November 28, 2009

No Journal published Nov. 28, 1930

No Journal was published Friday, Nov. 28, 1930 following Thanksgiving.

Important Editorial Notice: Tomorrow we'll reach the six-month mark for this blog. Up to now, I've followed a pretty regimented format, summarizing just about every significant story from the Journal each day in 1930. I did this because I wanted to give the feel of reading a paper back then, minimizing the influence of hindsight. I therefore tried not to select stories based on future events (though some of that inevitably crept in), and mostly avoided commentary except for the weekly digests. The effort required to restrain myself from pontificating was stupendous, but I think I did a decent job overall of staying out of the way and presenting an unbiased record. At this point, I think the sample is long enough to give a good time capsule and capture the zeitgeist for those interested. I'm therefore going to try a more opinionated format - picking the stories I find most significant, and doing more analysis, blathering, and unfocused rambling. This will probably be more fun both to write and read, though less valuable as objective historical record. So, see you back in 2009 in a couple of days!

November 27, 2009

Thursday, November 27, 1930: Dow 183.11 -2.36 (1.3%)

Assorted historical stuff:

Editorial: Pres. Hoover recently emphatically rejected the idea of the Federal govt. taking over “suppression of local racketeers in a dozen cities.” By sheer coincidence, Mayor Walker appeared the same day as a defense witness in a trial involving sale of a New York judgeship. Rackets are made possible by shortcomings of local police and “outright venality of some of the lower state courts.” In a score of cities, rackets “bear with particular cruelty upon the small business man, who cannot afford to buy adequate protection and is without the political influence to obtain it.” Pres. Hoover's declaration “serves notice upon the city political machines” that they can't use the smokescreen of Federal responsibility. It also usefully reminds the rest of us that we get the government we deserve.

In spite of promises of political truce, some statements that might be interpreted as political attacks have recently been made by officials of both parties.

Rep. Strong (R., Kans.) urges Pres. Hoover to support his bill authorizing the Fed. Reserve Board to use its funds to avoid deflation as far as possible.

Count Guiseppe Volpi, a prominent Italian public utility executive, currently visiting US to discuss state of Italian electric power industry. Attributes tremendous progress in production and consumption of electricity in recent years to aid of the Fascist government, which has helped it to develop “on sound and natural lines.” Total output of electricity in Italy in 1929 compares favorably with that of any other nation in Europe; consumption in first half 1930 was up 14% from 1929; equipment in use is most modern and compares in many respects with that in use in the US.

S. Baldwin promises first act of the next [British] Conservative govt. will be emergency tariff on all manufactured goods.

NY City Emergency Employment Committee contributions now over $2.5M; about 10,000 heads of families have so far been put to work at wages of $5/day.

Market commentary:

Market wrap: Trading was slow in the pre-holiday session; while much of the session was extremely dull, such activity as did crop up was on the down side. Bears said encouraged by weakness in leading shares late Tuesday, resumed “hammering tactics” for first time since recent recovery. Traders also had to digest reported declines from last week in steel production and freight loadings. While selling volume was small, liquidation was observed in brokerage accounts and leading stocks worked persistently lower as the session went on; declines grew sharper toward the close. Bond market moderately active, prices generally weaker; almost all classes showed mostly declines, including foreign govts. and highest grade corp.; US govts. relatively strong, with some bonds at yearly highs.

A “stubborn short interest” still exists, consistently selling on rallies; while some short covering goes on during reactions, “many of the recent successful bears still are maintaining their short position.”

Observers now expect a renewed test by bears of the early Nov. lows following the Thanksgiving holiday. However, recent investment buying has “by no means been exhausted,” and buying should become more aggressive if the early Nov. lows are approached again.

Good scale support has come into the market in the past few days; buying has come “from important interests that had taken profits at or near the highs, apparently because they did not desire to have the market move ahead too rapidly.”

Recent rally has still not recovered much of the last decline; the Dow lost 73.49 points from Sept. 10 - Nov. 10, and only gained 11.51 in the rally since then.

Brokers' loans have declined so much that some brokers are now reportedly lenders instead of borrowers of money.

Reduction in steel production in past week wasn't considered disturbing since trend hadn't been expected to improve until mid-January, when a gradual uptrend was expected into the spring on rail, auto, and structural demand. However, drop in freight car loadings of 52,150 for week ended Nov 15 was unexpectedly large.

K. Collins, R.H. Macy executive VP, says intelligent advertising to stimulate public buying will be one of most potent factors in relieving the business situation.

Economic news and individual company reports:

US Steel ingot production for week ended last Monday was at 45% vs. 47.5% prev. week and 70% in 1929; independents were at 37%, vs. 41% and 68%; industry total was 40%, vs. 43% and 69%. Definite improvement seen starting Jan. based on scheduled auto production, construction, and rail equipment inquiries.

Rumored steel price advances haven't materialized, but recently set minimum prices have been holding well, though scrap prices are weaker.

Public utility bonds in default increased $49.2M to $285.0M in year ended Nov. 1. Most were traction (mass transit); defaults rare in gas, electric, or water cos.

Ten of the 70 Arkansas banks that closed this week have now been reopened.

First 41 rails report Oct. operating income up 7.3% from Sept. but down 24.5% from Oct.1929; revenues were up 3.5% from Sept. but down 19.3% from 1929.

Companies reporting decent earnings: Crown Cork & Seal, Chesebrough Mfg. (Vaseline).


The Work of the Stock Exchange - “Commencing with a history of security markets in general, dating back to the Roman Forum, the volume briefly describes the establishment of the Stock Exchange in 1792, and its development down to present times.”


Pressing Business - Comedy set in the cleaning and pressing establishment of Goodman & Small; main storyline is romance between Ben Goodman and Peggy O'Day; features four of the cast members from Abie's Irish Rose.

Angna Enters - creator of “many striking costume-pantomimes in dance form” offers her annual series of performances; her “forte is mimicry of an unusually satiric nature.” Numbers this year include a burlesque reminiscent of the Isadora Duncan school of dancing, and two Elizabethan dance creations - “Shaking of the Sheets” and “Daunce We Praunce We.”


“A bricklayer said to a foreman on a new job: 'I'd like to work here, but I can't find a place to park my car.' The foreman replied: 'I guess you won't do. This is a high class job, and we only want bricklayers who have chauffeurs.'”

+ The Boring Stuff:

Continued disagreement on possible extra session of Congress in 1931 (following current short “lame duck” session; next scheduled session is at end of 1931). Prospects for the extra session seem less on agreements with “insurgent” Republicans to bring some bills to a vote in current session; farmer's organizations have also indicated they won't press for the debenture at this time. However, some still call for the extra session; Rep. Rankin (D, Miss.) predicts it will be needed since there's “no hope ... of beneficial legislation” with current Congress.

Editorial by T. Woodlock: Two ideas are emerging on dealing with the depression: the “high wages” theory, and use of “long range planning” for business. These must be combined to have a chance of success, since increasing wages and production without coordinated planning across the economy would run into limits on demand. Some blame business leaders for the depression and believe this planning must be done under public control, but a better alternative might be to make business leaders freer to act by relaxing our antitrust laws, as the rest of the world has done; we may be paying a high price for our “worship at the anti-trust shrine.”

Farm Board chair. Legge warns that Russia's revival as a large-scale wheat exporter may make world price of $1/bushel unusual; calls for curtailing US production to domestic requirements.

Dr. P. Silverberg, Harpen Mining chair., attributes German financial crisis to “capital destruction,” including unproductive investment, social policies, and excessive reparations. Speaks out against “political phantasies of the extreme right parties”; calls for utmost economy in public finances, centralized control and reorganization of local govts., and private enterprises taking responsibility for themselves instead of “throwing it upon the state.”

Italian Foreign Min. and Soviet Commissar of Foreign Affairs confer on perfecting existing trade agreement; Italy wants to increase shipments of manufactured goods to Russia while Russia wants to ship more raw materials to Italy.

Cuban Pres. Machado's request for “virtually dictatorial authority” over all of the country approved in principle by Cuban Senate and House.

Cuba notifies League of Nations it has accepted the Root Protocol revising World Court statutes; this reportedly removes final barrier to US entry to the Court.

Turkish govt. notifies Paris Debt Council that only about a third of $4.5M currently due on Ottoman public debt can be paid.

Editorial: New York State faces the decision of whether to turn control of the Erie and Oswego Canals over to the Federal govt., thereby saving millions a year in expenses. The NY State Waterways Assoc. opposes the turnover as an effort to kill the canals as possible competitors of the proposed St. Laurence shipway between the Lakes and the Atlantic. This belief may be justified, but the St Laurence will in any case be developed if feasible - which in itself isn't certain. Even if the canals were kept under New York control, there's little prospect of undertaking their “enormously expensive” conversion from barge canals to shipways.

Vermont is harvesting its Christmas tree crop - over 250,000 trees will be shipped in the next few weeks, filling 200 railway cars.

Conservative observers say real test to come when stocks approach lows at which recent rally started; if resistance develops around that level, stocks should be bought for a rally. Advise keeping liquid position to take advantage of declines from renewed bear pressure.

Dow theory adherents feel the recovery since Nov. 10 was largely technical; bearish operations had been “pushed to the utmost,” driven by “exaggerated pessimism” on business. Investment buying by “powerful banking interests” came in, drawn by yields over 5% in high-grade stocks such as US Steel and AT&T; however, this buying was unwilling to follow the rally up to higher price levels. This resistance at higher levels brought experienced bears in again to renew pressure.

Broad Street Gossip: “Some of the large banking interests and wealthy individuals have been placing fairly large scale buying orders under the market in certain of their favorite stocks.”

Demand by short sellers for stocks in the loan market was fair, particularly for US Steel, and Westinghouse.

Drop in gasoline in storage considered encouraging; current total of 36.532M barrels is lowest since Oct. 18 and not much above 35.805M on Nov. 23, 1929.

Number of stockholders in 31 oil cos. Mar. 31 was 419,199 vs. 338,125 in 1929 and 200,556 in 1925. Standard Oil NJ holders on Feb. 15 were 103,689 vs. 26,829 in 1925. Most of the companies have no funded debt.

Commodities mixed. Grains slightly higher. Cotton down moderately. Copper market near standstill, with small amount available at smelters at 10 1/2 cents, large producers holding at 12 cents, but “insufficient metal changing hands to indicate any real price at the present time.”

Electric light and power industry expected to show increase of 3%-4% in revenues this year; this is one potential bright spot for copper, since the electric industry is one of its largest consumers.

W. Storey, Atchison pres., says 6-hour railroad work day “entirely impracticable”; wouldn't increase employment on train crews but just result in more overtime. Recent conference of rail unions was unable to agree on proposal for changing working hours; unions will meet in early Dec. to try again; options include 6-hour day with 6-hour pay, 6-hour day with 8-hour pay, and 26-day month.

After many months of lean business, locomotive companies report some signs of better demand, with large inquiries from NY Central, St. Paul, and IRT.

German unemployment Nov. 15 was 3.484M vs. 1.760M a year ago.

J. Rosenwald, Montgomery Ward chair., denies knowledge of resumed negotiations for merger with Sears: “I am here in Chicago, and if people want to talk in New York, I cannot help it.”

Vortex Cup Co. (paper cups) stock about 20, yield 10%, earnings for year ended Sept. 30 were record high of $5.01/share.

November 26, 2009

Wednesday, November 26, 1930: Dow 185.47 -2.80 (1.5%)

Assorted historical stuff:

Increased “dumping” of Russian products generally attributed to need for foreign exchange to pay for equipment with which to carry out Five-Year Plan. Decline in prices received for many goods and increased imports in first year of Plan (starting Oct. 1, 1928) has led to policy of exports at any cost and inflation of rubles. This may cause withholding of produce by independent peasants, who still account for most of harvest in spite of Soviet plan for socializing agriculture. Govt. considered “wedded” to Five Year Plan; “belief grows that on the fate of the plan the fate of Sovietism may well depend.”

G. Frank, Univ. of Wisconsin pres., says current depression not an indictment of the “machine order” (“array of processes by which we make goods and produce wealth”) but of the “economic order” (“array of policies by which we use goods and distribute wealth”).

Pres. Hoover says agrees fully with Senator Reed's proposal to suspend immigration for 2 years after July 1 to relieve unemployment; points out that recently tightened visa procedures on his orders have already reduced immigration from 24,000 a month to about 6,000 in Oct.

Pres. Hoover says no new Federal laws needed to cover “racketeering” activities of gangsters; can be adequately dealt with using existing state laws.

Frankie Dunn, “racketeer and late leader of the North Jersey beer-runners” leaves estate of $413,558, mostly in stocks and bonds.

New Chinese language “Pei-Hua” invented to consolidate hundreds of existing dialects; mixture of Mandarin and other Northern dialects. Language is compulsory in every public school; use is “expected to abolish the language trouble after a generation or two.”

A weather balloon filled with hydrogen recently released from Roswell, New Mexico was recovered 242 miles away in Texas; it had reached a height of 12 miles.

Market commentary:

Market wrap: Substantial buy orders accumulated overnight following Monday's impressive late rally. Major stocks showed a strong tone through the morning led by US Steel and American Can, which hit new rally highs; good gains in other majors including AT&T and Consolidated Gas; merchandising shares and trading favorites strong. Selling on profit taking appeared going into the afternoon, encouraging “bear crowd to make a test of the market's position.” These operations kept the market heavy through the last hour; leading shares generally gave up their gains and worked below previous closing prices. Bond market more active, prices irregular; US govts. continued firm, near high prices for year; foreign govts. mixed; corp. irregular, with highest grade steady.

Market movements in standard stocks in past 2 weeks “have been under the domination of some of the most important and powerful industrial and financial interests. Their efforts have been directed toward stability, not only in the stock market, but also in various other directions.” While these interests don't desire any spectacular movements, they do believe a reasonable advance in stock prices is warranted.

Broad Street Gossip: Bull “tips” are on the rise; rumors have also been heard of new bull pools being formed in certain stocks, including some low-priced issues.

While there have been few signs of substantial improvement in business, “all reports indicate a better feeling in trade circles at present.” Local observers have maintained a better stock market might result in improved business sentiment; if this is happening now, “a long step in the right direction will have been taken.”

Car industry opinion mixed; while it's considered certain the first few months of 1931 will bring higher production, opinion differs on whether the increase will carry past the first quarter through the whole year; more conservative authorities say this will depend greatly on the reception given new models.

W. Gifford, AT&T pres., sees end of depression in near future, followed by a sustained period of prosperity such as the world has never before seen.

Economic news and individual company reports:

Oct. output of cars and trucks in US and Canada was 154,585 vs. 224,834 in Sept. and 394,540 in Oct. 1929; first 10 months was 3.215M vs. 5.269M.

Rail freight loadings for week ended Nov. 15 were 829,251 cars, down 52,150 from prev. week and down 153,675 or 15.6% from 1929 week.

First 19 rails report Oct. operating income 24.1% below 1929.

US Steel and large independent producers establish minimum sheet steel prices for Q1 1931, following recent similar action by Carnegie Steel for bars and plates.

Sen. Caraway (D., Ark.) proposes banning short sales in agricultural commodities; ban would not apply to “legitimate hedging” but to “pure gambling operations.”

Highest full page advertising rates: Ladies Home Journal $9,500; Woman's Home Companion $9,400; Delineator $9,200; Pictorial Review and McCall's $8,800; Saturday Evening Post (highest circulation) $8,000; Collier's $5,500; True Story $4,500; Liberty $4,250.

Companies reporting decent earnings: IBM, American Ice, US Gypsum, Scott Paper.

Biscuit makers generally have reported good 1930 earnings; attributed to “inelastic demand,” brand recognition, efficient distribution, and lower raw material cost.


“'How long will it take to fix that car?' Mechanic - I'm afraid it will take a long time, sir. That's the only job we have at present.”

“Reporter - Are you in favor of prohibition? Senator - Are you going to offer me a drink, or do you want a statement for the paper?”

+ The Boring Stuff:

Editorial: New regulations putting burden of proof on importers to show goods aren't produced using forced labor are effectively aimed at Russian exports; they are “a reasonable approach to an extremely difficult problem, while leaving the door open to Russian trade providing it can meet certain essential conditions.” How much Russian labor is literally convict is doubtful, but “that much or all of it is under some degree of compulsion and prevented from bargaining for terms is the general testimony of observers on the spot.”

Pres. Hoover states new regulations not directed against Russia, US doesn't intend to start trade controversy. Details on enforcement not completely clear.

Sir R. Borden, Canadian wartime PM, links present business depression to US refusal to cancel world war debts.

Sir C. Addis, director of Bank for Int'l Settlements and of Bank of England, stresses need for international stabilization of commodity prices to end worldwide depression; not calling for rigidity or fixed prices, but for world prices to be “kept fairly stable without attempting to control particular prices.”

Sec. of War Hurley criticizes railroads' opposition to inland waterway development, says govt. support is similar to subsidies granted to railroads in their early days, as well as Federal support for development of the merchant marine and highway building.

At the galleries: At French & Co., a 17th century “state bed” once occupied by King Charles II, “generally regarded among connoisseurs and collectors as one of the greatest of its kind” and valued at $50,000. At the Van Diemen galleries, exhibition of Venetian art including works by Titian (Portrait of a Nobleman), Bordone, Tintoretto (Resurrection), and Canaletto. Rains galleries continues sale of property of Mrs. Charles V. Bob, this time of furnishings from her Montauk Point home.

Adam Opel Works of Germany to build world's smallest six-cylinder car, producing 3,000/month to sell at $785.

NY City Merchants' Assoc. endorses building of waterfront highway along East side of Manhattan, withdrawing earlier insistence on elevated highway.

Conservative observers still advise picking up standard stocks on a scale during reactions, but recommend keeping part of funds liquid until “market has definitely shown that a resistance level has been reached.”

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

The Old Timer: “I have known people in Wall Street who refused to be optimists even in times of prosperity. They all die poor. Lately that has been the trouble with the general public; entirely too much pessimism. The atmosphere has been streaked with indigo blue. Even people with good jobs and with no shrinkage in income contracted the disease. Better action of the stock market and a little more business cheer has dissipated much of the pessimism, and if stocks do not take another nosedive, the improvement will continue and we will soon be back on the road to prosperity.”

Several Wall Street brokers report increased foreign buying, much of it investment but also some “speculative business particularly on the part of French, Dutch and English accounts.” While quantity isn't important yet, it's interesting that some of those buying have been out of the market since the summer of 1929.

C. Abbott, Amer. Inst. of Steel Construction exec. dir., sees “indications that the long continued decline in the building industry is drawing toward its end”; notes increased residential construction in Sept.; calls for “cooperation and more scientific management” to enable industry to help in “present national emergency.”

Commodities weak. Grains substantially lower. Cotton down slightly. Copper buying remains small, with large producers holding at 12 cents but moderate amounts available at 10 1/2 cents from smelters and second-hand.

Gasoline stocks at refineries Nov. 22 were 36.532M barrels, down 731,000 in week; refineries operated at 64.1% vs. 64.2% prev. week; oil production was 2.282M barrels/day, down 22,700 from prev. week and down 351,400 from 1929.

First 37 states reporting new car registrations for Oct. totaled 109,771 vs. 200,535 in 1929. Ford accounted for 37.5% vs. 34.8%; GM for 34.4% vs. 34.8%.

Six railway shop unions of US and Canadian rails propose demand of 5-day week with 6-days pay to relieve unemployment.

Savings bank meeting postpones action on relaxing requirements for railway bonds they may legally invest in. Current law is that roads must cover bond interest charges by margin of 1 1/2 times for 5 of past 6 years, including last year. A few months ago it appeared many rails might be dropped from the list due to lower earnings, but now market observers think only two rails are in serious danger. In addition, rails that look to be falling close to the minimum coverage can generally reduce maintenance or other expenses to avoid dropping below it.

Farmer's representatives say won't agitate for debenture or extra session of Congress at this time, will give Farm Board a chance.

American Machinist reports continued dull machine tool markets, though inquiries have improved in past week.

Bank of Montreal monthly letter reports “barometer” of Canadian business little changed in Oct.; mild weather helped construction, but drought and falling grain prices cut farmers' income; Oct. foreign trade down sharply vs. 1929 due to new Canadian tariff, which has also stimulated cotton, silk, and wool industries.

British registered unemployed on Nov. 17 totaled 2.286M vs. 2.262M previous week and 1.274M in 1929.

G. Harrison, NY Fed. Gov., leaves Paris for Berlin after discussions with Gov. Moret of Bank of France; believed to have discussed gold question. Influx of gold to France expected to continue due to nervousness over Oustric failure and German political developments.

Hope for German situation to improve if govt. can withstand radical attacks after Reichstag opens next week; Chancellor Breuning has offered penalty-free return for German capital sent abroad illegally.

Italian bank Credito Veneto closes; has 65 branches and deposits of 300M lire.

Dec. butter and egg futures hit new record lows on continued reports of heavy production.

Oct. sales of candy were $31.0M, up 10.6% from Sept. but down 14.1% from Oct. 1929. First 10 months' sales were down 8.7% from 1929.

More rails reporting improving results: Union Pacific and Atlantic Coast Lines.

Cash dividends paid by Standard Oil group of cos. in 1930 was new high record of $286.7M, up $17.0M from 1929.

T. Watson, IBM pres., says increased IBM earnings this year due mainly to more worldwide exports, not census; co. now operates in 77 countries. Earnings have increased steadily over past decade, with record earnings of about $11.50/share expected this year; stock is about 148.

November 25, 2009

Tuesday, November 25, 1930: Dow 188.27 +0.23 (0.1%)

Special banking report:

Merger announced among four large NY City banks: Public National, Bank of United States, Manuf. Trust, and Int'l Trust. New bank's chair. to be J. Herbert Case, currently chair. of NY Fed.; bank will be fourth-largest in NY with over $700M of deposits, 1M depositors and almost $1B of resources. Following announcement, Public and Manuf. were up sharply, but Bank of US “dropped perpendicularly” 6 1/2 points to all time low of 15 1/2 bid; other leading bank stocks closed only slightly changed. Merger considered very constructive, “calculated greatly to strengthen and stabilize the general banking situation at this center”; the new bank will apply to join the NY Clearing House Assoc. Merger terms “have been tentatively agreed upon,” but “are still subject to modification in one particular.”

Several recently closed banks reopen, and mergers reportedly in progress for others; however, two Ark. insurance cos. declared insolvent, and small banks in Ill., Mo., and Ind. were closed.

Stocks yesterday may have been helped by better banking news, with “various institutions in the interior” reopening.

Assorted historical stuff:

Editorial: In the past year US businessmen have become concerned about the ability of capitalism to deal with automation, or, as Chesterton calls it, the “insatiable monster who serves us at the price of our slavery.” “Will the laboring multitudes whose services have been so brilliantly economized be able to absorb the fruits of a productivity almost unbelievably expanded?” Problem is complex, but not unprecedented; industry has grappled with it since dawn of the industrial revolution.

J. Stalin, Sec. Gen. of Soviet Communist Party, denies rumors of revolts, mutinies, arrests of high Soviet officials and generals, and other recent alarmist stories. Denies general dumping of goods possible due to small Soviet production, but predicts will be “world's largest grain producer” in two years. Talk of “selling below cost, forced labor, etcetera is sheer nonsense.” Says if political ties with US not possible, “Soviet Union at least desires to strengthen its economic ties ... And America, being a great, wealthy, technically progressive and developed country, must appreciate the advantages of such economic intercourse as much as we do.”

Democrats and Republicans both seen divided by Prohibition issue, with wet-dry dissension within each. Dems. seen more likely to adopt extreme wet position in 1932, with chair. Raskob and prominent possible candidate Roosevelt both wets, and possible strategy of using wet stance to appeal to North while depending on South to stay Democratic. Republican strategy uncertain, although some form of modification might unite the party.

British Air Ministry orders 200 bombers and fighters for Royal Air Force from Hawker Engineering; largest single order for airplanes ever made.

Burial place of seven Dutch sailors on Jan Mayen Island in Arctic found this year by radio operator for the Norwegian weather service. Sailors were left on the island in 1633 by a whaling expedition and found dead the following year when the ship returned. Also found was diary of one of the unfortunates; final words April 30 were: “Wind as before. Sun shines. Who ---”

New car features to be exhibited at the 26th Annual NY Automobile Salon Nov. 30 at the Hotel Commodore: a recessed side vanity “illuminated by a tiny lamp and giving all the conveniences of a boudoir table”; and, for the back seat driver, a rear instrument panel including speedometer, clock, altimeter, and radio set.

Market commentary:

Market wrap: Bears exerted early pressure on theory market had become technically vulnerable after past two weeks advance; leading issues including US Steel and American Can were pushed down with moderate success for first three or four hours, but resistance was stubborn, with volume drying up and declines relatively small. A recovery set in during the last hour, with leading stocks rising above last week's closing levels, and the whole market displaying “a greatly improved aspect”; mail-order shares strong. Bond market very dull, prices irregular; US govts. continue firm; foreign mixed; corp. heavy with most issues down.

Market observers now expect further uptrend over Thanksgiving, and possibly for the next several weeks. Encouraging factors include: advance of both Dow industrial and rail averages; recent impressive resistance and buying support on price recessions; extensive deflation in brokers' loans; seasonal trade improvement.

Tax sellers who disposed of stocks in Sept. and Oct. have had a rare opportunity to buy them back at much lower prices.

An “important foreign operator” who took a huge short position last spring reportedly covered last week on advice from important bankers.

Recent market action seen “in line with the desires of important interests” who don't want either drastic declines or spectacular rallies; declines now are likely to be met with “scale support” because “important interests want to keep the market stable.”

P. Snowden, British Chancellor of the Exchequer, reports signs of improving trade in Britain and elsewhere, sees better times for world before much longer.

Season of increased retail buying for holidays usually starts right after Thanksgiving; retail trade will therefore be watched closely in coming weeks.

Economic news and individual company reports:

Fed. Reserve Bulletin reports retail trade up considerably more than usual seasonal amount Oct. 1 - Nov. 15, but industrial production and employment down; commodity prices declined further; money rates slightly easier.

Fed. Reserve member banks weekly report for Nov. 19: loans on securities down $66M to $7.838B, “all other” loans up $89M to $8.852B.

Treasury issues new rule placing on importers the burden of proof that goods are not produced by convict labor.

Companies reporting decent earnings: Canada Dry Ginger Ale, Illinois Central RR (against industry trend), Blaw-Knox (road building machinery), Thompson-Starrett (construction).


“Doctor - Your constitution is not so good. Patient - How about a little amendment, doc?”


The Metropolitan presents a “delightful and affecting” performance of Puccini's Madame Butterfly with Maria Mueller as Cio-Cio-San.


Just Imagine, a Fox picture - “presents a picture of what New York may be like in 1980,” when airplanes have virtually replaced motor vehicles, television apparatus has supplanted telephones, people are known by number instead of name, and eating is replaced by “simple swallowing, three times a day, of a small pill containing the essential essences of roast beef, vegetables, and desert.” However, Prohibition is still in force, though people get around it using liquor pills. Film's main interest is in introductory scenes showing how life is led in 50 years, and in glimpses of future male and female dress styles; “incidental song numbers and dances are unimportant, and the long expedition to Mars” is relatively boring.

+ The Boring Stuff:

James H. Oliphant & Co. look on positive side of the depression - there are some important constructive measures that are “only possible ... in consequence of severe economic distress.” For example, panic of 1907 led to Fed. Reserve system, “without which is painful to imagine what would have happened in the war period, the 1921 industrial paralysis, the 1929 stock inflation, and the 1932 deflation.” Suggested measures now include modification of Sherman antitrust law, and abolition of capital gains tax (“only the US has this uneconomic form of tax”) - revenue could be replaced with taxes on alcoholic liquor after legalization.

Rep. Snell (R. NY) says favors a vote in upcoming session of Congress on the Norris bill for govt. operation of Muscle Shoals [electric power] rather than having a special session; personally opposes govt. operation, but “This thing has been hanging like a sword over Congress for years. I am in favor of cleaning this and other controversial matters up in the coming session rather than allow them to come up in a special session which probably would last until Sept..”

Total drought relief spending requested by state committees estimated at $111M, not including request to advance $125M of road building funds from 1932.

Editorial: Advocates in Congress likely to reintroduce misguided farm relief idea: “Of all sad words of tongue or pen, the saddest are 'the debenture is back again.'”

Gen. L. Brown, Army Chief of Engineers, says Mississippi system of waterways may be developed as much in the next 10 years as in the past 100.

Editorial by T. Woodlock: Greatest opportunity for permanent gain in rail “economy of operation” is now upgrading of locomotives; while requiring considerable capital, this would be “obviously wise” if savings produced by modern locomotives would be enough to pay back buying costs over 15-20 years.

Will H. Hays offers cooperation of movie industry in helping recovery; “will do everything possible to help counteract unsound psychological factors that have retarded prosperity and employment.”

A rarity recently was presented to the stock transfer offices of the Chicago, Burlington & Quincy Railroad - an 1857 stock certificate for 30 shares that have remained in the name of the same estate ever since. This railroad is one of the few that hasn't passed through bankruptcy or consolidation in the past 75 years, though it's now 97% owned by the Great Northern and Northern Pacific railways.

Failure of yesterday's bear attempts to bring out liquidation “strongly suggested that distressed holdings were no longer overhanging the market.”

In spite of considerable recent short covering, a large short interest reportedly still exists.

Conservative observers remain positive; advise scale buying on reactions, taking profits on good rallies, against taking short side since trend appears to be up.

Old traders encouraged by recent “coming to life” of a large number of stocks that have been “dead” for months.

Broad Street Gossip: “Why is it that after stocks have a break of 50 to 100 points or more, they look less attractive to the average trader than when they are hitting peak prices?”

Foreign markets sell off to start new week. Berlin's sharp decline attributed to US selling; leading shares now yield 8%-12% based on last dividends. French market weakness partly attributed to remaining shadow of Oustric bank failure. London, Milan also down.

Wheat stability considered important for stocks; “on numerous occasions an upward trend in securities was halted by unsettlement in grains.” Therefore it's encouraging that there's “growing belief that the situation in wheat is under better control now than at any time” since downtrend began; “important grain interests are more cheerful on the outlook than they have been in a long time.” Farm Board reportedly believes it can sustain price of US wheat at 75-76 cents.

T. Hardin, world's largest wheat farmer, praises past week's Farm Board action for preventing drastic break in wheat, very bullish on wheat due to use as feed.

Some rails are starting to show much better traffic comparisons with 1929, although comparison is with a period when rail loadings began to drop sharply.

Harvard Economic Society says commodity prices, after pausing in summer, resumed decline in mid-Sept.; recent decline concentrated in agricultural products. See stabilization of wholesale prices within a few months, but price recovery unlikely before business revival.

Harvard investment portfolio showed sizeable increase in stocks over past year; as of June 30, total investments were $103.3M, of which industrial stocks were $12.6M, up 75% in year; utilities $5.9M, up 20.2%; rails $4.8M, up 25%; banks and insurance stocks $2.0M, up 35%.

Commodities mixed. Grains up moderately. Cotton down somewhat on dull trading. Copper remains at 10 1/2 cents - 12 cents, with few sales but fair amounts available secondhand and from smelters at the low price.

Direct foreign investment by US corps. and businessmen at end of 1929 was $7.478B. Areas with most investment were Canada, $1.960B; South America $1.548B; Europe $1.353B; Cuba/West Indies $1.054B. Largest investment types were utilities $1.625B; manufacturing $1.525B; mines $1.2B; oil $1.115B.

Five rail unions meeting in Chicago agree to appoint subcommittees to consider relief measures. A. Whitney, pres. of Brotherhood of Railroad Trainmen, says conference endorsed principle of 6-hour workday; reports 21 rail labor unions currently have 1.5M members with about 400,000 out of work.

Canada is world's third-largest producer of gold and silver; annual gold output $40.3M, or 9.9% of $405M total; largest producer is South Africa with 52.2%.

Canadian rail freight loadings in year to Nov. 15 were 2.842M cars vs. 3.185M in 1929 and 3.273M in 1928.

Ice industry to set records in 1930 at over 65M tons, $450M in sales.

Butter, at 28 1/4 cents, and eggs, at 18 1/4 cents, set new records lows for Dec. deliveries; little improvement expected due to heavy receipts of eggs and butter.

NYSE seat sold for $250,000, up $19,000 from previous sale.

Pennsylvania RR expected to earn about $4.75/share in 1930 vs. $8.82 in 1929 and six-year average of $6.79.

All fulltime GE employees to contribute 1% of wages to company unemployment fund; company will match contributions.

Kellogg Co. adopts 6-hour day to increase number of workers 25%; plant continues to operate 24 hours.

November 24, 2009

Monday, November 24, 1930: Dow 188.04 -2.26 (1.2%)

Assorted historical stuff:

US has about 6% of world population and 6% of total land area, but currently has 76% of world's cars and trucks (34.9M), 58.4% of telephone and telegraph wire in use (122.3M miles), 67.6% of petroleum output (1.489B barrels/year), 48.8% of copper production, 58% of corn, 56.6% of cotton, and 35.9% of coal.

Sen. Reed (R., Penn.) seeks to suspend new immigration to US for 2 years starting July 1, 1931, to prevent unemployment.

F. Goodenough, Barclay's Bank chair., urges industrialists campaign for war debt revision; if not cancelled, should at least be adjusted based on commodity prices.

Editorial: W. Johnson has pointed out the huge growth in govt. payrolls to where they now include one of every 10; “Reducing the thing to an absurdity one might visualize the day when each and every one of us would be a govt. employee.” While Mr. Johnson's suggestion of reducing govt. payrolls by 25% may seem badly timed, he's undoubtedly referring to “holders of the so-called 'gravy' jobs”; these wouldn't need to “take to apple-selling. They could exist on their surplus fat.”

One man's proposal: Selling apples on the street may be a good idea to relieve unemployment, but switching to bananas might be even better: “Just think what this would lead to. Everywhere banana skins would be strewn. The [city] would have to hire extra help to clean things up. People would slip on peels, bruising themselves, tearing their clothing .... Lawsuits would follow; lawyers would have more cases. Tailors would have more ... jobs, physicians would become busy, ... Prosperity would come slipping in on a banana skin. ... But, seriously, how about a change of diet? I, for one, can't look an apple straight in the face any longer.”

US Lines plans to build two new 50,000 ton liners - to be fastest afloat and equipped with catapult-launched planes, enabling 3-day transatlantic mail service.

3,563 “Gold Star” mothers [who lost a child in the war] visited France in the past summer; Congress appropriated $5.7M to pay for costs of the pilgrimage.

Market commentary:

Market wrap: Stocks presented a mixed picture. Sugar shares rallied on news of producers conference, as did mail order cos. on improved sales. This strong response to good news, as in yesterday's rally in rails, was taken as encouraging evidence of market technical strength. However, main body of stocks was highly irregular; US Steel weak, but generally majors traded in narrow range and volume declined on recessions. Bonds moderately active, irregular; US govts. strong; foreign mixed, South American and German weak; corp. quiet, rails steady, convertibles mixed.

Week in review: Stocks continued uptrend, interrupted only by brief technical reactions; buying reported by powerful banking interests and by those reversing previous tax sales. Bond market featured strength in US govts; foreign govts. were irregular, mostly reactionary; corp. bonds were mixed. Spanish situation unsettled. Rumor of large French loan to Britain dismissed. Money markets remained very easy; banks increased investments and loans on securities. More optimism on steel industry. Cotton down moderately. Sharp break in wheat prevented by aggressive Farm Board action.

Mark C. Steinberg & Co. believe “investors will resume the practice of several years ago of buying 'values' among common stocks instead of 'names.'”

Internat'l Harvester commended for statement that current dividend was safe; leading observers say similar announcements by other cos. would be beneficial.

F. Godber, Royal Dutch Shell dir.: oil industry at crossroads, further production cuts needed to avoid continuation of current unprofitably low prices, “ruination of thousands of producers, destruction, and waste.”

S. Strawn, Montgomery Ward chair., says current of M. Ward's business improving, “we are beginning to feel a change in the public apathy towards buying.”

Jack Warner, VP Warner Bros., says industry faces year of prosperity in 1931, W.B. will produce record high of 70 films together with First Nat'l. Pictures.

Atlanta Fed. Reserve Bank Gov. Black reassures on “fundamental situation” of Southern banks; they have $10B in reserves, tangible wealth of South over $80B.

W. Persons, formerly of Harvard and Amer. Statistical Assoc. pres., gives “convincing array of evidence” that “business recovery is in prospect and should be in progress by spring.” Argues that level of economic activity 20%-25% below normal, as observed in previous depressions, is “bed-rock below which depression did not go.” Careful survey of conditions shows “the stage is fully set for a business recovery.”

Economic news and individual company reports:

BLS reports index of 550 wholesale prices in Oct. was 82.6 vs. 84.2 in Sept.; farm prices declined 4%. Retail food prices declined 0.9% from Sept. 15 - Oct. 15, and 10% from Oct. 15, 1929 - Oct. 15, 1930.

Irving Fisher's index of 200 commodities for week ended Nov. 21 was 80.8 vs. 82.2 previous week and vs. 92.2 a year ago.

Arkansas state banking dept. took control of 30 suspended banks. Over $5.5M of Tenn. state funds tied up in closed banks; Gov. Horton denies malfeasance.

Youngstown District steel operations down 6% to 46% this week. Steel cos. in district still expect increased auto steel demand.

Commerce Dept. dispatches from agents abroad report improved business stability in almost all commercially important countries. Foreign credit and collections greatly improved in past few months due to seasonal business and trade revival; bankruptcies down.

Negotiations for unification of NY City transit lines resume after brief hiatus when transit cos. reject city's final offer.

Musical comedy:

Sweet and Low - revue presented by Billy Rose. Some good music and acting, though “most of the comedy is of the low order.” “Fannie Brice is best in a Spanish-Jewish song 'I Knew Him Before He Was Spanish,' accompanied by dancing with castanets.” George Jessel appears as a foreign professor showing a series of stereoopticon slides of American advertising slogans. Paula Trueman acts amusingly in “Ten Minutes in Bed,” referring of course to “those last few moments in the morning before a girl dashes off to work.” High point for many will be Borrah Minevitch's harmonica band.


“Blonde Waitress - I have stewed kidneys, boiled tongue, fried liver and pig's feet. Brakie - Don't tell me your troubles, sister, give me a chicken pie.”

+ The Boring Stuff:

Editorial by T. Woodlock: Current “emergency” in railways is also a great opportunity for lasting remedies. These should include centralized control of rates, cheaper and better coach service, and organization of the huge number of rail security holders to better inform themselves and speak up for their interests.

Rail industry more optimistic; have decided to take more aggressive action for higher rates, and regulation of bus and truck lines; believe Q4 earnings will compare more favorably with 1929 due to expense cuts. Texas & Pacific RR employees form organization to oppose discrimination in favor of motor transport. E. Lee, Penn. RR VP, calls on business to help rails by “concertedly refraining from efforts to pull down specific rates,” and agreeing to rate rises that have “a sound basis.”

Editorial: Some are now campaigning to abolish the Farm Board. While it has been a bitter disappointment to those who thought it would “relieve” agriculture, ending it now would probably lead to even worse ideas such as the export debenture plan. We should keep in mind the farm proverb that a calf given plenty of rope will strangle itself, and allow the Board ample rope to demonstrate its failure clearly.

American Assoc. of State Highway Officials urges emergency Federal appropriation of $250M to be used immediately for constructing highways.

Canada reportedly likely to form agency similar to US Farm Board following sharp break in Canadian wheat last week.

Russian wheat crop reportedly largest since the war, may about equal the largest pre-war crop; exports of 75M-100M bushels expected.

Spain reportedly begins steps to stabilize currency. However, political situation remains disturbed; Republicans on one hand and Communists on the other pursuing overthrow of monarchy; unions “jealously guarding” influence; business community lacking confidence.

US and British bankers rumored to have had talks in London regarding gold and debt situations.

Final corrected Census figures give continental US population of 122,775,046; US and possessions 124,926,070. Calif. had largest percentage gain in population, 65.7%; Florida was next with 51.6%; only state to lose population was Montana.

Round trip New York - Washington DC airfare reduced 33% to $20.

Broad Street Gossip: “More brokers are advising customers to buy stock on reactions than are those advising customers to sell on rallies.”

Broad Street Gossip: “At the height of the boom last year many did not hesitate to buy stocks on margin. Now, with the same stocks off 50% to 80% or more, the same traders are so timid about things that they pay outright for everything they buy.”

Some traders may have been absent Saturday due to “lure of football games.”

Recent rail strength encouraging to Dow Theory adherents, who believe the Dow rail average must confirm the trend mapped out by the industrial one. Theory has been dangerous to ignore this year, when rails failed to confirm rallies in May, July, and August.

Investors exercising “considerable discrimination” in stock selection; preferring issues with long dividend records and prospects for benefitting from general business improvement. Brokers report clients seeking advice “more eagerly than in several years.”

Reactions in past week have brought in better investment demand than in some time, possibly attracted by satisfactory yields.

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

Farm Board considered on firmer ground in latest stabilization operation than in past buying of wheat at over a dollar a bushel.

Commodities firm. Grains up sharply after Farm Board didn't enter market to sell recently purchased wheat. Cotton little changed.

Natural gas sales by 80% of industry in Sept. were 31.8B cu ft, down 7.3% from 1929; manufactured gas sales by 90% of industry were 26.9B cu ft, down 3.5%.

Prices for exported gasoline are down following Export Petroleum Assoc.'s withdrawal of price schedule on Nov. 7; prices are now 5 3/4 - 6 3/4 cents/gallon depending on grade and location, vs. 6 3/4 - 8 cents previously.

859 lumber mills reported orders for the week ended Nov. 15 were 5% under production of 225.0M feet.

Mexico modifies tariffs to help domestic industry and agriculture; duties raised on products competing with Mexican manufactures, lowered on machinery, raw materials.

Texas proration advisory committee lowers statewide oil production target to 681,538 barrels/day from 750,000 previously.

Copper producers said informally advocating copper tariff to Pres. Hoover.

Iowa Gov. Hammil asks Pres. Hoover to use flexible tariff provision to protect corn market against Argentine imports.

US exports of wheat from Jul. 1 - Nov. 15 were 75.5M bushels vs. 71.2M in 1929. Exports of cotton Aug. 1 - Nov. 21 were 2.952M bales vs. 3.030M.

Alaskan mines produced $16.1M of minerals in 1929, up $2M from 1928; value of fishing products was $50.8M, down $3.8M.

Eureka Vacuum Cleaner Co. reports sharp increase in sales following advertising campaign begun two months ago.

Galeries Lafayette net for year ended July 31 was 40M francs, down 10M from prev. year.

November 23, 2009

Favorites of the week Nov. 17-Nov. 22, 1930

No Journal was published Sunday, Nov. 23, 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. 22:

[Note: Interesting.] Extremely high cost of illness, medical and hospital care throughout the US” has led to formation in many Western cities of associations to reduce these costs. A hospital and medical staff is hired by the association to serve members exclusively; members then pay fees less than 50% of those charged by doctors in private practice. Service is not for poor or wealthy but for “that large middle class which is able and willing to pay reasonable fees.”

[Note: Perils of historical precedent dept.] I. Patterson, of Incorporated Investors: “Prices of sound stocks are at very real bargain levels.” Not calling bottom; “The intelligent investor has learned from past experience the impossibility of picking the low point ... But we do say that the sound policy of buying the best near the bottom will prove highly profitable.”

[Note: Perils of contrarianism dept.] One broker's opinion - “Don't become discouraged by the pessimistic talk you hear. It is no different from the talk I have heard in six depressions I have gone through. ... Go against your own feelings. I am blue myself, but have been buying stocks. And believe me, when you buy stocks feeling as blue as indigo, it hurts.”

[Note: So that's what that mast is for.] 205-foot dirigible mooring mast completed at top of Empire State Building; can withstand dirigible pull of 100,000 pounds.

Nov. 21:

[Note: First use of “Jehad” term to insult political opponent?] 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.

[Note: Perils of experience dept.] 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.”

[Note: Strangely familiar Dept.] 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.”

[Note: Strangely unfamiliar Dept.] 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.”

Nov. 20:

[Note: Sheer Genius Dept.] 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.

[Note: Perils of historical precedent dept.] 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 ...”

[Note: Strangely familiar Dept.] 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.

Nov. 19:

[Note: This Guy's Good Dept.] 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.

[Note: This Guy's Good Dept.] 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.

[Note: Always keep your eye on the freight loadings dept.] 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.

[Note: Strangely familiar Dept.] 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.

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

[Note: Sheer Genius Dept.] Huge triangular parachute, designed to save airplanes when motors go dead or propellors break, tested successfully at Wright Field.

[Note: Historical Joke Dept.] “'Those girls look exactly alike. Are they twins?' 'Oh, no. They merely went to the same plastic surgeon.'”

Nov. 18:

[Note: The first major banking crisis in the Depression is commonly said to have started with the failure of Bank of United States in about three weeks, since it was the largest bank to fail in US history to that date. However, my impression is the Caldwell failure was probably in the same ballpark in terms of size.] 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).

[Note: Interesting.] 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.

[Note: Perils of conservative valuation dept.] 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.

Nov. 17:

[Note: Ay Chihuahua! Dept.] 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.

[Note: Perils of historical precedent dept.] 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.

[Note: Strangely unfamiliar Dept.] 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.

November 22, 2009

Saturday, November 22, 1930: Dow 190.30 +3.21 (1.7%)

Assorted historical stuff:

Editorial: Proposal for NY State sales tax is absurd for several reasons. Advocates want it in order to provide relief for real estate taxes of $250M/year, but since total retail sales are about $6B, this would require a 4% rate; “a 4% retail tax is unthinkable.” Even a tax of 1% would “inevitably drive trade to the nearest border” state, or to mail-order houses. Retailers' expenses in collecting the tax would have to be added to price of goods. Finally, “to make every purchase of the necessaries of life a constant reminder of taxes” would have a psychological effect that “would obviously result in a dimunition of spending.”

Extremely high cost of illness, medical and hospital care throughout the US” has led to formation in many Western cities of associations to reduce these costs. A hospital and medical staff is hired by the association to serve members exclusively; members then pay fees less than 50% of those charged by doctors in private practice. Service is not for poor or wealthy but for “that large middle class which is able and willing to pay reasonable fees.”

Att'y General Mitchell reveals US govt. energetically fighting racketeers and gangsters in larger cities, especially Chicago. 40 New York leaders to meet with DA Crain on program to combat “public enemies.” Nat'l Crime Commission to send secret survey to big-city merchants asking details of experiences with racketeers.

Sen. Norris (R., Neb.) says extra session of Congress will be needed if progressive program not acted on by upcoming session.

C. Warburton, Nat'l. Drought Relief Committee chair., says most severe test for drought relief is to come in winter months.

Col. W. Starrett says skyscrapers twice as high as current record quite possible from engineering viewpoint, but maximum economic height likely already reached.

205-foot dirigible mooring mast completed at top of Empire State Building; can withstand dirigible pull of 100,000 pounds.

US govt. has successfully created large reindeer industry in Alaska, starting from a herd of 16 imported from Siberia in 1891, there are now about 1M.

Market commentary:

Market wrap: Stocks continued technical correction early; yesterday's late reaction was extended, with bearish pressure renewed and good-sized sales of leaders including US Steel, Westinghouse, and GE at the opening. However, selling was absorbed easily and dried up within first hour; bear efforts were “hastily abandoned”; considerable buying came into standard stocks, with many hitting new rally highs; buying broadened with many daily highs hit in late afternoon. Particularly strong features included rails on talk of rate increase proposal, Montgomery Ward, Sears, and various specialties. Bond market mixed; US govts. strong, with many at new yearly highs; foreign govts. irregular, South American particularly weak; corp. mixed, convertibles rally after early losses.

I. Patterson, of Incorporated Investors: “Prices of sound stocks are at very real bargain levels.” Not calling bottom; “The intelligent investor has learned from past experience the impossibility of picking the low point ... But we do say that the sound policy of buying the best near the bottom will prove highly profitable.”

Security loans by banks to non-brokers continued their recent steady increase, believed to indicate better-quality buyers (good credit and ample resources).

One broker's opinion - “Don't become discouraged by the pessimistic talk you hear. It is no different from the talk I have heard in six depressions I have gone through. ... Go against your own feelings. I am blue myself, but have been buying stocks. And believe me, when you buy stocks feeling as blue as indigo, it hurts.”

Some are beginning to think it will be a more cheerful Christmas than was thought possible” two weeks ago when stocks were hitting new lows; hopeful signs include more cheerful auto industry, commodity price stabilization, and that “public seems to be regaining its courage slowly but surely.”

R. Grant, GM VP, says statistics show automotive industry quickest to recover; looks to 1931 to level out sales curve and 1932 to be very good.

F. Hobbs of Central Trust of Ill. sees recent evidence of uptrend in commodity prices; “A rising trend is now as certain as was a declining trend sure 11 years ago ... I have real sympathy for the man who has been sitting back awaiting a lower bottom, and who has not yet protected his needs in cotton or copper or rubber.”

Under-Treasury Sec. Mills says Fed. tax reduction of $1.541B over past 7 years was offset by local rises; urges curb on “alarming rate” of local spending.

Economic news and individual company reports:

Total value of NYSE-listed stocks Nov. 1 was $55.0B vs. $89.7B Sept. 1, 1929; total value of listed bonds $48.4B vs. $46.7B.

BLS reports building permits in 286 cities in Oct. were $125.2M, down 14.6% from Sept. and down 39% from Oct. 1929.

US life insurance sales in Oct. were down 13% from 1929; first 10 months down 2%.

Western rails reportedly preparing application to the ICC for broad-based increase in rates.

Pres. Hoover says against reducing “sinking fund” for retirement of national debt; would be unsound financing. Fund has reduced debt about $400M annually.

Withdrawals, caused in some instances by unfounded rumors,” forced closing of 16 more small banks in South and Midwest, bringing past 5 day total to 114.

Company reports since Oct. 1: 201 companies reported higher earnings vs. 1929 and 336 lower; 506 dividends unchanged, 50 increased, 72 cut.


“Stage Hand - You received a tremendous ovation; they're still clapping. What did you say? Actor - I told them I would not go on with my act until they quieted down.”

“Mistress (to new maid) - And when you leave, I want plenty of warning. Maid (haughtily) - It's me custom, ma'am, just to give three toots on me auto horn.”

+ The Boring Stuff:

Editorial: In its recent meeting, the Assoc. of Railway Executives revealed that rails spent $699M on plant improvements in the first 9 months of 1930, or $125M more than last year, and promised to continue improvements and employ the greatest possible number of workers over the winter. There were also a couple of plaintive statements recommending that carriers be given a respite from orders reducing their earnings, and expressing “faith in the fairness of the American public.” However, there were also some signs the rails may have had enough - VP Lee of the Penn. RR declared that “we have taken too many evilly meant blows on the chin with a smile,” and that the rails would henceforth attempt to give blow for blow. This may be necessary; faith in the fairness of all of us is admirable, but Heaven helps those who help themselves.

In spite of persistent rumors that beer may be legalized soon, modification of Prohibition believed unlikely in near future. Current [lame duck] Congress solidly dry, next one will still have dry majority; report of Wickersham Commission (studying the issue for Pres. Hoover), even if it recommends modification, not binding on Congress. Likely test of the issue in 1932.

Conference of railway unions fails to reach agreement on alleviating unemployment; adopts resolutions opposed to unregulated operation of bus, truck, and pipe lines, and to govt. inland waterway plans.

G. Roberts, US member of League of Nations Gold Commission, says disagrees with statements of British economists that large US and France accumulation of gold would cause worldwide economic crisis; believes remedy is foreign investment, “world benefits from the free flow of capital.”

Sen. Kapper (R., Kansas) calls for alleviating wheat surplus by diverting 15M bushels to feed the unemployed.

NY Emergency Employment Committee reports $1.943M has been raised out of $6M goal.

Sir Josiah Stamp, noted economist, estimates net British wealth at $90.2B vs. $71.6B in 1914.

British govt. grants $87,500 annually for next 5 years to promote grand opera in Britain.

Electrically welded steel pipes able to withstand high-pressure have increased pipeline market; until 1927, pipelines over 250 miles were rare, but now lines up to 1,200 miles are being constructed.

Continued odd-lot buying reported in recent sessions. Many brokers are catering to small investors by lowering minimum commissions, typically from $5 to $3.

Some investors are reportedly considering taking their profits from bonds and switching into common stocks at these levels.

Recent market action “has created a better feeling in many quarters”; stock standing out on advances have been leading issues, while “character of the buying during reactions has been of the best.” Observers now recommend scale buying for the long pull on technical setbacks.

Market reaction to expected bad Q4 earnings reports is uncertain. In past recoveries, bad news has been ignored; however, this happens only when people are convinced business has definitely turned up, just as good news is ignored only when people believe business has turned down. “Past and present events have little to do with the market's trend when people are able to look into the future.”

Municipal bond market dull, prices comparatively soft; bond men expect more activity and firmer prices in Dec. in line with usual seasonal pattern.

M. Ayres, speaking to Nat'l Assoc. of Finance Cos., predicts more cars will be produced and sold in 1931 than in 1930, but fewer than in 1929; recommends financing cos. specializing in cars diversify into other goods.

C. Hix, Virginian Rwy. pres., says in his opinion worst of the business depression over, outlook “clearing up.”

Commodities mixed. Grains up substantially. Cotton off moderately. Copper buying small; producers holding price at 12 cents, some smaller sales at 10 1/4 cents; most consumers said to be covered far ahead on requirements.

Bradstreet's weekly review sees slower wholesale and retail sales due to warm weather, but colder weather possibly coming. Dun's sees more hopeful but uneven picture, seasonal influences stimulating some lines but retarding others; little change in business expected for rest of year, but longer term aspects more reassuring.

NY City bank weekly report showed deposits at new yearly high, but reserve balances drawn down to invest in acceptance and bond markets.

Contracts awarded for new construction in 37 states east of the Rockies during Nov. 1-14 was at the rate of $11.7M per business day vs. $13.0M in Oct. and $15.6M in Nov. 1929. Year to date was $4.151B vs. $5.211B.

Freight traffic handled by class 1 rails in Sept. was 36.2B net ton miles, down 18.1% from 1929 and 17.3% from 1928.

Farm Board declines to comment on reports it's now holding over 110M bushels of wheat.

German political prospects said better on support of state govts. for Breuning program. Spain reportededly preparing currency stabilization and return to gold standard; however, uneasiness caused by reports King Alfonso will declare military dictatorship. London and Berlin stocks down in past week.

Cuban Senate votes to extend Pres. Machado's power to suspend constitutional rights throughout Cuba following student riots and other disturbances.

Standard Oil NJ reduces price of gasoline to dealers 1 cent/gallon.

Addressograph-Multigraph merger to unite two leading business machine cos.; Addressograph is largest maker of addressing and name-and-data record-keeping machines, while Multigraph is one of leading makers of duplication and folding machines.

Decline in lumber prices that started in May 1929 seems to be nearing an end, as Oct. prices were only slightly under Sept.

Carolinas textile industry, which was doing badly even before the general depression hit about a year ago, is reportedly reviving, with mills that had been working 2 and 3 days a week back to full time and no surplus stocks on hand.

The humble bean - an important supplement to many a menu, as well as a source of countless jokes” has become a substantial source of income for farmers. In 1929, total crop of about 20M bushels of dry beans was produced on 1.9M acres, with value of $73M.

NYSE seat sold for $231,000, up $5,000 from previous sale.

Companies reporting decent earnings: Chesapeake & Ohio Rwy (against industry trend), Kansas City Power & Light.

Montgomery Ward says Oct. earnings strong, now likely to break even for first 11 months and Dec. earnings may cover class A dividends.

Three major tobacco companies (American Tobacco, Reynolds, Ligget & Myers) are selling at an average of 12.3 times estimated 1930 earnings. All three have a remarkably consistent record of increasing earnings over the past 10 years; only twice in the past 10 years has any of them shown reduced earnings year-to-year. Amer. Tobacco in 1930 is expected to earn $42.5M, highest earnings ever for a US tobacco co.