Look at These Green Shoots . . . From 1930

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I've linked the News from 1930 blog before, but it remains fascinating . . . and eerily familiar.

Market opened at about the previous low levels with some further decline; increasing resistance to bear efforts as the morning progressed; rallies developed in recent trading favorites. Good news on steel encouraged bulls, as well as rumors of important operators "lining up their forces for another bullish demonstration;" rally broadened in the afternoon. Good rebounds from Monday lows in many majors. Banks and trusts higher.


Administration members reported telling Wall Street that business has turned corner, and should curve slowly upward until winter, becoming clearest in October. No forecast beyond that ventured. However, administration strenuously denies rumors of using "its influence to bring about organized support for the stock market."



Irving Trust July review says we may be entering "ultimate pit of the depression;" sees mostly bad news in June, including declines in most lines of business, lower commodity prices, stock market declines, and possible tariff reprisals. Nevertheless, advises remembering that "It is always darkest before dawn."


Sentiment improved by market support yesterday. Conservative observers still advise buying on dips and selling rallies, but if market can get above previous resistance, would be considered confirmation of uptrend and convert many observers to the bull side.


Banks reported deposit increase by $257M in past week, to $21.317B; most of money not employed; increase of $37M in loans and $82M investments.


Rail freight loadings for week ended July 12 were 915,985 cars, down 150,429 from 1929 and 108,940 from 1928, but up 123,844 from July 4 holiday week.


US Steel production in past week was almost 64% vs. 63% prev. week and 55% holiday week; industry was 57.5% vs. 57% and 48%.


Developing consensus among brokers is that market is in general uptrend with occasional downward reactions. Advise gradually buying high-grade stocks for investment, advise traders to buy on dips and sell on rallies. Enough bears still around "to make trouble when the market begins to show signs of wavering."


Technical analysis: Next week is crucial to determining whether the current rally was due to fundamental factors or just technical. As of last Friday market had recovered about 50% of the June break. Bear test on Saturday and Monday then wiped out about a third of the rally gains. New support yesterday was encouraging; if market continues up, this indicates rally is due to fundamental reasons (increased business confidence).


Current month is the anniversary of the business slowdown; October will be anniversary of the stock decline. "Every succeeding day means we are just that much nearer a definite turn for the better." Meanwhile a Canadian broker points out: In the 1907 panic March 14 was the low, and the nearest low afterwords was 224 days later. Likewise in the 1929 panic, Nov. 13 was the low and the nearest low afterwords was 224 days later (on June 25)!


Meatpacking industry sales first 5 months sales $5.083B, almost as large as last year. Packing stocks in a rut thanks to low profit margins.


Machine tool market still dull, but thought to be at bottom; sentiment improved.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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