November 7, 2009

Saturday, November 8, 1930: Dow 174.38 -6.34 (3.5%)

Assorted historical stuff:

A. Smith, Union Trust of Cleveland Exec. VP, addresses Nat'l. Battery Mfr. Assoc. convention; says present price levels and improving business outlook justify public buying for normal needs; predicts national efforts to relieve unemployment would put at least 300,000 to work in final quarter; “as to the immediate outlook for business, we have passed the worst of the depression ... The element of unreasonable fear and caution in business today is going quite beyond the realities ... we are working our way out of business depression because price declines are effective, like wage increases, in encouraging public buying ... I expect 1931 to be a period of unmistakable recovery, leading to a return of prosperity.”

Chicago Assoc. of Commerce launches “steady buying” campaign urging all those not affected by unemployment to buy “all normal wants.”

Johns Hopkins researchers establish fact that common cold is infection transmitted by “non-filterable viruses, minute disease producing agents so small as to defy most powerful microscope; if virus can be made to grow in laboratory tube, vaccine may be developed.”

French Nat'l Economic Council adopts resolution for calendar reform, with majority preferring the 13 month plan.

Mr. and Mrs. James A. Smith of Deposit, NY, have indulged their wanderlust spirit by traveling in 42 states over the past eight years. They live in “a regular cottage on wheels” measuring 11 3/4 feet long by 8 feet wide by 6 feet high. “It is equipped with electric lamps, running water, refrigerator, cooking equipment, wardrobe space, a six tube radio, comfortable chairs and a double bed.”

Port Norris Oyster Co. formed in Bivalve, New Jersey.

Market commentary:

Market wrap: Heavy liquidation resumed, “some of it appearing to be necessitous in character.” Selling began in rails, including leaders such as New York Central, Union Pacific, Pennsylvania, and others; many sold at lowest prices in several years. Liquidation then spread in all directions; industrials were weak with US Steel hitting a new low since 1928 and other majors down sharply; utilities also severely pressured, including AT&T and Consolidated Gas. Liquidation continued heavy into the last hour, and market closed at the day's lows. Bond market more active, with liquidation in many parts of the list and many bonds hitting new lows for the year; corp. generally down, particularly convertibles; foreign irregular; US govts. active, firm.

Heard in the customers' rooms of brokerage houses: “The way stocks decline without any substantial support is beyond belief.” “Is there something we know nothing about overhanging the market?” “Why don't the 'big interests' do something to end the decline?” “Stocks are cheap, many selling far below respective book values. Why don't people buy?” “Will they ever stop going down?”

D. Haddock, Arkansas Chamber of Commerce: “The economic situation is 'buyological' rather than psychological. A new 'buyology' will solve it - buy something.”

Consumer finance companies are reportedly reducing their bank credit lines due to materially lower business this year, attributed to drop in radio and auto sales. Delinquencies said to be “far below expectations” and customers have paid down much of their debt, but renewed buying is not yet evident.

Dow made new post-panic low, closing at lowest price since July 1927. The Dow utility average broke below the fall panic low for the first time. There was one new yearly high and 270 new lows.

Economic news and individual company reports:

Bradstreet's and Dun's weekly reviews report trade and industry somewhat quieter, possibly due to Election Day holiday and end of peak fall wholesale season. some isolated bright spots due to holiday buying and cooler weather stimulating retail sales, but no broad trade revival seen.

Total loans on securities at end of Oct. were $8.814B, down $721M in Oct. and $4.391B off the Sept. 30, 1929 peak. The decline in loans has been entirely in loans by non-banks (corps. and individuals) - loans by Fed. Reserve member banks were $8.057B, up slightly from Sept. 30, 1929; these are now 91% of the total vs. 59% at the peak. Security loans to non-brokers have been gradually increasing since May; seen as indicating stronger or “better quality” buying.

The stronger 5-and-10-cent stores have generally had earnings only slightly below 1929; the two largest chains are Woolworth and S.S. Kresge.

Amer. Iron & Steel Inst. reports steel ingot production in Oct. averaged 50.32% vs. 55.10% in Sept. and 85.64% in 1929; first 10 months 68.01% vs. 93.92%.

French market calmer after Oustric Bank requests “judicial liquidation.” However, French banks still appears to be withdrawing gold from London, causing Bank of England to advance short term rates slightly. The French banking troubles also apparently caused some nervousness in German bank stocks.

Company reports since Oct. 1: 155 companies reported higher earnings vs. 1929 and 337 lower; 355 dividends unchanged, 35 increased, 53 cut.

Stock market joke:

“Applications for membership in the Half Century Club are coming in so thick and fast that enlarged quarters are being talked of. Practically the entire floor space of the Double Century Club is for rent and a great part of the space of the Century Club.” [Note: I believe this is a reference to stock prices.]


“'Are you going abroad next summer?' 'No,' answered Senator Sorghum. 'What's the use of traveling around among people who don't speak my language, and who couldn't vote for me even if they did.'”

+ The Boring Stuff:

Gains by wets in Tuesday's elections considerable, but probably not enough to change law in next two years; strength of outright repeal advocates in House roughly doubled from 75 to 150. Election results may also act to change some of the less committed Congressmen currently counted as dry. Wets apparently now have strength to at least force an up or down vote in 1932 or 1933. It's unclear if wets will go for outright repeal, modification to allow beer and light wine, or “nullification” in which federal govt. will withdraw from enforcement in states.

Young Plan for German reparations, planned to last for 60 years, is now subject of widely discussed campaign for revision “before the ink has dried.” Campaign attributed to German economic troubles and recent election results; current German govt. still trying to carry Plan out. There is provision for postponing some payments in case of economic difficulty, but this in itself would probably be so damaging to general German credit that permanent revision would be needed. Plan will certainly need to be modified if price deflation continues; ironically, previous Dawes Plan replaced by Young Plan did contain such a provision.

Editorial: Report of the Farmers National Grain Corp. (established by the Farm Board as a cooperative marketing organization) is strangely uninformative on vital financial details including how much money has been paid in and by whom, marketing costs compared to private grain houses, etc.

New revolutionary govt. in Brazil says will revise terms of Henry Ford concession involving “immense tract of land in the interior.”

Capt. F. Hawks flies from Havana to New York in nine hours 21 minutes, breaking previous record of 14 hours; average speed was 182 mph.

Trading has been growing steadily more professional; activity by outsiders is largely selling for tax purposes or to get out of stocks.

Stop loss orders again prominent, attributed to traders who had bought during recent weakness expecting a technical rally.

Broad Street Gossip: One reason trading may have fallen off is that many traders have exhausted their cash resources trying to catch the bottom.

Some scale buying for long-pull investment has been seen, but not “any concentrated effort on the part of the former bullish leaders to move the market forward.”

Some speculation US Steel report of unfilled orders as of Oct. 31, to be released Monday, will show a surprise increase due to heavier buying on low prices.

J.S. Bache say tangible factors such as production, carloadings, and electric output were more favorable before the fall panic; however, “other considerations” influencing prices, including price/earnings multiples, dividend yields, money rates, and brokers' loans, are more favorable now; “as other considerations in the summer of 1929 warned of the approaching peak of the bull market, so do these considerations today hint of the early termination of the bear market.”

Many veteran traders expect a definite market upturn before end of the year, but with a period of irregularity first. They note that all stocks have joined in the downtrend, even those with 1930 earnings close to or exceeding 1929; this is unnatural and can't last. The downtrend is partly blamed on tax selling, but this should reverse in Dec.; this will also mark 18 months of business recession, and sentiment is now at a low extreme; the time to buy stocks is when no one wants them.

Some observers attributed part of recent stock selloff to insurgent Republican Sen. Brookhart's statement favoring Sen. Glass' bill for tax on speculation. Glass hearings will convene in Dec., but “well informed Washington authorities” now expect them to be “extremely conservative” since Democrats, anxious to maintain their recent advantage, won't want to do anything that might interfere with business recovery.

Number of stockholders in 38 motor cos. Mar. 31 was 431,398 vs. 191,914 in 1929 and 111,018 in 1925. GM holders were 218,392 vs. 82,415 and 39,799. Currently, only 12 of 50 representative motor cos. have any funded debt, and total debt is only $67.4M.

Most popular stocks held in fixed investment trusts (similar to ETF's): AT&T, Nat'l Biscuit, NY Central, US Steel, GE, Consolidated Gas, du Pont, Std. Oil NJ, Westinghouse, Atchison, Pennsylvania, Woolworth, Int'l Harvester, Amer Tobacco B, Eastman Kodak, Otis Elevator, Union Pacific.

Commodities strong in spite of break in stocks. Wheat up slightly but receded from early highs; other grains little changed. Cotton up substantially. Copper buying continues good abroad; domestic producers unwilling to sell, awaiting developments on curtailment.

Fed. Reserve entered open market last week for first time in a month, buying $20M of bankers' acceptances to keep rates from rising; seen as demonstrating continued willingness to maintain easy money conditions.

Sears sales Oct. 9 - Nov. 5 were $34.6M, down 17.8% from 1929; Jan. 2 - Nov. 5 were $319.1M, down 8.7%. Kroger sales for 5 weeks ended Nov. 1 were $25.2M, down 10.1%; for 43 weeks $221.6M, down 6.7%. S.H. Kress Oct. sales were $5.716M, down 1.9%; for 10 months $51.7M, down 2.6%.

Region where rails performed relatively best in first 9 months was Southwest, with operating income down 19.0% from 1929; worst was South, down 36.4%.

Rails extend test of reduced fares between Midwest and Pacific coast through Dec.; one-way coach fare from Chicago to Calif. is $47.50.

Detroit industrial employment index Oct. 31 was 79 vs. 74.8 on Sept. 30 and 98.5 on Oct. 31, 1929. Cleveland employment index was 91.6 vs. 92.0 and 119.2.

US soft (bituminous) coal production in Oct. was 44.3M net tons vs. 38.6M in Sept. and 52.2M in 1929.

A number of NYSE seats sold for $226,000-$240,000; previous sale was at $240,000.

Chevrolet prices for 1931 range from $475-$650 vs. $495-$685 for 1930.

GE reports sales of electric refrigerators in first 9 months up 30% over 1929.

Assabet Mills in Maynard, Mass., for years the largest woolen mill in the world, to suspend operations.

Some valuation extremes of companies in difficulty: four automotive companies (Mack Truck, White Motor, Reo, and Hupp) carry no long-term debt and are selling below net quick assets, i.e. below probable liquidation value, not counting plants or other fixed assets. Goodyear stock is about 41, or less than 4 1/2 times 1929 earnings of $9.34; annual dividend is $5 for a yield over 12%; company thought likely to continue dividend this quarter although it's not being earned.

Friday, November 7, 1930: Dow 180.72 +0.91 (0.5%)

Election Special:

Final outcome of Tuesday's Congressional elections won't be known for days or weeks, since a number of recounts will be demanded for close contests. It appears the two parties will differ by only 1-2 votes in the House, so vacancies, which average about 10 a year, may change the situation; decision which party organizes the House may be postponed until new Congress meets in Dec. 1931. Senate situation appears similar, with 48 Republicans, 47 Democrats, and 1 Farmer-Laborite. Regardless of exact outcome, Republican strength has been cut so neither party can have effective control in either chamber.

Only once in history has an “unfavorable verdict” for the President's party in an off-year election not been followed by a defeat in the next Presidential elections.

While Republicans shouldn't in fairness be held responsible for the depression, they may be suffering for campaigning as party of prosperity in 1928. Another cause of trouble is widespread feeling against “Washington optimism” expressed too often since last spring. The situation is still salvageable for the Republicans; the US is still “overwhelmingly Republican in a national sense,” and a more favorable business climate seems likely to develop. However, Republicans still have work to do - the party needs to select candidates and leadership of better character, and Hoover needs to recapture the confidence and imagination of the country.

Republican “insurgency” in Senate may be toned down as “some of the insurgents had unpleasantly close calls as results of the Democratic tide they helped to create.” Election results may “bring home the value of some semblance of party solidarity” and bring more cooperation between Senate Republicans and President.

Assorted historical stuff:

A survey of the 500 female students at Stanford got 225 responses. Summary: About 90% expect to marry, with 40% currently in love. College men and fraternity members preferred. 70% “do not enjoy kissing for its own sake”; 20% believe in “companionate marriage”; 80% believe in divorce; 30% “consider themselves experienced in love”; 20% “approve of the double standard of morals”; most important qualities in husband: personality, appearance, and wealth. Favorite cities: San Francisco, New York, Washington, Los Angeles; most admired women: Mrs. Hoover, Helen Wills, mother, Amelia Earhart; most admired men: Lindbergh, Hoover, Edison, David Starr Jordan, Admiral Byrd. Religion: almost half Christian, 15% no religious faith, 7% “exotic Oriental creeds”, 1% spiritualism.

British Labor govt. plan to revive farming and decrease unemployment calls for initial spending of $125M, large-scale establishment of experimental farming “along Socialist lines”; to be conducted through Agricultural Land Corp. “empowered to acquire land by agreement or by compulsory methods” or by reclamation; would grant jobless men and women small farms and cottages at nominal rent and provide loans as working capital.

Prominent German business leaders recommend wage cuts of 20%, reparations relief, and strict control of public spending to meet present crisis.

Number of movie theaters in China has more than doubled in the past few years; there are now 233 theaters with a total capacity of 137,000.

Dr. Dervieux of the Medico-Legal Institute of Paris asserts that in most advanced countries in Europe, 2 per 1,000 are buried alive, with percentage probably much higher in certain other countries. Group of 35 deputies, mostly physicians, proposes law requiring verification of death by physician before burial.

New York Railways plans to ask Board of Estimate to substitute buses for trolleys on all its Manhattan lines.

Market commentary:

Market wrap: General market remained unsettled; majors including US Steel and American Can showed gains over Wednesday but broader recovery “held in check by sporadic outbursts of selling in various departments”; utilities particularly weak on election results, with new yearly lows for AT&T and Consolidated Gas. Bears continued attacking weak spots, particularly stocks selling at high earnings multiples; targets included Eastman, Nat'l. Cash Register, GM, du Pont. However, leading issues showed increasing resistance as the session wore on, and pressure lifted from the general list; US Steel and Loews showed particular strength; some short covering and moderate rallying in last hour. Bond market more active; corp. generally lower; US govts. firm; foreign govts. irregular.

A number of market observers who have advised waiting to buy stocks until a definite turn for the better, are now saying current opportunities are too attractive to be overlooked; It's argued that with patience and good judgment there is little chance of suffering losses on standard stocks. “It is evident that liquidation has been extensive enough to suggest that it is fairly well completed”; the Dow has declined over 200 points from its peak, while brokers' loans are at a record low.

H. Firestone predicts largest tire business in history in 1931 due to sharp decline in 1930 tire sales even as total car mileage increased.

Broad Street Gossip: A Chicago banker reports “talking with some of my friends, I have reached the conclusion that while stocks may be off 50% to 75% from peak prices, sentiment is off 99% from its 1929 peak.”

B. Anderson, Chase Nat'l. Bank economist, sees fundamentals much better than in 1921, including both “general world picture” and domestic commercial credit situation (particularly corporate inventory and debt levels). Points out that in 1921, unlike today, “many businesses could not do even the business that was in sight” because of urgent demands from creditors. Estimates consumption and retail buying has for about 4 months outrun wholesale buying and factory production. Sees “makings of an upturn in business” that can become “long period of prosperity” if fundamentals are right, but should in any case be “good while it lasts.”

Economic news and individual company reports:

Revised Sept. exports $307.6M vs. $437.7M in 1929, imports $226.3M vs. $351.4M; 9 months exports $2.903B vs. $3.844B, imports $2.401B vs. $3.360B.

US and Canada auto production in Oct. was 156,743 vs. 230,888 in Sept. and 394,510 in Oct. 1929. first 10 months 3.223M vs. 5.269M.

Electric output by US light and power industry for week ended Nov. 1 was 1,748 GWHr vs. 1,725 in prev. week and 1,830 in 1929.

Total class 1 rail operating income in Sept. was $104.078M, down 22.5% from 1929; revenues were $467.469M, down 17.6%; 9 months operating income was $659.4M, down 31.5% from 1929, while 9 months gross was $4.083B, down 14.6%.

French market continues nervous on Oustric bank failure; several small brokers and banks fail. French banks said withdrawing gold from foreign accounts.

Companies reporting decent earnings: So. Calif. Edison, International Cement, Bulova Watch, George W. Helme (snuff and ground tobacco).


East is West - Melodramatic Chinese-American love story starring Lewis Ayres as Billy Benson, Lupe Velez as Ming Toy, and Edward G. Robinson as Charlie Yong. Cast is generally mediocre with outstanding exception of Mr. Robinson. Following much discussion “to the effect that the souls of all people are the same no matter what color their skin,” story ends with discovery that girl was the daughter of white missionaries who died in China when she was a child.


“'How did you head off your son's marriage? Did you tell them you'd disinherit him?' 'No; I told the girl.'”

“'Do you mean to say,' asked the magistrate, 'that such a physical wreck as your husband gave you that black eye?' The woman smiled proudly. 'He wasn't a physical wreck your worship,' she said, 'till 'e gave me that black eye.'”

+ The Boring Stuff:

Editorial: Gov. Roosevelt has asked the Public Service Commission for “searching inquiry” on New York's Central's proposal to increase commuter fares, adding “you of course realize that this hardly seems to be the appropriate time to increase rates ...” While we questioned New York's Central's wisdom in asking for an increase, we do feel compelled to ask Gov. Roosevelt the question: When is an appropriate time for increasing rates?

Editorial by T. Woodlock: Public anger tends to focus on packers and railroads as source of high meat prices, but they do their work very efficiently; back of the envelope calculation indicates they make a profit of about 1/2 cent per pound of meat, with distribution accounting for much more of the cost.

Govt. officials call for Congress to raise limit on spending for federal construction; current plan is for about $80M this year but could be doubled if limit is removed.

Luigi Facta, Italian Premier before Mussolini's march on Rome, dies at 69.

Republic Steel and other independents were weak on worse than expected earnings; these have been hurt by dependence on automotive industry.

Leading steel companies anticipated to show Q4 earnings considerably below Q3; some hope January will bring improved orders. US Steel ability to earn dividend requirements in Q3 considered indication of strong and diversified position.

A good percentage of Q3 earnings declines for many corporations may be due to inventory markdowns due to commodity price declines; many carry inventory at the lower of cost or market.

Stocks have again become more difficult for short-sellers to borrow, with premiums charged on some leading issues; attributed to reluctance of holders to loan shares. Short interest is still believed to be large, but increasingly done by outsiders.

Market observers have noted recent declines on unusually low volume; stop loss orders are believed to have played an important part.

Bond market as a whole rallied sharply last Nov. and Dec. following the fall panic, but has been relatively dormant since; however, highest-grade bonds have continued to advance gradually since Jan.

Renewed instability in commodities drawing attention; many operators trade both stocks and commodities, causing markets to move “sympathetically.”

Many investment trust (similar to mutual funds) companies are now liquidating holdings of other investment trusts. This may be due to public suspicion of these cross holdings caused by two failed NYSE firms that sponsored investment trusts bearing the firm's names (including Prince & Whitely); companies may also feel that “as matters have worked out in the past year ... they could have accomplished as much, if not more, by directing the investment of all their own funds.”

Stock dividend yields present a mixed picture now, with some of the “standard” investment stocks still having yields well below those reached in previous bear markets, while others are substantially higher, particularly among high-grade rails. One of the “new era” bull arguments in 1929 was that the tremendous increase in US wealth over the past decade had created a much higher volume of capital looking for investment. While new era conceptions have “lost their savor,” this increase in capital was a fact; “capital as well as labor is unemployed just now and the former ... must expect to work for a smaller compensation.” This means that when dividends are comparatively safe, yields must remain relatively low; these stocks even take on something of the nature of a bond.

Number of stockholders in 35 steel cos. Mar. 31 was 175,355, up 31% from Mar. 31, 1925; US Steel holders were 128,594, up 37.6%; others were up 19%. This contrasts with a gain of 114.5% in holders of a group of 469 industrial companies of all types.

While some oil fundamentals are favorable, including reduced production and increased gasoline consumption, gasoline and oil price cutting remains widespread and gasoline in storage of 37.215M barrels is still 3.5M above last year.

Commodities mixed. Grains up substantially. Cotton continued down. Copper unchanged at 9 1/2 cents.

During the postwar deflation, total loans and discounts at national banks declined 11.6% from 1920 high to 1921 low; current decline from 1929 peak is 9.6%.

Fed. Reserve reports money in circulation Nov. 5 up $65M to $4.491B, total Reserve Bank credit outstanding up $25M to $1.010B. Member banks in NY City report brokers' loans down $58M to $2.454B vs. $4.882B in 1929, “all other” (commercial) loans down $12M to $2.604B.

New bond offerings in Oct. were $416.6M vs. $424.0M in Sept. and $363.9M in Oct. 1929; first 10 months were $4.842B vs. $2.852B.

US Shipping Board has warned intercoastal shippers that if destructive rate cutting continues to endanger their industry they may recommend that Congress put the industry under the Interstate Commerce Act; calls for self-regulation of rates. Traffic reportedly about 25% below normal.

F.W. Dodge reports construction started in 37 states east of Rockies in week ended Oct. 31 was $57.3 M vs. $59.7M prev. week and $90.6M in 1929.

Dow average of eight finished iron and steel products was $44.56/ton, unchanged from prev. week and low for 1930; 1929 range was $49.88 - $51.25.

Commerce Dept. reports Sept. iron and steel exports were 131,211 gross tons vs. 151,235 in August and 221,415 in Sept. 1929.

General Mills reports US flour production in Q3 was 29.289M barrels vs. 29.250M in 1929.

F.W. Woolworth Oct. sales were $26.422M, up 18% over Sept. but down 4.5% from 1929; first 10 months were $222.9M, down 4.2%.

George W. Helme (snuff and ground tobacco) stock about 84, yield 8.2%, 1929 earnings $8.52/share, 1930 earnings expected about the same.

November 6, 2009

Thursday, November 6, 1930: Dow 179.81 -5.58 (3.0%)

[Note: Unfortunately the blather on contemporary events I tried to write yesterday kept expanding so I didn't get it done - will try and finish it soon!]

Election Special:

Congressional returns incomplete; Democrats appeared to gain control of the House and make inroads into Republican Senate majority. Regardless of exact outcome, neither party expected to have any effective control in Congress; administration expected to be “greatly embarrassed in pursuing its policies over the next two years”; Washington center stage to be occupied by “political jockeying and maneuvering for the preferred position in 1932.”

Editorial: This year's swing away from the Presidential party is apparently “more pronounced than the traditional mid-term reaction,” but to call all of Tuesday's results a repudiation of Hoover's leadership, “as the Times does,” is exaggeration; there are many other issues involved. Most importantly there's the depression; rightly or wrongly, “voters who have half a job or none visit their resentment upon the party in office.” Tariffs always cause a reaction at the polls, and Prohibition influenced many votes. We must wait for completed Congressional returns to see how much of a “national overturn” has taken place. A Democratic Congress, by historical precedent, might foreshadow a Democratic President in 1932, “but much water is to go over the dam in the intervening two years.”

NY Gov. Roosevelt reelected by record 3/4 million margin; “more than ever stands out as the likely presidential selection of his party two years hence.” While greatly strengthened, his candidacy still might be resisted because of anti-Prohibition stand and New York political affiliations. Also gaining as a possible presidential candidate was Robert Bulkley, elected senator from Ohio on a wet platform.

Editorial: Gov. Roosevelt's victory in New York, while impressive, may not have been a referendum on Hoover but largely driven by local issues. Roosevelt's program of social relief naturally had special appeal in a year of depression. His opponent was little known, had an incompetent party organization, and his only noteworthy issue was the Tammany Hall scandals. “Thus the unprecedented Roosevelt majority in this state was primarily a personal and local affair.”

Prohibition expected to become outstanding issue in 1932 Presidential and Congressional elections. Wets in House increased from about 75 to 125-150; gains in Senate were small but considered influential. Wets expected to move aggressively toward showdown, though change considered unlikely by this Congress.

Bulk of the local public works bond issues on the ballot were approved, for total of about $300M.

Assorted historical stuff:

Report to White House child conference estimates annual crime bill at $16B and annual child welfare cost at $5B.

Alien immigration to the US was 17,792 in Sept. vs. 28,020 in Sept. 1929.

Officers and workers of Chicago area railways join to aid rail workers in need; cash funds for aid gathered from voluntary contributions; commissaries at important points will provide necessities including coal, food, and medical care.

Speech from British throne censures government for having no constructive program to cure depression and unemployment. Liberal party presents plan to reduce unemployment by one million by reducing production costs, govt. stimulation of new enterprise, encouragement of agriculture, and public works.

Prohibition movement advancing slowly but surely in Europe: following “ten years propaganda in favor of total abstinence,” village of Mengsdorf, Czecho-Slovakia unanimously adopts resolution to refrain from drinks and revoked liquor license of town's only inn.

Gov. Dern of Utah says will remain neutral in lawsuit filed by Arizona to stop construction of Hoover Dam.

Gallery exhibitions include a show of 50-odd Degas pastels and drawings at the Seligmann Galleries, and paintings by Max Backmann, the leading modern artist in Germany, at the New Art Circle. The Museum of Modern Art regrets to report that one of Daumier's finest small works, “The Print Collectors,” valued at $35,000, was stolen from its exhibition walls last week. “A detective is now constantly on guard at the museum to prevent any further thefts.”

Westinghouse creates automatic fire extinguisher able to operate without human attention. An electric eye is rotated by a motor. When it detects a fire, it stops the motor and directs a stream of water toward the source of the flame; After extinguishing the fire, it begins to rotate again. In a recent demonstration, the eye found and extinguished 5 separate fires in various parts of a room in that many minutes.

Dr. H. Eckener says all future German Zeppelins to use helium gas due to danger of hydrogen shown in R-101 disaster.

Market commentary:

Market wrap: Whole market under pressure most of the session; “results of the election were undoubtedly the principal factor”; as additional results became known and it became clear Democratic gains were larger than expected, liquidation increased; commodities also came under severe pressure. Leaders including AT&T, Westinghouse and Standard Gas hit new 1930 lows; selling spread to rails; US Steel broke to lowest point since 1928 on further decline in production. Volume was not heavy and decline orderly but steady; activity increased in final hour when new lows were established. Bond market more active; high grade corp. generally higher; US govts. firm; foreign govts. steady, Brazil higher.

Utility shares were heavily sold; apparently due to Roosevelt and Pinchot victories in NY and Pennsylvania; “ideas of neither man are in harmony with normal private operations of utilities”; Gov. Roosevelt's prominence as 1932 Presidential candidate seen as “unpleasant cloud on the horizon.”

Eastman Kodak hit new 1930 low on reports holiday outlook not promising; however, company reportedly has attractive Christmas line including “Kodatoy”, a $12 movie projector for children projecting the 16mm film used for home movies, as well as the “Beau Brownie” and “Kodak Coquette.”

Technicolor hit new low under 11 but found support; traders said attracted by long-range possibilities of color films.

R. Budd, Great Northern Rwy. pres., sees business starting to definitely improve next summer and back to normal by end of year; points to depleted inventories as providing stimulant when consumption returns.

Dow made new post-panic low. There was one new yearly high and 127 new lows.

Economic news and individual company reports:

American Bankers Assoc. reports savings deposits at US banks and trusts June 30 were a new record of $28.485B, up $267.2M vs. 1929. Number of depositors was 52.769M, up 5,048.

Rail freight loadings for week ended Oct. 25 were 959,335 cars, up 28,250 from prev. week and down 175,025 or 15.4% from 1929 week.

Class 1 rail employees in Aug. totaled 1.514M and were paid $215.8M vs. 1.532M paid $217.9M in July and 1.760M paid $260.0M in Aug. 1929.

French banking difficulties continue; stocks declining, “advices from Paris hint of possibility of further difficulties before liquidation has run its course.”

Companies reporting decent earnings: United Light & Power, Federal Water Service, Loews.


“Dr. John B. Watson was recently quoted as follows: 'In fifty years there will be no such thing as marriage.' Consulting 'Who's Who,' I find that I am able to write with a degree of confidence that in fifty years there will certainly be no further prophecies from Dr. Watson. - Rev. David A. Poling.”

“'What are you standing over there throwing rocks at that little boy for?' 'I dasn't go closer, ma'am. He's got the whooping cough.'”

+ The Boring Stuff:

Strange editorial by T. Woodlock where he points out that stock market fluctuations don't result in overall total money gain or loss across society since the buys and sells all balance out. Doesn't seem to acknowledge potential of bubbles to increase borrowing, resulting in over-consumption, over-expansion by business, etc.

Survey by authorities in Kiangsi Province of China finds “so-called 'Communist' bandits” blamed for killing 81,300, destroying $214M worth of property, and burning down 37,700 houses in the province in first 9 months of 1930.

Aviation Corp. of Canada to be formed with Canadian Railway participation; to control several existing Canadian airway cos. and provide coast to coast service.

Many industrials have greatly increased cash holdings as a result of lower inventories and smaller accounts payable.

Up to Sept. 10, the day the last rally ended, 75% of traders believed the market had definitely turned; now, 75% are bearish.

Thus far in the bear market it's been the long-term bear that made money, while those traders who try to switch between long and short have had difficulty.

Steel trade interests see further declines in production before change for the better due to seasonal factors.

D. Willard, B. & O. Rail. Pres., attacks government subsidized inland waterways and free use of highways by trucking companies.

Increase in freight loadings considered encouraging, since at this time in 1929 loadings were trending down; comparison vs. 1929 was since Aug. 30; however, market interests inclined to wait for next few week's results before placing too much importance on the increase.

Commodities weak. Wheat down sharply to new season lows, corn little changed, other grains also down sharply; several month contracts down to lowest levels in 20 years or more. Cotton down sharply on late weakness. Copper buying continues active abroad; domestic producers not anxious to sell, seen buying time and hoping for production curtailment.

Currency Comptroller reports resources of 7,197 national banks Sept. 24 were $28.379B, down $737.9M from June 30 but up $454.4M from Oct. 4, 1929.

US Steel ingot production for week ended last Monday was at 52% vs. 55% previous week and 80% in 1929; independents were at 44% vs. 47% and 75%; industry total was 47% vs. 50% and 77 1/2%. Scrap steel and iron prices reported sharply lower. Iron Age reports “steel trade still clings to the opinion that production is close to bottom,” counting on rail and structural steel buying; machine tool orders reported down in Oct.

Gasoline stocks at refineries Nov. 1 were 37.215M barrels, up 560,000 in week; refineries operated at 64% vs. 65.7% prev. week; oil production was 2.363M barrels/day, down 15,150 from prev. week and down 456,400 from 1929.

State and municipal borrowing in Oct. was $157.1M vs. $72.6M in Sept. and $122.3M in Oct. 1929; first 10 months $1.202B vs. $1.090B.

Bradstreet's reports Oct. business failures were 1,943, up 10.2% from Sept. and 17% from Oct. 1929; liabilities totalled $74.2M, up 31.1% and 146%; first 10 months were 19,818, up 21.2% from 1929; liabilities totalled $744.0M, up 49% and a new record high.

World copper production in Sept. was 302.0M pounds, down 23.3% from peak in April 1929 when copper was 24 cents; US prod. was 137.0M, down 37.9%.

Japanese business activity reported about 27% below 1929 level, and foreign trade about 30%. Stocks have steadily declined since July, 1929; total value of shares listed on Tokyo Stock Exchange Sept. 1 was 1.671B yen, down 989.2M since Sept. 1, 1929. Business uncertain on govt. policy; many who favored “deflation and rationalization” when current govt. took power in July 1929 are now in favor of inflation, with govt. providing emergency aid for all classes of business by giving funds to the Industrial Bank of Japan and having it “endorse any commercial bill or note of which there was even a remote chance of repayment.”

Industrial machinery exports in first 9 months were down 5% from 1929 but up 19% from 1928.

Q3 production of fats and oils was 1.087B pounds, of which 482.6M were vegetable oils and 339.4M were lard.

NYSE seat sold for $240,000, up $8,000 from most recent sale.

Assorted Q3 earnings: Mack Trucks $0.62/share vs. $1.85 in Q2 and $2.67 in Q3 1929; Standard Oil of Calif. $0.83 vs. $0.80 and $1.13.

The last survivor of the original 54 subscribers to stock of the old American Electric Co. is A. Sloper. This company was a predecessor to GE formed 50 years ago to market an electrical arc-light. The stock issue was 3,500 shares at $25 par, of which Mr. Sloper took 20 shares for $500; had he held on to the stock he would today have GE stock worth a total of $35,669.

November 5, 2009

No Journal published Nov. 5, 1930

No Journal was published Wednesday, Nov. 5, 1930 following the Election Day holiday. I know you're all in suspense, but you'll have to wait until tomorrow for the results!
I'll try and blather on about some contemporary topics later in the day.

November 4, 2009

Tuesday, November 4, 1930: Dow 185.39 +0.50 (0.3%)

Election special:

Republican control of Congress now expected to be “pared to a shadow if not obliterated” in today's election. Democrats claim majority in House but don't expect to win control of Senate; Republicans anticipate “victory” but expect to lose some strength and fear loss of effective control in House as has occurred in Senate; independent observers don't expect Democrats to gain control.

Main cause of Republican trouble seen as depression; absent this, even with issue of Prohibition and troublesome claims of ineptness, only normal off year election losses would be expected. Results of the election will probably be used to forecast Democratic presidential victory in 1932; if it really “ain't goin' rain no mo,” this may be the case, but things may change if economic conditions improve “as they almost surely will”; Democrats must also tend to “lack of any one outstanding candidate on whom various factions of the party can agree” and to lack of other issues or constructive program to campaign on. Republicans have been in power so long they have grown “careless and fat”; also, “without desiring to pun, it may be said that too many nuts are loose within it.” Results of election may in fact put “a good fright” into the Republican party and make it “train down and do a little fighting with its broad back to the well-known wall.”

Editorial: An increasing number of votes for third-party candidates seems driven by protest. Those who vote this way should consider if they're doing more harm than good; “the decline of parliamentarism which has driven more than one of the nations of Europe to dictatorship was caused in the main by too-fine division of the electorate into many warring factions ... ”

Business fears as to election results seem exaggerated; the new Congress won't meet until Dec. 31, 1931 and will probably be too closely divided to do anything controversial; In fact, since the new Congress will meet shortly before a presidential election, it's an almost unbroken rule that it won't do much of anything.

Anti-Prohibition forces expected to gain from election, but drys expected to retain control; repeal or modification not expected for at least two years.

Assorted historical stuff:

J. Raskob advocates construction of “coast-to-coast super highways” and reduction of 5 1/2 day workweek to 5 days at same wages to restore prosperity. Various US communities will aid unemployment situation by immediately starting public works that normally wouldn't be undertaken for 2 to 3 years; many related bond issues will be voted on today. E.I. du Pont de Nemours announces will advance work on plant repairs and replacements. Hudson Motor adopts 5-day week.

Glass Senate subcommittee won't begin meeting until Dec. 1; will inquire into activities of Federal Reserve system and banking and finance generally; believed changed economic conditions necessitate study of banking laws to determine what modifications necessary.

W.R. Hearst calls for substitution of Canadian or Swedish system for national Prohibition in US.

The position of railways on smoking in dining cars has become complicated due to the recent increase in smoking by women; “It is more difficult for the head steward to say 'No smoking, please,' to a charming lady ... If she declines to listen to his objurgations, the head steward's position is practically untenable.” The Boston & Maine Railroad has now resolved to settle the question by a customer ballot.

Notable new developments in business machines: IBM - automatic billing machine, new time clock equipment, “safe electric” food slicer; N.C.R. - check writing and signing machine; Burroughs - cash registers in colors, savings bank entry machines; Royal - pastel and duo-tone typewriters, 44 inch carriage for statistical work; Addressograph - bill printing and addressing machine. Earnings generally down moderately from 1929 except for IBM.

Market commentary:

Market wrap: Trading extremely light due to tomorrow's election day holiday; many traders “seizing the opportunity for a three-day vacation,” and others were reluctant to commit before election results were known. Leading shares opened slightly lower and staged a moderate recovery about 11 o'clock, then traded in a narrow range the rest of the session. Amid general dullness, some individual weak spots stood out including Simmons, Coca Cola, International Nickel, Chrysler, and Westinghouse late; however, attempts to spread weakness to the general list made no headway. Bond market also dull, little changed; foreign and US govts. and high grade rails showed firm tone.

Editorial by T. Woodlock: Vast majority of investment trust funds (similar to mutual funds) were invested after start of 1928, at “final stage in the greatest speculative orgy that this country - or any country ever experienced.” Ironically, conditions today are now ideal for starting an investment trust; we're in a period of “maximum depression” with many bargains to be had, but past mistakes seem to prevent grasping the opportunity.

T. Girdler, Republic Steel Pres.: “Operations for the industry are around 50% of capacity and there are many signs that this will be maintained or improved upon during the last two months of the year. I expect a national and sound recovery in prices and operations to get under way in the steel industry early next year.”

Neisner Bros. Pres. A. Neisner sees noticeable improvement in fall buying, expects co. business for Q4 as good or better than 1929.

Movie companies adjusting to novelty of sound films wearing off; box office again dependent on film quality; some companies now offering widescreen as new novelty; stage shows at high-end theaters being restored; more children's films planned.

Dr. D. Friday, economist, predicts recovery this winter but warns that “fat days coming will be far leaner than those of preceding cycle.”

Economic news and individual company reports:

Longest US dividend records: Penn. Railroad 75 years; New York Central 61 yrs; Western Union 57 yrs; AT&T 48 yrs; United Gas Improvement 45 years.

NYSE reports brokers' loans at end of Oct. were $2.556B, down $925.3M in month and lowest total ever recorded (figures have been recorded since Jan. 1926; value of NYSE-listed shares has since increased from $34.5B to $60.1B as of Oct. 1).

Standard Oil of NJ cuts retail gasoline 1 cent/gallon throughout its territory. Std. Oil of Indiana lowers prices on midcontinent crude oil by 12 cents/barrel.

US gasoline consumption in first half was 6.810B gallons vs. 6.292B in 1929; taxes collected $230.6M vs. $175.1M; avg. tax per gallon 3.39 cents vs. 3.07 cents.

C. Hanch, Nat'l Assoc. of Finance Cos. GM, reports average car loan in 1929 was paid off in a little over 9 months (standard terms are 1/3 down, a year to pay the balance). Urges more installment buying as stimulus to business today.

Companies reporting decent earnings: Pullman (passenger rail cars), Canadian Wire & Cable (benefited from power development), Distillers Corp. - Seagrams (Canadian whiskey, able to increase sales in spite of Canadian govt. efforts to end exports to US).


“'So you took that pippin home from the movie last night.' 'Yeh.' 'How far does she live from the theatre?' 'Oh, three soda fountains and a candy store.'”

+ The Boring Stuff:

Editorial: Rails are suffering because of scheduled freight trains that must be run with whatever loads are available. They should consider cutting back; “Is the element of time so supremely important in the case of most of this ... freight?”

K. Druisberg, Nat'l. Assoc. of German Industries Pres., says Young (reparations) Plan “cannot be carried out,” leads to “the severest damage, not only to German economy, but also to the economic life of the creditor states.”

Dr. G. Vargas, Brazil provisional Pres., promises to dissolve Congress, reorganize courts, and investigate Banco de Brasil for criminal misuse of public funds; says will not take vengeance on members of deposed govt.

Yonkers Mayor Fogarty joins Gov. Roosevelt and Westchester officials in denouncing New York Central's proposed 40% commuter fare hike.

German air officials plan to use helium in new Zeppelin if negotiations with US succesful. R-100 airship plant at Yorkshire, England shut due to lack of orders [the R-101 recently crashed and burned, as reported on Oct. 7].

While Eskimos have previously been considered uninterested in the outside world or worldly riches, some families are now earning up to $40,000 a year in the fur trade “with a resultant disregard for expense that is startling.” Extravagances include chartering airplanes for travel, paying $300/ton for coal, and radios that “bring American jazz to the igloo.”

Major US govt. research labs include the 4,600 acre Wright Field site outside Dayton Ohio where main aeronautic research is carried out; 7 types of aircraft are now being developed including “attack, bombardment, ... transport, and photographic”; work now being done on engine design, high altitude flying, fog penetration by light rays, etc. Also important is Nat'l Bureau of Standards on 43 acres Northwest of White House, with 70 specialized groups in 11 major buildings.

F.J. Lisman & Co. lists 10 cash-rich industry leaders that may become blue chips of the next bull market: American Radiator, Commonwealth & Southern, Commercial Solvents, Chrysler, Phillips Petroleum, Remington-Rand, Standard Brands, Kroger Grocery, Lorillard, International Nickel. 100 shares of each can be bought for a total of $18,000.

O. Kahn tells Suffolk County Republican Committee that US financial and economic foundations are perfectly sound, no cause for alarm in present depression.

R. Pressprich suggests banks employ excess funds to buy NY City bonds, pointing out they are most liquid next to US govts. and, at about 4%, yield 3/4% more than highest-yielding US govts.

Recent market has moved down on low volume, indicating discouraging lack of support; this “has smashed the theory of 'don't sell a dull market.'”

The new Bank for International Settlements is off to a slow start in fulfilling its founders' ambitions, particularly that of equalizing credit conditions among member countries; rates can be 1% in one country and 15% in another though both are on the gold standard; while currencies are stabilized, “there is no atmosphere of mutual confidence permitting capital to circulate freely from one currency to another in the certainty of being able to make the reverse journey without injury.”

Commodities mixed. Grains down sharply, with wheat at season's lows. Cotton up moderately after easing off earlier gains. Copper buying continues active at 9 1/2 cents, with producers unwilling to fill all orders; prospects for curtailment still uncertain.

US Post Office to employ 228,490 for Christmas mail rush; will as far as possible give preference to “competent men with families to support.”

Transit Commission announces employment for 10,000 in 1931 will be provided by crossing and other transit improvements involving cost of $173M.

Commerce Dept. reports public works construction costs down 9%-20% below 1929; avg. municipal bond rates were 3.97% vs. 4.38%.

Fed. Reserve member banks weekly report for Oct. 29: loans on securities down $85M to $8.057B, “all other” loans up $134M to $8.707B.

New NYSE listings in Sept. were $346.3M ($79.6M stocks and $266.7M bonds) vs. $2.089B in 1929; may account for gains in shareholders of existing cos.

Pennsylvania crude oil, after recent 15 cent cut to $2/barrel, is at lowest price since 1915.

US coal output for week ended Oct. 25 was 10.438M tons, up a more than seasonal 13.1% from prev. week but down 10% from 1929.

More efficient rail transport has stimulated large increases in fruit and vegetable production; domestic fruits and vegetables unloaded in 66 markets in 1929 were 615,387 carloads, up 3.2% over 1928 and 5.3% over 1927. Largest market was New York with 21% of total, second was Chicago with 10%.

USDA estimates 1930 wheat production in 32 countries at 3.231B bushels, up 4.5% from 1929.

Average corn crop forecast by 5 experts was 2.040B bushels, up slightly from last month's 2.003B; final crop in 1929 was 2.614B, and this would be smallest crop since 1901.

Cudahy Packing Pres. E. Cudahy testifies in court hearing on allowing meat packers to sell at retail: depression has had serious effect, with people demanding cheaper cuts of meat and refusing to buy better grades; says monopoly impossible in packing industry due to perishability and widespread production of livestock.

French tax receipts in Sept. were 3.414B francs, up 45M from Sept. 1929; 6 months ended Sept. 30 were 22.007B francs vs. 23.606B in 1929.

French Banque Adam fails as result of Oustric troubles; govt. recruits 5 largest French banks to liquidate 200M francs in assets; stock market remains nervous.

Canadian employment at 7,384 firms Oct.1 was 1.021M vs. 1.025M Sept. 1, usual seasonal decline; index was 116.2 vs. 116.6 Sept. 1 and 125.6 in 1929.

F.W. Dodge reports NY metro. area new construction contracts in Oct. were $80.0M vs. $81.6M in Sept. and $80.4M in Oct. 1929.

Montgomery Ward Oct. sales were $30.1M, down 6.4% from 1929 and improved from Sept. decline of 18.3%; first 10 months were down 2.0%.

Assorted Q3 earnings: Coca Cola $4.899M vs. $4.333M in Q2 and $4.661M in Q3 1929; Timken Roller Bearing $.48/share vs. $1.25 and $1.55; Pullman $1.75/share vs. $1.37 and $1.87.

International Nickel has production capacity of 180M pounds/year, roughly 1/3 more than world consumption in 1929, and probably enough ore for 75 years.

November 3, 2009

Monday, November 3, 1930: Dow 184.89 +1.54 (0.8%)

Assorted historical stuff:

Editorial: Recent events in Europe suggest “political skies there may soon be perceptibly brighter,” particularly Chancellor Bruening's success in persuading the Reichstag to reject all motions by extremist parties to modify reparations. Even Mussolini's recent speech celebrating the eighth anniversary of the march on Rome “seemed to reveal some appreciation of the risks inherent in unrelieved swashbuckling.” A less pleasing aspect of Mussolini's speech was his bid for German and Austrian support in undoing the Versailles Treaty; however, German reaction indicates they're increasingly recognizing “that their relations with France ... are the key to both political and economic improvement on the continent.” Much depends on Berlin continuing to resist “temptation to play upon the relations between France and Italy”; if the current govt. stays the course, “little need be feared from either the periodic fireworks from Rome or the obviously unsettled reparations settlement.”

Colombia reportedly has suffered less political unrest due to Colombian coffee prices not declining as much general coffee prices.

Average height in Japan has been increasing; doctors attribute this to “athletics, more open air living, and better diet and sanitary conditions.” As one result, the Tokyo police force has increased the minimum height one inch to 5 feet, 2 inches.

An interesting new use for old rail cars and locomotives has been discovered by an enterprising Midwestern showman: taking the old equipment and staging sensational train wrecks, to which he charges $1 a head admission. The first show netted over $16,000.

Town of Hickman, Ill., consisting of store, post office, house, and two smaller buildings, auctioned off for $1,053; buyer will move buildings and use as corn land.

Market commentary:

Market wrap: Market unsettled in short Saturday session. Some stocks heavily pressured, including AT&T and specialties such as Gillette, Fox Film A, Warner Bros., and Auburn Auto; some weakness in other leaders including Allied Chemical and American Can. Bulls cautious on signs “liquidation had not been fully completed,” and main body of stocks was under pressure most of the session, though trading was light. Moderate improvement developed throughout the list toward the close, with particularly brisk recoveries in Bethlehem and US Steel. Bond market more active on reinvestment demand, prices generally steady; US govts. firm.

Week in review: Stocks declined extensively on weak business news and election jitters; a particular low point was Bethlehem Pres. Grace's pessimistic statements; many leading stocks hit new bear market lows. Money remains extremely easy, and brokers' loans continued sharp decline; banks continued heavy purchases of securities, with investments now at record levels. Grain prices eased off, while cotton lost part of an early week rally. Oil and steel prices declined. Main feature in bond market was strength of foreign govts., particularly Brazil on reassuring statements by revolutionary govt., and Germany; US govts. lightly traded, strong; domestic corp. irregular: highest grade rails firm, utilities steady, industrials and lower-grade weaker.

K. Hogate, Dow Jones & Co. GM, reports recently improved sentiment in East although as yet no signs of generally improved business. “The feeling exists in important places that the depression has gone far enough, and it has been decided that no more important houses are to be allowed to fail, provided they are meritorious, so that several sore spots have been healed. ... The one thing that is necessary to revive business is shortage. That is the one 'panacea' that has always worked us out of depressions in the past. We now have actually reached a point of shortage ...”; this should be felt in retail business first, as is apparently happening. Revival of business has so far been postponed because “most individuals went into the current depression better supplied than in any previous depression. ... There may be nothing sensational in immediate prospect, but ... we are, I believe, definitely beyond the really disheartening phase.”

National City Bank Nov. circular says there's little doubt depression is now scraping bottom; sees several signs of improvement; while timing of general recovery is impossible to predict, believes “next important movement will be upward.” Positive factors include impressive gains in industrial efficiency, recent stability in commodity prices, and improvement in textile and lumber industries.

GM earnings considered encouraging; Q3 net of $0.53/share was slightly above most optimistic estimates, and company now expected to comfortably cover year's $3 dividend requirement in spite of “great business unsettlement.”

Economic news and individual company reports:

Bureau of Securities charges Prince & Whitely with taking $2M-$3M from Prince & Whitely Trading Corp. and falsifying books to show loan had been repaid, and with using stock supposedly bought for the Trading Corp. for its own brokerage business.

Fed. Reserve Oct. review notes usual peak period for credit demands passed with only slight, temporary tightening in money market; banks continue to increase holdings of investments; bank positions considered strong, with little Fed borrowings and many having surplus funds seeking profitable employment. Savings banks showed unusually large increases vs. 1929; Oct 10 deposits were up 6.4% year over year vs. a 2.7% increase in 1929 and an avg 5.5% increase in prev. 4 years.

BLS reports cigarette production in year ended June 30 was 119.9B, up 150% from 1920 and 3,600% from 1900. Avg. hourly earnings for workers in the industry were 37.8 cents for males and 26.8 cents for females.

Ford Motor Co. says saves $4M - $5M annually by salvaging old materials including used lumber, waste paper, glass, rubber, etc.

Technicolor operations reportedly down to about 50% due to lower motion picture business; 1930 earnings will be about $2/share, well below earlier estimates.


“'Your silver wedding anniversary, is it? Congratulations, old boy.' 'Yes, that's the first twenty-five years of it over.'”

“Foreman - Well, everything is all right? Night Watchman - Yes, I haven't done so bad for the first night. I've checked off everything, and there's only one thing missing - the steam roller.”

+ The Boring Stuff:

Editorial from Boston: The Justice Department recently asked us “in confidence” whether we favored prohibition. Since we have at least as much confidence in our readers as in the Bureau of Prohibition, we will share the questions and answers with you. “Question 1. Is your paper in favor of prohibition? Answer: No. Question 2. Is your paper against prohibition? Answer: Yes. Question 3. Is your paper neutral on the subject of prohibition? Answer: No. Question 4. Will you state briefly your reasons for adopting the policy you are advocating? Answer: 'Prohibition' inevitably promotes intemperance and has already undone a generation's progress toward temperance.” Prohibition is based on “the mistaken assumption that law and legislation are identical, and on a misunderstanding of human nature.” Its continuation “constitutes a demoralizing menace to constitutional and representative government.”

Editorial: New York's Central's attempt to raise commuter fares is bound to turn over a hornet's nest. “To raise these fares means to start a small riot in each of literally scores of communities, in each of which is then presented a glorious opportunity for 'defenders of the public interest' to distinguish themselves.” Without prejudging the merits of the business case, the rails might be better off keeping the current fares to avoid losing more business to buses.

NY Gov. Roosevelt asks thorough investigation of NY Central rate hike request, states “this seems hardly the appropriate time to ... make living expenses of suburban dwellers higher.”

Five Southwestern rails join Northern and Western carriers in petitioning ICC on recently ordered reductions in grain rates, climbing rates are already too low to provide a fair return as mandated by law.

Work on Boulder [later Hoover] Dam to start in about two weeks; Interior Dept. to put $60M - $70M of contracts up for bid by about Dec. 1.

Western states to undertake enormous engineering projects in next few years, including Colorado River - LA aqueduct estimated to cost over $225M, and two other projects on the same scale: Columbia River development in Washington and water conservation program for Northern and Central Calif.

Bulls discouraged by Friday's new bear market low and “dissipation of hopes” for immediate recovery in business. This was said to explain reduction in buying and market decline on low volume; also cited was increasing short selling by small traders. However, looking slightly further ahead, the next few weeks may “mark the transition from the prolonged downward movement ... [of stocks] since September 1929.” The market seems close to completing its adjustment to current business conditions, and fundamentals should start being more favorable soon. Usual holiday improvement in merchandising, and Jan. and Feb. improvement in steel trade will now be accompanied by vastly improved margin situation, very easy credit, and attractively valued stocks.

French stock market nervous over troubles of Oustric Bank.

Increasing hopes for copper curtailment; some observers point to succesful effort in 1921 when a similar surplus was built up.

Short covering said to be relatively small recently, with short interest down considerably. Stop-loss orders said increasingly popular, and a factor in recent declines.

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

Bureau of Securities reports Oct. security fraud losses of $11.765M, bringing total to $51.015 for first 10 months; Oct. said most active month in Bureau history.

Dun's reports 2,124 business failures in Oct. with total liabilities of $56.297M, vs. 1,963 with $46.947M in Sept. and 1,822 in Oct. 1929.

Agriculture Dept. reports agricultural exports in Q3 were $286.3M vs. $336.7M in 1929.

Irving Fisher's index of 200 commodities for week ended Oct. 31 was 82.4 vs. 82.7 in previous week and 93.7 a year ago.

South Penn Oil Co. cuts Pennsylvania crude oil prices $.15 a barrel. Texas Railroad Commission approves cut in allowable oil production in Panhandle from 80,000 barrels/day to 70,000.

Ford Motor Co. owns or controls Ford companies in Great Britain, Irish Free State, almost all European countries and others. Some manufacture their own parts, while others just assemble cars, or distribute cars built elsewhere.

German shipyards inactive, with only 200,000 tons of 1M capacity commissioned vs. 270,000 at end of 1929 and 500,000 at end of 1928.

German coal production in Q3 was 34.4M metric tons vs. 34.2M in Q2 and 42.3M in Q3 1929.

Chinese Fin. Min. Soong denies China seeking loans abroad at this time.

877 lumber mills reported orders for the week ended Oct. 25 were 4% under production of 260.2M feet; first time in 6 weeks orders fell below production.

Youngstown District steel operations expected to decline 2% to 52% this week. Auto business down; further slow decline expected until Jan., followed by slow advance on automotive demand.

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

Detroit factories and shops reportedly called 3,446 men back to work in past week and 5,727 in past 2 weeks.

Metro. Los Angeles district had 194 new industrial plants and expansions for $24.4M announced in first 9 months vs. 196 for $22.6M in 1929.

Three NYSE seats sold for $232,000 - $235,000, up $12,000 - $15,000 from previous sale.

Melville Shoe reduces retail shoe prices 10%.

Companies reporting decent earnings: Ulen & Co. (engineering and construction), Melville Shoe.

Canada Dry Pres. P. Saylor says co. is unlikely to be hurt by repeal of Prohibition, pointing to Canadian subsidiary's tremendously increased profits since 1924 even though every Canadian province with the exception of Prince Edward Island was dry in 1924 and is wet now. Also expressed his belief that more beer is made and consumed today under Prohibition than was ever made or consumed prior to Prohibition.

November 2, 2009

Favorites of the week Oct. 27-Nov. 1, 1930

No Journal was published Sunday, Nov. 2, 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.

[Note: Sheer Genius Dept. - this one is from after the crash in 1929, of course.]
The Trader's Lament:
They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”

[Note: And another item from 1929 - I feel the need to honor the one guy I found quoted in the Journal who got things right.] P. Mazur of Lehman Bros. took a contrarian view: “Yesterday's crash on the stock market is likely to have an immediate and probably lasting effect on retail buying. Not only will those who have lost money in the collapse cease to purchase luxuries for a time, but will withhold commitments upon necessities.”

Nov. 1:

[Note: How could anyone put their money into fly-by-night outfits like those? Dept.] Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.

[Note: Behavioral Finance before its time Dept.] Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”

[Note: Stimulus Dept. ] Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.

[Note: Stimulus Dept. Interesting - an indication stimulus in 1930 may be undercounted, since much of it came through “volunteering” of industry by govt., and so wasn't counted in govt. budgets.] Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.

[Note: Words to live by Dept.] Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”

Oct. 31:

[Note: Ay Chihuahua! Dept.] H. Nicholas, First Bancshares Corp. Pres., notes bank stocks have declined below last fall's panic low, in spite of growth in deposits and dividends; says it's the ideal time for organization of a fixed trust (similar to ETF) in bank stocks.

[Note: A depression is a depression, but a good cigarette is a smoke.] Tobacco tax receipts in first 9 months: cigarettes $276.2M vs. $271.7M in 1929; cigars $14.3M vs. $16.4M; loose tobacco and snuff $51.1M vs. $52.4M.

[Note: Huh??] Berlin inventor creates “reading machine” that can project several book pages from a postcard size film onto a screen, to be read together by a family or audience.

Oct. 30:

[Note: Interesting claim Dept.] British PM MacDonald states if US used same system as English in figuring unemployment, they would show unemployed of 10M-12M.

[Note: Ay Chihuahua! Dept.] Editorial: An analysis by Banker's Monthly finds that of the many small bank failures in the past 9 years, a large portion happened due to the communities themselves “melting away” rather than bad banking. Nonetheless, speculation in real estate and other unsound practices were also large factors. It's a good thing this dead wood was cleared away before the current depression; “one of the reassuring aspects of the situation today is the stable banking position.”

[Note: Sheer Genius Dept.] Calif. State Dept. of Public Works announces will use no mechanical devices at four construction camps in order to provide work for more men.

[Note: Best final words Dept.] Theater: The Noble Experiment - “Almost the entire array of racketeers is present, including bootleggers, gamblers, gangsters, dope-peddlers, hijackers, prostitutes, and corrupt sheriffs and judges, yet they are all unbelievable and at best only laughable caricatures.” Protagonists final words: “When you see my people in Europe, tell them I died in a country where the people have bathtubs for their bodies but none for their souls!”

Oct. 29:

[Note: Strangely familiar Dept.] Pres. Hoover charges R. Kelley with attempt to manufacture a political scandal close to election time; points out Kelley never mentioned the oil shale matter last summer when in conference with Interior Dept. officials, but at the time was negotiating with a New York “journal of the opposite party” for sale of a series of articles. Calls charges groundless and easily seen false. Kelley calls Justice Dept. report a “ridiculous whitewash.”

[Note: Stimulus Dept. ] Editorial: Col. Woods points to at least $450M in public works bond issues to be voted on Tuesday, most of which will probably be approved; there are also several other methods by which public works spending is being increased. This large scale stimulation of employment has merit, but strictly as an emergency measure. The spending is likely to be not thoroughly planned, and will add to taxation burdens. While justified to remedy a fairly desperate situation, it's a temporary measure, not to be confused with a real industrial recovery. The program, however, should give private industry the boost it needs to get back on its feet.

[Note: Strangely familiar Dept.] Fed. Reserve member banks continue to buy securities heavily, holding a record high of $6.667B on Oct. 22, up $126M in the week and $1.272B vs. 1929.

[Note: Yeah, but what have you done for me lately? Dept.] GE main research lab located in Schenectady; budget $1.5M-$2M/year; highlights of research include development of incandescent lamp, hydrogen welding, x-ray apparatus, electric refrigeration, and many others, as well as pure scientific research.

Oct. 28:

[Note: Ay Chihuahua! Dept.] J. Raskob, GM exec. and Democratic Nat'l. Committee chair., gave radio address presenting economic proposals including: adoption of five-day workweek by industry and celebration of all legal holidays on Monday; changes in FTC consideration of possible mergers; abolition of capital gains tax; removal of tariff from politics as far as possible; and referendum on prohibition. “In closing, let me say that no country in the world, not even our own, was ever in as splendid position to go forward and enjoy a period of prosperity as our own country is today. Everything has been thoroughly deflated and business is now turning upward. The momentum is necessarily slow at first, but within three months ... we will quickly leave depression behind.”

[Note: Doesn't exactly look overvalued ... but there was almost an 80% downside from here in about a year and a half.] Some stats on the 28 dividend paying members of the Dow average (of 30 industrials): The group as a whole is selling at 9.8 times average earnings for the past five years, with the multiple ranging from 2.5 for Hudson motor to 33.3 for GE. Average dividend yield for the group in 6.6%. Dividend payout ratio appears conservative at 71% of average earnings for the past 5 years and 53.3% of 1929 earnings. The group is selling at a 44.8% premium over the net asset value on their balance sheets; total net asset value is $7.950B and total market cap $11.516B.

[Note: Speculators affecting prices - that's crazy talk!] G. Hoffman of Agriculture Dept. finds price fluctuations in corn futures from 1924-28 corresponded closely with activities of group of 17 speculators.

Oct. 27:

[Note: Strangely familiar Dept.] Union Trust of Cleveland says fresh wave of business pessimism in Oct. was unwarranted; notes definite evidence of improvement in merchandising and residential building, and very low inventories. Says business may be disappointed at slow pace of improvement, but believes fourth quarter will be looked back on at start of business recovery. Criticizes attempts at the “false stimulation” of trade.

[Note: Strangely familiar Dept.] Sept. rail earnings have so far been much better than expected, with first 12 rails reporting a 13.8% decline vs. 1929, compared to a 32.5% decline for all rails in Aug.; improvement is attributed to expense cuts in response to lower revenues.

[Note: Rate in 2006 and 2007 was 14.3, in 2008 was 13.9.]US birthrate in 1929 is lowest since 1915, at 18.9 per 1,000 population.

November 1, 2009

Saturday, November 1, 1930: Dow 183.35 -4.72 (2.5%)

Election editorial and endorsement:

Treasury Sec. Mellon in his radio address disputed those blaming the administration for the depression and said it was due mainly to worldwide conditions over which they had no control. This is valid, “but is there much ... sound thinking to be found in the heat of a political campaign?” The administration should fairly be judged on the measures taken since the economic storm broke. On this they have a strong record; Pres. Hoover, as Mellon points out, has great experience and expertise in reconstruction work, large public works are being undertaken to increase employment, and Treasury's house is in order. To quote Mellon, “It is not time for divided authority. It is rather a time for strong and united action ... in this way we shall attain most quickly that full measure of economic recovery which is inevitable in a nation so self-reliant.” As Coolidge said this week, “this is no time for rash experiments in men or measures.” Also, consider Lincoln's advice on changing horses in midstream. This administration knows “the needs of industry and trade,” and is headed by men of recognized business judgment and ability; they should be entrusted with the task of putting business on its feet again. To hamper them now wouldn't be good business, to say the least.

Assorted historical stuff:

Federal public works program estimated to total about $1B by high administration official. Total govt. employees about 1.033M on Oct. 1 vs. 990,000 Jan. 1.

Three men in what “used to be called the dry goods business” have amassed fortunes of tens of millions of dollars: Alexander T. Stewart, Marshall Field and John Wanamaker; curiously, all three made much of their fortunes as Wall Street operators, partnering with men including Gould, Vanderbilt, and Drew. Wanamaker: “one of the surest ways to ... success was by being something of a rolling-log ... by living up to the creed that no real man ... stays glued to one counter.”

Bank of Manhattan Trust Co. sponsors series of lecture on finance for women at the NY Junior League; several prominent financial figures to lecture.

One New York suburb contains a family that has lived on the same piece of land for almost 200 years, originally farm land purchased by the first settlers from the Indians. Europe has some examples of families that have lived in the same place over 1,000 years, but 200 years is a rarity in greater New York.

Treasury officials say over half of imported antique furniture is fake.

Market commentary:

Market wrap: Further substantial selling in main body of stocks brought Dow to a new bear market low, though rails and utilities held slightly above previous lows. Bethlehem's poor earnings report had been expected, but Pres. Grace's statement that no improvement was in sight “attracted widespread attention.” With both traders and investment buyers increasingly reluctant, selling took place “on a descending price scale.” Slight improvement at mid-day, but selling resumed broadly in the afternoon; general list came under severe pressure; leaders including US Steel, Westinghouse, and AT&T hit new lows on the decline; sharp breaks in Auburn, Sears, and J.I. Case. Bond market active, mostly firm; notable strength in South American govts., rails; utilities firm; industrials weaker.

Bearish operations have recently converged on stocks believed selling too high compared to 1930 earnings, including Eastman Kodak, Coca Cola, and Otis Elev.

Broad Street Gossip: “In reference to your claim that 9 out of 10 people who buy for investment don't sell right away ... I wish to say that 9 out of 10 people I know do not sell them for 20 years ... They would rather leave them in their estates than accept a loss.”

One banker says the cry of too much oil, too much copper, ... too much this and that is founded on facts, but temporary facts ... in later years, the cry may be not enough oil, copper, coal and so on if producers do not strive to conserve.”

C. Denney, Erie Rail. Pres., sees constructive elements now at work leading to gradual and well sustained recovery before many months; says the Erie is maintaining spending on improvements and maintenance to aid unemployment.

Total NYSE volume in Oct. was 64.497M vs. 141.667M in 1929; largest day was 6.297M vs. 16.410M; Dow range was 183.35 - 214.18 vs. 230.07 - 352.86.

Dow made new post-panic low. There were no new yearly highs and 94 new lows.

Economic news and individual company reports:

Rail equipment experts more optimistic. About a month ago, survey of leading executives indicated little buying likely for 6 - 8 months, which would have severely affected many industries. Now, following “many inducements” to railroads including 100% financing, and “pressure ... brought to bear on roads by banking and high government officials who are anxious to stimulate business,” the picture is said to be more hopeful.

Interesting items in recent reports by Fed. Reserve member banks in NY: brokers' loans down sharply while loans on securities to non-brokers are increasing; seen as stronger buyers (those borrowing from banks instead of brokers) absorbing selling from weaker ones. Banks have been left with such high surplus funds that “they were forced to invest heavily in securities and bankers' acceptances”; last week's increase in “all other” loans was due to heavy buying of acceptances.

Bradstreet's and Dun's weekly reviews continue to see uneven picture, with some encouraging spots but no sign of marked improvement in near term.

Bank of England reportedly considering cutting discount rate, possibly in preparation for 5% war loan conversion.

Index of farm prices Oct. 15 was 106% of prewar level, down 5% from Sept. 15 and down 34% from Sept. 15, 1929, and lowest Oct. level since 1915.

Rates on 150 and 180 day banker's acceptances down 1/8% to 2 1/8% - 2 1/4%, indicating “reign of extremely easy money in NY is by no means near an end.”

Gasoline in storage Sept. 30 was 38.254M barrels vs. 33.181M in 1929, but down 3.370M in month; consumption was up 6.9% over 1929.

Companies reporting decent earnings: Canada Dry Ginger Ale, United Gas Improvement, Lincoln Printing.

Assorted Q3 earnings: GM $0.53/share vs. $1.17 in Q2 and $1.58 in Q3 1929; Auburn Auto $0.97 vs. $4.25 and $6.72; Nat'l Tea $0.30 vs. $0.21 and $0.53.

Company reports since Oct. 1: 116 companies reported higher earnings vs. 1929 and 256 lower; 297 dividends unchanged, 32 increased, 44 cut.


“The witness was certainly no chicken, and the young barrister thought it would be to his advantage to get her rattled. ' And now, madam,' he said, 'I must ask a personal question. How old are you?' 'Young man,' she replied, 'it isn't more than an hour since the judge there objected to hearsay evidence. And I don't remember being born; all I know of it is hearsay.'”

“Teacher (to new scholar) - How does it happen that your name is Allen and your mother's name is Brown? Little Lad (after a moment's thought) - Well, you see, it's this way; she married again and I didn't.”

+ The Boring Stuff:

Editorial: One of the chief causes of wasteful and inefficient overproduction is nationalism in commodity production, or the objective of national self-sufficiency in commodities; “the idea itself is a survival of war-time modes of thought. ... An economically self-contained nation, be it a Balkan monarchy or a far-flung empire, is today an impossibility.” If any country could achieve it it would be the US, “but it cannot hope to do so for all its wealth and area, unless it wishes its civilization to recede to that of the Civil War period.” The first remedial measure against the depression should be to turn our back on this idea.

Editorial: Pres. Hoover's denunciation of the Kelley oil charges as political was strong, but may have been justified. Many public servants make financial sacrifices with the only possible reward aside from service being in reputation. “After all, not everything 'goes' in politics!”

Washington authorities dismiss rumors of early action on Prohibition by Pres. Hoover or Congress; dry majority in Congress is expected to last until 1932 election, when cities gain larger representation; however, that Congress won't meet until Dec. 1933.

US Gypsum Pres. S. Avery selected as industry liaison to Col. Woods' emergency employment committee.

Australia total imports for year ended June 30 were $655.7M vs. $718.2M in 1929; imports from US were $149.5M vs. $176.5M.

China to seek 1B ounce silver loan worth about $360M from US for rebuilding; US govt. expected to be skeptical.

New York World reports revolution breaks out in Greece.

Unification of many leading NY City private charities planned to facilitate aid to unemployed, Emergency Employment Committee reaches agreement with Catholic and Jewish charities and Salvation Army; $150,000 weekly goal to be raised.

Hawaiians, proud of the fact that their islands are an integral part of the United States,” are always annoyed when tourists ask what kind of stamps to use on postcards. However, Hawaiian stamps of the past are highly collectible and prized in many collections around the world.

Trans-Arctic Submarine Expedition Co. formed to take over U.S. Navy submarine in which Captain H. Wilkins intends to explore Arctic.

Charles F. Brush [developed arc light, first wind turbine generator] estate valued at $5.2M.

Stop loss orders reportedly hit in large numbers, while short covering was much smaller (attributed to efforts to minimize short selling).

Some are paying more attention to action of preferred stocks and bonds, believing these are less affected by technical market conditions and therefore indicate company prospects more accurately than common shares.

The more optimistic are encouraged by lower volume in recent sessions during reactions, indicating a lack of urgent liquidation or concentrated bear pressure.

Some market letters continue to urge caution to prospective buyers. With the market as low as it is, a few words of caution to short sellers also might be helpful.”

Dr. P. Atkins, economist for Ames, Emerich & Co.,: “low point in business activity has been touched if it has not already been passed, and there are good prospects that the start of a slow but certain upward trend in business activity is at hand”; sees resulting upward trend in lower-grade bonds.

Commodities weak. Wheat off moderately, other grains down substantially. Cotton down moderately, recovering somewhat from early lows. Copper buying continued in good volume, with some producers refusing to fill all orders; however, curtailment prospects seen doubtful.

For a group of 530 industrial stocks continuously listed from Mar. 31, 1925 to Mar. 31, 1930, the number of common stock holders increased from 961,027 to 2.062M, while preferred shareholders increased from 447,583 to 498,097; number of shares outstanding increased from 272.6M to 527.0M.

Panama Canal toll traffic for first four weeks of Oct. was 10% above Sept. but 8% below Oct. 1929.

Cotton cloth buying has shown a notably improved sales and price trend in the past few weeks; considered interesting since in 1921 the cotton market turned up in January, followed in June by general business improvement.

German cabinet approves increase in import duty on raw tobacco from $19 to $95 per 100 kg; total tobacco revenue from taxes and duties estimated at $303M.

O. and M. Van Sweringen provide $15M of US Treasury certificates to the Van Sweringen Corp. to maintain the required 50% in liquid securities against $30M corporate notes outstanding; these replace Alleghany Corp. common shares formerly used.

Warner Bros. (movies) reports business has improved from slump that started last May, thanks to release of new productions and return of normal fall attendance.

International Nickel reports improved sales trend since July, though Q3 earnings will be well under dividend requirements.

Rudolf Wurlitzer Mfg. (radios) reports operations at 100%, production greater than a year ago; F. Wurlitzer, Pres.: improvement “clearly indicates that a genuine upturn in business is under way.”

Gillette shareholders lawsuit said not seeking to block Autostrop merger but aimed at some directors alleged to have profited from stock dealings with the co.

IRT and NY City reach cost sharing agreement on purchase of 289 new subway cars.