Little Bits of History

Black Tuesday

Posted in History by patriciahysell on October 29, 2015
Crowds outside NYSE

Crowds outside NYSE

October 29, 1929: Wall Street trading leads to the day known as Black Tuesday. The crash began on October 24 and was the most devastating stock market crash in US history. It was also the beginning of the Great Depression affecting all Western industrialized countries. After World War I, the country was rejoicing in wealth, prosperity, and a new sense of freedom and the Roaring Twenties were a symbol of the newfound optimism. Many rural Americans decided to become urban Americans and the move to the cities created a labor pool which fueled growth. But with so many farmhands moving to the cities, the American farmer was left in crisis.

There was much talk about the excessive speculation in the stock market and on March 25, 1929 there was a mini crash after the Federal Reserve pointed out the dangers. Speculation in this sense means investing in risky transactions in the hopes of making large sums of money due to market fluctuations. On March 27, Charles Mitchell of National City Bank announced they would provide $25 million to stop the stock market’s slide. While it worked, at least temporarily, the US economy was in trouble with steel production down, housing markets in decline, and car sales slowing. Because easy credit had been available, many Americans were drowning in debt. Even with all these indicators, the market recovered and continued to climb throughout the summer with an increase of total value of 20% between June and September.

On September 20, the London Stock Exchange crashed and several top investors were jailed for fraud and forgery. In America, this made investors pause and in the days leading to the ultimate crash, the markets were extremely volatile. Adding to the fear was the Smoot-Hawley Tariff Act being debated in Congress which was to raise tariffs to a high not seen for over 100 years.  On Black Thursday, October 24, the market lost 11% of its value on opening due to very heavy trading. The tickers around the country couldn’t keep up with the rapidly dropping prices and so stocks were sold without knowing what the actual value was. Panic broke out on the trading floor. Richard Whitney, at the request of several bankers, went to the floor and began buying large blocks of blue chip stock in the hopes of stemming the panic. It worked and the market was only down 6.38 points for the day.

The rally continued on Friday and the markets were then open for half days on Saturdays and that too, saw the markets rise. But the weekend papers had stories about what was happening on the floor of Wall Street and on Monday many investors with margin calls decided to get out of the market altogether. The market dropped 13% on Monday. On this day, with panic selling at a fever pitch and no buyers to pick up even the inexpensive stocks, the market dropped another 12%. While a few financial giants attempted to stem the tide, the public lost confidence in the stock market and the value of the markets were down $30 billion dollars over the two days.

One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute. – William Feather

The difference between playing the stock market and the horses is that one of the horses must win. – Joey Adams

If stock market experts were so expert, they would be buying stock, not selling advice. – Norman Ralph Augustine

You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets. – Peter Lynch

Also on this day: Ali, the Greatest – In 1960, Cassius Clay, later to be known as Muhammad Ali, had his first professional fight.
Seeing Red – In 1863, the International Red Cross got its start.
You’re in the Army Now – In 1940, the first peacetime draft in the US was instituted.
Raleigh – In 1618, Sir Walter Raleigh was executed.
Serial Killer – In 1901, Jane Toppan was arrested.

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: