice Meynell said: “Rhythm is the law of human hopes, fears, and loves; perpetual oscillation ... reflects itself in all things human.” Poets over the ages have agreed; while they generally haven't written about the stock market, nothing exemplifies this principle better or reflects hope and fear more directly. It's the essence of the market that when hopes are highest their frustration is at hand, while “when fears crowd in like the Mongol horde” and shake the stoutest hearts, the danger has already passed. For successful investing it would suffice to have an instrument measuring current intensity of emotions and, “the stronger they are, the more resolutely act against them.” Simple, but no easier than Ovid found it 1,900 years ago; perhaps we can start by recognizing “fears are now running riot.”

US Chamber of Commerce says expects more government regulation and participation in business to be proposed in upcoming session of Congress; “measures seen as forerunner of more sweeping political control of economic activities.”

Manifesto calling for abolition of military training and conscription published around world; British signers include H.G. Wells, Bertrand Russell, Aldous Huxley.

Chess increasingly popular in Britain; only two games permitted in Parliament are chess and checkers.

NY City tentative budget of $615.869M accepted by Board of Estimate; will require significant tax hike.

47 of 48 Republican ward leaders in Philadelphia switch parties to support J. Hemphill, wet Democratic candidate for governor, after Republicans nominate a dry.

Plans for national full fashioned hosiery exchange will probably be abandoned due to waning interest.

Leading toiletry co. has created new advertising novelty - books of matches cleverly made into miniature replicas of tubes of shaving or dental cream.

German fire insurance cos. report largest cause of fires is children playing with matches or imitating elders.

Market commentary:

Market wrap: Stocks opened firm following Friday's dramatic late rally, which raised the Dow from 186.70 to the close of 198.50. Some fractional gains in first half-hour; an attempt to extend the rally under leadership of US Steel brought out heavy selling, and early momentum was lost; most traders seemed content to take profits before the holiday [Columbus Day] weekend; leading issues closed lower. Bond market active and strong; sharp rallies in many foreign govts.; domestic corp. and convertibles markedly higher; observers surprised at sensitivity of bonds to stock market movements.

Week in review: Stocks heavily liquidated almost without interruption until late Friday rally; Dow broke below last fall's panic level. Failure of Prince & Whitely (major broker) may have contributed to downturn, though unclear if creditors will suffer losses. Bond market also declined, with highest grade domestic resisting pressure best and foreign particularly weak. Money noticeably tighter, with call rates up to 2%. Substantial increase in commercial loans, decrease in brokers' loans. Weak figures from steel and rail loadings. Grains and cotton down. Unexpected German rate hike. Political disturbances in Brazil and Spain.

Many high-grade stocks now seem to be good “long pull” investments at current prices. For example, US Steel stock is 146, yield 4.8%, and averaged almost $15 a share annually in earnings over past 4 years. GM stock is under 40, yields about 8%, and earned a total of $21/share over past 4 years.

Not in years have so many disturbing rumors circulated; unfortunately, “one or two” proved correct, leading to natural tendency to pay more attention to all.

Strong rumors Friday from “usually well informed quarters that banking support in the market had become aggressive”; may have contributed to sharp late rally.

Samuel Insull, head of Insull utility group: Continuing large capital investments; taking long-term view; consider depression temporary; electricity still growing, gas sales flat, and transportation declining; “I have the greatest confidence that the conservatively financed utilities ... will weather the present business depression.”

Economic news and individual company reports:

Fed. Reserve Bulletin reports money market conditions remained easy in Sept., against usual seasonal trend; member banks' deposits are high, Reserve borrowings low, some growth in investments and loans on securities while “all other” (commercial) loans remained low.

Irving Fisher's index of 200 commodities for week ended Oct. 10 was 82.9 vs. 82.3 in previous week and 94.4 in Oct. 1929.

Julian Oil is now battling proration (production control) in Okla. State Supreme Court, in Federal Court, and in a hearing at the Okla. State Corp. Commission.

Belgium reportedly resisting recession relatively well in spite of export-based economy; while stocks are down and some individual industries are suffering, unemployment remains low; attributed to low costs of living and production. Belgium also has low tariffs and taxes.

Companies reporting decent earnings: Otis Elevator, Crown Cork & Seal, Wesson Oil, Gray Telephone (biggest maker of pay phones), Hawaiian Pineapple.

Joke:

“'In time of trial,' inquired the speaker, 'what brings us the greatest comfort?' 'An acquittal,' interrupted a man at the back of the hall.”

+ The Boring Stuff:

Editorial by T. Woodlock, former ICC member: Rails face a difficult long-term situation: revenues are declining due to large and inevitable factors including motor transportation and pipelines, while avoidable expenses have mostly been wrung out of the system already. Expected traffic in coming years won't support the system at the quality we're used to, so we will need to either pay more or cut it back; the ICC will manage this process as well as possible.

British cabinet decides against Canadian proposal of reciprocal trade protection between dominions.

Supreme Court to rule in current session on 6 rail industry cases involving contested orders by Interstate Commerce Commission.

One of world's largest oil tankers built for Standard Oil NJ - cost $2M, capacity 150,000 barrels.

15 years ago today, NYSE switched from quoting stock prices in percent of par value to dollars per share.

Friday's trading suggested oversold condition; in first 3 1/2 hours Dow declined 5.30 points on 4.750M volume, while rally of 11.80 took place on 1.5M volume.

Market possibly was technically weakened by sharp rally late Friday, which caused mild “bear panic” and short-covering, though good-size short interest remains. Many bears also believed to have closed their positions on Friday “because they desired to leave the Street for an extended week-end.”

Consensus seemed to be to let market prove itself after “erratic and nervous condition which had developed toward the latter part of the week.” In spite of Friday rally many observers were concerned about possibility of further liquidation.

Conservative observers still advise remaining on sidelines until “market has demonstrated conclusively that a point of resistance has been established.”

Editorial: For the first time since 1816, when there was a frost every summer month, it looks likely we'll run out of corn this year before the next crop. Wheat can make up some of the deficit but not all. This should be a seller's market for feed grains, and corn shouldn't be cheap; farmers are likely to raise less cattle this winter.

Commodities mixed. Corn plunges, other grains down substantially. Cotton again up moderately.

Prince & Whitely receivers appointed in NY and Chicago; no accounting of firm's financial condition yet available.

Refined copper stocks in North and South America Oct. 1 were 360,650 tons, up 12,962 in month and vs. 94,751 on Oct. 1, 1929.

Youngstown District steel production expected to remain unchanged at 53% next week.

Gasoline in Chicago wholesale market was 5 1/2 - 6 1/4 cents/gallon vs. 5 5/8 - 6 1/4 previously.

881 lumber mills reported orders for the week ended Oct. 4 were 14% above production of 255.2M feet; production is about a third below 1929 levels.

Nat'l. Assoc. of Cotton Mfgr. outgoing Pres. calls for continued curtailment, cooperation in textile industry; says elimination of night work for women and children will help. G. Sloan, Cotton Textile Inst. Pres., says situation improving; sales have been below production for 3 months and inventories have declined to minimum.

British imports in Sept. were 78.7M pounds vs. 79.9M in August and 98.4M in Sept. 1929. Exports were 42.7M vs. 42.8M and 55.1M.

Germany report: Discussions continue on new $125M loan; French banks hesitating on cooperation, decision unlikely until Reichstag's attitude on financial program clear. Central bank heads meeting in Basel reportedly were asked to activate Young Plan clause allowing postponement of some reparation payments. Marks lower; Reichsbank rate rise to 5% apparently ineffective in preventing further capital flight. Official count of unemployed was 3.088M as of Sept. 30th, about 2M of whom are receiving unemployment insurance benefits.

Many bankers believe worldwide recovery will be difficult until France starts lending its “enormous unused balances”; however France is so far “giving no signs of entering the foreign loan market in a sizeable way.”

Los Angeles Chamber of Commerce reports Sept. showed continued improvement in most Los Angeles district industries; employment was up from Aug., while building permits and postal receipts were above Sept. 1929 levels.

Visitors to national parks in year ended Sept. 30 were 2.819M vs. 2.681M in 1929; most popular was Yosemite with 458,566.

Pennsylvania RR has paid dividends continuously since 1847.

Woolworth sales continue improvement of last month; based on present business, 1930 sales may be close to the 1929 record year and profit is likely to be better. Current store count is 1,890 in US, Canada, and Cuba, with 65 opened this year.

Favorites of the week Oct. 6-Oct. 11, 1930

No Journal was published Sunday, Oct. 12, 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.

Important administrative note: A couple of weeks ago I wondered why no one had ever made a movie about Black Friday (Sept. 24, 1869), on which Jay Gould and Jim Fisk engineered a corner of the gold market. I am now informed that at least one movie was made that does depict it, though apparently only toward the end: The Toast of New York from 1937, starring Edward Arnold, Cary Grant, and Frances Farmer, no less! It appears to be a highly fictionalized biography of Jim Fisk. Unfortunately it's not available on Youtube; there is an insanely expensive DVD on Amazon, and I believe it's in the TCM channel library.

[*] Note: It may seem like I'm making fun of the optimistic forecasts like the ones I marked with [*] below. In fact, I think most of them were made reasonably by good to great businessmen and administrators based on the solid information they had in front of them.

Oct. 11:

[*] A. Coleman, Asst. Postmaster General, says inquiries indicate higher volume of mailings planned in Oct. and Nov., says this is one of best business barometers.

[*] J. Schenck, United Artists Pres., says “business depression definitely is ending,” announces increased production schedule.

[Note: Strangely familiar dept.] Bears argue that some stocks continue to sell at higher price earnings ratios and yields far below those reached in previous depressions; optimists reply higher valuations are justified in seasoned, financially strong stocks with record of consistently good earnings, also point to lower money rates vs. previous depressions.

[Note: This speech of course reminded me of the Greatest Movie Ever: “Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”] Richard Whitney, NYSE Pres., defends value of speculation as providing liquidity to market, allowing investors holding securities to turn them into cash at any time; this is an essential service for complex civilizations. Short selling necessary part of market, absence would distort prices from “real estimate of security values.” Extent of short selling and “bear raiding” exaggerated. Also believes capital gains tax an indirect cause of last year's inflation in security prices.

[Note: Ay Chihuahua! dept.] L. Baldwin, Missouri Pacific Pres.: Backbone of the long drought has been broken; situation greatly improved over a few weeks ago; Midwest and South preparing speedy comeback from economic depression resulting from the drought; praises farmers' resourcefulness and determination.

[Note: They're almost done with that dept.] Airline demands construction of passenger waiting room at Newark Airport, say will move to another airfield if demand not granted.

[Note: Strangely, the unbreakable glass had bits of pineapple floating in it.] Of 22M pounds of gelatin produced last year, 10M were used for dessert or salad and 5M for ice cream; also used to make movie film and unbreakable glass.

Oct. 10:

[*] F. Corley, Marshall Field VP, says inventories have been cleaned up, general business and industry on eve of recovery.

[Note: Strangely unfamiliar dept.] Rep. Byrnes (D., Tenn.) charges Treas. Sec. Mellon is exaggerating budget surplus for political ends; Mellon defends record, says accusation is itself political.

[Note: Sheer Genius dept.] Cure for pneumonia by electrically-induced fever of 116 degrees presented at Amer. Phys. Therapy Assoc. convention.

Oct. 9:

[*] W. Procter, Pres. Procter & Gamble: "In our opinion we have passed the bottom of the curve and business is slightly but unmistakingly better and in our opinion will continue to improve slowly."

[Note: Strangely familiar dept.] An optimist reports looking at cars on the road and finding almost all needed a new tire or two; similarly for shoes, “and so it does all the way down the line from automobiles to the end of the alphabet. Everything wears out. You and the other 121,999,999 people must buy soon.”

[Note: I like how they just casually mention the “bullet wound, mistaken identity” part.] Bill “Bojangles” Robinson appearing at the Liberty Theater in musical comedy about adventures of a company of black soldiers in the World War. Cast includes “some of the nimblest dancing talent in Harlem ... Mr. Robinson seems to find it as easy to dance as the audience finds it easy to watch him, although one of his arms at present is in a sling, due to a bullet wound, the result of mistaken identity. His dogs do not bark; they purr.”

Oct. 8:

[*] C Denny, Erie Railroad Pres., speaking to Traffic Club in St. Louis, says in his opinion business has passed bottom of the depression.

[*] T. Girdler, Republic Steel Chair.: “Steel prices are touching bottom”; large buyers now placing orders for future delivery; “Prices of many steel products have dropped to a point where many large consumers themselves realize any further decline would serve no constructive purpose.”

[*] F. Hulswit, Amer. Commonwealth Pwr. Pres., says co. will buy now for future needs; based on study of current conditions believes bottom of depression passed.

[Note: Some interesting stats here about US consumption/standard of living in 1930. I've seen some opinion that one difference between today and the 1930 is the more dominant US position today; while this may be true with regard to “superpower” status, it doesn't seem correct WRT consumption.] Pres. Hoover speech marking 150'th anniversary of battle of King's Mountain [major Southern battle in American Revolution]: One test of our system of govt. is the practical results: US has more youth in higher education than rest of the world combined; compared to the most advanced European countries, US has double the rate of homeownership per capita, consumes 4 times as much electricity, has 7 times as many cars, etc. Equally important is intangible qualities - sense of freedom, security, confidence in future progress. Sees govt. involvement in business except in emergency as destructive of equal opportunity and tyranny through bureaucracy; business practices which would dominate the country for selfish purposes likewise destroy equality of opportunity.

Oct. 7:

[Note: For those wondering why Hoover is suddenly appearing everywhere, I'm assuming it's because of the upcoming midterm election. This speech is interesting because it shows there was in fact a significant amount of “stimulus” applied in 1930 – note the entire Federal budget was only about $4B at the time. It appears that most of the stimulus was accomplished by enlisting industry, particularly rails, to maintain expenditures and advance planned work. Hoover seems to have conceived of these industries as reservoirs of spending that could be drawn on in times of unemployment.] Pres. Hoover addresses AFL. Praises cooperation of labor and business after fall market panic, says measures adopted “served as a practical system of unemployment insurance”; notes public works and construction by rails and utilities in first 8 months was $4.5B vs. $4B in 1929; “a new and improved tool has been added to the working kit for the solution of our future problems.” Says some regulations that lead to destructive competition and instability may need to be modified. Praises scientific and labor saving development as gain to employers, workers, and consumers; recognizes problem of “technological unemployment” but believes new discoveries and inventions will absorb workers displaced from older industries.

[Note: 1914 must have been one hard-partying year.] Prohibition Bureau estimates illicit liquor production in US in year ended June 30 at 876.3M gallons; estimates consumption at 40% of 1914 level.

Oct. 6:

[*] S. Archer, Pres. Archer-Daniels-Midland, says Sept. business largest of any month this year, inventories remain low; “with the more general feeling of optimism that is being manifested, we expect the holding off tendency which has been so pronounced to give way to more liberal buying from now on.”

[*] G. Verity, Pres. Amer. Rolling Mill Co.: “I think it is pretty well conceded that we have reached or passed the bottom of this depression and from now on can look to gradually improving business”; industry should be back to normal by end of Q1 1931; company business in Sept. up 25% over Aug.; Business recession has been costly, but cost will be recovered thanks to removal of “deadwood acquired in prosperous times.” Looks forward to tremendous prospects in all industries.

[Note: Strangely familiar dept.] Times are changing in Manhattan real estate. In the past 15 years many landlords did as little as possible for tenants; repairs were kept to bare necessities unless tenants paid, and “requests for redecorating were as often as not received with dignified silence.” Recently, a tenant requested a number of quite expensive jobs; the landlord's letter back concluded “Our decorator will be around in the near future to arrange for the work at your convenience.”

[Note: Thank goodness they don't do that anymore dept.] Federal grand jury indicts six former employees of Manhattan Elec. Supply for manipulation of the stock; tactics included employing a group to send out letters, market sheets, and telegrams to the public, and paying money to brokers in return for advising customers and the public to buy the stock.

[Note: Sheer Genius dept.] Berlin radio engineers build mammoth loudspeaker audible over a 25 mile diameter, plan to attach speaker to a balloon anchored 3,000 feet high to broadcast concert to the city. Loudspeaker creates airwaves that can be felt 150 feet away.

Saturday, October 11, 1930: Dow 198.50 +6.50 (3.4%)

Assorted historical stuff:

Richard Whitney, NYSE Pres., defends value of speculation as providing liquidity to market, allowing investors holding securities to turn them into cash at any time; this is an essential service for complex civilizations. Short selling necessary part of market, absence would distort prices from “real estimate of security values.” Extent of short selling and “bear raiding” exaggerated. Also believes capital gains tax an indirect cause of last year's inflation in security prices.

L. Baldwin, Missouri Pacific Pres.: Backbone of the long drought has been broken; situation greatly improved over a few weeks ago; Midwest and South preparing speedy comeback from economic depression resulting from the drought; praises farmers' resourcefulness and determination.

Denmark Defense Min. proposes reduction of defense budget from $15M to $5M, abolishing ranks of General and Colonel and replacing with Inspector.

Mayor Walker's advisors now preparing to negotiate with BMT and IRT on city buyout; main question is price city can afford to pay while retaining 5 cent fare.

2,500 Bronx chicken pluckers schedule general strike for today; demand minimum wage of $25/week.

Airline demands construction of passenger waiting room at Newark Airport, say will move to another airfield if demand not granted.

Of 22M pounds of gelatin produced last year, 10M were used for dessert or salad and 5M for ice cream; also used to make movie film and unbreakable glass.

“Mechanical ears” being installed on safes; detect noise such as drilling, triggering alarm.

Market commentary:

Market wrap: Stocks opened under heavy liquidation, with all sections hitting new low levels and very high volume.Selling continued until well after noon, interrupted only by a few brief rallies. A “stiff technical recovery” began in the afternoon; prices turned, and a good rally continued to end of the day, with leaders and all averages closing up for the day. Utilities, investment trusts, and trading favorites were particularly weak during early selling pressure. Bond market sold off heavily most of session on high volume, even soundest corp. bonds weak; sharp rally in last 15 minutes; US govts. were exception, dull and steady.

Foreign stock markets generally lower after Thursday's US selloff. Yields on first-grade German stocks now at 10%.

Early liquidation said mainly due to “unreasoning fear” caused by failure of one of NYSE's oldest brokerages yesterday. With credit ample, “It was the conviction in the banking community that a constructive program could be depended upon in the event of any real distress.” Some market students did contend there was evidence of banking support in the market. Nevertheless, various rumors again circulated during the early decline.

Trading remained orderly, with most industrial leaders having bids under the market and few wide-open breaks.

Bears argue that some stocks continue to sell at higher price earnings ratios and yields far below those reached in previous depressions; optimists reply higher valuations are justified in seasoned, financially strong stocks with record of consistently good earnings, also point to lower money rates vs. previous depressions.

Early selling ignored some positive news, including decline in brokers' loans, increase in commercial credit, and strength in commodity markets.

A. Coleman, Asst. Postmaster General, says inquiries indicate higher volume of mailings planned in Oct. and Nov., says this is one of best business barometers.

J. Schenck, United Artists Pres., says “business depression definitely is ending,” announces increased production schedule.

In spite of afternoon rally, there were 4 new yearly highs and 411 new lows. Until the rally, market had declined almost continuously since Sept. 10.

Market value of all shares listed on the NYSE on Oct. 1 was $60.143B, down $7.577B from Sept. 2.

Economic news and individual company reports:

Bradstreet's and Dun's weekly trade reviews say business situation complex, irregular, and difficult to read; Dun's notes improvement in retail trade over much of the country, though industrial activity hasn't clearly improved.

US steel unfilled orders Sept. 30 were 3.424M tons vs. 3.580M on Aug. 31 and 4.022M on June 30. Current consensus is that situation will not improve until next year at the earliest, and fourth-quarter steelmaker earnings will be poor.

Most aviation related cos. continue to lose money, but traffic is growing sharply; air mail in first 7 months was 4.453M pounds, up 17.5%, while passenger traffic on many airlines is up over 100%; for example, Aviation Corp. of Delaware carried 41,657 passengers in first 7 months vs. 20,659 in all of 1929.

Companies reporting decent earnings: American Chicle (chewing gum), City Ice & Fuel.

Company reports since Sept. 1: 126 companies reported higher earnings vs. 1929 and 158 lower; 545 dividends unchanged, 37 increased, 79 cut.

Higher priced cigars in decline as consumption switches to 5-cent segment.

Market joke:

“'I want to sell some Westinghouse short. I've got a tip that it is going very much lower,' said [the customer]. 'I would advise you against it,' said the broker. 'Remember, Westinghouse at 124 a share is over 75 points from the high of this year and more than 168 points from the high of last year.' 'But I'm positive it's going down. I have a chart that shows it,' said the customer. The broker sold the stock for the customer at 124. It got as low as 109 3/4 Friday. 'You see, you brokers don't know everything,' said the customer. 'What's the use?' said the broker.”

+ The Boring Stuff:

Editorial: Commodity prices have broken below postwar levels, with many important ones selling at or below production cost. Effects of falling prices are mixed. They cause problems for producers and subject debtors to constantly increasing pressure. On the other hand, the rentier

class benefits, wage earners who remain employed get a permanent gain in real (as opposed to money) wages, and construction costs decline. Most obvious current problem is world's debts to the US, particularly German; these will clearly be impossible to service if prices continue down; the sooner debts are adjusted to account for price declines the better for all.

Editorial: Most recent cotton crop estimate is 14.5M bales, down from 14.8M in 1929 and five year average of 15.3M. In spite of this decline, the total supply of cotton available will be about 20.5M, almost 50% larger than estimated consumption of 14M. “In such circumstances cost of production has nothing to do with the price ... [which] will be in accordance with consumers' ability and willingness to pay.”

Five-year survey of number of stockholders in US corporations shows banks with five-year gain of 336%, utilities 123%, industrials 115%, and rails 3%. Companies with largest number of stockholders are AT&T: 492,088, Cities Service: 359,000, GM: 218,392, and Pennsylvania RR: 191,079.

The Chicago conflagration still known as “the Big Fire” [Oct. 9, 1871] caused total damages of $167M, and many fire insurance companies failed following this and another great fire in Boston the following year.

Yale University endowment is $82.857M, up $12.990M in 1929.

Conservative observers remain skeptical, pointing out market has staged a number of good recoveries that didn't last; waiting for more definite indications.

One factor in early selling may have been protection of margin accounts; many margin calls reportedly went out Thursday afternoon.

Brokers' loans have been liquidated beyond all expectations, most recently declining to $2.905B vs. peak of $6.804B last Oct. This puts the market in a stronger technical position, indicating passing of stocks from weak margin accounts to strong hands.

Of the few stocks advancing during recent selling waves, a large proportion have been preferreds.

Some economists now believe weakness in the stock market is slowing business recovery.

Although auto production is far below 1929 level, observers were encouraged that the Aug. to Sept. decline was only 2.7% vs. 16.2% in 1929.

Delegates to 6th Int'l. Road Congress say rails should be allowed to operate buses in areas where highways have cut rail traffic. H. Thornton, Canadian Natl. Rwy. Pres., says rails should deal with motor and air competition by increasing speed and offering better passenger service.

Commodities up. Grains up sharply, wheat particularly strong. Cotton up moderately. Copper buying continues quiet; price outlook unclear.

Bonds, notes, and stock offered by corporations in Sept. totalled $328.2M vs. $235.2M in Aug. and $1.395B in Sept. 1929. First nine months were $5.396B vs. record of $8.948B in 1929 and $5.975B in 1928.

Dr. G. Smith, US Geol. Survey dir., recommends unit (cooperative) development of large new Kettleman Hills oil field in Calif. Regarding accusations Interior Dept. favoring large oil interests for concessions in Western oil shale areas, says date of practical oil shale development is “remote indeed.”

Agriculture Dept. corn crop estimate on Oct. 1 was 2.047B, up 64M bushels from Sept. forecast.

French retail prices have risen steadily from May through Sept., though wholesale prices continue to decline. French index of industrial production in Sept. was 139 vs. 141 in July, but equal to the 1929 average.

Net gold moved from South America to US in first half was $71.6M; attributed to low commodity prices and fewer US loans.

Two NYSE seats sold for $265,000, down $10,000 from prev. sale.

PG&E orders 12M pounds of copper at 10 cents/pound, covering requirements for next year.

Deere stock about 53 vs. 1929 earnings of $13.75/share and 1930 estimate of $10.50; traders said to fear drastic revision due to farm depression. C. Deere Wiman, Pres.: “We can see many indications that the worst is now over for all industry and that, especially in the farm equipment group, the outlook for the next year is reasonably good.”

A&P Sept. sales were $77.0M, up to 2.3% from 1929; first nine months were $800.2M, up 6.5%.

Sears sales from Sept. 11th to Oct. 8 were $32.8M, down 14.5% from 1929; Jan. 2 to Oct. 8 sales were $284.5M, down 7.5%.