Black Thursday—Eighty Years Ago

The Great Depression began 80 years ago. Wall Street suffered Black Thursday on October 24, 1929. (The actual anniversary is Saturday, but since today is Thursday, I’m going for it).
The Dow had peaked on September 3 at 381.17. Traders were even breaking out their Dow 400 hats. Slowly, the market started losing ground. On October 23, the Dow dropped 6.33% to 305.85. Then on Thursday morning, the Dow dropped nearly 11% to 272.32.
In one of the great scenes in Wall Street history, around mid-day on Thursday several bankers got together and had Richard Whitney, the future president of the NYSE, to go down to the exchange and make a great show of buying huge blocks of stock for the pool. Whitney walked across the trading floor placing order far above current prices. A visitor named Winston Churchill watched in the gallery.
The tactic worked and stocks rallied. On Black Thursday, the Dow closed down just 2.1%. Check out this article from The Guardian. Here’s the final paragraph:

Most experts claim that there is nothing in the general conditions to warrant pessimism. The deluge of selling today is said merely to have pumped water from a number of highly saturated overvalued securities. But the fact is that today’s crash affected good issues as much as bad ones. New York bankers were tonight blaming the panic on the technical inadequacy of the ticker-tape system (Quick! Call Patrick Byrne) in processing such massive volume trading. Whatever the reasons, the spree of easy money and over-confidennce is now over. The bear market has returned with a vengeance, crushing the dreams of an army of small investors some of whom lost everything: 11 speculators are said to have committed suicide.

The following Tuesday, the Dow crashed 12.8%, then another 11.7% on Wednesday bringing the index down to 230.07.
The closing low came on November 13 when the Dow hit 198.69. After that began a sucker’s rally as the Dow topped 290 by mid-April.

On July 8, 1932, the Dow bottomed out at 41.12 for a loss of 89%. An equivalent loss from today would bring the Dow to about 1,075.
Oh, I nearly forgot. That Richard Whitney guy? It turns out he a little embezzlement problem and got his ass locked up in Sing Sing.
Here he is denouncing Securities Exchange Act of 1934. Except for the name of the bill, this speech could be delivered verbatim today.

Posted by Eddy Elfenbein on October 22nd, 2009 at 9:17 am

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