November 21, 2009

Friday, November 21, 1930: Dow 187.09 -0.48 (0.3%)

Assorted historical stuff:

Editorial by T. Woodlock: in a recent speech, Gov. Roosevelt asked public support in a “war” between those against special regulation of utilities and those who recognize their necessity and seek to prevent them from giving “unreasonable profit” to the few. “Here is a summons to a 'Jehad' - a 'Holy War' issued by a man whose election ... as Gov. ... attracted the attention of the nation as perhaps” the next Democratic Presidential candidate. Stripped of the rhetoric, Roosevelt's stand is unfair; it means all the benefit of innovation and skills applied by the utility owner to provide more efficiency and lower costs must go directly to the users.

Rail executives ask for “new spirit and attitude” from regulators; point to difficult trends for rails since 1920, not even taking depression into account; claim that in spite of vastly improved efficiency, rails have never produced the 5 3/4% return on property investment contemplated in current law. However, in spite of lower earnings executives pledged to as far as practical “carry on ... work which may provide employment for the greatest possible number of men during the winter.”

Bulls arguing for wheat based on “increase in the demand for bread which always accompanies a period of depression. ... As a result of relief measures, millions of loaves of bread daily are being purchased from the various bakeries throughout the country with money raised to satisfy the hungry.”

New Jersey Legislature convened in special session to act on needed budgetary reforms after thorough investigation of state affairs by Abell committee aroused public sentiment. “New Jersey is still in a chaotic state of irresponsible officialism even worse than that from which Alfred E. Smith rescued New York.”

M. Tremaine, NY State Comptroller, points to soundness of NY State finances; net debt is under 1% of total assessed value of $28B; “The state does not issue bonds except for projects that last at least a life time.”

Over 1/3 of the 165,000 tons of sauerkraut packed in the US last year came from area of Geneva, NY. One plant has 77 vats, each of which has a capacity of 80 tons of kraut. Recent discovery of vitamins in sauerkraut has given a big boost to the industry.

Market commentary:

Market wrap: Leading stocks made further progress on the rally. Bulls encouraged by optimism from steel industry and Farm Board, by more foreign buying, and by market ability to resist bad news. Major industrials including US Steel, American Can, and GE, staged good gains in first 4 hours. Reactionary tendencies developed in late afternoon on profit taking, but sales were well absorbed on moderate price recessions, with the setback appearing technical. Bond market more active; US govts. and high grade corp. strong; speculative corp. irregular; foreign govts. mixed.

Broad Street Gossip: The head of one prominent Exchange firm has been seeking opinions among his 1,200 customers; finds that experienced traders are now optimistic, having “been through numerous panics” in the past only to see the country recover and become “more prosperous than ever before”. On the other hand, the young trader with less than 10 years experience “can see nothing but black clouds ahead ... and just cannot see how industry can get back on its feet again.”

In past few weeks, fire insurance company funds have been increasingly invested in common stocks of leading companies with safe dividends; viewed as significant since these investments “are directed by shrewd and conservative observers.”

S. Strawn, Montgomery Ward chair., says recovery depends on business men not politicians; warns against “drift toward Bolshevism”; says great problem now is gearing production down so that it will “synchronize with consumption”; implies some wage cuts may be needed.

Market ability to resist bad news is in contrast with a short time ago, when it “ignored any favorable development.” In past week, market has dealt with failure of an Exchange house, wheat irregularity, decline in rail car loadings, bank failures, etc., with little more than a hesitation in the upward trend.

Economic news and individual company reports:

US internal revenue collections in Oct. were $80.041M vs. $86.774M in 1929; collections Jul. 1 - Oct. 31 were $788.4M vs. $857.6M; corporate income tax collections in that period were $324.1M vs. $338.1M; individual income tax collections were $259.2M vs. $302.0M.

Series of small banks in Ga., Ky., Mo., and N.C. closes; two sizeable Cincinnati banks taken over by Cinn. Clearing House Assoc. (acting for 8 member banks).

Some congressmen discussing reducing payments to “sinking fund” (for reducing national debt) in order to continue last fall's 1% tax reduction without deficit.

Commerce Dept. reports total US retail credit business of $20B/year; avg. loss on open credit sales 0.6%, on installment sales 1.2%.

Nat'l Industrial Conf. Board monthly survey reports Oct. business activities at low point for the present recession, Nov. so far at same level, but see signs “industry has reached a point where replenishment should begin.”

Companies reporting decent earnings: F. & W. Grand-Silver Stores, City Ice & Fuel, Mahoning Coal Railroad, Gibson Art (greeting cards).


“'Thankful! What have I got to be thankful for? I can't pay my bills.' 'Then, man alive, be thankful you are not one of your creditors.'”

An old and practical New England lady was on her deathbed. She called her favorite niece Grace and said “'I want to be laid out in my black silk dress; but take out the back panel and make yourself a dress from it.' Grace said: 'Oh, Aunt Mary, I don't want to do that. When you and Uncle Charlie walk up the golden stairs, I don't want people to see you without any back in your dress' 'They won't look at me,' the old lady replied. ' I buried your Uncle Charlie without his pants.'”

+ The Boring Stuff:

Editorial: Domestic cotton mills are making great progress in reducing inventories of cloth by cutting production to a low rate. This improvement in “one of the great industries of the country is as pleasing as would be the voices of bluebirds on a wintry day.” Results should be seen when “the expected revival of business comes.”

Australian cabinet presents financial plan involving 2.5%-15% salary cuts for govt. workers, promoting new works to aid unemployed, and raising taxes on income derived from property.

Census Bureau reports US shipments of perfumes, cosmetics, and toilet articles in 1929 were a record $207.5M vs. $178.5M in 1927.

Modern automatic railway signals are amazingly reliable; in one district on the M-K-T line, the record for nine months shows one signal interruption for each 185,777 signal operations.

Hiram W. Ricker, Maine capitalist and developer of Poland Springs, dead at 73.

Brokers continue to report good “long-pull” public buying, “small individually but fairly large in the aggregate.”

Stocks that have continued down during the recent rally have generally been those not available to loan, “preventing a cushion of short covering.”

Conservative observers continue advising buying on a scale during reactions; advise buying on a larger scale if leading issues “demonstrate conclusively” that they're supported above last week's lows.

Bull pools” reportedly almost completely inactive, a marked contrast to last year before the fall panic, when dozens were in active operation.

Investment trusts (similar to mutual funds) to start releasing 1930 reports in a few weeks; almost all expected to report substantial depreciation in portfolios, and many have done considerable switching into stocks considered stronger. Proponents believe this year's reports will show the trust structure “safeguards resources in a bear market more thoroughly than can the average individual.”

E. Kulas, Otis Steel pres., expects price firmness for some steel products to spread; price quotations “seem definitely to have reached bottom.”

J. Edgerton, Nat'l. Assoc. of Mfrs. pres., reports on survey of 18 presidents of state manufacturing assocs. - while business still below a year ago, some improvement in past few months; employment slightly better; confidence on upswing; see gradual and definite recovery in late winter or early spring.

Farm Board chair. Legge says wheat problem being worked out by use as (animal) feed, pointing out one pig will eat as much wheat as 5 people. Actual extent of wheat use as feed is still largely a guess. G. Milnor, Grain Stabilization Corp. pres., says wheat consumers can safely buy against future advances.

Commodities mixed. Grains up substantially, corn rises particularly sharply. Cotton down moderately on setback in final hour. Large copper producers holding price at 12 cents, while some smelters offer it at 10 1/2.

Fed. Reserve reports money in circulation Nov. 19 up $5M to $4.482B, total Reserve Bank credit outstanding down $32M to $1.003B. Member banks in NY City report brokers' loans down $50M to $2.185B vs. $3.587B in 1929, new low since May 1925; “all other” (commercial) up $72M to $2.716B.

Dow average of eight finished iron and steel products was $44.42/ton vs. $44.56 prev. week and low for 1930; 1929 range was $49.88 - $51.25. Scrap market mixed, no general improvement. Steel shipments up slightly in Oct. vs. Sept. but unfilled orders down.

ICC expected to ask Congress to regulate railroad “holding” companies; it's not clear if individuals or groups can buy control of multiple rails under existing law. Two holding cos. attracting particular ICC attention are the Allegheny Corp. formed by the Van Sweringens, and the Pennroad, formed under Penn. RR. auspices.

Electric output by US light and power industry for week ended Nov. 15 was 1,718 GWHr vs. 1,731 in prev. week and down 5.1% from 1929.

Federal regulation of electric power considered unlikely in near future; almost no chance of tackling it in upcoming short Congressional session, and there's also pending litigation and two investigations (by the FTC and a Senate committee) to clear up.

Imperial Bank of India raises discount rate 1% to 6% to defend rupee in face of tense political situation and pessimism on results of London round-table conference; current level of rupee thought to favor British exports and has aroused popular resentment, with M. Gandhi asking return of former value.

British govt. denies reports of long-term loan from France to help defend sterling against francs.

Spanish currency improves following conclusion of general strike and rioting in Barcelona.

French trade declines 9.9B francs ($397M) in first 10 months; imports off 10%, exports off 13%.

Rep. Langford (D, Ga.) says commodity production control needed; proposes amendment to Federal Farm Act providing that when 75% of farm members of a cooperative agree to limit production of any commodity, the board would in turn advance the farmer the 10-year average price of the commodity.

By contrast with Oct. decline of 255.2M in total US cigarette sales vs. 1929, sales of Lucky Strikes gained 504.7M in Oct. vs. 1929.

Coarse Grain Commodity Advisory Committee recommends increasing corn duty from 25 cents to 37 1/2 cents.

US merchant marine on June 30 totaled 25,214 ships of 16.068M gross tons.

W. Washburn, asst. att'y general, estimates US investor losses on fraudulent securities in first 10 months on 1930 at $500M.

Harvard Univ. reports for year ended June 30: total revenues $12.248M; income from funds and gifts $5.406M; tuition fees $3.131M; receipts from athletics $1.283M; income from varsity football $693,713 and expense $126,662; book value of endowment $108.1M.

November 20, 2009

Thursday, November 20, 1930: Dow 187.57 +4.15 (2.3%)

Assorted historical stuff:

Leaders of both parties seen against extra session of Congress between Mar. 4 and end of 1931; neither party has effective control, and long period of legislative uncertainty is thought undesirable. However, “insurgents” may be able to force extra session by blocking essential appropriations bills using filibuster.

Editorial by T. Woodlock: Stance of Gov. Roosevelt and Progressives on utility regulation is inconsistent; on one hand, utilities have been strictly regulated because they're “natural monopolies,” but on the other Roosevelt seems to favor publicly owned competition for utilities whenever possible. This seems to “run counter to elementary principles of fair dealing”; if there's to be competition, “neither competitor should be strait-jacketed. Further, there should be a fair ring and referee.”

Editorial: Chinese people have first real opportunity for effective national govt.; “except for still troublesome communistic disorders in the South, two decades of civil war” have resulted in ascendancy of Nanking govt. under Chiang Kai-shek; Washington should extend all possible cooperation on a basis of mutual respect.

Marquis of Winchester estate insolvent; was “premier marquis of England,” chairman of 14 cos. in 1929; estate liabilities about $2.3M, assets $2,500 and car.

Ford plant at Dearborn, Mich. expected to become world's largest consumer of water when new water intake system with capacity of 914M gallons/day is completed - this is more than used by cities of Detroit, Philadelphia, Cinncinnati, and Washington combined.

Newspapermen assigned to Gov. Roosevelt's reelection campaign put together a pool of money to be won by the best guess at the Gov.'s margin of victory. Winner was Roosevelt himself, with the high guess of 437,000, which was still about 300,000 short of his actual margin.

A British tourist agency is running a cruise including the Antarctic, stopping at the Bay of Whales about 700 miles from the South Pole, where Byrd spent 14 months on the ice in 1929-30. Route of the cruise: England, New York, Havana, Panama Canal, Galapagos, Antarctic, Australia, Java, Suez Canal.

Karsten Statistical Laboratory describes machine they're working on to predict “economic tides”; machine has 50 dials, each representing an economic statistic such as call money rates, gold movements, bank clearings, etc.

Market commentary:

Market wrap: “Powerful support” by “important interests” for high-grade shares gradually broadened into advances in “a long list of representative shares.” Market showed resistance to bad news for second day; yesterday to wheat news, and today to failure of an Exchange firm. Bear attempt to start reaction around noon fizzled. Major industrials, auto shares, and utilities showed sustained strength; rails, entertainment shares, and some industrial specialties were up sharply. Bond market mixed; US govts. firm; corp. high grade and convertibles strong, second grade weaker; foreign govts. irregular, mostly down.

Advertisement from Saturday Evening Post: “The whole history of Business is golden testimony to the truth that in times like these the seeds of future growth and greatness are ... most enduringly sown. Even now ... the business that are heeding this lesson by working instead of wishing are depression-proof and flourishing ...”

Broad Street Gossip: Some traders are less inclined to buy stocks now than when they were hitting record highs last year. This is human nature, but “the big fortunes have been made by people who accumulated and held standard securities after a prolonged decline, such as we have had over the past 12 months.”

Broad Street Gossip: For the past year, “public men have been giving long speeches” on causes of the depression, blaming “overproduction, silver depreciation, excess speculation, mal-distribution of gold, etc.” If these same people could tell us how to fix the situation, we'd be grateful.

B. Fairless, Republic Steel VP, reports many signs start of a buying movement in steel is not far off.

Economic news and individual company reports:

Maintenance of steel production level considered encouraging, as was pricing firmness on large order from Penn. RR; Iron Age reported demand from auto makers increased slightly, while prospects were seen for better auto and rail buying early in 1931.

NYSE firm Bauer, Pogue, Pond & Vivian suspended for insolvency, causing sharp breaks in sponsored stocks including Bulova Watch.

Executives of Lord & Taylor, Bloomingdale, B. Altman's, Gimbel Bros., and many others, unanimously warn NY State tax revision commission that “in their opinion a retail sales tax was perhaps the worst method of tax revision that could be devised.”

Total state bond issues now over $2B, or about $17 per capita, vs. $1.4B in 1923; “burden of taxation may be spread over a long period by issuance of bonds and thereby passing a part of the obligations to future generations, yet it does mean heavy taxes and is a problem ...”; heavy spending on roads, schools, hospitals.

Northern Trust bond review says long term result of gold inflows to US and France will be their assumption of responsibility for providing long term loans to other countries; notes transition of US from borrower to lender since war; says foreign bonds one of safest investments regardless of temporary difficulties.


Smiles - Comedy presented by Florenz Ziegfield, starring Marilyn Miller and Fred and Adele Astaire. “The story brings the Astaires and Miss Miller to the stage with satisfactory frequency ... since these three, together or alone, dance while they sing, perhaps there need not have been all that concern about the lyrics.”


“Rural Doctor (meeting patient) - I've - er - taken the liberty of sending in my little account [bill] again. Patient - Is that so? Well, acting on your advice I'm avoiding business worries for the present.”

+ The Boring Stuff:

Editorial: Recent local epidemic of bank failures caused by collapse of an investment bank that had controlling interests in many of them gives some general lessons for group or chain banking. While most of these systems have “greatly improved and strengthened local banking conditions,” the controlling concern should “conform to the essentials of sound banking.” Also, since it essentially acts as a central bank to its group, it must always stay in liquid condition with easily realizable assets.

Justice and Treasury Depts. requested appropriations for Prohibition enforcement in 1931 total a record $17.4M. Vote among members of the American Bar Assoc. is in favor of repealing Prohibition, 13,779 to 6,304.

French govt. preparing plan for development of colonies while reviving French industry; calls for granting 4.650B francs in credits to colonies to be spent in France; believe this would provide work for one million workers for a year.

Macy's now erecting large addition to its New York store taking up almost the entire remainder of the block; to be completed early in 1931. Current New York store does volume of almost $100M/year.

Canadian Nat'l. Rwys. has opened a new booking office in New York “finished in the character of a drawing room in a private English manor house.”

Chicago Yellow Cabs are installing rotating mechanism switching between up to 23 different advertising cards.

Copper companies seen likely to maintain dividends if they can hold prices at 11-12 cents.

Conservative observers more cheerful; recent market action seen indicating good support, at least for the time being; advise picking up stocks on any technical reaction and adding to positions if resistance develops above last week's lows.

Substantial European buying reported in US stock markets since end of last week, first significant buying in some time; mostly from Switzerland and Holland.

Short sellers continue to fight the market, though some “desertions from the ranks of the pessimists have taken place recently” due to greater resistance on reactions. Scale support in leading stocks has increased impressively this week, particularly in US Steel; this has been a favorite bear target because of its influence on the general list. Buying was said to be coming from “the strongest banking and industrial interests.”

M. Ayres of Nat'l. Assoc. of Finance Cos. expects loan companies to provide 10%-15% more funds for car purchases in 1931; looks for business improvement in spring and normal conditions by end of 1931.

Corporations have a record amount of idle cash due to slack business and low inventories; a number have been investing cash in good common stocks.

Commodities firm. Grains up moderately on Farm Board support. Cotton slightly higher. Copper remains quoted at 12 cents but with small buying.

ICC reportedly considering sweeping revision of the recapture clause of the Transportation Act (this provides for recapture of “excessive” profits over the legally defined fair return of 5 3/4% on investment). This clause has lead to much protracted litigation.

US Steel ingot production for week ended last Monday was at 47%-48%, unchanged from prev. week and vs. 73% in 1929; independents were at 41%, unchanged and vs. 70%; industry total was 43%, unchanged and vs. 71%.

Chicago wheat market distorted by Farm Board support, with May prices almost the same as Dec. instead of the usual 7-9 cent premium. This is expected to push large amounts of Dec. wheat onto the market.

Increasing imports of foreign feedstuffs reportedly weakening US corn and other feed markets and reducing use of wheat for feed.

Decline in car loadings of 53,239 for week ended Nov. 8 attributed to Election Day holiday; market interests will watch future loadings closely.

US cigarette production in Oct. was 10.947B vs. 11.202B in 1929; large cigars were 624M vs. 702M.

Hide prices are down near 10-year lows, with sales small due to lower shoe production.

Fed. Reserve Nov. bulletin notes trend this year of gold movement from “outlying” countries producing raw materials to “commercial” countries (US, France, etc).

German business conditions unimproved; total unemployed Oct. 15 were 3.184M vs. 1.489M in 1929; index of production ending Aug. was 81 vs. 103 in 1929. Govt. aiming at reducing production costs; raw materials are down 12% in past year but wages are unchanged this year.

London Financial Times survey of wheat situation says it's worst in history, with world supply so large new crops are unlikely to find buyers for 20 months; calls for immediate aid from US and Canadian govts.

British registered unemployed on Nov. 10 totaled 2.262M vs. 2.263M previous week and 1.259M in 1929.

Dec. sugar futures down 4 points to 1.26 cents/pound on reported dissension among Javan producers on curtailment.

Fall River, Mass. loan defaults said due to depression in cotton textile industry.

Autostrop shareholders approve Gillette buyout. Gillette stock down, attributed to past earnings restatement. However, company prospects considered improved by merger thanks to ending of patent litigation and consolidation of operations.

Childs Co. (restaurants) points to effectiveness of newspaper advertising; after starting to advertise its dollar dinner Oct. 15, Nov. sales are expected to double.

Companies reporting decent earnings: Household Finance.

November 19, 2009

Wednesday, November 19, 1930: Dow 183.42 +2.92 (1.6%)

Assorted historical stuff:

A Washington correspondent: Concerns about election results are almost always overdone. Still waiting to hear “what there is in the ... background and record of Franklin D. Roosevelt to lead to the belief that he is about to become a red radical, instead of the vigorous and magnetic person Washington knew as Assistant Secretary of the Navy ... The course for Democrats in 1932 is plainly outlined and it does not include a radical economic program but the opposite.”

Henry Morgenthau, former ambassador to Turkey, says another European war imminent, in which US will be forced to take part. Proposes 5-year postponement of war debt payments to US, with stipulation that any country acting as aggressor in a war would lose deferment.

Rep. H. Fish submits findings of Congress. committee investigating Communist activities; reports at least 400,000 sympathizers in US; recruiting actively in southern black communities, textile, mining, and shipping industries.

W. Johnson, W. Virginia State Treasurer, calls for “hard boiled system” for controlling govt. spending; “Our governments are over-manned. A few years ago it required one person out of every 22 to administer our governments - national, state, and local, but today it is one out of every 10.” Calls for 25% cut.

Brokers feed jobless - H. Hentz & Co. set up “rolling kitchen” on Monday near W 31 St. to feed unemployed; 3,000 fed breakfast Tuesday.

Even with aid of tugs, a 1,000-foot ship needs a half mile of free space to turn around. When the huge Imperator made its first visit to New York Harbor and was turning around to get into its berth, the amount of space needed was miscalculated; she ran into a wharf, bumped other ships, and caused $45,000 in total damage.

Huge triangular parachute, designed to save airplanes when motors go dead or propellors break, tested successfully at Wright Field.

Art exhibitions now at galleries include Henri Navarre, known for his glass work, shaped by hand while molten; Chagall, whose “medley of strange shapes and pictorial combinations do please the eye”; a group of dog studies by Morgan Dennis; and the Munson collection of historic portrait sculptures in wax, including one of John Calvin thought to be the only likeness in existence, a study of the dying Voltaire, and an Egyptian wax funerary head from about 700 BC.

Market commentary:

Market wrap: Bears exerted early pressure in attempt to extend decline, selling majors including US Steel and AT&T. However, powerful buying support came in, starting in US Steel, “representing reaccumulation by interests who liquidated in the early spring. ... Seeing this kind of buying in progress, the bears started a covering movement around noon”; prices generally recovered from early lows. Buying broadened in afternoon; major industrials worked higher; tire cos. strong on recent rally in rubber prices. Bond market mixed, volume below average; US govts. firm, foreign reactionary; corp. irregular, higher grade steadier.

F. Goodhue, Internat'l Acceptance Bank pres., criticizes bank practice of putting surplus cash in call loans on the stock exchange: “these so-called reserves in time of stress are apt to prove reserves only in name, not being based on self-liquidating transactions nor on securities eligible for rediscount” with Fed. Reserve. Practice of putting bulk of secondary reserves in call loans prevents Fed. Reserve from exercising its chief functions; banks continue it to avoid moderate loss of revenue.

Some fear that recent large number of bank closings will cause some liquidation of stocks held by the banks.

R. Stephenson, Amer. Bankers' Assoc. pres., says charges that credit extended for installment sales allows people to make committments beyond their ability to pay will persist until “agencies of consumer credit ... work out practices of administration which will prevent excesses in the extension of such credit.” Notes consumer credit has grown without setback up to now due to era of general prosperity, but “testing time is now here.”

Col. L. Ayres of Cleveland Trust Co. predicts 1931 to be year of progressive but slow improvement, conditions still below normal at end of year.

D. Friday, economist, says bottom of business depression reached in Oct. predicts 10%-12% recovery by spring.

Brokers report large increase in inquiries on any sharp multi-day rally; thousands of investors and traders seem to be waiting for “favorable moment” to buy stocks.

Economic news and individual company reports:

Co-receiver appointed for Caldwell & Co., collapsed investment banker; assistance needed due to scope of business, involving sizeable operations in 20 states. “Well-informed quarters” say National Bank of Kentucky failure due to Caldwell matter, not significant to national banking system.

Rail freight loadings for week ended Nov. 8 were 881,401 cars, down 53,239 from prev. week and down 167,567 or 15.9% from 1929 week.

Champlin, a small refiner, cuts midcontinent crude 10 - 20 cents/barrel; co. initiated last round of price cuts. Possible gasoline price war developing in Northwest.

Some price weakness reported in Southern scrap steel and iron markets.

Companies reporting decent earnings: Brooklyn-Manhattan Transit (BMT), Public Service of NJ, United Biscuit, Liquid Carbonic.

Stock market joke:

Question to the editor of Broad Street Gossip: The earth's age is set at 1.825B years and brokers' loans are at $2.235B. Soon, brokers' loans should be down to $1 a year for the age of the earth. Will the market then go up as the years increase? Reply - Ask Einstein.


“Maid - ... There are half a dozen men downstairs with vacuum cleaners. They say they have appointments to give demonstrations. Mistress - Yes, I sent for them. Put them in different rooms and tell them to get busy.”

“'Those girls look exactly alike. Are they twins?' 'Oh, no. They merely went to the same plastic surgeon.'”

+ The Boring Stuff:

Editorial: Farm Board's decision to resume large-scale support in the wheat market, while preventing an immediate collapse in the market, has put it in the position of a man who can't turn back, but “must struggle through the quicksand and support the situation it has made until there is a world adjustment of prices.” The Board had previously announced it would make no more attempts at stabilization, but now claims that numerous banks and individuals would have been bankrupted had it not acted. Because of current market distortion, the Board must now stand ready to either buy in almost unlimited quantities or let the market collapse.

Editorial: In the recent dispute between T. Lamont, who said the Smoot-Hawley tariff, while not a major cause of the depression, was inopportune, and Sen. Smoot, who defended the tariff, the facts are on Lamont's side. If “a nation wishes to sell, it must also buy.” Increased tariff in Canada, the largest buyer of US goods, will clearly hurt US exports.

Editorial by T. Woodlock: No need seen for proposed Federal Power Commission to regulate “interstate commerce” in electric power; field properly belongs to state regulators; bill would create “another huge piece of bureaucratic machinery, with all its attendant evils.”

Northeastern Governors to participate in Albany roundtable in Jan. to discuss unemployment situation; NY Emergency Employment Committee opens drive for $6M to place 20,000 men in jobs by Jan. 1. Alabama Emergency Employment Commission to meet Nov. 25.

Final 1930 Census report delivered; shows total population of 122,093,455.

Teapot Dome oil reserves now estimated at 24M barrels, down from first estimate of 135M.

Scheduled air lines carried 122,626 passengers in Q3, almost 3 times the number in Q1; Sept. passengers were slightly down from prev. month for the first time this year. Mail carried in Q3 was 1.919M pounds, of which 81,022 pounds were express. Average distance per trip in first 9 months was 245 miles.

Train vs. plane: average US freight train speed in July was 13.9 mph; average plane speed of Eastern Air Transport was 99 mph. Average load per freight car was 27.1 tons, about 100 times as large as average plane load.

Good demand by short sellers for stocks in the loan market. Short selling was reportedly resumed at the beginning of the week.

Stop loss orders reported more generally used than they have been in years. A number of brokers report heavy switching between stocks.

Action yesterday strengthened hopes that Monday's decline was a technical reaction to proceeding five-day rally. Market observers generally expected resumption of the rally, particularly since improvement came in face of unsettled grain markets and some reported weakness in copper prices.

Conservative observers remain encouraged, warn against following stocks up but advise buying on a scale on moderate reactions, discourage short selling.

Q4 earnings reports expected to be unfavorable for many cos.; however, based on experience, if business is improving early in 1931, the market should still go up.

Recent increases in “all other” loans attributed to buying of bankers' acceptances rather than increased commercial demand for credit. Bank investments last week were at a record high of $6.767B, up $1.166B from last year.

Number of stockholders in 49 textile cos. Mar. 31 was 36,289 vs. 35,333 in 1925.

A. Legge, Farm Board Chair, hits excessive cost of retail distribution, in agriculture and other fields, as one of the main problems facing the nation; defends federal financing of cooperative marketing agencies. Believes “corporation farming” not necessary to establish agriculture on a sound basis, would tend to “destroy one of the bulwarks of American national life ... the home life on the farm.”

Commodities weak. Grains sharply lower. Dec. wheat at Winnipeg sold almost 20 cents below Chicago price, which held at 73 cents due to Farm Board support. Liverpool prices were about 4 cents below Chicago vs. usual 15-25 cents above. Canadian govt. refused to commit to guaranteeing minimum price for Canadian wheat. Cotton down moderately. Major copper producers holding at 12 cents; some reports of offerings at 11 cents.

Gasoline stocks at refineries Nov. 15 were 37.263M barrels, up 251,000 in week; refineries operated at 64.2% vs. 63.8% prev. week; oil production was 2.305M barrels/day, up 7,300 from prev. week and down 315,450 from 1929.

Recent low of $2.235B in brokers' loans, while a record low for the official series kept since 1926, was not a record when compared to a previous, almost identical, series kept from 1917-1926; in that series, brokers' loans were below the current total in June 1925, and record low was $473.4M in Jan. 1918.

Combined production of 3 main feed grains (corn, oats, and barley) in 1930 estimated at 87.8M tons, down 12.4% from 1929.

Fall River, Mass. defaulting on some loans, state may be forced to put commission in charge of city finances.

American Machinist reports continued slow demand in machine tool market.

Substantial wage cuts proposed for British railway operatives and shopmen, and in coal industry.

Italy cuts govt. workers salaries 12% to close budget deficit.

Gold has flowed steadily into France for the past two years, with gold reserves increasing from 30B francs to 51.1B francs, or $2.044B. This is arousing concerns of serious inflation when the economy picks up again; as it is, the cost of living is up over the past year although wholesale prices are down.

British Oct. trade figures show better than usual seasonal improvement, though still well below 1929 levels; Sept. seen as bottom month for trade. Japanese exports for Oct. fall below Sept., imports rise.

US silver production in Oct. was 3.910M ounces vs. 3.780M in Sept. and 5.130M in 1929; world production in first 9 months was 161.9M vs. 163.7M.

German Ford sales in first 10 months were 11,000 cars vs. 8,000 in 1929.

Poland extends Kreuger match monopoly until 1965 in return for $32.4M loan at 6 1/2%.

Eastman Kodak puts workers on 5-day week to avoid layoffs; has more workers currently employed than a year ago.

Baltimore & Ohio and Northern Pacific rails are yielding over 9%, although earnings this year are expected close to or slightly above dividend requirements.

Gillette shareholders approve Autostrop merger.

November 18, 2009

Tuesday, November 18, 1930: Dow 180.50 -6.18 (.%)

Assorted historical stuff:

Editorial: Preparatory Disarmament Commission meeting at Geneva has run into many obstacles, but it doesn't follow the nations involved “are secretly bent on making war”; they may just be “accustomed of old” to armament and mutual suspicion. Latest obstacle is reluctance of US to base limitation on spending due to higher prevailing US wages. London Naval Conference also had potential flaw since it limited number of ships but not each ship's capabilities. These obstacles, however, are not final and may be overcome; there may be “many short steps on the long hard road toward limitation of arms.”

Gov. Roosevelt reappoints committee named in March to study unemployment, asks members to plan loan funds to sustain those completely out of work

Some descriptions of early steam locomotives: “puffing billies,” “snorting race horses,” “hell on wheels,” “devil wagons,” “iron horses,” “black dragons snorting sparks.” The term “devil wagons” was also applied to early cars.

In its first 2 weeks Transcontinental & Western Air, first all-air line between NY and Los Angeles, carried 2,041 passengers, completed 95% of scheduled flights.

Number of movie theaters in Europe and Britain is 33,870, up 11,445 theaters and 5.283M seats since 1926. Germany has most, Russia and Britain follow.

Warner Bros. announces golf champion Bobby Jones will retire from competition to make series of one-reel instructional films for them.

Market commentary:

Market wrap: Extensive profit taking set in after five days of rising prices; active stocks suffered sizeable setbacks from rally highs. Market opened down on accumulated orders, steadied momentarily, but began another slow decline around 11. However, action of majors was very encouraging to bulls, since “it was evident that the selling was coming mostly from day-to-day traders, and that distress liquidation” was no longer substantial. With “banking sponsors ... standing aside to allow the market to digest its recent gains,” efforts by bears to speed the decline were thwarted by drying up of selling volume. Banks and trusts weak. Bond market showed early strength but then turned dull and mildly reactionary; US govts. firm; foreign slightly lower; corp. mixed.

Dominick & Dominick point to enormous US savings reserves as placing “people in a better position to withstand the present depression” than any time in history. In past 15 years, savings bank deposits tripled to $28.5B, or $232 per capita, vs. $40 in Britain, $33 in Germany, and $10 in France.

Harvard Economic Society says “now near the end of the declining phase of the depression,” which should happen in early 1931; sees “steady but gradual revival for the remainder of that year.” Sees low interest rates enabling long term borrowing on favorable terms.

Head of one of the largest steel cos. says operations below 50% are not bearish but rather indicate “customers will have to buy in the very near future. Even in a depression the country, through actual needs, requires more than 50% of the country's steel capacity.” Confident industry will be at 80%-90% by next spring.

Head of an oil company, when asked if his stock was cheap: “Use your own judgement ... If we liquidated today, we could, out of working capital, pay our shareholders more than the stock is selling for,” while still having fixed assets such as refineries, pipelines, wells, etc.

When buying for yield, make sure dividend is safe; stocks with unusually high yield “are often dearer in the long run than stocks not so attractive” in terms of yield.

Economic news and individual company reports:

Numerous banks closed - 6 in Kentucky, 3 in Illinois, 4 in Missouri, over 30 in Arkansas. Many of the closures said due to “rumors” and “hasty withdrawals” following collapse of Caldwell & Co. of Nashville, Tenn., largest investment house in the South. Among larger banks closed were National Bank of Kentucky ($41.1M in deposits), Amer. Bank & Trust ($15M), and Quincy State Savings ($6M).

Income tax receipts running slightly below expectations so far in the fiscal year; for the first quarter (Jul. 1 - Sept. 30), receipts were down $55.0M, vs. expected decline of $160M for the whole fiscal year. Treasury expected to wait until Mar. 15 to complete borrowing plans since extent of decline will be better known then.

Commerce Dept. reports Oct. exports $328M, up $16M from Sept. but down from $528.4M in 1929; imports $248M, up $22M but down from $391.0M.

1930 earnings for 8 leading car cos. estimated at $154.7M, down 53.9% from 1929 and 58.7% from record 1928. At recent lows, total market cap of the 8 cos. was $1.724B, down $761M from 1929 and down $3.566B from 1928 (cos. are GM, Packard, Nash, Chrysler, Studebaker, Mack Trucks, Hudson, and White).

Farm Board announces has resumed purchases of wheat to check panic selling; about 10M bushels bought in past 4 days, bringing total holdings to 70M.

S.W. Straus reports building permits issued in 589 cities in Oct. were $153.1M, down 10% from Sept. and 40% from 1929; usual Oct. seasonal increase is 5%.

US Bureau of Mines reports petroleum storage (crude and refined) on Sept. 30 was 678.5M barrels, down 10.7M from Jan. 1, but still problematically large.

Companies reporting decent earnings: Procter & Gamble, Cuneo Press (commercial printing).


Hello, Paris - musical comedy presented by the Messrs. Shubert. “Charles 'Chic' Sales, our most thoroughgoing and hilarious mimic,” plays his standard character, “practically extinct in farce and vaudeville ... the hick, from the small town, as distinguished from the rube, from the small farm. He and his cronies take a chaw from the same plug, spit in the stove,” and believe anyone from a town of over 50,000 is morally suspect. “Care and expense have been bestowed on settings and costumes, appropriate to scenes on an oil field, in a New York speakeasy, on a pier, in the salon of a liner, and in the Cafe Lapin Agile in Paris.”


“'Did you cancel all my engagements as I told you, Smithers?' 'Yes, sir, but Lady Millicent didn't take it very well. She said you were to marry her next Monday.'”

“An orator, warming to his task, took off his coat, which rather disconcerted one of the stewards of the meeting ... Toward the close, he said to the speaker 'I don't suppose you knew, when you removed your coat, that a newspaper man was present?' 'Yes, I did,' was the reply, 'but I kept my eye on the coat all the time.'”

+ The Boring Stuff:

Editorial by T. Woodlock giving evidence that private electric utilities supply power more cheaply and with fewer employees than public ones; also points out private utilities pay taxes while public ones don't; “Governor Roosevelt will, perhaps, be good enough to note this for future reference.”

Editorial: Value of agricultural exports in Q3 was $286.3M vs. $366.7M in 1929; some of this decrease is caused by lower prices and world depression, but not all. Our current farm policies are failing miserably, and new approaches are needed; this sector is important, still accounting for a third of exports.

NY State Commission on Tax Revision considering proposals to increase State income tax, impose sales tax; S. Rayburn, Lord & Taylor pres., leads opposition.

First New York - Chicago all-air service to be started by Nat'l Air Transport Dec.1; westbound flight will take 8 hours.

Leading observers continue to advise picking up standard stocks “on a scale” during reactions, with stops for protection.

Considerable criticism is heard” of the recent sharp rise in copper metal, “but that has come from those who have been short of copper stocks.”

Broad Street Gossip: Majority in trading circles believe “market definitely has turned for the better,” though severe interruptions may occur. Of course, many felt the same way on Sept. 10, when a 2-month decline ensued. However, due to general deflation in that time, “majority believes the market is in better shape for permanent improvement now than at any time since the first of the year.”

Demand by short sellers for stocks in the loan market was somewhat higher.

Greater hope seen for commodity price stabilization. Optimists can point to recent quick turnarounds in copper and cotton printcloth prices following production curtailment efforts, as well as ongoing efforts in oil and sugar. General commodity prices have also shown improved tone in recent weeks.

Commodities mixed. Grains up sharply on Farm Board buying. Cotton almost unchanged. Large copper producers holding at 12 cents but some smaller sellers at 11.5 cents; little domestic buying, some skepticism on whether 12 cent price will hold.

Fed. Reserve member banks weekly report for Nov. 12: loans on securities down $181M to $7.904B, “all other” loans up $42M to $8.763B.

Total US and Canada Oct. output of cars and trucks was about 156,743, down 60.8% from 1929 and 62.3% from 1928. Decline from Sept. was 32.1%, much worse than the decline of 8.1% from Sept.-Oct. 1929; attributed to earlier showing of new models. First 10 mos. was 3.223M vs. 5.269M in 1929; industry may see lowest production in 1930 since 1922, when total was 2.646M.

New securities listed on NYSE in Oct. were $346.3M vs. $211.1M in Sept. and record $2.089B in Oct. 1929; of current total, $266.7M were bonds, of which $105.8M were foreign govts. and $79.2M were rails. First 10 months were $7.459B vs. $13.868B.

Industrial bonds now generally selling at considerably higher yields than rail and utility bonds; examples include Chrysler 8.3%; Amer. Ice 6.4%; Liggett & Myers 4.63%; Republic Steel 4.93%; Int'l Paper 8.15%.

Financial experts report Florida bond situation materially improved from a year ago; banks in the state appear sound, and public opinion seems “in favor of doing everything possible to meet debts.” State courts have ruled municipal obligations must be met; St. Petersburg expected to start catch up on defaulted interest, and West Palm Beach has increased payments after litigation. State Supreme Court to rule on whether municipal issues of refunding bonds can proceed in spite of Florida constitutional amendment passed on Election Day that appears to forbid most bond issuance without a referendum.

Steel trade reports some increase in inquiries after recent announcement of minimum prices.

Ford Motor Co. of Mexico will quote prices and pay wages in silver instead of gold to cooperate with Mexican govt. efforts to stabilize silver currency.

Spanish pesetas plunge on general strike, concern that Republican movement will overthrow monarchy.

Canadian report: Wholesale price index in Oct. was 81.4 vs. 82.5 in Sept.; retail index 97.1 vs. 97.4 (base of 100 in 1926). Govt. revenue in 7 months to Nov. 1 was $235.6M vs. $284.8M; spending $192.5M vs. $182.7M; net debt Oct. 31 was $2.149B vs. $2.137B in 1929. Canadian Bank of Commerce reports manufacturing activity in first half 1930 was comparable to previous years except 1929, but sharp decline in Q3 due to construction, mining, and agricultural weakness; some seasonal recovery in past month. W. Gordon, Minister of Mines, predicts Canada will be first nation to recover from depression.

Cuba Pres. Machado signs Chadbourne plan for sugar stabilization involving purchase and removal of 1.5M tons from market.

Calif. citrus crop in past season valued at record high of $135M.

A&P sales for Oct. were $101.0M, down 4.75% from 1929 and first monthly decline this year; decline due to lower prices, as weight sold was up 5.82%.

Cuneo Press stock about 29, yield 8.6%, earnings in 1929 were $6.72/share, equal or higher earnings expected for 1930.

November 17, 2009

Monday, November 17, 1930: Dow 186.68 +2.65 (1.4%)

Assorted historical stuff:

Advertisement: “The unemployment situation in New York is critical. Unless it is speedily met, we face a winter of hunger and distress for families whose bread-earners are without work and without funds. The great majority of family men now unemployed are asking not for charity, but for a job. In the richest city of the world, where the vast majority are at work, it is unthinkable that anyone should be permitted to starve. The Emergency Employment Committee is composed of New York business and professional men, formed at the request of experienced welfare organizations of the city. It is raising funds which will be used by these organizations to give temporary work to heads of families and to relieve distress caused by unemployment without regard to race, creed, or color.” Followed by endorsement from Pres. Hoover and appeal for funds.

Sen. Smoot denies tariff is retarding business recovery, says it has saved thousands of jobs and helped maintain wages and preserve farm purchasing power; points out only one country has increased its tariff since US adopted revisions; says question now is whether tariff is high enough, not whether it is too high.

George Washington letters recently sold at auction in Philadelphia: letter to Maj. Gen. Heath on his retirement - $1,200; two-page letter to General Nathaniel Greene on July 20, 1776 - $875; letter from Mary Washington, mother of George, on Christmas Day 1748 - $1,450.

First public use of gaslight in London was for Westminster Bridge in 1807; first street to be gaslit was Pall Mall in 1812, now lit by high-pressure gas lamps.

For the first time in the history of the New York Cocoa Exchange, no trades were recorded yesterday.

Market commentary:

Market wrap: Stocks were slightly lower early in the weekend session, attributed to profit taking on recent gains. However, impressive demand developed on moderate decline; many Exchange brokers had advised buying standard stocks on setbacks.Upward trend resumed; majors including US Steel and American Can rose above Friday highs, and buying spread through the list; amusements, utilities, and oils strong. Some irregularity at close, but day's highs fairly well maintained. Bond market continued recent uptrend in corp. issues, particularly speculative and convertibles; US govts. dull, slightly lower; foreign steady.

Week in review: Stocks mounted sustained rally for first time in 3 months; attributed to stronger technical conditions, good copper news, and more support from “prominent industrialists” and “powerful banking interests.” Money continued extremely easy; “funds accumulated in banks until money became almost unlendable”; banks heavily buying bankers acceptances; call money lent at 1% - 1.5% in outside market, though official rate stayed at 2%; Fed “somewhat more aggressively expansionist.” Corp. bonds very weak early in the week, with many low-grade issues down sharply to new lows; general recovery set in at midweek; US govts strong, foreign irregular. Grains and cotton moved irregularly. Copper rose dramatically from 9 1/2 cents to 12 cents in a few days.

Good buying reported from “prominent industrial and banking interests.”

Bankers who have made a thorough investigation of conditions state that the financial horizon is now much clearer than it has been since midsummer ... At the moment no forced selling is overhanging the market.” Barring unforeseen development, don't anticipate selling similar to what caused past 2-month decline.

T. Lamont of J.P. Morgan says plenty of precedent for current depression in the 13 crises suffered over past 130 years; hopeful we're at bottom of cycle and “the extreme of our depression is probably as unwarranted as the extreme of our exaltation was 14 months ago.” Thankful that people are now working and saving instead of speculating and spending. Cautions against attempts to overstimulate ailing business with nitro-glycerine pills, which might cause further explosions. Says tariffs have complicated situation to some degree, though “we cannot class them as controlling factors in our present depression.” As causes of depression, lists overproduction, artificially supported commodity prices, fall in price of silver, movements of gold holdings, political unrest, and overspeculation.

Prof. B. Ohlin of Stockholm Univ. of Commerce says depression rapidly nearing an end; sees upward movement in US by spring if not sooner.

Oil outlook: Little if any increase in gasoline consumption seen in Q4 1930 and Q1 1931; preservation of even current low prices for crude oil and refined products likely to require further curtailment of production and refining.

Outlook for US shoe industry said threatened by flood of cheap foreign shoes.

Economic news and individual company reports:

NY State savings bank deposits were down $4.4M in Oct. to $4.598B, first decline since May, but much smaller than Oct. 1929 decline of $85.2M.

While Pres. Hoover hasn't publicly changed stand in favor of continuing 1% income tax reduction, there's growing sentiment even among those close to the Administration that it would be inadvisable to do this and chance a large budget deficit (as high as $300M). Some believe “a deficit is not such a fearsome thing,” particularly when the govt. can borrow at such low rates; however most presidential advisers apparently believe this is a bad idea in the long run.

Irving Fisher's index of 200 commodities for week ended Nov. 14 was 82.2, unchanged from previous week and vs. 92.6 a year ago.

BLS reports employment in 13 industrial groups was down 1.4% in Oct., with payrolls down 0.8%; Oct. employment was down 18.6% from 1929.

More optimism on steel: Youngstown District operations up 2% to 52% this week; rumors of advance in steel prices. Observers also note that even stabilizing prices would help earnings, since prices have often been “shaded” in recent months. Optimism that most steel producers will now follow lead of the large companies.


Renegades, a Fox picture - yet another movie “for those not already surfeited with movie tales of the French Foreign Legion and its troubles with the Riffs in Morocco.” This one is noteworthy for an appearance by Bela Lugosi as a Moroccan tribal chief.


'Where did you learn to sing?' 'I graduated from correspondence school.' 'Boy, you sure lost lots of your mail.'

“'Do you object to hecklers?' 'Not under certain circumstances,' replied Senator Sorghum. ' They're a great help if you can meet 'em beforehand and have 'em well rehearsed.'”

+ The Boring Stuff:

Editorial by T. Woodlock: US faces a difficult choice. Other countries, particularly Germany, are aggressively cutting costs to make exports more competitive. To lower wages in response would be difficult, to increase productivity would make unemployment worse, and there's not much room left to cut on the profit side.

German leaders including Chancellor Breuning, cabinet ministers, and Dr. Luther, Reichsbank pres., admit failure to obtain adequate price reductions, call on German housewives to arouse public opinion and exert pressure on dealers.

Gov. Larson of New Jersey signs law allowing cities to issue bonds in excess of debt limits to speed up public works and aid unemployed. Hershey estate, controlled by Hershey Chocolate Co., plans $2M construction program to prevent unemployment in area of its plant. General Foods offers to contribute several thousand packages of “Post Toasties” as well as sufficient Walter Baker chocolate to supply many thousand people.

Treasury Dept. preparing new rules placing burden of proof on importer to show goods not made by convict labor.

Greater NY rapid transit and surface car lines carried 3.009B passengers in year ended June 30, up 36M from previous year; revenues were $161.6M, up $2.4M.

Los Angeles installs 400,000'th phone; new lines were 16,021 so far in 1930.

Demand by short sellers for stocks in the loan market considerably lighter than earlier in the week.

Many market observers impressed by advance in the past week, particularly resistance to profit taking and to several efforts by bears to start another reaction.

Market has reacted strongly to positive copper news and hopes for stabilized steel prices; it had also apparently become “ripe technically for an abrupt turnabout.”

While the Dow has rallied 15.08 points since last Monday, it still has 58.41 points to go to reach the Sept. 10 rally peak of 245.09.

Broad Street Gossip: “Bankers, brokers, and traders” seem more cheerful; majority doesn't expect a rapid recovery in business or stock prices, but does believe “bottom has been reached and that from now on things in general will be better. Everything is now on a deflated basis - stocks, commodity prices, brokers' loans, and money. Probably no better foundation ever existed from which to build.” Inventories are at rock bottom and corporations now have billions in cash on hand; while a year ago that money could be lent out at 6%, it “now can be more profitably employed in rebuilding inventories and new construction.”

Wall Street element has changed its sentiment substantially”; with two basic industries of copper and steel showing signs of substantial improvement, “a radical change may take place in general business in the near future.” Most observers now strongly in favor of buying stocks on reactions.

Col. L. Ayres in Cleveland Trust Co. monthly bulletin: It's probably true that business recovery can't take place until commodity prices stabilize; therefore encouraging to see some signs of this stabilization happening; if this continues, we'll be justified in believing we've “reached the bottom both of the price decline and of the depression”. Increasing reason to believe a real upturn will start in spring. Although previous severe depressions also been international in character, this is probably the first one where the “international interdependence of business” has been widely recognized in the US. Bear market in stocks has also been international; although it started at different times around the world, the market bottoms will probably be much more closely grouped. Important to take international developments into account rather than just looking at US markets.

Commodities mixed. Cotton little changed. Grains sharply lower; wheat hits season lows on future months on rumors of Canadian Wheat Pool dumping large amounts on market. Copper held at 12 cents, with heavy foreign buying. No indication seen of Dept. of Justice action against copper curtailment program.

Deposits at world's 10 largest banks as of Sept. 24 totalled $13.868B vs. $13.632B at end of last year. British big five banks account for $7.826B, four US banks for $5.336B, and one Canadian bank for $706M.

A. Van Duzer, Amer. Road Builders' Assoc. pres., says much more than half of money authorized for road and bridge construction goes to workers.

Cuban House and Senate approve sugar stabilization law.

Companies reporting decent earnings: General Amer. Tank Car.

November 16, 2009

Favorites of the week Nov. 10-Nov. 15, 1930

No Journal was published Sunday, Nov. 16, 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.

Nov. 15:

[Note: Sheer Genius Dept.] Pan American and Imperial Airways to collaborate on transatlantic service from New York via Bermuda and the Azores, possibly using “seadrome” floating landing fields being developed by du Pont to shorten “hops”; service will begin by carrying airmail only, flight time of three days hoped for.

[Note: Strangely unfamiliar Dept.] G. Charls, Nat'l. Assoc. of Flat Rolled Steel Mfrs. pres.: “Once it was considered necessary to reduce wages in periods of depression. Today the entire steel industry accepts the principle that such reductions only reduce purchasing power and delay the return of prosperity. Industrial buyers pushing for lower prices on steel should be mindful of their joint responsibility in helping the steel industry maintain the purchasing power of its employees.”

[Note: Ay Chihuahua! Dept.] Shearson, Hammill & Co. bullish: “not in sympathy with the extreme wave of pessimism which now prevails ... We believe a gradual improvement in business is under way.” Consumption has exceeded production for some time. Corporations have ample resources and have become more efficient. “The recuperative power of our country is great. The banking situation generally is strong.”. Credit is easy. Increased savings by individuals means latent buying power. Considering all this, “and that security prices generally are much below their real value, we unhesitatingly strongly recommend the purchase of” sound and well-managed stocks.

[Note: Perils of historical precedent Dept.] A recent indication of stocks passing into strong hands on a large scale: brokers' loans extended by NY City banks were down $987M in past 7 weeks, to $2.235B, while loans to non-brokers were up $150M, to $2.042B. “In the past, increases in loans to non-brokers, especially when accompanied by decreasing brokers' loans in a declining market, invariably have indicated buying to have been of better quality than selling, with an early upward turn in stock prices.”

Nov. 14:

[Note: I'd say that this sounds strangely modern in its concept of the Fed aggressively adjusting the credit supply to smooth out the business cycle. But the really eye-opening part is the fact that asset prices, including stocks and real estate, are part of the suggested price index to be used - for my money, this puts him miles ahead of the asset-bubble-oblivious central bankers of today.] Letter from T. Macauley, Sun Life of Canada pres., defending his proposal for Fed. Reserve to halt depression by buying $500M of bonds, increasing bank lending power by over $5B. Currently, dollar has no fixed purchasing power but varies with amount of currency credits outstanding as controlled by the Fed. “If we permit commodity price levels to go up and down with good and bad times, we are asking for trouble ... we shall automatically transform moderate depressions into severe ones and severe ... into disasters.” Suggests boom-bust cycle can be moderated by stabilizing value of dollar relative to broad price index of industrial and farm products, rents, real estate and security prices. Praises Fed actions in preventing inflation by selling bonds to absorb excessive gold imports in past years, and in already buying $450M of bonds to reduce effects of current depression; believes it may be hindered in acting more agressively by current criticism and opposition.

[Note: Slightly premature predictions Dept.] Editorial: “China, with its great population and low standard of living, offers a great potential market ... so too does all Asia.” China trade already has grown dramatically; from 1900-20, imports grew from $155M to $940M and exports from $120M to $670M; since then wars and depression have somewhat reduced trade. China needs both physical infrastructure for business and political stability, but latter will follow former. Rehabilitation should be a business benefit, not burden.

[Note: Slightly premature predictions Dept.] Sir Percival Dewhurst Perry, chair. of Ford Motor Cos. in Europe, makes bold call on Russia: “The Russians have seen the writing on the wall. With the collapse of their five-year plan there is no doubt that they will revert to capitalism. It is the only way in which they can avoid a revolution.”

Nov. 13:

[Note: Strangely unfamiliar Dept.] Editorial: Pres. Hoover's Armistice Day speech makes his concept of the US role in world politics clearer; he favors building up the “moral obligation” to avoid hostilities through agreements such as the London Naval Treaty and agreements to use “arbitration and conciliation” to resolve disputes, but believes US role in promoting cooperation must stop “short of any implication of the use of force.” This is advisable; an obligation to “preserve peace by making war,” in the current state of world politics, “would merely throw the nations back upon the ancient European system of competitive alliances.”

[Note: Strangely familiar Dept.] Rep. Eaton (R, NJ), following meeting with Pres. Hoover, criticizes banks for not taking more active part in relieving depression: “Idle money is lying in the banks, piled up, yet the banks refuse to give loans to those who need them, with some exceptions.”

Nov. 12:

[Note: Strangely unfamiliar Dept.] Halsey, Stuart study reports newspaper circulation up 39% in past decade, advertising revenue up 60%.

[Note: Sheer Genius Dept.] Recent trend of odd-lot investing may have found its ultimate example in one broker's customer who in the last year bought 192 shares of 192 different companies.

Nov. 11:

[Note: Strangely familiar Dept.] F Sargent, Chicago & North Western Rwy. pres., attacks Agricultural Marketing Act as unconstitutional; “I strongly criticize the establishment of government agencies to compete with private business as constituting unlawful confiscation of property.”

[Note: Stimulus Dept.] Pres. Hoover to ask Congress for special emergency appropriation to expedite public works for unemployment relief.

[Note: Perils of contrarianism Dept.] Experienced observers believe recent increase in short-selling by small traders is hopeful: “Just as a rapid expansion in brokers' loans heralds the culmination of a bull swing, general switching from long to short positions by inexperienced speculators is a familiar feature of the final stages of a prolonged decline.

[Note: Something to take note of.] Many stocks are depression-proof based on increasing earnings, but in the recent decline no stocks have been bear-proof.

[Note: They should have gotten Maurice Chevalier Dept.] Sentiment in France said better, but “still nervous despite reassuring statements by the Premier, the Finance Minister, and the Governor of the Bank of France to which wide publicity was given.” Rumors persist about some banks, may result in mergers.

[Note: Words to live by Dept.] “'There is nothing so satisfactory as a clear conscience.' 'No,' answered Senator Sorghum; 'and the next best thing is a good lawyer.'”

Nov. 10:

[Note: Strangely unfamiliar Dept.] Editorial: Gesture by Dems. is sincere, but may be passing: “Before an election politics is at its height. The men in the heat of the fight honestly regard the opposition as either fools, criminals, or both ... Once the ballots are counted ... the pendulum swings to the other extreme ... even the politicians are eager for a rest from politics for a time.” Statement is still encouraging since it suggests Dem. leaders will curb the wilder schemes and more radical proposals of some of their party members.

[Note: Possibly strangely familiar Dept.] Executives in wide variety of industries agree future earnings will depend mostly on sales volume, since costs have been cut as far as possible.

[Note: Stimulus Dept.] Col. A. Woods summarizes reports on unemployment from governors: main problem is in Great Lakes and US industrial centers; almost all states reported they're “stimulating public works and pushing ahead work which had been planned for a later date”; general feeling is to provide work for unemployed rather than relief.

[Note: Morality can never be accomplished by law - that's crazy talk!] Editorial: People may disagree on the meaning of Tuesday's elections, but one result is absolutely clear: public sentiment against Prohibition is rapidly increasing. People are starting to understand “morality can never be accomplished by law.” Instead, the effects of the “noble experiment” have been seen in “an increase in crime, the placing of almost unlimited wealth in a criminal class, and the spread of drinking among young men and women. ... People have been revolting against our prohibition laws; the elections show the revolt is changing to revolution before which this legislative tyranny must fall.”

[Note: Ay Chihuahua! Dept.] Broad Street Gossip: Patient investors will, in the long run, make a lot of money buying good stocks at current prices. Some people are in fact doing this, as seen in record numbers of shareholders in US Steel, AT&T, GM, and others; “The little fellow has been getting in on the ground floor while the big fellow with the big income has been busy seeking ways and means to cut down his 1930 tax payments.”

November 15, 2009

Saturday, November 15, 1930: Dow 184.03 +3.65 (2.0%)

Assorted historical stuff:

Most important development in next Congressional session as far as financial community is concerned will be Glass Senate inquiry. “The inquisitorial committee has broad powers to go into almost any conceivable angle of the country's financial machinery.” Exactly what the committee will do will be decided when its membership reaches Washington after Dec. 1, but Sen. Glass and other committee members resent statements it will be a “Senatorial fishing expedition.” Investigation will probably concentrate on banking and Fed. Reserve, but subject of short selling might come up as Sen. Glass is an outspoken critic of the practice.

Conference of British coal mine owners and workers ends unsuccesfully; possible major strike seen. Over 20,000 coal miners in Spain go on strike.

Chile contemplating 35% tariff on all goods manufactured locally to provide work for unemployed and defend against dumping of foreign goods.

French Chamber of Deputies supports A. Briand foreign policy following 10-day debate involving “surprising shifts of support.”

Warden Thomas of Ohio state prison recently told paroled prisoners they could come back as trustees if they couldn't find honest work outside. A large number have apparently taken him at his word, coming back to where they are at least assured of a warm place to sleep, plenty to eat, and 2 cents an hour for their labor.

Pan American and Imperial Airways to collaborate on transatlantic service from New York via Bermuda and the Azores, possibly using “seadrome” floating landing fields being developed by du Pont to shorten “hops”; service will begin by carrying airmail only, flight time of three days hoped for.

Berlin is soon to have another zoo, “much larger and more pretentious” than the present world-famous Tiergarten. The new zoo is being set up to attract tourists; it will contain “the most extensive and most modernly maintained collection of wild animals in the world,” including 120 polar bears.

Sears catalog to contain advertising section with space sold to national advertisers; Sears distributes two catalogs a year, with circulation of over 7M copies.

Market commentary:

Market wrap: Recovery continued yesterday, with “general list enjoying the most prolonged respite from pressure since early Sept.” Bulls encouraged by better technical position seen in greatly deflated brokers' loans, and by good copper news. Moderate but persistent advances in majors including US Steel, American Can, Consolidated Gas, AT&T, and New York Central; coppers strong; active short covering; upward trend sustained to end of day, with day's highs near the close. Bond market moderately active, generally higher; US govts. continue firm; foreign mostly steady; corp. irregular but mostly higher.

Speculative sentiment” decidedly cheered by recent string of positive days without “encountering a fresh flood of liquidation”; seen as indicating main body of stocks “has absorbed most of the impaired holdings that appear likely to be thrown at it,” suggesting a more sustained recovery may be at hand.

Shearson, Hammill & Co. bullish: “not in sympathy with the extreme wave of pessimism which now prevails ... We believe a gradual improvement in business is under way.” Consumption has exceeded production for some time. Corporations have ample resources and have become more efficient. “The recuperative power of our country is great. The banking situation generally is strong.”. Credit is easy. Increased savings by individuals means latent buying power. Considering all this, “and that security prices generally are much below their real value, we unhesitatingly strongly recommend the purchase of” sound and well-managed stocks.

Insurance companies reportedly have increased buying of common stocks in past two weeks; seen as reflecting belief they offer good long-pull prospects.

G. Charls, Nat'l. Assoc. of Flat Rolled Steel Mfrs. pres.: “Once it was considered necessary to reduce wages in periods of depression. Today the entire steel industry accepts the principle that such reductions only reduce purchasing power and delay the return of prosperity. Industrial buyers pushing for lower prices on steel should be mindful of their joint responsibility in helping the steel industry maintain the purchasing power of its employees.”

Economic news and individual company reports:

A recent indication of stocks passing into strong hands on a large scale: brokers' loans extended by NY City banks were down $987M in past 7 weeks, to $2.235B, while loans to non-brokers were up $150M, to $2.042B. “In the past, increases in loans to non-brokers, especially when accompanied by decreasing brokers' loans in a declining market, invariably have indicated buying to have been of better quality than selling, with an early upward turn in stock prices.”

Bradstreet's and Dun's weekly business reviews note continued uneven and difficult to characterize situation; while recession remains prominent and only slow recovery is expected, some bright spots are noted particularly in chain store and holiday sales.

W. Franklin, Independent Petroleum Assoc. of Amer. pres., says crude oil price has dropped below cost of production due to imports, calls for oil tariff.

Company reports since Oct. 1: 175 companies reported higher earnings vs. 1929 and 285 lower; 418 dividends unchanged, 40 increased, 61 cut.

Companies reporting decent earnings: R.J. Reynolds (expects 10th consecutive year of increased earnings), Vortex Cup.


Morocco, a Paramount film - “Brings a new Greta Garbo to the screen in the person of Marlene Dietrich, a German musical comedy actress who is an almost perfect double for the Swedish star in appearance, manner, and voice.” Also appearing are Gary Cooper, playing a French Foreign Legionnaire in “his usual simple, affecting manner,” and Adolphe Menjou in his first English talking role as a wealthy European.


Grocer - Here's your fly paper. Anything else? Customer - Yes, I want about six raisins. Grocer - You mean six pounds? Customer - No, about six raisins - just enough for decoys.

+ The Boring Stuff:

Editorial: Rep. Eaton's charge that bankers are piling up money and refusing to lend is way off base. For example, banks currently stand ready to buy commercial paper at 2.75%-3%, but businessmen are only offering a small amount. While last year it could be argued that Wall Street was drawing money away from legitimate business, now “every agency from the Government and Fed. Reserve System down, has been directed toward making money cheap and available for all business. ... Far from being a 'bankers panic', this is a borrower's market, for the small business man as well as for the big.” Money has never been easier to get, and if in some cases it's not obtainable, “the result is apt to be the fault of the would-be borrower, not the bank.”

Sen. Smoot (R, Utah), Senate Finance Committee chair., says continuation of 1% tax reduction will be impossible in view of authorized spending; says govt. must pay its debt, believes it may be necessary to use some foreign payments on war loans to avoid Treasury deficit. Sees no need for extra session of Congress in summer 1931. White House denies reports Democratic Senators may filibuster to force extra session.

M. Harrison, pres. of national rail security owners assoc., opposes 6-hour day for rails since it would increase overtime; suggests 26-day month as alternative that would add 75,000 workers without increasing payrolls.

Editorial: In Tuesday's elections, voters in Washington state were taken in by “campaign talk of how beneficiently the little homes and cottages might be electrified if only we had the intelligence to throw off the yoke of some power trust,” and voted to set up public utilities. This was in spite of clear facts presented by the Washington Water Power Co. that customers of the public electric company across the border in Ontario were paying higher rates. Apparently, private utility corporations don't even have honor in their own states.

Dr. H. Schacht, chair. of German commissions that negotiated the Dawes and Young Plans (reparations), says Germany in good position to compete on trade, but will require free market trade to pay reparations; loans made to Germany by individuals in past 7 years will be repaid in full; regarding Germany's frontiers, “western problem is solved entirely,” but Germany will never be satisfied with current state of her eastern frontier; however, “Germany will never do anything violent about this matter ... because she has confidence in human and political reason” that something will be done to provide for permanent European peace.

Commission under German Chancellor Breuning discussing price reductions with producing and selling organizations; slight cuts have been agreed on for milk, meat, drugs, machinery, etc., but it's not clear how to reduce rents and public service charges due to poor municipal finances.

New Jersey population Apr. 1 was 4.041M, up 885,434 from 1920; population density was 537.8/sq mile, second only to Rhode Island.

Survey of St. Louis elementary schools finds 3,194 left-handed writers out of 85,000 pupils.

Conservative observers say some of recent buying has “been of the best character,” therefore anticipate strong support when market is tested again. Advise buying standard stocks on any good setback, and add to holdings if stocks supported above recent lows; warn against taking short side.

With a more extended rally seen in store, question naturally arises whether it will be a bear market recovery or start of a new bull. History suggests it may be neither; while approximate bottom of the bear may have been reached, bear markets usually culminate in a period of irregular fluctuations during which “market is building a shelf on which permanent improvement may be based.” Market action therefore seen likely to be “extremely erratic” for rest of year.

Broad Street Gossip: Future market course depends on public participation. Some may say public has no money to buy stocks, but “in depressions of the past, that theory always has been exploded.” Even taking depression into account, US earning power is close to $70B; if people had no money to buy, how did they absorb $5B of new security issues this year, while adding 20% to 50% to shareholders of record of leading corporations?

Oct. decline in bond market wiped out Sept. gains, though bond indexes remained above June levels and well above low levels of Sept. 1929 - Jan. 1930.

Commodities mixed. Grains down substantially, particularly later months, on rumors of Farm Board failure and imminent resignation of Chair. Legge. Cotton fluctuated irregularly but closed up slightly. Copper was in heavy demand at 11 cents/pound, and price advanced late in the day to 12 cents/pound for deliveries to end of March.

Interesting items from most recent Fed. Reserve weekly report: $21M more in bills held by Fed, $25M total increase in Fed credit outstanding, $15M increase in gold, and $19M in currency, making total of $59M, greatly increasing potential member bank credit; instead, however, member banks allowed reserve balances to increase $80M. “How long they will permit large sums to remain idle is problematical,” but precedent indicates it won't be very long.

$125M Treasury bill issue Nov. 13 received over $568M of bids; $127.5M were accepted for average rate of 1.72%.

Unofficial comment among railway officials” indicates Western roads may oppose ICC's order for lower grain rates in federal court; Many rail presidents said to feel it's time for roads to take a definite stand against losses in revenue due to ICC orders.

W. Potter, former ICC commissioner, writes letter suggesting ICC look into methods of raising rail income. As possible alternative to general rate hike, suggests placing part of all rail revenues into a pool to be redistributed according to need.

Bell System's construction budget in 1931 will be about $500M vs. $600M in 1930, $588M in 1929, and $428M in 1928.

Scheduled airlines in the US carried 208,357 passengers in the first half, a fourfold increase from 1929; total miles flown were 16.9M vs. 9.2M.

Consumption of rubber by US mfrs. in Oct. was 27,271 tons, up 8% from Sept. but down from 34,800 in 1929; usually there's no change from Sept. to Oct.

US cotton mills consumed 444,494 bales in Sept. vs. 394,321 bales in Sept. and 639,759 in Oct. 1929.

Dutch foreign trade has been unusually well-maintained, with first 8 months imports 1.679B guilders vs. 1.813B in 1929, and exports 1.178B vs. 1.313B; tonnage of imports and exports were actually greater than in 1929.

A&P Oct. sales were $101.0M, down 4.7% from 1929; first 10 months were $901.1M, up 5.1%.

A&P is one of the largest US shippers; in past year, rails transported over 205,000 carloads for its stores, with a freight bill close to $25M.

Jerome A. Newman [I believe this is the Newman who was Benjamin Graham's partner] offers $39/share for Bristol Mfg. Co. of New Bedford; directors recommend accepting offer since mill is running at a loss.

Gillette reports weakened consolidated balance sheet after Autostrop buyout: current ratio is downfrom over 16 to 4; $20M paid was over 3 times book value, though only 10 times earnings; income restated over more than 5 past years due to consolidation of foreign sales subsidiaries, surplus down $16M vs. end of 1929.