Monday, June 29, 2009

1930s? 2000s? Headlines Pretty Much the Same

The New York Times highlighted this newish blog titled "News from 1930s". Essentially it tracks "this date" in 1930, and the top headlines in the Wall Street Journal. Of course as you know, after a rebound from an initial economic shock based on overleverage (among many other things) - the "green shoots" of recovery petered out... leading to a Great Depression. These headlines were before that happened. Being a curious sort I had to check out the main business and political headlines.

Just replace a few names (one President for another), one Fed head for another, and you see nothing has really changed. :) Well one thing - this week in 1930, Goldman Sachs (GS) was hitting an all time low - not so much now. What it shows me is ideological dogma is a permanent condition, humankind is eternally optimistic - even if naive, and humans - at least of the American kind - learn little from history. The resemblances in some of these are almost verbatim to what is being said, (or better put, is being "sold") today.

Some snippets from the past week
  • Washington officials will be looking carefully at whether the record-low 2.5% discount rate will revive business. So far easy money hasn't affected the credit picture much, with demand for commercial credit continuing down. However, the lower rates and longer duration now in effect should give a fairer test. Also hoped that easy credit together with lower commodity prices will encourage businesses to restock.
  • Col. Ayres, VP Cleveland Trust, predicts an abrupt recovery in stock and commodity prices by Labor Day due to current consumption exceeding production. Distinguishes between two types of depression, “V”-shaped and “U”-shaped.
  • Current speculative sentiment is bearish, but the conditions are there for a strong bull market in the future.
  • Conservative observers warn clients against buying into the rally, advise those long the market to sell when market turns weak again. One experienced observer criticizes the excess of optimistic market talk, says market won't improve until fundamental business conditions do.
  • Market observers see some hopeful signs: buying support is now coming out for stocks when they approach recent lows, and volume has been low in response to bear operations. Anticipate a possible quiet period rather than strong rally - this is typical of the end of bear markets.
  • Congressional subcommittee praises strategy of accelerating public works projects to moderate unemployment in business slowdowns, emphasizes good psychological effect of doing this quickly.
  • Census indicates New York City contains “300,000 unemployed and 100,000 drifters.”
  • Senator Glass is heading a subcommittee considering extensive changes to banking regulations. Among the changes considered are restricting speculative loans by banks to brokers and stock exchange members, removing the Secretary of the Treasury as a member of the Federal Reserve Board because of undue influence, making it easier for banks to expand nationwide, etc. Anticipated the committee will have meetings all of next year's session and submit recommendations December 1931. (oh boy, oh boy - if only he saw what the powers that be would do within 70 years)
  • J. Westerfield of the NY Stock Exchange lectures civics clubs of Yonkers on the causes of the current business recession. Says the effort to attribute it to any single cause is superficial; criticizes sanguine statements of “new era” economists that “the vast amount of reliable statistical information had practically abolished the old-time evils of large inventories and overproduction.” Concludes that an illusion grew popular that “paper profits in ... quoted values for real estate, commodities, securities, and other forms of property increased fortunes and thereby spending power.” (wow! literally could be ripped from the headlines the past decade)
  • One broker's opinion: “When this economic and market readjustment has been completed, it will merely be represented by a small curve downward in our steadily mounting curve of prosperity, consumption, production and efficiency ...”
  • Congress will adjourn in about a week - this might help market sentiment. (hah!)
  • Central Trust of Illinois says economy seems to be recently improving from end of 1929 and first months of 1930. Employment and imports seem to be trending up recently...... Union Trust of Cleveland also says the long-term outlook is improving and some indicators are pointing up. Philip Wagoner, president of Underwood (office equipment) is also seeing good month-to-month improvement. (I guess the term "2nd derivative improvement" was not quite so en vogue back then)
  • Survey of Illinois Manufacturers Association finds slow but sure recovery in business, expects improvement in second half of 1930 with profits for year as large as 1928, and further improvement in 1931.
And just for kicks....
  • Technicolor is target of bear attacks amid rumors of lost contracts and competitive color film processes. Stock has declined from $70 to $25 over a period of weeks. Company denies rumors, says full capacity is sold out well into 1931, current year earnings estimated at $5.
[May 25, 2009: Louise Yamada - 2000s Uncanny Resemblance to 1930s]

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