Saturday, September 6, 1930: Dow 240.37 +4.33 (1.8%)

Assorted historical stuff:

Editorial: Lindbergh proved the northern Atlantic could be flown eastward, and Costes and Bellonte, landing in Dallas on Sept. 4, proved it could under certain conditions be done westward. “No commercial use can be made of that information” now, but this was true of many technologies when first invented such as the steam engine and telephone - as a result of their development “the idea, handed down from primitive times, that every stranger is an enemy, has to a large extent been broken down under the influence of quick transportation and communication.” In the near future, aviation too will be developed; success will be measured by progress “in standards of living, and in social relationships that foster peace and goodwill between nations.”

French Ministry of Public Works reports nearly all reconstruction of regions devastated by World War has been completed. Almost all trenches filled in; most of 8M or more acres of ravaged soil has been cleaned. “Nature has healed the scarred and desolate land of 1918 beyond the most hopeful expectations.”

Brazil suffering from political disturbances, falling currency, coffee crisis, and pessimism regarding ability to get through depression without damage to credit.

Rumors Canadian govt. will shortly announce new policy to help industries such as textiles hurt by foreign competition; unclear what form policy will take.

New York metro area population is 10.741M, of which 64% live in 5 boroughs, 25% in New Jersey, 9% in other New York counties, and 1% in Connecticut.

Market commentary:

Market appeared to have been strengthened by past two days of consolidation; bulls encouraged by failure of bear efforts to bring out liquidation; also by increase of $8M in brokers' loans, taken as sign of greater public participation (though a relatively small increase). Retailers strong following news of improving Aug. sales at Woolworth. Major industrials recovered vigorously from recent lows. Amusements, utilities, banks also strong. Volume increased as prices went higher, and “bullish demonstrations” spread. Rails and oils neglected. Market closed on day's highs. Bond market strong; Dow 40 bond average at new 1930 high of 97.29; high grade corp. strong; convertibles more active; govts irregular, little changed.

Market opinion now sharply divided; bears cite repeated failure to break through 241 resistance level, bad farm news, and recent bad business news; bulls point to market resistance to selling (volume drying up on declines), and to strong positive reaction to good news as indicating path of least resistance is upward.

More brokerage houses advising purchase of stocks in their market letters; considered supporting factor for market.

One broker advises patience for current type of market; “If you hold the good stocks long enough you are bound to make money,” but if the average trader buys a stock and “it fails to move as expected, he soon tires and sells out.”

Veteran observers encouraged by recent bond market action; strength has spread from bonds to preferred stocks; this usually precedes rise in common stocks.

Bank merger rumors recently revived; possible resumption of vigorous 1929 competition to become largest financial institution.

Foreign markets including London, Paris, and Berlin sharply higher in past week; however, no increase in public trading seen and little foreign buying in New York.

M. Katzenberg, Pres. New York Hide Exchange, issues review of Exchange's first year of operations, says hide prices have declined to extremely low levels.

Economic news and individual company reports:

Bradstreet's review notes “unmistakable” business improvement from July and early Aug. dullness, back-to-school buying; Dun's review sees “acceleration of activity,” though commercial recovery still expected to be gradual.

Index of import volume for July was 91 vs. 97 for June and 124 for July 1929; lowest since Aug. 1924. July cotton imports $3.580M vs. $9.271M in 1929.

Weekly report by Fed. Reserve member banks shows currency in circulation up $65M vs. $81M in 1929; “all other” (commercial) loans up $3M vs. $41M.

Agriculture Dept. reports based on 100,000 special crop correspondents: corn crop futher damaged in first 3 weeks of Aug.; pasture also affected by drought; feed shortage said worst since 1901. Aug 1 estimate was for crop 500M bushels below average; deficit is now “no doubt considerably larger.”

Companies reporting decent earnings: American Fruit Growers, Prentice-Hall (textbooks), Penick & Ford (corn products).

Company reports since July 1: 187 companies reported higher earnings vs. 1929 and 446 lower; 918 dividends unchanged, 16 new, 10 increased, 71 cut.

Public reception favorable to new lower-priced Cadillacs; Sept. production increase announced.

Joke:

“'Are you married?' they asked the bachelor. 'Alas, no, thank heaven,' he answered.”

Movie news:

Paramount presents the Marx Brothers in Animal Crackers. Film is “usually amusing, and, once or twice, hysterically so. It is, however, almost tedious in those spots where the authors have allowed their propensity for punning to get beyond control.”

+ The Boring Stuff:

Farm Board chair Legge sees Russian return to wheat market inevitable, says only way to ensure profits for US farmers is restricting production to domestic needs. Farm Board asked to approve plan by US and Cuban sugar growers to curtail output.

GE asks employees for suggestions for improving their jobs; in first half, 17,474 suggestions were made, 5,616 adopted, and $56,974 paid to suggesters.

Acquisition by Procter & Gamble of independent British soap maker Hedley & Co. indicates they may be gearing up to challenge Unilever's effective monopoly on the British soap and margarine trade. Unilever controls every step from production of raw materials in Africa to distribution through extensive retail outlets.

Public participation in market trading still not believed large, but reported to be increasing.

Commodities mostly strong. Cotton up after rally in final hour. Grains strong; wheat up strongly, corn down slightly on profit taking, other grains up. Copper remains dull, price unchanged at 10 3/4-11 cents. Cocoa and crude rubber touch record lows at 6.04 and 8.80 cents, respectively.

F.W. Dodge reports construction contracts awarded in 37 states east of Rockies in August was $347.3M, down 5% from July and 29% from Aug. 1929. Total for first 8 months was $3.353B vs. $4.157B in 1929.

Wholesale gasoline prices in mid-continent (central US) market have increased by 1/2 cent to 6 cents in past few days. Due to oil curtailment, gasoline in storage has been reduced by 16.148M barrels since peak on March 29, although current total of 38.815M is still up from 31.233 on Aug. 31, 1929.

Steel industry currently producing at 55% of capacity, about at lowest level hit in severe depressions in past. However, inventories have not been piled up as in the past; production has been limited to requirements. Companies continue to invest in more capacity, confident in eventual growth of demand.

British steel trade reported improving from current low level; higher inquiries and better outlook.

Russia to spend 3.5B rubles to improve transportation system, of which 2.320B will be on rail system.

Freight cars ordered from US makers in Aug. were 823 vs. 1,306 in July and 2,562 in Aug. 1929; passenger cars were 13 vs. 32 and 131.

July aircraft produced were 244 (63 military); aircraft delivered were 282. For first 7 months 1,721 aircraft were produced and 1,832 delivered.

Curtiss-Wright reports first half loss of $5.352M; says company still in sound fiscal condition, but is “less than one year old, and ... still in the phase of pioneering development of a new industry”; also, industry is still recovering from severe overproduction in 1929.

Friday, September 5, 1930: Dow 236.04 -1.50 (0.6%)

Assorted historical stuff:

Editorial: A Senate committee has been investigating campaign expenses of Mrs. Ruth McCormick, a Senatorial candidate. Mrs. McCormick retaliated by herself investigating one of the Senators, hiring a detective agency for that purpose. The Senator described McCormick's investigation as “shoddy, scabby, unprincipled, unconscionable, contemptible”; this may indicate he has lost “the fine judicial poise that befits the toga.” Public sympathy is mostly with McCormick, thanks to the Senate's tactics in previous investigations, including treating witnesses arrogantly, taking private papers unconstitutionally, and making their contents public.

Editorial: Real estate owners are organizing to reduce local tax burden. Real estate taxes have always been major part of local taxes, but some states including New York and Massachusets have now adopted an income tax as well; curiously, the new tax, “though it has raised much money, has not materially reduced the tax on real property.” New York state is now organizing a bipartisan commission to study whether a sales tax can be applied to relieve the real estate tax.

International Law Assoc. recommends to world govts. that contracts between residents of countries at war should be dissolved at outbreak of hostilities.

“New York's tiny housekeeping apartments of today are nothing new under the sun. In London, following the Great Fire of 1666, vast numbers of families were obliged to live in one room and two room apartments.”

New York city has 20,000 postal employees handling daily 300,000 sacks of mail totalling 17M individual pieces.

Construction of 30 “baby” blimps 100 feet long by 25 feed wide with capacity of up to 8 people started at US Navy hangar in Cape May, NJ.

Audo-Cinema contracts to help wire 1,000 Soviet movie theaters for sound films; currently only one theater in Moscow is wired.

Market commentary:

Generally dull session; volume down, little public participation, leading stocks traded in narrow range. Bears attempted to extend late market break Wednesday into yesterday's session, but no liquidation was forthcoming and buying support came in on setbacks. Some declining tendency in final hour. Banks and trusts weak. Bond market more active; utilities higher, Dow bond average at new 2-year high of 97.27; govts. mostly firm except South American.

Market technicals seen favoring higher prices; most recent rally recaptured all of ground lost in break from July 28-Aug. 12, first time that happened since current bear market started last Sept. However, period of consolidation is logical considering swiftness of the advance since mid-August.

Conservative observers more cautious, noting failure to break through July resistance level about 241. C.O.'s also inclined to wait for actual business improvement before taking long positions.

Positive sign seen in increasing savings deposits and increasing number of shareholders in large corporations; this indicates continued “prosperity for many in a period of depression,” since they mean a surplus left after expenses.

Goodbody & Co. expresses some conservativism about business recovery; says will be gradual, may only be seasonal. However, because of amount of liquidation already and professional nature of market, “we doubt whether much of a decline will take place from the present level.”

J. Mills, Pres. Natl. Purchasing Agent's Assoc., advises Pres. Hoover he believes business will be slow during winter but turn up in late winter and spring.

Economic news and individual company reports:

Census finds most of unemployed concentrated in big cities; those with population over 100,000 had proportion of unemployed about 50% over US as a whole.

June gasoline consumption in 44 states was 33.331M gallons/day, up 2.418M from May and up 2.005M from June 1929.

US and Canada Aug. car production hits new 1930 low of 240,100 vs. 272,551 in July and 512,842 in Aug. 1929; first 8 months was 2.843M vs. 4.445M in 1929. Little prospect seen of upturn for next few months; car industry seems determined to hold output down to finish clearing out old inventory this year, then make “new start on its next era of prosperity,” though inventory is quite low already; upturn expected in 1931. Normal market demand seen as about 4.6M cars/year.

Many large companies seen able to maintain dividends due to huge surplus accounts built up in past.

August customs collections were $32.1M vs. $56.4M in 1929, but increased from July.

Companies reporting decent earnings: Canada Dry Ginger Ale.

Joke:

“'I want a very careful chauffeur - one who doesn't take the slightest risks,' warned the would-be employer.
'I'm your man, sir,' answered the applicant. 'Can I have my salary in advance?'”

+ The Boring Stuff:

J. Dunn of Dunn, Fisher & Co. (London investment house) says British opinion moving toward policy of free trade within empire and high tariffs for outside trade; cites recent statements from both bankers and trade unions; says US “has become the most progressive and richest of all nations” through system of high tariffs. Britain said to be slowly “emerging from the Cobdenite miasma of more than 80 years” during which British prosperity was attributed to free trade rather than its 100-year lead in manufacturing and commercial development. Current crisis has made clear that high tariff countries are using Britain as dumping ground for their products while shutting British products out of their markets. Ever-increasing unemployment, depression, and drain of gold to France are working to cause change .

In 15 years ended 1928, coal consumption went up 5% while other energy sources including crude oil, natural gas, and hydro power, increased 133%-243%.

Pres. Hoover nominates Eugene Meyer, Jr. to succeed R. Young as Fed. Reserve Board Gov.; former chair of Fed. Farm Loan Bd., said favored by Mellon.

NY City independent subway lines (the BMT and IRT) seen moving to unification with the new city system that will start operating late in 1931, though IRT has been resistant. Some dispute over valuation of both companies; values assigned to BMT vary from below $200M up to $273M.

Steel industry has passed through difficult period, though observers are now hopeful for gradual improvement in rest of year. Hopeful signs include low stocks on hand, good demand from some sectors such as tin plate, and improving scrap prices. Most authorities don't expect dramatic improvement until next spring; declining steel prices have caused extreme caution in ordering.

Commodities mixed. Cotton up slightly. Grains generally down, wheat again hits new season lows. Copper remains at 10 3/4-11 cents with little buying.

Lack of anticipated public participation in market following Labor Day seen as discouraging to bulls.

Public interest in investment trusts (similar to mutual funds) currently at a low ebb; “while waiting for improved conditions, considerable thought is being given to various phases of investment trust operation.” United Founders favors active management and continuous supervision; likens other approaches to pilotless ships.

American mining interests pleased with new Mexican mining law offering better terms to foreign investors.

Brokers' loans reported by Fed. Reserve member banks up $8M in past week to $3.110B. Call money continued at 2.5% but expected to return to 2% shortly.

New bond offerings in Aug. were $202.8M vs. $508.8M for July and $129.7M in Aug. 1929; new low for 1930. First 8 months $4.002B vs. $2.279B in 1929.

R.G. Dun & Co. report Aug. business failures were 1,913, down 5.7% from July but up 8.6% from Aug. 1929; first month this year below 2,000. Total liabilities were $49.2M, up 23.5% from July and up 45% from 1929.

Construction costs for industrial buildings are lowest in past 8 years; decline is due to efficiency and lower material costs, not lower wages.

Activity in steel scrap metal markets down in past week although recent firmer prices have held. Finished steel prices also steady at 1930 lows.

Gasoline in Chicago wholesale market was up 1/4 cent.

Total dividends paid by 18 copper companies now down to 48% of peak dividend rate.

July sales by meatpacking companies were 6% below June and 20% below July 1929, largest decrease this year.

Ericsson Telephone Co. meets, confirms takeover by Kreuger & Toll, who is now seen backing Siemens-Ericsson combination in telephone field.

Company reports since July 1: 185 companies reported increased earnings vs. 1929 and 440 decreased; 898 dividends unchanged, 16 new, 8 increased, 70 cut.

Thursday, September 4, 1930: Dow 237.54 -2.88 (1.2%)

Assorted historical stuff:

Gov. Roosevelt charges public utilities with stock watering, also singling out Associated Gas & Elec. for refusing to allow examination of books to determine reasonableness of rates.

Editorial: Gov. Roosevelt's program for building bridges across Hudson is economically sound and beneficial; should be coordinated with new Mid-Hudson Bridge Authority; “the great success of the New York Port Authority stands as a condemnation of the blind partisanship that delayed it for several years.” There will soon be four state-owned bridges in the 150 mile stretch between NY City and Albany, paid for entirely by tolls, not taxes; eventually there may be many more.

British trade unions adopt report calling for favoring groups within British empire for trade development.

Govt. spending over $19,000/day to fight forest fires in many of the 149 US national forests; danger increased by drought conditions.

Market commentary:

Leading stocks steady for most of the day but broke in final 15 minutes; attributed to discouragement over continued failure of seasonal business improvement to materialize, rise in call money to 2.5%, some mildly bad business news. Bears, thought to be defending resistance level slightly above 240, pressed advantage on bad news; volume increased at close. US Steel particularly weak. Bond market volume moderate, prices generally slightly higher; Dow 40 bond avg. at 97.15, highest since July 1928.

Bulls discouraged by some bad business news including slight US Steel production cut due to Labor Day, drop in commercial loans, continued bad freight figures.

Conservative observers say not surprised by market decline; continue to advise reducing long positions and only buying gradually on declines; expect further selloff before next rally.

Cassatt & Co. recommend against trying to catch reactions for trading purposes, favor holding long positions and adding on declines.

Chatham Phenix Natl. Bank says August business activity improved somewhat from July low, indicating July level was “extreme low of the depression, with the natural corollary that from now on the curve of activity will rise.” Finds some improvement in employment; sees likely rise in commodity prices.

Iron Age and American Metal Market report some small signs of improvement in steel production in past few weeks (small increases in production, high demand for structural steel, some improvement in tin plate and automotive demand). This month seen as determining course of steel for rest of year; even mild seasonal recovery will help the industry return to firmer basis.

C. Denney, Erie railway Pres., sees signs of business improvement in recent Erie freight loadings.

Economic news and individual company reports:

Fed. Reserve member banks report for week ended Aug. 27: “all other” (commercial) loans down $64M to $8.416B; total decline of $156M since June 25, was reverse of usual seasonal rise - may indicate “process of business retrenchment is not yet at an end.”

National debt as of Aug. 31 was $16.188B, up $12.1M from July 31 but down $617.8M from 1929.

Brokers' loans to NYSE members Aug. 29 were $3.599B, vs. $3.689M on July 31 and $7.882M on Aug. 30, 1929.

New car registrations for July were 254,098 vs. 260,861 in June and 432,503 in July 1929; for first 7 months registrations were 1.908M, down 26% from 1929. Ford market share in July was 43% with 109,372 vs. 112,717 in June and 151,901 in July 1929; market share for first 7 months was 41.6%.

NYSE Stock transactions in Aug. averaged 39.868M shares/day vs. 95.603M in 1929 and 67.160M in 1928.

Weather Bureau reports substantial rains helping South, but severe drought continuing in large areas including Oklahoma, Texas, Iowa, Missouri; rain generally needed almost everywhere east of Rockies, except for some areas of Great Plains.

Surprisingly, National Casket Co. reports bad earnings due to depression; Pres. P. Heintz attributes decline to lower mortality during depressions and switch to lower-priced caskets.

Newport News Shipbuilding & Drydock Co. submits low bit of $15.560M for construction of new aircraft carrier.

Joke:

“A Russian was being led to execution by a squad of bolshevist soldiers one rainy morning.
'What brutes you bolsheviki are,' grumbled the doomed one, 'to march me through a rain like this.'
'How about us?' retorted one of the guards. 'We have to march back.'”

+ The Boring Stuff:

A.Coleman, Asst. Postmaster General, blames unemployment among substitute mail carriers and clerks on unusual 15% Aug. slump in mail volume vs. 1929.

Spanish Finance Min. calls on Bank of Spain to help defend currency. Most of Bank's executives reported unfavorable to new bank governor, “who is considered to be entirely under the dictates of the government.”

Market notes: most Stock Exchange brokers more optimistic, but only moderately so; believe “good stocks now are worthy purchases,” but improvement will only be gradual. Short interest remains large. Many small investors have been buying, but in much lower volume than 1929; most accounts using much less margin.

Seasonal upturn in business would normally be expected this month, though it may be delayed due to upset sentiment and low price levels. However, this should be countered by depleted state of inventories as result of long period of “hand-to-mouth” buying. Most trade authorities now expect only seasonal upturn in fall and sustained upturn in business not until spring. Despite lower business, many leading corporations are well-positioned to take advantage of any revival.

Commodities mixed. Cotton moderately higher. Grains lower, wheat hits new season lows in spite of some bullish news. Copper stays at 10 3/4 bid, 11 ask, but with “somewhat firmer tone.”

Some of strength in bond market may be caused by bank buying; Fed Reserve member banks reported bonds other than US govt. at $3.420B on Aug 27, up about $600M since start of year.

Thus far larger steel companies have held up better to declining demand than smaller ones, generally maintaining earnings above dividend requirements; attributed to diversity of markets. Smaller steel companies may also be suffering from focus on automotive parts. US Steel now at 13 x earnings, 4% yield; Bethlehem at 9 x, 7%; each is still earning enough to cover dividends.

Railways operating in East protest new rate structure given by Interstate Commerce Commission, say it will reduce overall revenues rather than increase them.

British registered unemployed were 2.040M on Aug. 25 vs. 2.018M on Aug. 18, and 1.156M on Aug. 26, 1929.

Steel ingot production in week ended Monday was almost unchanged at 57%; US Steel about 65% vs. 66% previous week.

Gasoline in storage at refineries for week ended Aug. 30 was 38.518M barrels, down 1.027M from previous week and 16.184M from March 29 high. Refineries operated at 69.2% of capacity vs. 72.4%; crude oil production was 2.461M barrels/day, down 9,150 from prev. week and down 512,100 from 1929.

Corn crop now estimated at 2B bushels vs. 2.614B a year ago and 5 year average of 2.7B. If current higher corn prices are maintained the total value of the crop would be almost as high as the initial July 1 estimate based on a 2.8B crop. However, this is doubtful; other grains including wheat, oats, and barley are available in abundance and may be substituted; also scarcity will probably cause economies in use and lower consumption.

US flour production in week ended Sept 3 was 6.621M barrels, down 163,748 from 1929.

F.W. Dodge reports Aug. new construction contracts for New York metro area were $76.7M vs. $68.9M in July and $75.7M in Aug. 1929; total for year to date was $658.1M vs. $846.9M in 1929.

Two copper companies cut dividends (Kennecott from $3/year to $2; Consolidated Copper from $1.50 to $1 after cut from $3 last quarter).

Kreuger & Toll pay $46.5M to Germany as first installment of $125M loan in exchange for granting Swedish Match and International Match (US subsidiary) major participation in German match business for 30-50 years. Kreuger interests also acquire L.M. Ericsson Co.

Stock of 17 of largest utilities now selling at average of 20.5 x earnings in year ended June 30 vs. 33.7 x 1929 earnings at market peak last Sept. and 12.5 x 1929 earnings at low last Nov. These stocks have recovered about 28% of the loss in the Nov. break, vs. 23% for industrials and almost no recovery for rails.

Companies reporting decent earnings: American Cyanamid.

Wednesday, September 3, 1930: Dow 240.42 +0.0 (0.0%)

Assorted historical stuff:

Prof. C. Persons quit job in Census Bureau because higher official decided to exclude from count of unemployed those laid off with “promise of reemployment at some indefinite future time”; Prof. Persons estimates there are 5M unemployed, contradicting census estimate of 2M-3M.

Times asks J. Gerard's list of 64 “rulers” of US how to tackle business depression. Buckling down to work recommended by S. Mitchell of Electric Bond & Share and A. Zukor of Paramount; W. Crocker of First Natl. Bank San Francisco, sees depression as severe only compared to 1929 boom, says mental adjustment needed to slower advance in business; W. Green of AFL, calls for teamwork between business and govts., fulltime employment of workers.

Editorial: “Deep as may be American sympathy for ... self government, the Indian question cannot be judged by American viewpoints.” Sir J. Simon makes case that India not ready, although British govt. pledged to “give them that opportunity as rapidly as they are prepared for it.” India is mix of a dozen languages with hundreds of dialects, as well as religious split between Hindu and Muslim. Also, rigid caste system “is not a promising field for independence and self government.”

Market commentary:

“With the new high-speed ticker in full service, the entire machinery of Wall Street seemed geared to greater efficiency yesterday.” Rally based on business optimism continued in morning, with leading industrials hitting rally highs. Automotive shares strong on Mack Truck continuing dividend; movie stocks strong on better theater attendance in cooler weather. Profit taking came in early afternoon, but was absorbed without much trouble. Utilities, banks and trusts strong. Bond market quieter, generally steady; South American govts. fluctuated.

Market has now reached resistance level where it ran out of steam on July 18 (240.57) and July 28 (240.81). Breaking through this level would be considered highly bullish signal. General confidence that this will happen based on recent market action; many leading stocks have already surpassed July highs. Further positive technicals seen in recent volume pattern (higher on rallies and lower on pullbacks), and in continued large short interest.

Some wariness based on recent good rally recovering all of drought-related break; some observers advise taking profits on at least part of long positions, to be in position to rebuy on good pullbacks.

Most economists agree business upturn close; peak in business was reached July 1929, so depression has lasted about 14 months. “Those who have faith and confidence in the country and its ability to come back will profit by their foresight. This has also been the case over the past half century.”

National City Bank says August business showed little improvement, but this was not unexpected; current situation “affords a basis for belief that the worst months of the depression have been seen.” Sees business down to “solid minimum” that proceeds “regardless of price fluctuations”; some improvement in last week of August strengthens confidence in at least a seasonal fall upturn in business. Calculates corporate return on capital in first half at 9.2% vs. 14.8% in 1929 and 11.7% in 1928; in spite of decrease, 9% is not too bad considering conditions and doesn't justify extreme pessimism on corporate earnings.

Harvard Economic Society points to steady rise in bond prices as favorable for stocks. Says there is “every prospect that the [business] recovery ... will not long be delayed,” although fall period may not be strong as expected. Notes worldwide decline in business, but 1922 recovery demonstrates US due to “great size, natural advantages, and diversity of conditions ... can lift itself out of depression without the stimulus of improved foreign demand.”

Economic news and individual company reports:

Rail freight loadings in week ended Aug. 23 were 940,549 cars, up 17,726 from previous week but down 197,417 (17.3%) from 1929; largest decline this year.

American Gas Assoc. reports first half manufactured gas sales up 1.4% over 1929; natural gas down 3.2%. These results showed more stability than any other major industry aside from electric power production.

Fed. Reserve member banks report for week ended Aug. 27 shows “all other” (commercial) loans down $64M to $8.416B; loans on securities up $62M to $8.377B; investments down $11M to $6.329B.

Mack Truck and National Cash Register continuing dividends at current rate in spite of lower profits; optimistic on future outlook.

Companies reporting decent earnings: Electric Power & Light, Monigan Mfg. (excavating machinery).

Warner-Lambert (Listerine, Pro-Phy-Lac-Tic brushes, other toiletries & medicinals) selling about 94, earned $5.02 in first half, yield about 8.5%.

Theater:

“Dancing Partner. A skeptical ne'er-do-well falls precipitously in love, under the spangled chandeliers of Paris and Biarritz ... David Belasco has staged a fatuous comedy skillfully.”

+ The Boring Stuff:

Editorial: British opinion on tariffs is divided; latest statement signed by 116 bankers and businessmen favoring free trade follows statement by other leading bankers favoring tariff wall around empire; trade unions thought leaning toward protection. In present highly competitive conditions, with other nations crowding Britain out of foreign markets and flooding her domestic maket, some protective tariffs are in order; “for a country to persist in a policy of defenselessness for the sale of an ideal seems like courting disaster.”

Hoover advisor Henry M. Robinson rumored as replacement for R.Young as Fed. Reserve Gov.; Young will now head Boston Fed. Reserve Bank; says reserve system in better condition than a year ago, all reserve banks ready to function if business revival develops; disagrees with idea that New England is “backward or decadent.”

Commodities weak. Cotton down. Grains down sharply, wheat at new season lows. Copper still quoted at 11 cents asked, some available at 10 3/4.

Shearson, Hammill & Co.: “moderate improvement is reasonably certain during the coming months ... we believe prices of many securities are sufficiently low or deflated to justify their purchase.”

While business sentiment is now more optimistic that a recovery is underway, it's still conservative about how strong the recovery will be. Recovery from depression is usually “tedious process.” Also, purchasing power of farmers and workers has shrunk by about $2B each in past 10 months. However, “veteran economists” point out that past depressions have never lasted longer than a year unless accompanied by “weakening of the nation's financial structure”. Therefore, since “credit structure was never in stronger position,” and inventories are low, recovery may be fairly strong; this should “justify a worthwhile advance in stocks.”

Sharp decline in trade starting in late 1929 blamed on lower flow of US capital abroad due to absorption in US stock market. This led to depletion of dollars abroad and export of gold to US to settle balance of payments. This has mostly corrected itself; US market now deflated, and foreign exchanges now mostly high enough to avoid gold exports. Trade situation should gradually improve.

A.C. Huffman, Pres. Continental Can, says expects normal year for can-making industry; expects amount of vegetables canned slightly below 1929 and fruits above; thanks to increased consumption, expects carryover of canned fruits and vegetables to be cleaned up. Also notes some improvement in demand for general-purpose line of cans used by many industries.

German production in first half down 10% from 1929; production in June down 20%.

Canadian economic stats: construction started in August up 32.2% over July but first 8 months 17% under 1929; July steel ingot production was 68,424 tons, 28% under June and 47% under July1929; freight loadings in week ended Aug. 23 were 64,014 cars, down 29 from previous week and down 5,883 from 1929.

July output by public utility power plants was 7,870 GWHr vs.7,753 in June and 8,072 in July 1929; 5,009 was produced by fuel and 2,862 was hydroelectric; amount of hydro power was curtailed by drought.

Profits of 24 oil companies for first half were $57.0M, down 30.6% from 1929 but up 18.8% from 1928.

Crude oil production in week ended Aug. 30 was 2.473M barrels/day vs. 2.970M in 1929 and down 2,245 from previous week.

Company reports since July 1: 181 companies reported increased earnings vs. 1929 and 430 decreased; 842 dividends unchanged, 15 new, 8 increased, 58 cut.

Exports of industrial machinery in first 7 months were $149.5M vs. $148.1M in 1929.

Youngstown district steel activity reported unchanged this week at 57% of capacity, except for usual Labor Day shutdowns.

Report of 878 lumber mills for week ended Aug 23 shows orders 95% and shipment 98% of production of 279.3M feet, vs. 87% and 91% of 295.5M feet.

Cadillac reduces prices on Cadillac and La Salle lines by $180-$900 to new range of $2,195-$3,795.

Administrative note, Sept. 2, 2009

Some of you may have noticed some delay in posting last week.

The cause of this, briefly, was that Google decided that my blog was a suspected splog (spam blog). For those of you who've managed to avoid splogs so far, these are automatically produced blogs that get their content by more or less randomly cutting and pasting pieces from other sites on the web. The effect is rather strange - at first glance, the splog looks like a legitimate blog and each small fragment likewise looks legitimate, but after 10 seconds of looking you generally realize that the blog as a whole makes no sense. I believe the reason people make splogs is to generate traffic from search engines or other illegitimately obtained links, and thereby make money from ads.

This note may seem a bit ungracious, considering that Google gives out lots of cool services for free and splogs are a growing problem that they do have to tackle. In fact, I wasn't going to write this until the blog my girlfriend is developing was also flagged. This made me think some suggestions to Google might be in order, specifically about a couple of idiocies that they should probably think better of.

The first idiocy is that for this, as for their other services, Google makes it impossible to contact a human to fix problems; the only message from Google was a no-reply email with a notice that my blog had been locked to new posts and would be deleted in 20 days, and a link for me to click if I believed my blog wasn't spam. if I did this it was intimated that Google would get around to checking things out sometime in the next 2 business days and unlock the blog if they did decide it wasn't spam. Let me suggest to Google that they change this no-human-contact policy since it's really dumb. I don't have much hope this suggestion will be taken because it does appear to be a fundamental principle at Google that the algorithm is to be trusted over human judgement.

Second, If you do insist on giving algorithms primacy over humans, it would at least behoove you not to use lamebrained algorithms, as you did in this case. A few examples of how a smarter algorithm could easily tell this blog isn't spam:

- It has been mentioned on and linked to by writers for the Financial Times, Wall St. Journal, The Atlantic, The NY Times, and most recently by the estimable Australian economist Steve Keen (that website has lots of interesting stuff by the way). The odds of these people talking about and linking to a spam blog are close to nil.

- It has around a thousand subscribers from many countries who read items regularly; while in theory this could be faked, I'd guess very few splogs take the trouble, so it might make sense if you find this situation to delegate a human to spend the 10 seconds necessary to check if the suspect blog is in fact spam.

- My girlfriend hadn't launched her blog yet, so it was set to be invisible to search engines and other readers. The odds of a spam blog having this setting seem very small. I'm guessing the spam detection was set off because she had a bunch of repeated text in dummy blog posts, but this seems it would like a fairly common thing for authors who are setting up the design of a new blog.

Once again, I'm sorry to have to complain like this about a free service. I'm sure your spam detection algorithm was programmed by a crack team of dual linguistics-computer science Ph.D.'s and is the last word in sophistication, but I think a little common sense might also be added to the mix. While I'll continue to use your blog service since it's free and pretty good, this experience has certainly reduced the possibility of my using a Google service for anything crucial to my financial or physical well-being without some policy changes on your part.

Cleaning out the attic, Sept. 1, 1930

No Journal was published Monday, Sept. 1, 1930 or Tuesday, Sept. 2, 1930 due to the Labor Day holiday weekend. I'll be putting up some assorted fun and/or possibly informative stuff that I've accumulated instead.

1) A 1930 singoff: Here's a couple of 1930 versions of “My Baby Just Cares For Me:
Eddie Cantor from his 1930 film Whoopee,
a more uptempo 1930 version from Jack Payne,
and for good measure a modern version by Nina Simone.
Feel free to comment on which one is the best (the correct answer is the second). Also, make sure to check out the great Eddie Cantor 1930 version of Making Whoopee (I just put this up on the right side of the blog web page as well).

2) For the investors among you, a great effort by someone named Vinod. The bible of value investors, Security Analysis by Graham and Dodd, came out a few years after 1930, with weapons forged in the fires of the Depression. For those of us not up to wading through the full 800-odd pages at the moment, here's a summary of the book so you can at least get the flavor.

3) For both investors and non-investors, a pretty good interview with Charlie Munger from last spring on how we got into this mess and what we should be doing now (HT CR).

Favorites of the week August 25-August 30, 1930

No Journal was published Sunday, August 31, 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.

August 30:

[Note: I understand Amtrak now offers two kind of hot dogs ... ] Canadian Natl. Railways facilities for Toronto-Vancouver train include mini-gym with “Swedish massage machines, vibrating apparatus, and foot and hand exercisers,” shower bath, ice cream parlor, barber shop, valet service. Windows in observation cars are of “vita glass” transparent to UV rays.

[Note: Interesting difference - lack of safety net, and similarity - consumer-driven economy. ] Editorial: Gov. Roosevelt's proposed state-supported unemployment insurance may be debatable, but he's at least called attention to a crucial problem. Workers make a majority of the national income (in 1928, 46.6M workers of a total population of 119M made $50B of a total income of $89.4B, the rest being interest, dividends, rents, etc). Therefore, business life depends on workers' income and consumption, and it's crucial that there be steady and well-paid work for all those willing and able. Automation and other factors have contributed to unemployment; solution “calls for deep study of experts and an economic, not a political cure.”

[Note: Strangely familiar dept. ] Pres. Hoover meets with heads of govt. building activities with view to accelerating programs.

[Note: Interesting stat if accurate. ] American Tree Assoc. says world's forests are concentrated in Russia, British empire, Brazil, and US; these four contain 2/3 of world forest land.

August 29:

[Note: For you non-Depression-buffs, Whitney would turn out to be yet another Depression Disgraziato, winding up in Sing Sing prison a few years later. ] Richard Whitney, NYSE Pres., to give opening address at NYSE Educational Institute on subject “Trade Depressions and Stock Panics.”

[Note: Sheer Genius dept.] NY City has thriving trade in shops renting complete outfits for weddings, including bridal gowns, tuxedoes for groom and best man, gowns for bridesmaids, and outfits for family members. Larger shops have up to 300 gown selection; bridal outfits rent for $15-$25, grooms for $5 including stovepipe hat.

August 28:

[Note: Strangely familiar dept. ] There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

[Note: Not so sure about whether the last part is still true dept. ] Fed. Reserve seen continuing easy credit policy pursued since start of year. Some concern that increased reserve credit “will flow into speculative channels,” but this doesn't seem to have happened much yet.

August 27:

[Note: Thank goodness we're now getting back to the civil, rational discourse of old-fashioned town hall meetings.] Editorial decrying the 1930 election campaign being waged using the new mass medium of radio: “A practically new kind of artillery is used, known as the radio which is charged with political hot air and fired, not at the opposing side but at the people ... the contestants count on keeping up the bombardment until the November elections by which time the people will be gassed into submission to one side or the other.” Cause of current depression is that “this, the richest nation on earth, with millions of idle money is not giving employment to a large consuming class,” but neither side in the campaign is offering constructive solutions.

[Note: Strangely familiar dept.] Economists say unemployment is biggest factor keeping business down and delaying recovery; point to loss of 1.6M factory jobs since last September.

[Note: Strangely familiar dept.] Commercial credit continues down slightly; this may not be significant, however, since corresponding weeks in previous years have also been down. Banks have also been reducing loans on securities, though they remain high. Banks have been pouring surplus funds into investments, now at highest level on record.

August 26:

[Note: Forgotten wisdom dept. ] Dr. D. Laird of Colgate U. claims at least 5% of US payrolls is wasted due to inefficiency caused by noise. Tests of typists found up to 30% increase in output when noise was reduced; noise apparently harms nervous system even when workers are used to it and don't consciously find it disturbing; typists used 25% more energy in a noisy room “as a result of pounding the keys harder and of muscular tension.”

[Note: Good luck with that dept. ] Latin American representatives to meet in Washington to “devise means to limit manufacture of narcotics to medical needs.”

August 25:

[Note: I believe Dept. of Fisheries later produced educational film with Dean Martin titled That's A Moray.] US Dept. of Agriculture has extensive department producing educational films, including T.B or not T.B., Insect Allies, That Brush Fire, and Persimmon Harvesting and Storage in China.

[Note: Strangely familiar dept. ] Editorial: Some have suggested banning short-selling as aid to business recovery. But recent market swings have not been due to short-selling but to public recognition of reduced earning power; similarly, farmland in corn belt has gone down by 2/3 from wartime level, though noone has been selling it short.

[Note: Strangely familiar dept. ] Alarmed by shrinking population, France budgets $45M to encourage large families; parents to receive $20 for second child, $30 for each additional.

[Note: It really wasn't that deep. ] Second Greta Garbo sound film released, Romance - her “deep sonorous voice” is no longer surprising, but another interesting facet of her screen presence. No actress in Hollywood photographs better; melodrama with fine cast stars her as Italian opera singer Rita Cavallini in ill-fated romance with Tom Armstrong.

[Note: Truer words were never spoken dept. ]
“'Politics is very uncertain.'
'Very,' agreed Senator Sorghum. 'Even after a man succeeds in being elected, he doesn't know whether he's going to take credit for what happens or whether he's going to get the blame.'”

Saturday, August 30, 1930: Dow 240.42 +2.63 (1.1%)

Assorted historical stuff:

Editorial: Gov. Roosevelt's proposed state-supported unemployment insurance may be debatable, but he's at least called attention to a crucial problem. Workers make a majority of the national income (in 1928, 46.6M workers of a total population of 119M made $50B of a total income of $89.4B, the rest being interest, dividends, rents, etc). Therefore, business life depends on workers' income and consumption, and it's crucial that there be steady and well-paid work for all those willing and able. Automation and other factors have contributed to unemployment; solution “calls for deep study of experts and an economic, not a political cure.”

Pres. Hoover meets with heads of govt. building activities with view to accelerating programs.

Canada PM Bennett calls special session of Parliament for Sept. 8 to consider unemployment relief, possible new tariffs.

Buenos Aires remains calm, although Pres. Irigoyen remains under special guard, arranged on his insistence over cabinet objections. Pres. Irigoyen said to have become convinced he has “alienated the sympathy of the army” by recent actions. Some reports of “trouble of a rebellious character” in Brazil.

Canadian Natl. Railways facilities for Toronto-Vancouver train include mini-gym with “Swedish massage machines, vibrating apparatus, and foot and hand exercisers,” shower bath, ice cream parlor, barber shop, valet service. Windows in observation cars are of “vita glass” transparent to UV rays.

American Tree Assoc. says world's forests are concentrated in Russia, British empire, Brazil, and US; these four contain 2/3 of world forest land.

Market commentary:

Major stocks advanced vigorously in unexpectedly strong pre-holiday session; bulls encouraged by $26M decrease in brokers' loans, and by recent market action; buying support even on small declines is seen preventing even normal technical setbacks from developing. Volume lower due to upcoming holiday. US Steel reached May level; also strong were American Can, Union Carbide, GE. Utilities and rails; shorts in various trading favorites had “uncomfortable time.” Banks and trusts strong. Bond market mixed; Latin and South American bonds down sharply, but other govts. strong; high grade corp. steady; convertibles up sharply.

Bradstreet's and Dun's reviews note some seasonal upturn in business, better trade sentiment.

Market sentiment quite hopeful. Some reports of increased public buying. Most observers now recommend buying standard stocks on reactions.

Recent strength in banking stocks considered positive - this group suffered heavily in panic last fall; only recently has renewed accumulation been evident.

Some bears have been arguing that stocks are still selling at higher price-earnings multiples than at low point of previous depressions; optimists counter that the greater current financial strength of corporations justifies the higher multiple.

Treasury Sec. Mellon praises Federal Land Bank system as sound and useful, and bonds as sound investments; says present drought situation temporary and confined to certain areas; Land Banks are mutually responsible for each other's obligations; this strengthens the system due to diversity of conditions across the US.

Economic news and individual company reports:

Weekly bank reports mixed; “all other” (commercial) loans were down $39M, opposite of usual seasonal pattern; this was “not reassuring.” However, currency in circulation was up $6M, bringing increase for August up to $51M, a larger gain than recent years. Brokers' loans by Fed. Reserve member banks on Aug. 27 were $3.102B, down $999M over previous 12 weeks.

Money rates remained low in August: call money on the NYSE was at 2%-2.5%; prime commercial paper was at 3%.

Rails seen benefitting if business upturn arrives because of increased efficiency forced by depression; this increased efficiency is seen in July earnings reports, which had revenues down a higher percentage than June but net down 32% vs. 34% in June.

Class 1 rails reported record fuel efficiency in first half; avg. of 125 pounds fuel required to haul 1,000 tons one mile, 4 pounds below previous record.

New high speed tickers to go into operation just in time for rush after Labor Day holiday.

P. Boggs. chair of California oil curtailment committee, calls for meeting to decide if current 596,000 barrels/day limit needs to be cut due to lower sales.

Companies reporting decent earnings: Arundel Corp. (sand and gravel), Industrial Rayon Corp, Thatcher Mfg. (milk bottles).

Company reports since July 1: 174 companies reported increased earnings vs. 1929 and 418 decreased; 818 dividends unchanged, 14 new, 7 increased, 56 cut.

Household Finance Joke:

“The wife had been put on the budget plan. At the end of each month she and her husband would go over the accounts together. Every once in a while he would find an item, 'L.O.K. $3,' and a little further on 'L.O.K. $6.'
Finally he asked: 'My dear, what is that L.O.K?'
'Lord Only Knows,' she replied.”

Prohibition Joke:

“Visitor - My word, I am thirsty.
Hostess - Wait a moment, I'll get you some water.
Visitor - I said thirsty, not dirty.”

+ The Boring Stuff:

Minnesota Gov. T Christianson says doubts success of Farm Board campaign to reduce wheat acreage; approach should start at the smalller cooperative units and build up rather than working top down from national agency, and should be focused on substituting other crops such as flax for wheat. Requiring farmers to restrict output of all products would be strongly opposed as it “would permanently subordinate agriculture to industry,” since farmers wouldn't be able to produce a surplus to sell abroad as industry can.

Reports given to Pres. Hoover on available methods for drought relief: general approach proposed is use of existing credit facilities to lend through banks or marketing cooperatives, with little direct aid available; Fed. Reserve Gov. R. Young says Reserve banks will be lenient toward member banks in affected territories, but warns they “are not in a position to knowingly make poor loans under any conditions”; shippers of feed and livestock granted reduced rates in affected areas.

Effects of war and subsequent [hyper-]inflation in Germany were least on land owners, bankers, and industrialists.

Commodities mixed. Cotton down. Grains up, corn particularly strong. Cocoa touched new low at 6.33 cents but closed unchanged.

American Metal Co. chairman L. Vogelstein expects upturn in copper prices in next two months, substantial increase in demand in next year.

Oil stats for July: Consumption of gasoline was 43.950M barrels vs. 43.028M in June and 42.960M in July 1929; gasoline in storage at end of month was 46.077M barrels vs. 50.255M in June and 37.880M in July 1929; crude oil production was 76.743M barrels vs. 76.513M in June and 91.327M in July 1929; total storage of all oil (crude and refined) at end of month was 686.625M barrels vs. 690.916M in June and 666.962M in July 1929.

July net operating income for all class 1 rails was about $82.5M vs. $122.8M in 1929 and $95.2M in 1928, but was up about 19% over June.

July shipments of auto parts/accessories makers were 88% of Jan. 1925 base vs. 116% in June, 144% in May, and 188% in July 1929.

Cuban and US sugar producers meeting to agree on “program for the rehabilitation” of sugar industry; hope to then present united front to European and Java producers. Over past few years Cuba has been alone in restricting production, leading other producers to take up the slack. Five-year plan is contemplated to restrict production allowing demand to catch up and clean up current enormous surplus.

General Foods expected to benefit from introducing frozen foods; tests of frozen fish, meat, vegetables, and fruit in Springfield, Mass. very successful.

Friday, August 29, 1930: Dow 237.79 -0.14 (0.1%)

Assorted historical stuff:

Editorial: R.Young has resigned as Governor of Fed. Reserve Board to become head of Boston Reserve Bank for financial reasons (raise in salary from $12,000 to $30,000). This is example of “America's extravagant wastage of brains through underpayment of public officials.” Gov. Young was moderating influence on otherwise misguided Reserve Board who refused to follow some of the Reserve Bank's recommendations to raise rates last year until it was too late to help. Fed. Reserve act has “created a banking system of marvellous strength and stability,” but split structure between Board and 12 local Reserve banks is a weakness. Since the Reserve Board holds tremendous power, it's in the public interest to ensure it's staffed by the “best in brains and experience.”

Revolution in Peru apparently concluded with installation of new military junta headed by S. Cerro.

Rumors of “uprising or outbreak of some sort” in Argentina; govt. offices and presidential home under heavy guard; “Buenos Aires has always been filled with a number of belligerent political factions” so uprising does seem possible, but not full scale revolution as just happened in Peru.

State Dept. says Mexican immigration into US has been drastically reduced.

Farmers being encouraged to settle in Alaska; experimental farms have been operating successfully for several years.

Richard Whitney, NYSE Pres., to give opening address at NYSE Educational Institute on subject “Trade Depressions and Stock Panics.”

NY City has thriving trade in shops renting complete outfits for weddings, including bridal gowns, tuxedoes for groom and best man, gowns for bridesmaids, and outfits for family members. Larger shops have up to 300 gown selection; bridal outfits rent for $15-$25, grooms for $5 including stovepipe hat.

Market commentary:

Volume lower as many traders stayed away in advance of Monday Labor Day holiday. Most trading in narrow range, though some weakness in individual stocks including Goodyear (10% salary cut), Houston Oil (Texas oil curtailment), IT&T (reports of another revolution in Argentina). Bear attempts to spread selling across market were frustrated as market anticipated more activity, higher prices next week when major operators return from summer vacations. Banks and trusts gained. Bond market generally steady on lower volume.

Central Trust of Illinois says business now “marking time,” but sentiment improving and seasonal upturn is assured. Says current gold exports not a concern unless much higher, in fact may be stimulative to foreign economies. Market sentiment in July emphasized bad news and ignored the positive, but has recently become more favorable. Decrease in rail freight not a cause for concern, but due to drastic drawdown of inventories.

W. Storey, Pres. Atchison, Topeka rail, expects normal fall seasonal pickup in traffic, though loadings curve may remain under those for past few years.

First Natl. Bank of Boston reports on New England business: slump has been severe and long; industrial production in first 7 months 19% below 1929 level; index of activity in July at 81.7 vs. 109.4 in July 1929; decline for all of US has been similar. While depression may be lifting, recovery is likely to be slow and irregular. Crux of problem is general overproduction and lack of purchasing power; decline may be self-reinforcing. While depression has the benefit of forcing greater efficiency and removing waste, “something more than efficiency ... is necessary for good business. There must be effective demand, which in turn rests upon an equitable distribution of purchasing power.” One bright spot is “irresistable urge of the American people for continuance of the high standards of living.”

Economic news and individual company reports:

Brokers' loans by Fed. Reserve member banks decrease $26M in past week to $3.102B, lowest level since July 1927.

Dividends distributed in July turned down vs. previous year for first time in 92 months; decline was 3%.

Canada increases tariffs on fresh fruit and vegetables 50%-100%; US imports are most affected.

Companies reporting decent earnings: Woolworth, American Home Products, Engineers Public Service, Burns Bros. (coal and oil distribution).

Operating income of 101 telephone companies in June was $22.7M vs. $22.2M in 1929; first half was $136.9M vs. $138.2M.

Ongoing trial of lawsuit to block Bethlehem Steel - Youngstown Sheet & Tube merger seems to be wandering a bit - mothers of some executives to be called as witnesses, “though what light the maternal parents can shed on the merger is problematical.”

Theater:

Main attraction at the Palace this week is radio star Floyd Gibbons, former war correspondent and current “headline hunter of the air.” During performance, “he sits at a desk in the middle of a darkened stage and rapidly relays to the audience, through a loudspeaker, information gleaned from a hurried perusal of the front pages of the latest editions of four local newspapers.” Afterwards, he chats with audience and relates anecdotes from his reporter days; however a weak aspect of this part is “his failure to select from his rich background anything really exciting to talk about.”

+ The Boring Stuff:

Chilean govt. departments instructed to reduce expenditures 25%, bringing 1931 budget to $125M.

British govt. to assist Cunard Line to build second huge ocean liner (about 70,000 tons, 1,000 feet long, cost $30M).

Census reports NY State had 160,120 farms at start of year, down 33,075 from 1920.

Strikes affecting local children's dressmakers (3,700 strikers) and raincoat industries (1,200 strikers).

Large shipments of gold to France attributed to old fashioned French central banking system; only way French banks can get cash out of the central bank is by depositing gold there, as opposed to rediscounting system in US and Britain; also illegal for French central bank to regulate rates by buying or selling investments in the open market.

C. Ellsworth suggests a new approach for investment trusts (similar to mutual funds) to enter “that virgin field which exists between the fixed type of investment trust [holding a fixed set of investments, similar to ETF], and the general management type [actively managed].” This should help address public loss of enthusiasm for inv. trusts following the crash. Approach would conservatively calculate value for stocks based on liquidating value plus reasonable expected earnings, buy when market price is below value, and sell if it rises significantly above value.

Commodities mostly dull, steady. Grains up slightly. Cotton almost unchanged. Copper continues very low volume sales, fluctuating between 10 3/4 and 11 cents with most sales at 10 3/4. Cocoa hits new record low at 6.40 cents/pound.

Market considered technically stronger after having recaptured practically all of most recent decline from peak of 240.81 on July 28; another good indication was the support in June holding above November panic lows, and then support in August holding above June lows.

Reduction in short interest in some stocks seen as reflected in reduced demand for stocks for loaning, but total short interest still seen large.

Farm Board chair A. Legge says believes overall farm income won't be reduced by drought; income reduced in most affected sections will be offset by increased prices obtained by other sections.

Farm Board says will no longer loan on cotton based on fixed price but based on percentage of market value. Board members feel cotton close to bottom.

Total of corp. bonds called for payment in Sept. in advance of maturity were $49.2M vs. $23.6M in Aug. and $30.2M in Sept. 1929; however, total for first 9 months was $308.8M, lowest since 1924, and compares with $637.3M in 1929, $1.616B in 1928, and $1.129B in 1927.

US electricity output for week ended Aug. 23 was 1,676 GWHr, up about 4.4 GWHr from previous week but down 2.8% from 1929.

Dow average of 8 iron and steel products at $45.52 vs. $45.80 previous week; new low for 1930. However, scrap steel prices have been advancing, and at least one producer plans to advance finished product prices in the middle of next month.

R. Campbell, Pres. Calumet & Arizona Mining Co., calls for tariff to protect US copper industry; notes US mines operating at 60%-70% and losing money, while foreign producers still expanding.

Sears selling about 65, annual dividend $2.50, stock dividend of 1%/quarter, 1929 net $6.62/share, but expected substantially lower this year.

Warner Bros. expects sharply lower earnings for 6 months ended Aug. 31, operated at loss in quarter ended Aug. 31 and has had to raise money in new stock offering. Disappointing earnings mainly attributed to poor film performance, particularly 5 “musical operetta-type films in color.” Optimistic on next year's films.

Thursday, August 28, 1930: Dow 237.93 +2.46 (1.0%)

Assorted historical stuff:

Editorial: Some have called for extension of branch banking by pointing to the 5,000 bank failures in the past 10 years, many of which were small independent banks in rural areas. In fairness, many of these failures were due to “extraordinary economic changes ... not likely to be witnessed again for a long time,” including deflation in agricultural prices and collapse of real estate boom. “When a bank fails it is the bank officials that must bear the blame ... but in the end the local community, carried away by the speculative fever, is not without ... responsibility.” Change in banking system should come naturally, not by scrapping old system.

Navy Dept. considers closing all but two navy yards on Atlantic Coast and selling expensive properties acquired during world war; would save millions annually.

Canada has largest amount of hydroelectric construction underway in its history, including 9 large projects.

Federal grand jury in Brooklyn proposes plan for reducing pollution in New York harbor by using modern incinerators for sewage disposal, inspecting ships thoroughly, and removing all sunken vessels.

Loose-Wiles Co. cashing in on aviation craze by producing biscuits in shape of airships.

Market commentary:

Market opened vigorously, with major industrials including US Steel, GE, Westinghouse, advancing to new rally highs. Irregularity developed toward noon as profit-taking came in; some nervousness also caused by another break in Vanadium on Peru revolution (main vanadium deposits located there). Volume was active early but dried up on the setback. Declines were moderate except for individual stocks including IT&T and Gillette. Banks and trusts strong, particularly City. Bond market strong on active trading; many new highs in high-grade utility and rail bonds; preferreds and convertibles rally; govts. firm.

There's a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.”

Fed. Reserve seen continuing easy credit policy pursued since start of year. Some concern that increased reserve credit “will flow into speculative channels,” but this doesn't seem to have happened much yet.

Recent market strength seen in strong response to good news, resistance to weakness in isolated spots, and declining volume on setbacks.

A large broker reports signs of important bank buying of leading stocks, notably American Can.

Intl. Nickel Co. of Canada reports survey of leading US and Canadian industrialists finds growing optimism that worst of the depression has passed and gradual upturn will start in the fall.

Economic news and individual company reports:

F.W. Dodge reports construction undertaken in 37 states east of Rockies was $3.285B in year up to Aug. 23, vs. $4.035B in 1929. Labor Dept. reports building permits in first half for 85 cities were $736.6M, vs $1.570B in 1929.

Govt. reports weather helps crops in past week; recent rains over much of US benefit corn, though drought conditions remain in substantial areas.

Weekly steel reviews said cautious but somewhat more hopeful; ingot production slowly increasing; scrap prices showing strength although finished products prices still weak; good demand from tinplate, structural steel, oil and gas industries.

National Park Service reports visitors through week ended Aug. 9 were 1,942,541, up 121,095 over 1929. Most of increase was automotive.

Companies reporting decent earnings: Coca Cola, Columbia Gramophone, Warren Bros. (pavement).

Company reports since July 1: 167 companies reported increased earnings vs. 1929 and 401 decreased; 770 dividends unchanged, 12 new, 5 increased, 50 cut.

First 54 rails report July earnings $57.7M, down 32.3% from 1929 but up 19.2% from June.

Atchison, Topeka & Santa Fe Railway reports July income up over 1929 in spite of decline in revenue; achieved by cutbacks in expenses including capital improvement and maintenance; considered hopeful sign that other rails can do the same.

Rudolph Guenther-Russell Law, Inc. (advertising agency) reports distinct revival of interest in advertising by financial corporations, utilities, and industrials.

Joke:

“A blonde flapper called at the hospital the day after the accident.
'I want to see the young man who was injured in the auto wreck last night.'
'Are you the girl who was with him?' asked the nurse.
'Yes,' was the reply, 'and I thought it was only right to come and give him the kiss he was trying for.'”

+ The Boring Stuff:

AFL Pres. W. Green urges organized labor to back Gov. Roosevelt for reelection; says with Roosevelt's personal backing, “labor has very seldom secured the enactment of so many measures during a single session of a legislative body.” Says unemployment seems improved this month, though considers situation serious because 22% of union members have been unemployed through the whole summer.

Editorial: The “buy-a-bale-of-cotton” movement now promoted in Georgia would be another failed attempt to artificially support a commodity by taking it off the market, as previously tried unsuccessfully with coffee, cotton, and wheat. The “success” of the earlier buy-a-bale movement in 1914 is mythical; cotton prices didn't peak until 1917 due to heavy wartime demand and short crops.

New South Wales (Australian state) Labor party and affiliated unions repudiate Niemeyer austerity plan accepted by govt., demand repudiation of Australian war debt and moratorium on [payment of] loans from overseas.

City of Buffalo, NY is second largest in state with population of 572,913; has excellent credit position; is important railway and flour milling center and has major lake trade in iron ore, grain, and manufactured goods.

In spite of generally improved market sentiment, conservative observers still advise buying gradually on reactions, and discriminating toward “standard dividend paying stocks which are likely to show some betterment in trade conditions soon.”

Street veterans say it's first time they can recall that market isn't trying to anticipate business conditions but instead watching closely and reacting sharply to each incoming item of trade news, good or bad. Attempts to anticipate business improvement earlier in the year were disastrous. Current sentiment is improving; reports of slight business improvement in some industries in past few days are being followed closely.

US Steel considered technically strong since it has broken through July resistance level though the Dow is still a few points below July high.

Commodities weak. Grains down. Cotton practically unchanged. Copper markets in near-deadlock as producers are asking 11 cents but buyers are unwilling to even pay 10 3/4.

Farm Board Chair Legge says wheat sent to drought areas for emergency feed won't come from surplus held by Stabilization Corp. but will be bought on open market; policy is not to sell surplus until it can be sold at least at the price it was bought for.

Iron Age reports steel trade slightly improved, sentiment cautiously hopeful for at least some seasonal improvement. Hopeful factors include relief of drought, some increased interest by steel buyers, and stronger scrap prices, although finished steel prices still weak. Average ingot production 54% vs. 53% last week (American Metal Market reports production at 56.35%).

Heavy melting steel scrap sells at Pittsburgh for $16/ton, up $0.25.

World production of nitrogenous fertilizers year ended June 30, 1931 estimated at record 3.6M tons; unsold stocks on June 30, 1930 were 860,000 tons, expected to go up to 1.4M tons on June 30, 1931.

Agriculture Dept. summarizes world beef situation: smaller supplies in producing countries; lower prices; weaker demand in US and Europe.

Natl. Elec. Light Assoc. reports 68,532 farms were newly electrified in first half vs. about 48,000 in 1929.

Iron Age reports slightly better machine tool orders in most districts.

Goodyear cuts all sales,office employees, and executive salaries by 10% as of Sept. 1. Company is employing 20% fewer salaried workers than last year's peak.

Technicolor has recently been rallying after a long fall from 86 1/2 to 24 1/8 due to concerns about lasting popularity of color movies, competitive color processes, and poor prospects for early dividend action.

Wednesday, August 27, 1930: Dow 235.47 +3.95 (1.7%)

Assorted historical stuff:

Editorial decrying the 1930 election campaign being waged using the new mass medium of radio: “A practically new kind of artillery is used, known as the radio which is charged with political hot air and fired, not at the opposing side but at the people ... the contestants count on keeping up the bombardment until the November elections by which time the people will be gassed into submission to one side or the other.” Cause of current depression is that “this, the richest nation on earth, with millions of idle money is not giving employment to a large consuming class,” but neither side in the campaign is offering constructive solutions.

Entertainment plans announced for American Bankers' Assoc. convention in Cleveland. Events include a revue entitled Next to Nothing, a “presentation of women's fashions in a musical comedy setting ... while planned to be of interest to the wives of the delegates, has been designed with dramatic plot to interest the delegates themselves as well.” Also planned are “boxing matches and ring entertainments, interspersed with music,” indoor polo games, golf, and a grand ball.

Lady Simon cites League of Nations and Anti-Slavery Society estimate that at least 5M slaves remain in the world.

Spanish govt. shakes up cabinet, installs new Fin. Min. J. Wals in “economic dictatorship” to stabilize currency. Peseta declines near record low.

Television program transmitted from Jersey City to New York, about 6 miles; longest distance transmission so far in US. D. Sarnoff of Radio Corp. says active use in the average home still some years away.

Airplane successfully lowered with huge parachute; only damage was bent propeller.

Changes in women's dress styles have enabled Princeton to reduce width of stadium seats from 19 inches to 17.5, allowing 6,000 more seats in stadium.

Market commentary:

Bulls encouraged by good steel and rail freight news; buying spread throughout the market, finishing strong in final hour. Particularly strong were US Steel (passed through recent resistance levels to over 170), American Can, Standard Gas, major rails, banks and trusts, and many trading favorites including Air Reduction. Bond market substantially more active; Dow 40 bond avg. up to new 1930 high of 97.10; preferreds strong; foreign govts. firm, US slightly off.

Babson statistical organization makes first change in bearish stance taken before last fall's crash; advises clients to use 20% of liquid funds to buy selected stocks including US Steel, GE, du Pont, National Dairy, General Foods, Standard Oil NJ.

Lt. Gov. H. Lehman says personal opinion as business man is that decreasing wages would prolong depression; says prosperity based on public buying power.

Strength in bond market has recently spread to lower grade bonds; taken as second phase in advance which should spread to preferred, then common stocks.

Economists say unemployment is biggest factor keeping business down and delaying recovery; point to loss of 1.6M factory jobs since last September.

Conservative observers now anticipate somewhat higher prices in advance of seasonal business upturn, but advise buying gradually on reactions rather than chasing stocks up; also advise clients to stay away from Vanadium, as it has been a favorite target for manipulation on both the long and short side.

Commercial credit continues down slightly; this may not be significant, however, since corresponding weeks in previous years have also been down. Banks have also been reducing loans on securities, though they remain high. Banks have been pouring surplus funds into investments, now at highest level on record.

Economic news and individual company reports:

Dow Jones reports first large increase in steel production in several months; US Steel ingot production in week ended Monday was at 66% vs. 62% previous week; industry average was 58% vs. 54.5%.

Rail freight loadings in week ended Aug. 16 were 922,823 cars, up 18,666 over previous week but down 179,744 or 16.3% from 1929.

First 37 rails report July net down 32.6% from 1929, but up 13.9% over June.

July cigarette production of 11.859B was new record high, up 10.6% from 1929; July production has increased a similar percentage for previous 3 years. First 7 months production of 71.284B is also a record. Cigars declined, although 5-cent cigars increased; snuff increased.

Companies reporting decent earnings: Fox Film, Columbia Pictures, National Power & Light, American Ice, Lehigh Valley (rail, helped by expense cuts).

Nine of Canada's principal breweries to merge, forming the Brewing Corp. of Canada.

Movie review:

Abraham Lincoln, directed by D.W. Griffith. “An almost unbelievable number of historical characters are brought to life in almost photographic likenesses,” as are the settings of battles and the Lincoln-Douglass debate. Walter Huston impressive as Lincoln; “The changes wrought by time and experience in the face of Lincoln are admirably achieved; the changes in his character are as beautifully portrayed by Mr. Huston's acting.” Other characters faithfully reproduced include cigar-smoking Grant also “indulging freely in whisky”, Lee, Sheridan, Douglas, and John Wilkes Booth. [Note: this film is in the public domain and viewable on youtube, or for download here (can't vouch for the quality), or on DVD at Amazon.]

+ The Boring Stuff:

Editorial: The recent revolution in Peru is of concern to US investors considered they have about $200M of loans and other investments there, but the new Peruvian govt. doesn't seem threatening to US investments. US experience with Mexican oil nationalization doesn't inspire much confidence in US ability to protect capital invested abroad, but “Mexico's subsequent plight has been an object lesson” against that policy. State Dept. says deposed Peruvian Pres. Legula was friend of the US, but sees no current reason for US investors in Peru to worry; “At the same time, it was said this country would follow its traditional policy of protecting American property if events made that necessary.” Main US investments are bonds, minerals, and oil.

Commodities mixed: Grains down with wheat weaker than corn. Cotton up sharply on short-covering. Copper traded down to 10 3/4 cents.

Market sentiment said more optimistic based on expected seasonal upturn in business. Some public and foreign inquiries on stocks reported, though mood is anxious with regard to price movements.

Union Trust of Cleveland reports improved business sentiment across country, general opinion that trade has passed bottom. Cites current general level of production below consumption. Says wages have declined somewhat, as has cost of living; predicts commodity prices may stay low for some time; says process of adjustment of price structure is difficult, but in the long run doesn't necessarily mean low profits if business adjusts operations properly.

L. Wakefield, Pres. First National Bank, defends banking groups against charges they are driving independent country banks out of business.

Crude oil production in week ended Aug. 23 was 2.471M barrels/day, up 6,950 from previous week but down 495,850 from 1929; gasoline stocks at refiners were down 1.410M in week to 39.842M.

Canadian steel ingot and castings production in July was 68,424 tons vs. 95,321 in June and 129,827 in July 1929.

Sugar industry conference meets in NY to deal with “demoralized” industry; Cuba offers some export cuts in exchange for production restrictions by others.

Great Atlantic & Pacific now operates 15,000 about stores; sales volume has almost doubled over past 4 years to $1.1B, or a quarter of total US chain store business. Company has expanded sales by adding food departments, and by sharply cutting prices on some commodities including coffee.

I. Nelson's (300 share stockholder) suit to force Warner Bros. into receivership dismissed in Delaware Chancery Court.

Company reports since July 1: 160 companies reported increased earnings vs. 1929 and 390 decreased; 734 dividends unchanged, 4 increased, 49 cut.

Tuesday, August 26, 1930: Dow 231.52. -2.90 (1.2%)

Assorted historical stuff:

Dr. D. Laird of Colgate U. claims at least 5% of US payrolls is wasted due to inefficiency caused by noise. Tests of typists found up to 30% increase in output when noise was reduced; noise apparently harms nervous system even when workers are used to it and don't consciously find it disturbing; typists used 25% more energy in a noisy room “as a result of pounding the keys harder and of muscular tension.”

Editorial: Gov. Roosevelt is considered heir apparent to former Gov. Smith as Democratic standard bearer, but now faces a tough situation: needs support from NY City Democrats but faces a brewing scandal in the City govt. now controlled largely by Tammany Hall and Mayor Walker. He's trying to arrange a limited investigation by the courts rather than one by a Republican legislature that could “run amuck” - but this could backfire if he looks like he's covering up.

Enlistments in Navy in year ended June 30 were 94,778 vs. 81,815 previous year; in Marines were 45,190 vs. 32,395; attributed to unemployment situation.

Japanese airmail to Europe and Americas now available; leaves Japan by boat, transferred to plane for Europe on reaching Siberia.

Peru Pres. A. Legula flees country, govt. in hands of military committee.

Latin American representatives to meet in Washington to “devise means to limit manufacture of narcotics to medical needs.”

Market commentary:

Following early advances, bears renewed tests of leading stocks, resulting in moderate declines. Market grew more unsettled following bad break in Vanadium on news of July loss. Oils continued weak. Recent trading favorites (United Aircraft, Radio) had sizeable setbacks. Bulls, however, encouraged by evaporating volume as decline progressed. Bond market very dull, most prices firm except Peruvian govt.

Farm Board chair Legge denies Board is being “radical or socialistic” in suggesting farmers cut back production to market requirements.

J.S. Bache & Co. says current optimism has more sound foundation than the misplaced confidence of last spring. Bullish factors include recent gradual improvement in business news, easy credit, strong bond market, passing of drought scare, and declining margin loans. Stock buyers can also take heart from repeated ability of market to resist declining back to last year's lows. This seems a good time to deploy investment funds; if buyers wait until “every element of doubt is removed,” stock prices will be substantially higher; trying to pick exact bottoms is usually futile.

Bank of Nova Scotia points to general overproduction, says purchasing power not adequate to handle current production volume. This may be corrected by increased purchasing power, cutting production, or cutting prices. Current most important question is, at what price level will this happen (where will prices stabilize).

GM Pres. A. Sloan expects buildup of delayed car purchases due to depression, but sees little chance of improvement in second half. Thinks growing popularity of low-priced cars partly due to depression and partly to improvements in values offered. No plans for change in wage rates.

Economic news and individual company reports:

Fed. Reserve Bd. reports business activity down further in July; output of factories and mines (seasonally adjusted) down 6%; factory employment and wages down to lowest level since 1922; building contracts, freight loadings, and dept. store sales down; wholesale prices continued down sharply.

Census Bureau reports as of April 1 US has 2.508M unemployed, 2% of total population and 5.2% of estimated workers (those without jobs, able to work, and seeking work). Highest number of unemployed were in New York (364,617); highest percentage was in Michigan (8.2% of est. workers).

Internal Revenue collections for 1930 fiscal year ended June 30 were $3.040B; largest state was NY, $830.2M; cost of collection $1.13 per $100.

Fed. Reserve member banks report for week ended Aug. 20 shows loans on securities down $61M, all other loans (commercial) almost unchanged.

Agriculture Sec. Hyde committed $121.9M federal matching highway funds to be paid out to states on July 31, 1931; this should allow states to begin construction projects now to relieve unemployment, particularly in drought areas.

Companies reporting decent earnings: Autostrop Safety Razor (July earnings 60% ahead of 1929, heavy advertising this year).

Canadian Industrial Alcohol (whiskey) says sales held up well so far this year, but recent tightening of US border has severely curtailed them.

Movie review:

The Matrimonial Bed, an entertaining farce adapted from the French. Adolphe Noblet, a happily married man, suffers amnesia after a rail accident and is believed dead. He becomes a barber, remarries, and has 4 children. Five years later, his wife and old friends are marking the anniversary of his death, when his wife (now remarried) decides to change hairdressers and gets the shock of her life. “Innumerable complications” ensue. One friend hypnotizes the barber, causing him to wake as his former self and forget his current wife as well as “the ladies to whom he has shown more than ordinary attention as their hairdresser.” Finally, in order to free his former wife to be happy in her second marriage, he is hypnotized again and pretends to have a relapse and return contentedly to his second wife, although he does fail to recognize his children by name.

+ The Boring Stuff:

Aviation industry predicted to do better in 1931; while most will lose money this year, overproduction has been relieved, there have been fewer “unfortunate accidents” this year, and the new Watres airmail bill together with govt. buying should increase aircraft demand. Watres bill should also help loss-making passenger air business. Govt. is also developing 25,000 mile lighted airway system across country, and taking other steps to make travel safe and reliable.

Federal govt. spending $19,000 daily to fight forest fires in national forests.

US canned food production has increased almost 500% in past 25 years; attributed to large population shift to cities - from 40% in 1900 to 57% currently. Canners experimenting with new technology to counter frozen foods, including cans with glass sides.

Canadian govt. will reduce Soviet coal imports said to be partly produced with convict labor.

Some observers believe recovery may be slow, pointing out that in 3 previous depressions full recovery took 13-17 months. However, statistical dept. of a large utility department is more optimistic; predicts trade activity, now about 17% below normal, will recover to 5% below by next Feb. and normal levels by next July.

Recent rally has regained about 75% of the decline from July 28-Aug. 12, but has been on continued low volume under 2M shares/day.

Commodities mixed. Grains mostly slightly lower. Cotton up despite favorable crop weather. Buying of copper very low, with price deadlock continuing at 10.75 cents bid/ 11 cents asked. Cocoa breaks sharply to new record low at 6.5 cents (previous record 7 cents). Sugar also hits new low at 1.06 cents.

Standard Oil NJ's publication, The Lamp, warns oil refiners they must cut back operations to balance with lower seasonal demand in rest of year, criticizes past overproduction leading to long-term buildup of excessive inventories; calls for long-term rationalized program rather than emergency measures. However, E.B. Reeser, Pres. American Petroleum Institute, says industry is in best statistical condition of the year, with curtailment having been largely successful.

Agriculture Dept. estimates 1930 wheat production in 22 countries 2.287B bushels, up 4% from 1929. Believes wheat price decline near end.

Dept. of Commerce reports worldwide idle shipping tonnage on July 1 was 2.055M tons over 1929, increase of 60%; total tonnage was 66.441M. Index of full-cargo shipping rates was 83 in Q2, a new postwar low.

First 20 rails report July operating income down 30% from 1929 but up 17.8% from June. An small but increasing number of rails are not earning enough to cover dividends, and margin of safety is generally declining. Rails seen not offering much speculative opportunity due to increasing regulation of rates and earnings.

US auto production in July 262,363 vs. 335,477 in June and 500,840 in July 1929; first 7 months 2.481M vs. 3.726M.

Chicago territory steel demand improves; last week's sales best in month. Prices still seen too low for profitability.

British unemployment reported slightly improved in London and rural south, but still at crisis levels nationwide; up to 30% in manufacturing and mining sections.

Kreuger & Toll interests acquire control of large new Boliden copper mine in Sweden.

Pacific Gas & Elec. says spent $22.973M on new construction in first half, more than in 1929 first half; has added 3,000 to payroll in past year.