1929
BLACK TUESDAY
"Black Tuesday,"
Oct. 29, 1929, wiped 10% off the value of U.S. common stocks and seared
a place in America's financial psyche.
Even
today, the popular image of "the panic" is of bankrupted
fat- cat investors throwing themselves to their deaths from windows high
above Wall Street. It was not the first great crash in Wall Street history.
Far from it. Major sellers' panics had swept the Street in 1837, 1857,
1873, 1893 and 1907, all except the last marking the start of a severe
depression. Nor was it the greatest
one-day decline in the market's history.
Regardless,
the stock
market crash of 1929 has entered into the folk memory of the American
people. Like 1492 and 1776, it is one of those dates that every schoolchild
knows. Like the Alamo, the sinking of the Titanic and Custer's last stand,
it has served as the
historical backdrop of innumerable novels, plays, movies and songs.
The
1920s were a period of immense prosperity for this country. The gross
national product rose by 59%, and average personal income by 38%. The
engine of the new prosperity was the automobile, which by then had become
the largest industry in the country, led by General Motors (nyse: GM -
news - people ) and Ford Motor. In that decade, cars tripled in number,
and their manufacture was consuming 20% of the steel, 80% of the rubber
and 75% of the plate glass.
Wall
Street could be detached from economic reality for only so long, however.
On the day after Labor Day, Sept. 3, 1929, the Dow reached a high of 381.17,
a figure it would not see again for a quarter-century. On Sept. 5, a market
analyst of no great note, Roger Babson, a perennial bear, addressed an
audience in Wellesley, Mass.: "I repeat what I said at this time
last year and the year before, that sooner or later a crash is coming."
No
one had paid any attention before, but now, when his innocuous remark
crossed the broad tape, the market reacted volcanically. In the last hour
of trading, volume was a fantastic 2 million shares, and major issues
declined by ten points and more.
For
the next few weeks, the market trended downward as bear raids and margin
calls increased. By late October, it was down over 20%. On Thursday, Oct.
24, panic swept the Street until a syndicate of bankers raised a pool
of $20 million and managed to steady the market with large purchases made
by the New York Stock Exchange's acting president.
But
on Monday, Oct. 28, selling resumed--and on Tuesday, forever Black
Tuesday, there was no stopping it. The volume of 16 million shares
traded that day would be a record for nearly 40 years. The tickers did
not spew out the last of the trades until five hours
after trading ended. The selling continued for another two weeks until
it finally ran out of steam on Nov. 13, with the gains of the
previous two and half years wiped out.
By
then, however, a greatly
overbought market had become an oversold one. Buyers began to move
in, and the market began to rise. In January 1930, The New York Times
thought that the biggest news story of the previous year had been not
the crash but Admiral Byrd's flight over the South Pole. By May, the market
had recovered about half its losses of the fall. When a group of clergy
visited President Hoover and asked for increased public works, he told
them, "You have come 60 days too late, the depression is over."
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