This Week In 1930

TW: The 1930 WSJ headlines are too ironic to only dip into once. We have a new feature for Saturdays for awhile at least- "This Week In 1930". The thing that impresses me most is how the rhetoric has barely changed over the past 80 years.

From June 24, 1930-
"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.”

Current speculative sentiment is bearish, but the conditions are there for a strong bull market in the future. While commodity price decline is serious, many are selling for record lows or below cost of production, which can't continue forever. Inventories are low. Wages have not gone down with deflation, leaving workers with more buying power. Businesses generally have good balance sheets and are operating efficiently; those that need to borrow can do so cheaply.

From Wednesday June 25th
"Oregon voters in November will decide on a Constitutional amendment outlawing manufacture, sale, or possession of cigarettes."

From Thursday June 26th
"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."

"Conventional wisdom is that stock market moves anticipate business conditions, so stocks should go up soon if predictions of a fall improvement in business are true. Skeptics note that the market kept moving up last fall even though business started turning down in July. "