The 1929 Stock Market Crash Analysis

The tremendous crowds which you see gathered outside the Stock Exchange are due to the greatest crash in the history of the New York Stock Exchange in market prices. December 31st, New Year's Eve. The crash and its terrible consequences were still in the future. Financial leaders, everyone, celebrated what had been a decade of prosperity and boundless optimism. They thought the party would last forever. They called it the New Era. 1929. All the hope and promise and delusion of the 20s converged in that one year. States is afflicted with new eras. Let us not think for a moment that the illusion, the aberration of the 1920s was unique. intimately a part of the American character. The mood of the era, I think, can best be remembered by... by the hit song, was that 1929, Blue Skies? In the 20s, yes. Blue Skies. How did that go? Nothing but blue skies do I see. Never saw the sun shining so bright. Never saw things going so right. Gray days, all of them gone. Nothing but blue skies from now on. Nothing but blue skies from now on. That was the whole tenor of the day. I mean, people believed that everything was going to be great always. Always. There was a feeling of optimism in the air that you cannot even describe today. And everybody seemed to have an interest in the stock market. Certainly the boot black, the tailor, the grocer. own shares of one kind or another. This was the first time that many ordinary Americans had begun to invest in stocks. A stock, a share of a company, is bought and sold here on the floor of the New York Stock Exchange. The stocks themselves have no fixed value. As in an auction, if the stock is in demand, its price goes up. No demand, and the price goes down. For almost eight straight years, stock values had been rising. By 1929, there seemed to be no upper limits in this world of paper, numbers, and dreams. It was an arena of unbounded opportunity, where somebody like my grandfather could come into it and make a fortune. So many people made so much money in the market that late in the 20s, it seemed that you just couldn't. go wrong buying stocks in American companies. He was a whole new way to make a fortune. Unlike the Carnegies and the Rockefellers of previous decades who built steel mills and dug oil wells, men like Michael Michael Meehan, Jesse Livermore, and Charles Mitchell had amassed their fortunes buying and selling stocks, pieces of paper. The public was fascinated. Bankers, brokers, and speculators had become celebrities, and they lived like royalty. I can hardly believe that a family lived in this kind of a house. I mean, today it would be almost unbelievable. Six stories and these great big rooms. Enormous. We counted it up the other day. We had 16 live-in help in this house. Not counting the chauffeurs. Not counting the chauffeurs, yeah. Aside from all the help we had in the Tuxedo Park house and the Southampton house as well. But those days are gone forever. I should say. But we never thought of it as being grandiose because... practically everybody we knew seemed to live in the same way. Jesse Livermore had a ticker tape in... Every home that he owned, they had a beautiful house on 76th Street in Manhattan, on the west side, off Central Park. They had a floor at 813 5th Avenue because Dorothea did not like to go to the west side to change her clothes. So they had a house in Great Neck, they had a summer house in Lake Placid, they had a house in Palm Beach, they had... Private railroad car, two yachts. Oh, they lived. They really lived. Few Americans lived like Jesse Livermore, but there was a rising expectation that everyone could have a piece of this prosperity. During his presidential campaign of 1928, candidate Herbert Hoover would make this extraordinary promise. Given a chance to go forward with the policies of the last eight years, we shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation. There was great hope. America came out of World War I with the economy intact, with the only strong country in the world, the dollar was king. We had a very popular president in the middle of the decade, Calvin Coolidge, and an even more popular one elected in 1928, Herbert Hoover. So things looked pretty good. The economy was changing in this new America. It was the dawn of the consumer revolution. New inventions, mass marketing, factories turning out amazing products like radios, rayon, air conditioners, underarm deodorant. This is a period in which the American household gets the washing machine, gets the refrigerator, goes off gas light and gets electricity in some cities. This is a period in which people would buy little plugs to put into the outlets of the wall so the electricity wouldn't leak on the floor. What will they think of next was a 1920s saying. There's new things continually coming out. And there were new things which you could enjoy, not just for the few. One of the most wondrous inventions of the age was consumer credit. Before 1920, the average worker couldn't borrow money. By 1929, buy now, pay later had become a way of life. So there were changes, many changes in the way people viewed the world and all of them optimistic. You extrapolate the curve and what do you have? Permanent prosperity. That was a term one heard in the late 1920s. We entered an age of permanent prosperity. Wall Street got the credit for this prosperity, and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen. Men like William C. Durant. It's almost impossible to realize the power and the significance of the man. In Flint, when Mr. Durand came to Flint occasionally, people used to say, Durand is in town. Just like that, Durand. is in town he will be bigger than life earlier in the century Durant had founded General Motors now he made his money on Wall Street backed by Midwestern auto industrialists he controls so much money that he could single-handedly drive up the price of a stock and then sell reaping huge profits He was just at the apotheosis, at the maximum of his power. He managed, according to the voices of the time, according to what was said, anywhere between two to five billion dollars, which in those days were fabulous. The market was filled with bulls, and he was the bull of the bulls. Durant came to Wall Street as one of the titans of industry. Jesse Livermore, whose fortune was estimated at over $100 million, never did anything in his life but play the market. Everything Jesse Livermore touched turned to gold, it seemed. All he had to do was to press a button and the stock would go up 10 points. And that meant, of course, that Jesse Livermore would make a lot of money. So the average American would look at this and say, gee, if only I knew what he was doing, I could make money too. How do you get in on Jesse Livermore's brains? Livermore was a speculator, pure and simple. He didn't study the health of a company. He didn't care whether it made a profit or paid a dividend. For him, the stock market was an abstract game of numbers. Money was not the end for this man at all. Money was a very peripheral thing for him. But beating the odds, winning the game. That was his objective. He was a numbers man. He lived by the numbers. He took an elevator by the numbers. He came into town by the numbers. Everything was done by numbers. When he left his house in the morning, he did not leave at 810. He left at 807. All of the policemen knew, because of his time schedule, that he would be going down Fifth Avenue, let's say, at 837. Well, of course, traffic lights were hand-operated then. Had policemen on boxes. So the instant that they saw his car, the lights were green. He never stopped for a red light. The success of large speculators like Livermore and Durant lured smaller investors to Wall Street. But Charles Mitchell, president of National City Bank, virtually invented the idea of mass marketing stocks and bonds to the general public. This was a totally new idea and a huge success. The bank, prior to Fathers being elected president in 1921, was geared mainly to doing business with large corporations. The father pointed the bank for the first time in the direction of going after the little man. I don't call him the little man. It was every man. Well, Yedamon, all right. How old was he then? 38 years old. And the National City Company had four offices. I know within three years there were over 50 offices. And by 1929 it was the largest distributor of securities. in the world. Even at the height of the speculative frenzy, only a small percentage of the American public actually invested in stocks. But the market had entered popular culture. Wall Street became Main Street. Everyone was talking stocks. Watching the ticker became a national sport. Popular magazines covered financial news. Dozens of bestsellers promised investors the inside out. track the characters in the popular comic strip gasoline alley were investing in a company called Robert keyhole stock tips came from everywhere some investors followed the advice of Evangeline Adams an astrologer She was able to calculate the variations of the stock exchange so accurately that there was practically no difference to having read it in a ledger somewhere. Among her more interesting clients... were charles chaplin mary pickford and jp pont morgan in february evangeline adams looked at the stars and predicted a dramatic upswing in stock prices for the coming months I'm looking up at the sky, I see the clouds rolling by. Hello, sunshine, hello. I'll say you long overdue. The stock market, once considered a highly risky place to put your money, was now beginning to attract a whole new group of amateur speculators. Among the new players was one Julius Marx. Everyone knew him by his stage name, Groucho. But they were poor and my father, it always affected my father because he was always kind of thrifty and worried about his future and where it would become of him when no one else wanted him as an actor anymore. So he was always saving money and turning off the lights and turning off the water around the house even after he was in Hollywood and making a lot of money of all the Marx Brothers Groucho was the most financially conservative in 1929 he took his life and put it in a sure thing, the stock market. He was always phoning a broker and getting hot tips and wanting to know what the stocks were, how they were doing. If he wasn't on the phone, he would take me into Great Neck, which was a little village at the time, but they did have a stockbroker called Newman Brothers and Worms and all these... Men who are investing in the market would all sit there in chairs like a little theater and watch the ticker tape go by. Groucho, along with record numbers of smaller investors, was borrowing money to buy stocks. It was called buying on margin. You only needed 10% down. Just $1,000 would get you $10,000 worth of stock. Suddenly you were in the same league with the big players, or so it seemed. But the stock market was not a level playing field. In the 20s and 30s, one of the big features of the stock market is the fact that it wasn't controlled. And that operators could do a lot of things that are not permitted today. One of the most common tactics was to manipulate the price of a particular stock. A stock like Radio Corporation of America. RCA was in the 20s what Xerox was in the 60s, what was a great growth stock. The stock went from, I can't remember the exact numbers, but from something like 20 to 400, split many times, and made many people, including my grandfather, very wealthy. It was one of the stocks that was manipulated by a pool. Wealthy investors would pool their money in a secret agreement. to buy a stock, inflate its price, and then sell it to an unsuspecting public. Most stocks in the 1920s were regularly manipulated by insiders, like RCA specialist Michael Meehan. In those days that was legal and it was quite common practice for a group of Wall Streeters to take a stock in hand and they would acquire a position in the stock early on and then they would see to it that there was good press on the stock, a lot of publicity. I would say that practically all the financial journals will undertake. This includes reports for the Wall Street Journal, the New York Times, the Herald Tribune, you name it. So if you were a pool operator, you'd call your friend at the Times and say, Look, Charlie, there's an envelope waiting for you here, and we think that perhaps you should write something nice about RCA. And Charlie would write something nice about RCA. Publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York. York City. Then they would begin to what was called painting the tape and they would make the stock look exciting. They would trade among themselves and you'd see these big prints in RCA and people will say oh it looks as though that stock is being accumulated. Now they are behind it you want to join them so you want you buy stock also. Now what's happening is the stock goes from 10 to 15 to 20 and now it's a 20 and you start buying. Other people start buying 30, 40 the original group the pool they stopped buying. they're selling you the stock. It's now 50, and they're out of it. And what happens, of course, is the stock collapses. On March 8, 1929, Michael Meehan began one of the most successful pools on Wall Street. From the 8th to the 17th, Meehan and the pool pushed up the value of RCA almost 50%. On March 18th, they sold and divided up their profits. In today's money, they had made... 100 million dollars for one week's work. The pools were a little like musical chairs. When the music stopped, somebody owned the stocks, and those were the sufferers. If small investors suffered, they would soon be back for more. They knew the game was rigged, but maybe next time they could beat the system. Wall Street had its critics, among them economist Roger Babson. He questioned the boom and was accused of lack of patriotism, of selling America short. Roger Babson warned of the speculation, said there's going to be a lot of speculation. be a crash and the aftermath is going to be quite terrible and people jumped on Babson from all around for saying such a thing so that people Oh who were cautious about their personal reputation, who did not want to call down on themselves a lot of calumny, kept quiet. Mobster Al Capone was not a cautious man. From his Chicago headquarters, he condemned the wild speculation on Wall Street. It's a racket, he said. Those stock market guys are crooked. Al Capone invested his money in a $100 million... dollar bootleg liquor business. Business was good on Valentine's Day 1929. He had just eliminated the competition. March 4th, Inauguration Day. Republican President Calvin Coolidge had run his administration on the belief that business was the basis of America's prosperity. Government should not interfere. Herbert Hoover had won a landslide victory promising to carry on the tradition. This was a time in our history when governments did not, as now, take responsibility for the economy. They presided over it, but the level of economic activity and the level of economic growth and the stability of prices were not yet everyday concerns of the president. And what Coolidge did was to say how wonderful times were, how happy everybody was going to be, and how prosperous everyone was going to be. And Hoover's responsibility was to continue that optimism. Herbert Hoover, you solemnly swear. Politicians came and went, but in the 20s, the businessman was king. New York City had a dapper, corrupt, and vastly popular... mayor Jimmy Walker. But behind the scenes were powerful financial leaders like Charles Mitchell. Jimmy Walker was high, wide, and fancy with the city finances. One day, father called... mayor walker up here and he had some other bankers with him and mayor walker was sort of put on the grill in the upstairs library and while these bankers read the riot act to him to try and get some fiscal responsibility uh instilled into him and i know that after the meeting uh someone took me into the library and pointed pointed me out the chair that the mayor had been sitting in and he'd been so nervous all those louis 14s chairs with all the little tax in there, brass tax, and he pulled out almost all the brass tax that was sitting on the floor out of sheer nerves. The stock market, too, was getting a severe case of nerves. On Friday, March 22nd, all eyes were on that august government body in Washington, the Federal Reserve Board. The board distrusted the boom. They saw the speculation as reckless. and dangerous because it was based more and more on the shaky foundation of borrowed money margin the board had the power to curb the borrowing but the market was now dependent on borrowed money without margin it would collapse The board met day after day. Would they ask for regulation of the stock market? They issued no public statements. Their silence was terrifying. Get my broker, say get my broker. Got the deal, got the deal, got the deal. On Monday, March 25th, investors began to sell. Blue chip stocks plunged. Tuesday. Another wave of selling swept the market. As it fell, people holding stock on margin were hit hard. They'd put only 10% down, but the value of their stock dropped more than 10%. So their down payment was gone. To hold their stocks, they'd have to put up more money. On March 26, millions of investors suddenly found themselves in deep trouble. Your broker would call you and say, We need more money. You're wiped out. more money he would then sell the stock now he would sell the stock which would cause the stock to go down to 83 85 86 and now more margin calls are triggered so one margin called figures another margin called another margin call and it goes all the way down with everyone trying to borrow money to cover the falling value of their stocks there was a credit crunch interest rates soared at 20 percent few people could afford to borrow more money the boom was about to collapse like a house of cards. Charlie Mitchell was horrified. His success, his entire career, his personal fortune had been based on a rising market. If nobody else was going to stop the crash, Charles Mitchell would. His father at that point stepped in and announced that the National City Bank would provide $25 million of credit, which was all very well and very necessary, but he added the fateful words, whatever. the Federal Reserve Board thinks. And Senator Carter Glass, who had been sort of the father of the Federal Reserve Act in 1913, took that as a direct slap across the face. But whatever Senator Glass thought, immediately the credit crisis was alleviated. In fact, within the next 24 hours, call money went from 20% to 8%, and that stopped the panic then in March. The next day the market rallied. The Federal Reserve Board remained silent, tacitly accepting defeat. The hero of the day was Charlie Mitchell. He had single-handedly stopped the crash of 29. With the start of the baseball season, people quickly forgot the break in the market. New events filled the papers. There was a crisis in Nicaragua, where the nationalist hero Augusto Sandino was threatening American Marines. Tragedy in the British mandate of Palestine, as Jews and Arabs clashed over control of Holy See. sites in Jerusalem. And in Antarctica, Commander Byrd was at his base camp, Little America, waiting for a break in the weather. His elaborately planned flight over the South Pole was still on ice. The newsreels had come into their own. Now in living sound, patrons could keep abreast of the important events of the day. The biggest news of the day is not the naval agreement, not even prohibition, but the return of the natural wasteland. The end. Kathy Livermore was a typical flapper. She has to embody the 20s. She would do almost anything on an impulse. She had some priceless pieces of 18th century furniture, but the house had settled and the floors were not level. But Mrs. Livermore didn't like to spend money that didn't show. So instead of having the hoists put underneath, she She simply solved the problem by having the legs of the furniture cut off to fit the sloping floors so that the tops of all the furniture were level, but of course the legs were on different angles. And this was her typical solution. As long as the tops were level, everything was fine. Everything was not fine that spring with the American economy. It was showing ominous signs of trouble. Steel production was declining. The construction industry was sluggish. Car sales dropped. Customers were getting harder to find. And because of easy credit, many people were deeply in debt. Large sections of the population were poor and getting poorer. Just as Wall Street had reflected a steady growth in the economy throughout most of the 20s, it would seem that now the market should reflect the economic slowdown. Instead, it soared to record heights. Stock prices no longer had any... to do with company profits, the economy, or anything else. The speculative boom had acquired a momentum of its own. This is the nature of mass illusion. Prices were going up, people bought. That forced prices up further, that brought in more people, and eventually the process becomes self-perpetuating. Every increase brings in more people convinced of their God-given right to get rich. The 20s was a decade of all sorts of fast money schemes. Three years earlier, everyone was buying Florida real estate. As prices of land skyrocketed, more people jumped in, hoping to make a killing. Then, all of a sudden, the world was a place of peace. overnight the boom turned to bust and investors lost everything wow the folks sunshine sunshine perpetual sunshine all the year around let's get the auction started before we get a tornado right this way step forward in may the mox brothers were before the cameras with their first film the coconuts its subject the florida land boom now in 1929 The gullibility of those naive speculators was something to laugh about. 800 wonderful residences will be built right here. Why, they're as good as up. Better. You can have any kind of a home you want to. You can even get stucco. Oh, how you can get stucco. Now is the time to buy while the new boom is on. Remember that old saying? a new boom sweeps clean and don't forget the guarantee groucho marx would film these scenes and then rushed to his broker to put more of his savings into the booming market on margin of course max gordon the broadway producer was also heavily in the market and gordon could never get over the fact that the market was going up and up and up all the time and he said to my father how how long has this been going on groucho and my father said i don't know but my broker down in Great Neck tells me that it's because there's a worldwide market for American goods and it's never going to get down. The market will just keep going up and up and up. May 1929. Stock prices were going up and up. With so much money to be made, people were borrowing more money than ever before to buy stocks. Market leaders like William Durant, far from being worried, were ecstatic. Off on his annual visit to Europe, he announced that everything would be fine as long as we all continue to believe. Confidence, not halfway confidence, but 100% confidence, is the real basis for our prosperity. Astrologer Evangeline Adams was now putting out a newsletter. Her 100,000 subscribers learned how the zodiac could influence stock prices. Her advice for the coming summer? Buy. Hitting the ceiling, hitting the ceiling, breaking through to the sky. They thought this was a ride that was never going to end. It just goes on and on and on, and every day they got more money, and they're counting up their paper profits, and they're selling and buying and buying and selling, and they're doing great. to the top hitting the ceiling hitting the shoes i go to get a shoe shine and say how's the market you go to the barbecue how's the market everybody was in the market They were people who were looking for the one lucky break. People who were just hoping that they strike it right. You know, you take a rifle, you aim it at the ocean, and you hope to hit a fish. Along with the market, temperatures soared that summer. It was a record heat rate and a record three months at the exchange. Some stocks doubled in value. In June, the New York Times Index of Stocks rose 52 points. In July, another 25. In the middle of the summer, the Graf Zeppelin was completing his first leisurely trip around the world. The Marx Brothers had finished shooting their film, The Coconuts. Commander Byrd was still at his base camp near the South Pole. He too had money in the market and radioed his broker for the latest quotes. Back in Cleveland, George Herman Ruth hit his 500th home run. And on the radio, they were playing the latest hit tune, I'm in the Market for You. I want a thousand shares of your caresses too. We'll count the hugs and kisses. And dividends are due, cause I'm in the market for you. On August 17th, Michael Meehan's brokerage firm launched a new service. One of my grandfather's innovations was putting brokerage houses on the ocean liners. The first went on the Bering area, and that allowed you, during the whatever it was, six or seven day passage to Europe, if you were such a stock market addict that you couldn't stand the withdrawal for that period, you could walk into the office and place your order to buy or sell 100 shares of General Motors or General Electric or whatever, and they would radio that order back to New York. It was being very modern at the time. They were... were very wealthy people on the transatlantic liners and it gave them something to do at sea and on land everyone seemed to be making money it was a stampede of buying and major speculators like John Jacob Rascoe whipped up the frenzy he told readers of the ladies home journal that now everyone could be rich September 2nd, Labor Day. It was the hottest day of the year. The markets were closed and people were at the beach. A reporter checked in with astrologer Evangeline Adams to ask about the future of stock prices. Her answer? The Dow Jones could climb to heaven. The very next day, September 3rd, the stock market hit its all-time high. My father and I had an ongoing discussion about the stock market. And I used to say, Pop, everybody's getting rich but you. You know, you work so hard and you're never going to make a nickel. All you do is you keep delivering these newspapers and that's about it. The guy who's shining shoes is in a stock market. The grocery clerk is in a stock market. The school teacher's in a stock market. The teller at the bank is in a stock market. Everybody's in a stock market. You're the only one that's not in a stock market. And he used to sit on the left and say, you'll see, you'll see, you'll see. On September 5th, economist Roger Babson gave a speech to a group of businessmen. Sooner or later, a crash is coming, and it may be terrific. He'd been saying the same thing for two years. But now, for some reason, investors were listening. The market took a severe dip. They called it the Babson Break. The next day, prices stabilized. But several days later, they began to drift lower. Though investors had no way of knowing it, the collapse had already begun. In the weeks to follow, the market fluctuated wildly, up and down. On September 12th, prices dropped 10%. They dipped sharply again on the 20th. Stock markets around the world were falling too. Then on September 25th, the market suddenly rallied. I remember well that I thought, why is this doing this? And then I thought, well... I'm new here and these people, like every day in the paper, Charlie Mitchell would have something to say, the J.P. Morgan people would have something to say about how good things were. And I thought, well, they know a lot more about this market than I do. I'm fairly new here and I really can't see why it's going up. But then when they say it can't go down, or if it does go down today, it'll go back tomorrow, You think, well, they really are like God. They know it all, and it must be the way it's going because they say so. As the market floundered, financial leaders were as optimistic as ever. More so. Just five days before the crash, Thomas Lamont, acting head of the highly conservative Morgan Bank, wrote a letter to President Hoover. The future appears brilliant. Our securities are the most desirable in the world. Charles Mitchell assured nervous investors that things have never been better. Practically every business leader in America and banker right around the time of 1929 saying how wonderful things were and the economy had only one way to go and that was up. Unfortunately, he didn't have a crystal ball. To predict the future. There's an old saying on Wall Street that the two most important emotions are fear and greed. And you go from fear to greed in about a fraction of a second. So you're very, very greedy. And you say to yourself, I want to make more. And then the market goes down ten points and you get frightened. I want to keep what I have, so you sell everything. And that's how you have a panic. So you have a panic on the upside, people rushing in to get in before the train takes off, and a panic on the downside, trying to get off the train before disaster hits. Monday, October 21st. Hoover, along with the political and financial leaders of the country, arrives in Dearborn, Michigan, to celebrate the 50th anniversary of Edison's invention of the light bulb. The host is Henry Ford. The country is reminded that in 50 short years, men like Ford, Duran, and Ford and Edison had transformed America from a third-rate power into the industrial giant of the world and while they celebrated their world was beginning to fall apart There came a Wednesday, October 23rd, when the market was a little shaky, weak. And whether this caused some spread of pessimism, one doesn't know. led a lot of people to think they should get out and so on Thursday October the 24th the first Black Thursday the market beginning in the morning took a terrific tumble The market opened in an absolutely free fall, and some people couldn't even get any bids for their shares, and it was wild panic. And an ugly crowd gathered outside the stock exchange, and it was described as making weird and threatening noises. It was indeed one of the worst days that had ever been seen down there. There was a glimmer of hope on Black Thursday. Directly across from the New York Stock Exchange was a low, stately building, the House of Morgan. Twenty-two years earlier, J. Pierpont Morgan had stopped the panic of... 1907, October 24th, high noon. All eyes were now on acting head Thomas W. Lamont. Tom Lamont called a number of the other bankers like Charles Mitchell of the National City Bank and People from the Bankers Trust and the Jay Albert Wiggin of the Chase Bank and so forth. There were about a half a dozen of them there. And they were gathered together to really discuss what they could do to stem this tremendous onslaught of selling stocks on the stock exchange that was taking place. About 1230, there was an announcement that this group of bankers would make available a very substantial sum to ease the credit stringency and support the market. And right after that, Dick Whitney made his famous walk across the floor of the New York Stock Exchange. Richard Whitney, vice president of the exchange, was chosen by the bankers to be their representative. At 1.30 in the afternoon, at the height of the panic, he strolled across the floor and in a loud, clear voice, ordered 10,000 shares of U.S. Steel at a price considerably higher than the last bid. He then went from post to post, shouting buy orders for key stocks. Stood up on one of the seats at the post, and he said, I give it 45 for 50,000 standard oil. And everybody started to pull, oh, the crash is over. If Morgan's putting his money in, maybe the crash is over. And sure enough, there seemed to be evidence that the bankers had moved in to end the panic. And they did end it for that day. The market stabilized and even went up. The New York Times said that thanks to the formation of this bankers pool, most observers felt that the panic and the great sell-off was over. And most people did feel that way. Tom Lamont felt that way. But Monday was not good. Apparently people had thought about things over the weekend, over Sunday, and decided maybe they might be safer to get out. real crash, which was on Tuesday, when the market went down and down and down without seeming limit. October 29th. Morgan's bankers could no longer stem the tide. It was like trying to stop Niagara Falls. Everyone wanted to sell. AT&T down 50%. RCA wants $110 a share. Couldn't find buyers at 26. Blue Ridge 100 plunged to $3 and still no buyers. On the floor, they had never seen anything like it. And it was just like a nightmare, and I couldn't believe what was going on. In those days, every buy order was on a black pad, and every sell order was on a red pad. saw was members running around with a fistful of red orders just like chickens with their head cut off they didn't know which way to run they were panicking screaming everybody was bumping into everybody else Don't remind them. Anyhow, this is what happened, and I tell you, and I'm supposed to answer everybody yelling at me. I said, what am I supposed to do? I mean, nobody knew what the hell to do. William Durant, the bull of the bulls, now tried single-handedly to support the market. The further it plunged, the more of his millions he poured into it. He became truly convinced that he was omnipotent. He thought that nothing could really unseat him. It was unfortunate. The forces were too great. There was no one man that could have been so powerful to control the market. There were some people, however, whose investment strategies made money. On October 29th, Jesse Livermore's wife, hearing of the crash, ordered the servants to move all the furniture out of their mansion into a small cottage on the estate. So when Mr. Livermore got home that night, he walked into a totally vacant house. When she told him that she had affected the move because... She was sure that they had lost all their money. He told her that he had made more money that day than he had ever made before. For most others, it was all over. In brokers offices across the country, the small investors, the tailors, the grocers, the secretaries, stared at the moving ticker in numb silence. Hope of an easy retirement, the new home, their children's education, everything was gone. My father was ready to kill himself. So in the morning of the crash, he got a call and it was Max Gordon and... Max Gordon says, Groucho. My father said, What? And Gordon said, Groucho, the jig is up. There were all sorts of rumors, and you'd see people going down the street looking up to see if they could catch somebody jumping out the window. Now, it turned out there weren't as many people jumped out the window as they reported, but some did. and others committed suicide otherwise 500 miles from wall street in the atlantic the luxury liner the berengaria was heading home from michael mehan's brokerage office word spread through the ship the bottoms fallen out of the market men came running out of their turkish baths and towels card games ended abruptly everyone tried to jam into the tiny office yelling sell at market They had left England wealthy men. They docked in New York without a penny. There's nothing unique about this. It is something which happens every 20 or 30 years because that is about the length of the financial memory. It's about... length of time that it requires for one new for a new set of suckers if you will a new set of people capable of wonderful self delusion to come in and imagine that they have a new and wonderful fix on the future In the 1930s, Charles Mitchell was hounded by Senate committees and the IRS. The crash had left him $12 million in debt. This house was taken over, of course, and things changed. And I began to know what the real world was all about. It was about time. I was 19 years old. Mitchell made a remarkable comeback. He paid off his debts and died in 1955, a highly respected figure on Wall Street. In 1936, William Durant filed for bankruptcy. His only... assets which he valued at 250 dollars were the clothes on his back in the late 30s the founder of general motors tried his hand at everything from running a bowling alley to selling a cure for dandruff he died in 1947 still talking about making a comeback Herbert Hoover spent much of the early 1930s fishing. He explained in a speech that fishing is a constant reminder of humility and of human frailty. For all men are equal, before fishes. The game on Wall Street had changed a great deal for Livermore. and the SEC was becoming a powerful factor and the rules were changed. He couldn't operate freely, buy and sell, the way he had in the past. And he couldn't adapt to the new regulations. So in a sense, his playing with the market was over. And I think a great deal of his interest in life was over at that point. The game was gone. In 1940, the day before Thanksgiving, a photographer snapped this photograph of an old and very tired Jesse Livermore. Several hours later, Livermore would go into a men's washroom and put a bullet through his head. At the end of 1929, as they celebrated New Year's Eve, all that lay in the future. Nobody knew that the Great Depression was coming. Unemployment, bread lines, bank failures. This was unimaginable. But the bubble had burst. Gone was that innocent optimism, the confidence, the illusion of wealth without work. One era had ended. They toasted the coming of the 30s. But somewhere, deep down, they knew.

They thought the party would last forever. They called it the New Era. 1929. All the hope and promise and delusion of the 20s converged in that one year.

States is afflicted with new eras. Let us not think for a moment that the illusion, the aberration of the 1920s was unique. intimately a part of the American character.

The mood of the era, I think, can best be remembered by... by the hit song, was that 1929, Blue Skies? In the 20s, yes. Blue Skies. How did that go?

Nothing but blue skies do I see. Never saw the sun shining so bright. Never saw things going so right. Gray days, all of them gone. Nothing but blue skies from now on.

Nothing but blue skies from now on. That was the whole tenor of the day. I mean, people believed that everything was going to be great always.

Always. There was a feeling of optimism in the air that you cannot even describe today. And everybody seemed to have an interest in the stock market.

Certainly the boot black, the tailor, the grocer. own shares of one kind or another. This was the first time that many ordinary Americans had begun to invest in stocks. A stock, a share of a company, is bought and sold here on the floor of the New York Stock Exchange.

The stocks themselves have no fixed value. As in an auction, if the stock is in demand, its price goes up. No demand, and the price goes down.

For almost eight straight years, stock values had been rising. By 1929, there seemed to be no upper limits in this world of paper, numbers, and dreams. It was an arena of unbounded opportunity, where somebody like my grandfather could come into it and make a fortune.

So many people made so much money in the market that late in the 20s, it seemed that you just couldn't. go wrong buying stocks in American companies. He was a whole new way to make a fortune.

Unlike the Carnegies and the Rockefellers of previous decades who built steel mills and dug oil wells, men like Michael Michael Meehan, Jesse Livermore, and Charles Mitchell had amassed their fortunes buying and selling stocks, pieces of paper. The public was fascinated. Bankers, brokers, and speculators had become celebrities, and they lived like royalty. I can hardly believe that a family lived in this kind of a house.

I mean, today it would be almost unbelievable. Six stories and these great big rooms. Enormous. We counted it up the other day.

We had 16 live-in help in this house. Not counting the chauffeurs. Not counting the chauffeurs, yeah.

Aside from all the help we had in the Tuxedo Park house and the Southampton house as well. But those days are gone forever. I should say. But we never thought of it as being grandiose because... practically everybody we knew seemed to live in the same way.

Jesse Livermore had a ticker tape in... Every home that he owned, they had a beautiful house on 76th Street in Manhattan, on the west side, off Central Park. They had a floor at 813 5th Avenue because Dorothea did not like to go to the west side to change her clothes. So they had a house in Great Neck, they had a summer house in Lake Placid, they had a house in Palm Beach, they had...

Private railroad car, two yachts. Oh, they lived. They really lived.

Few Americans lived like Jesse Livermore, but there was a rising expectation that everyone could have a piece of this prosperity. During his presidential campaign of 1928, candidate Herbert Hoover would make this extraordinary promise. Given a chance to go forward with the policies of the last eight years, we shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation.

There was great hope. America came out of World War I with the economy intact, with the only strong country in the world, the dollar was king. We had a very popular president in the middle of the decade, Calvin Coolidge, and an even more popular one elected in 1928, Herbert Hoover.

So things looked pretty good. The economy was changing in this new America. It was the dawn of the consumer revolution.

New inventions, mass marketing, factories turning out amazing products like radios, rayon, air conditioners, underarm deodorant. This is a period in which the American household gets the washing machine, gets the refrigerator, goes off gas light and gets electricity in some cities. This is a period in which people would buy little plugs to put into the outlets of the wall so the electricity wouldn't leak on the floor.

What will they think of next was a 1920s saying. There's new things continually coming out. And there were new things which you could enjoy, not just for the few. One of the most wondrous inventions of the age was consumer credit.

Before 1920, the average worker couldn't borrow money. By 1929, buy now, pay later had become a way of life. So there were changes, many changes in the way people viewed the world and all of them optimistic. You extrapolate the curve and what do you have? Permanent prosperity.

That was a term one heard in the late 1920s. We entered an age of permanent prosperity. Wall Street got the credit for this prosperity, and Wall Street was dominated by just a small group of wealthy men. Rarely in the history of this nation had so much raw power been concentrated in the hands of a few businessmen. Men like William C. Durant.

It's almost impossible to realize the power and the significance of the man. In Flint, when Mr. Durand came to Flint occasionally, people used to say, Durand is in town. Just like that, Durand. is in town he will be bigger than life earlier in the century Durant had founded General Motors now he made his money on Wall Street backed by Midwestern auto industrialists he controls so much money that he could single-handedly drive up the price of a stock and then sell reaping huge profits He was just at the apotheosis, at the maximum of his power.

He managed, according to the voices of the time, according to what was said, anywhere between two to five billion dollars, which in those days were fabulous. The market was filled with bulls, and he was the bull of the bulls. Durant came to Wall Street as one of the titans of industry.

Jesse Livermore, whose fortune was estimated at over $100 million, never did anything in his life but play the market. Everything Jesse Livermore touched turned to gold, it seemed. All he had to do was to press a button and the stock would go up 10 points. And that meant, of course, that Jesse Livermore would make a lot of money.

So the average American would look at this and say, gee, if only I knew what he was doing, I could make money too. How do you get in on Jesse Livermore's brains? Livermore was a speculator, pure and simple.

He didn't study the health of a company. He didn't care whether it made a profit or paid a dividend. For him, the stock market was an abstract game of numbers. Money was not the end for this man at all.

Money was a very peripheral thing for him. But beating the odds, winning the game. That was his objective.

He was a numbers man. He lived by the numbers. He took an elevator by the numbers. He came into town by the numbers.

Everything was done by numbers. When he left his house in the morning, he did not leave at 810. He left at 807. All of the policemen knew, because of his time schedule, that he would be going down Fifth Avenue, let's say, at 837. Well, of course, traffic lights were hand-operated then. Had policemen on boxes.

So the instant that they saw his car, the lights were green. He never stopped for a red light. The success of large speculators like Livermore and Durant lured smaller investors to Wall Street.

But Charles Mitchell, president of National City Bank, virtually invented the idea of mass marketing stocks and bonds to the general public. This was a totally new idea and a huge success. The bank, prior to Fathers being elected president in 1921, was geared mainly to doing business with large corporations. The father pointed the bank for the first time in the direction of going after the little man.

I don't call him the little man. It was every man. Well, Yedamon, all right.

How old was he then? 38 years old. And the National City Company had four offices.

I know within three years there were over 50 offices. And by 1929 it was the largest distributor of securities. in the world. Even at the height of the speculative frenzy, only a small percentage of the American public actually invested in stocks.

But the market had entered popular culture. Wall Street became Main Street. Everyone was talking stocks.

Watching the ticker became a national sport. Popular magazines covered financial news. Dozens of bestsellers promised investors the inside out. track the characters in the popular comic strip gasoline alley were investing in a company called Robert keyhole stock tips came from everywhere some investors followed the advice of Evangeline Adams an astrologer She was able to calculate the variations of the stock exchange so accurately that there was practically no difference to having read it in a ledger somewhere. Among her more interesting clients...

were charles chaplin mary pickford and jp pont morgan in february evangeline adams looked at the stars and predicted a dramatic upswing in stock prices for the coming months I'm looking up at the sky, I see the clouds rolling by. Hello, sunshine, hello. I'll say you long overdue. The stock market, once considered a highly risky place to put your money, was now beginning to attract a whole new group of amateur speculators. Among the new players was one Julius Marx.

Everyone knew him by his stage name, Groucho. But they were poor and my father, it always affected my father because he was always kind of thrifty and worried about his future and where it would become of him when no one else wanted him as an actor anymore. So he was always saving money and turning off the lights and turning off the water around the house even after he was in Hollywood and making a lot of money of all the Marx Brothers Groucho was the most financially conservative in 1929 he took his life and put it in a sure thing, the stock market. He was always phoning a broker and getting hot tips and wanting to know what the stocks were, how they were doing.

If he wasn't on the phone, he would take me into Great Neck, which was a little village at the time, but they did have a stockbroker called Newman Brothers and Worms and all these... Men who are investing in the market would all sit there in chairs like a little theater and watch the ticker tape go by. Groucho, along with record numbers of smaller investors, was borrowing money to buy stocks.

It was called buying on margin. You only needed 10% down. Just $1,000 would get you $10,000 worth of stock. Suddenly you were in the same league with the big players, or so it seemed. But the stock market was not a level playing field.

In the 20s and 30s, one of the big features of the stock market is the fact that it wasn't controlled. And that operators could do a lot of things that are not permitted today. One of the most common tactics was to manipulate the price of a particular stock.

A stock like Radio Corporation of America. RCA was in the 20s what Xerox was in the 60s, what was a great growth stock. The stock went from, I can't remember the exact numbers, but from something like 20 to 400, split many times, and made many people, including my grandfather, very wealthy.

It was one of the stocks that was manipulated by a pool. Wealthy investors would pool their money in a secret agreement. to buy a stock, inflate its price, and then sell it to an unsuspecting public. Most stocks in the 1920s were regularly manipulated by insiders, like RCA specialist Michael Meehan. In those days that was legal and it was quite common practice for a group of Wall Streeters to take a stock in hand and they would acquire a position in the stock early on and then they would see to it that there was good press on the stock, a lot of publicity.

I would say that practically all the financial journals will undertake. This includes reports for the Wall Street Journal, the New York Times, the Herald Tribune, you name it. So if you were a pool operator, you'd call your friend at the Times and say, Look, Charlie, there's an envelope waiting for you here, and we think that perhaps you should write something nice about RCA.

And Charlie would write something nice about RCA. Publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York. York City.

Then they would begin to what was called painting the tape and they would make the stock look exciting. They would trade among themselves and you'd see these big prints in RCA and people will say oh it looks as though that stock is being accumulated. Now they are behind it you want to join them so you want you buy stock also.

Now what's happening is the stock goes from 10 to 15 to 20 and now it's a 20 and you start buying. Other people start buying 30, 40 the original group the pool they stopped buying. they're selling you the stock.

It's now 50, and they're out of it. And what happens, of course, is the stock collapses. On March 8, 1929, Michael Meehan began one of the most successful pools on Wall Street. From the 8th to the 17th, Meehan and the pool pushed up the value of RCA almost 50%. On March 18th, they sold and divided up their profits.

In today's money, they had made... 100 million dollars for one week's work. The pools were a little like musical chairs.

When the music stopped, somebody owned the stocks, and those were the sufferers. If small investors suffered, they would soon be back for more. They knew the game was rigged, but maybe next time they could beat the system.

Wall Street had its critics, among them economist Roger Babson. He questioned the boom and was accused of lack of patriotism, of selling America short. Roger Babson warned of the speculation, said there's going to be a lot of speculation. be a crash and the aftermath is going to be quite terrible and people jumped on Babson from all around for saying such a thing so that people Oh who were cautious about their personal reputation, who did not want to call down on themselves a lot of calumny, kept quiet. Mobster Al Capone was not a cautious man.

From his Chicago headquarters, he condemned the wild speculation on Wall Street. It's a racket, he said. Those stock market guys are crooked.

Al Capone invested his money in a $100 million... dollar bootleg liquor business. Business was good on Valentine's Day 1929. He had just eliminated the competition. March 4th, Inauguration Day. Republican President Calvin Coolidge had run his administration on the belief that business was the basis of America's prosperity.

Government should not interfere. Herbert Hoover had won a landslide victory promising to carry on the tradition. This was a time in our history when governments did not, as now, take responsibility for the economy.

They presided over it, but the level of economic activity and the level of economic growth and the stability of prices were not yet everyday concerns of the president. And what Coolidge did was to say how wonderful times were, how happy everybody was going to be, and how prosperous everyone was going to be. And Hoover's responsibility was to continue that optimism.

Herbert Hoover, you solemnly swear. Politicians came and went, but in the 20s, the businessman was king. New York City had a dapper, corrupt, and vastly popular... mayor Jimmy Walker. But behind the scenes were powerful financial leaders like Charles Mitchell.

Jimmy Walker was high, wide, and fancy with the city finances. One day, father called... mayor walker up here and he had some other bankers with him and mayor walker was sort of put on the grill in the upstairs library and while these bankers read the riot act to him to try and get some fiscal responsibility uh instilled into him and i know that after the meeting uh someone took me into the library and pointed pointed me out the chair that the mayor had been sitting in and he'd been so nervous all those louis 14s chairs with all the little tax in there, brass tax, and he pulled out almost all the brass tax that was sitting on the floor out of sheer nerves.

The stock market, too, was getting a severe case of nerves. On Friday, March 22nd, all eyes were on that august government body in Washington, the Federal Reserve Board. The board distrusted the boom. They saw the speculation as reckless. and dangerous because it was based more and more on the shaky foundation of borrowed money margin the board had the power to curb the borrowing but the market was now dependent on borrowed money without margin it would collapse The board met day after day.

Would they ask for regulation of the stock market? They issued no public statements. Their silence was terrifying. Get my broker, say get my broker.

Got the deal, got the deal, got the deal. On Monday, March 25th, investors began to sell. Blue chip stocks plunged. Tuesday.

Another wave of selling swept the market. As it fell, people holding stock on margin were hit hard. They'd put only 10% down, but the value of their stock dropped more than 10%.

So their down payment was gone. To hold their stocks, they'd have to put up more money. On March 26, millions of investors suddenly found themselves in deep trouble.

Your broker would call you and say, We need more money. You're wiped out. more money he would then sell the stock now he would sell the stock which would cause the stock to go down to 83 85 86 and now more margin calls are triggered so one margin called figures another margin called another margin call and it goes all the way down with everyone trying to borrow money to cover the falling value of their stocks there was a credit crunch interest rates soared at 20 percent few people could afford to borrow more money the boom was about to collapse like a house of cards.

Charlie Mitchell was horrified. His success, his entire career, his personal fortune had been based on a rising market. If nobody else was going to stop the crash, Charles Mitchell would. His father at that point stepped in and announced that the National City Bank would provide $25 million of credit, which was all very well and very necessary, but he added the fateful words, whatever. the Federal Reserve Board thinks.

And Senator Carter Glass, who had been sort of the father of the Federal Reserve Act in 1913, took that as a direct slap across the face. But whatever Senator Glass thought, immediately the credit crisis was alleviated. In fact, within the next 24 hours, call money went from 20% to 8%, and that stopped the panic then in March. The next day the market rallied.

The Federal Reserve Board remained silent, tacitly accepting defeat. The hero of the day was Charlie Mitchell. He had single-handedly stopped the crash of 29. With the start of the baseball season, people quickly forgot the break in the market. New events filled the papers.

There was a crisis in Nicaragua, where the nationalist hero Augusto Sandino was threatening American Marines. Tragedy in the British mandate of Palestine, as Jews and Arabs clashed over control of Holy See. sites in Jerusalem.

And in Antarctica, Commander Byrd was at his base camp, Little America, waiting for a break in the weather. His elaborately planned flight over the South Pole was still on ice. The newsreels had come into their own.

Now in living sound, patrons could keep abreast of the important events of the day. The biggest news of the day is not the naval agreement, not even prohibition, but the return of the natural wasteland. The end.

Kathy Livermore was a typical flapper. She has to embody the 20s. She would do almost anything on an impulse.

She had some priceless pieces of 18th century furniture, but the house had settled and the floors were not level. But Mrs. Livermore didn't like to spend money that didn't show. So instead of having the hoists put underneath, she She simply solved the problem by having the legs of the furniture cut off to fit the sloping floors so that the tops of all the furniture were level, but of course the legs were on different angles. And this was her typical solution. As long as the tops were level, everything was fine.

Everything was not fine that spring with the American economy. It was showing ominous signs of trouble. Steel production was declining.

The construction industry was sluggish. Car sales dropped. Customers were getting harder to find. And because of easy credit, many people were deeply in debt.

Large sections of the population were poor and getting poorer. Just as Wall Street had reflected a steady growth in the economy throughout most of the 20s, it would seem that now the market should reflect the economic slowdown. Instead, it soared to record heights.

Stock prices no longer had any... to do with company profits, the economy, or anything else. The speculative boom had acquired a momentum of its own. This is the nature of mass illusion. Prices were going up, people bought.

That forced prices up further, that brought in more people, and eventually the process becomes self-perpetuating. Every increase brings in more people convinced of their God-given right to get rich. The 20s was a decade of all sorts of fast money schemes.

Three years earlier, everyone was buying Florida real estate. As prices of land skyrocketed, more people jumped in, hoping to make a killing. Then, all of a sudden, the world was a place of peace.

overnight the boom turned to bust and investors lost everything wow the folks sunshine sunshine perpetual sunshine all the year around let's get the auction started before we get a tornado right this way step forward in may the mox brothers were before the cameras with their first film the coconuts its subject the florida land boom now in 1929 The gullibility of those naive speculators was something to laugh about. 800 wonderful residences will be built right here. Why, they're as good as up. Better. You can have any kind of a home you want to.

You can even get stucco. Oh, how you can get stucco. Now is the time to buy while the new boom is on.

Remember that old saying? a new boom sweeps clean and don't forget the guarantee groucho marx would film these scenes and then rushed to his broker to put more of his savings into the booming market on margin of course max gordon the broadway producer was also heavily in the market and gordon could never get over the fact that the market was going up and up and up all the time and he said to my father how how long has this been going on groucho and my father said i don't know but my broker down in Great Neck tells me that it's because there's a worldwide market for American goods and it's never going to get down. The market will just keep going up and up and up.

May 1929. Stock prices were going up and up. With so much money to be made, people were borrowing more money than ever before to buy stocks. Market leaders like William Durant, far from being worried, were ecstatic. Off on his annual visit to Europe, he announced that everything would be fine as long as we all continue to believe. Confidence, not halfway confidence, but 100% confidence, is the real basis for our prosperity.

Astrologer Evangeline Adams was now putting out a newsletter. Her 100,000 subscribers learned how the zodiac could influence stock prices. Her advice for the coming summer? Buy. Hitting the ceiling, hitting the ceiling, breaking through to the sky.

They thought this was a ride that was never going to end. It just goes on and on and on, and every day they got more money, and they're counting up their paper profits, and they're selling and buying and buying and selling, and they're doing great. to the top hitting the ceiling hitting the shoes i go to get a shoe shine and say how's the market you go to the barbecue how's the market everybody was in the market They were people who were looking for the one lucky break. People who were just hoping that they strike it right. You know, you take a rifle, you aim it at the ocean, and you hope to hit a fish.

Along with the market, temperatures soared that summer. It was a record heat rate and a record three months at the exchange. Some stocks doubled in value.

In June, the New York Times Index of Stocks rose 52 points. In July, another 25. In the middle of the summer, the Graf Zeppelin was completing his first leisurely trip around the world. The Marx Brothers had finished shooting their film, The Coconuts.

Commander Byrd was still at his base camp near the South Pole. He too had money in the market and radioed his broker for the latest quotes. Back in Cleveland, George Herman Ruth hit his 500th home run. And on the radio, they were playing the latest hit tune, I'm in the Market for You.

I want a thousand shares of your caresses too. We'll count the hugs and kisses. And dividends are due, cause I'm in the market for you.

On August 17th, Michael Meehan's brokerage firm launched a new service. One of my grandfather's innovations was putting brokerage houses on the ocean liners. The first went on the Bering area, and that allowed you, during the whatever it was, six or seven day passage to Europe, if you were such a stock market addict that you couldn't stand the withdrawal for that period, you could walk into the office and place your order to buy or sell 100 shares of General Motors or General Electric or whatever, and they would radio that order back to New York.

It was being very modern at the time. They were... were very wealthy people on the transatlantic liners and it gave them something to do at sea and on land everyone seemed to be making money it was a stampede of buying and major speculators like John Jacob Rascoe whipped up the frenzy he told readers of the ladies home journal that now everyone could be rich September 2nd, Labor Day. It was the hottest day of the year.

The markets were closed and people were at the beach. A reporter checked in with astrologer Evangeline Adams to ask about the future of stock prices. Her answer?

The Dow Jones could climb to heaven. The very next day, September 3rd, the stock market hit its all-time high. My father and I had an ongoing discussion about the stock market. And I used to say, Pop, everybody's getting rich but you. You know, you work so hard and you're never going to make a nickel.

All you do is you keep delivering these newspapers and that's about it. The guy who's shining shoes is in a stock market. The grocery clerk is in a stock market.

The school teacher's in a stock market. The teller at the bank is in a stock market. Everybody's in a stock market. You're the only one that's not in a stock market. And he used to sit on the left and say, you'll see, you'll see, you'll see.

On September 5th, economist Roger Babson gave a speech to a group of businessmen. Sooner or later, a crash is coming, and it may be terrific. He'd been saying the same thing for two years. But now, for some reason, investors were listening.

The market took a severe dip. They called it the Babson Break. The next day, prices stabilized. But several days later, they began to drift lower. Though investors had no way of knowing it, the collapse had already begun.

In the weeks to follow, the market fluctuated wildly, up and down. On September 12th, prices dropped 10%. They dipped sharply again on the 20th. Stock markets around the world were falling too. Then on September 25th, the market suddenly rallied.

I remember well that I thought, why is this doing this? And then I thought, well... I'm new here and these people, like every day in the paper, Charlie Mitchell would have something to say, the J.P. Morgan people would have something to say about how good things were.

And I thought, well, they know a lot more about this market than I do. I'm fairly new here and I really can't see why it's going up. But then when they say it can't go down, or if it does go down today, it'll go back tomorrow, You think, well, they really are like God. They know it all, and it must be the way it's going because they say so.

As the market floundered, financial leaders were as optimistic as ever. More so. Just five days before the crash, Thomas Lamont, acting head of the highly conservative Morgan Bank, wrote a letter to President Hoover.

The future appears brilliant. Our securities are the most desirable in the world. Charles Mitchell assured nervous investors that things have never been better. Practically every business leader in America and banker right around the time of 1929 saying how wonderful things were and the economy had only one way to go and that was up. Unfortunately, he didn't have a crystal ball.

To predict the future. There's an old saying on Wall Street that the two most important emotions are fear and greed. And you go from fear to greed in about a fraction of a second.

So you're very, very greedy. And you say to yourself, I want to make more. And then the market goes down ten points and you get frightened. I want to keep what I have, so you sell everything. And that's how you have a panic.

So you have a panic on the upside, people rushing in to get in before the train takes off, and a panic on the downside, trying to get off the train before disaster hits. Monday, October 21st. Hoover, along with the political and financial leaders of the country, arrives in Dearborn, Michigan, to celebrate the 50th anniversary of Edison's invention of the light bulb.

The host is Henry Ford. The country is reminded that in 50 short years, men like Ford, Duran, and Ford and Edison had transformed America from a third-rate power into the industrial giant of the world and while they celebrated their world was beginning to fall apart There came a Wednesday, October 23rd, when the market was a little shaky, weak. And whether this caused some spread of pessimism, one doesn't know. led a lot of people to think they should get out and so on Thursday October the 24th the first Black Thursday the market beginning in the morning took a terrific tumble The market opened in an absolutely free fall, and some people couldn't even get any bids for their shares, and it was wild panic.

And an ugly crowd gathered outside the stock exchange, and it was described as making weird and threatening noises. It was indeed one of the worst days that had ever been seen down there. There was a glimmer of hope on Black Thursday. Directly across from the New York Stock Exchange was a low, stately building, the House of Morgan. Twenty-two years earlier, J.

Pierpont Morgan had stopped the panic of... 1907, October 24th, high noon. All eyes were now on acting head Thomas W. Lamont.

Tom Lamont called a number of the other bankers like Charles Mitchell of the National City Bank and People from the Bankers Trust and the Jay Albert Wiggin of the Chase Bank and so forth. There were about a half a dozen of them there. And they were gathered together to really discuss what they could do to stem this tremendous onslaught of selling stocks on the stock exchange that was taking place.

About 1230, there was an announcement that this group of bankers would make available a very substantial sum to ease the credit stringency and support the market. And right after that, Dick Whitney made his famous walk across the floor of the New York Stock Exchange. Richard Whitney, vice president of the exchange, was chosen by the bankers to be their representative.

At 1.30 in the afternoon, at the height of the panic, he strolled across the floor and in a loud, clear voice, ordered 10,000 shares of U.S. Steel at a price considerably higher than the last bid. He then went from post to post, shouting buy orders for key stocks.

Stood up on one of the seats at the post, and he said, I give it 45 for 50,000 standard oil. And everybody started to pull, oh, the crash is over. If Morgan's putting his money in, maybe the crash is over.

And sure enough, there seemed to be evidence that the bankers had moved in to end the panic. And they did end it for that day. The market stabilized and even went up.

The New York Times said that thanks to the formation of this bankers pool, most observers felt that the panic and the great sell-off was over. And most people did feel that way. Tom Lamont felt that way.

But Monday was not good. Apparently people had thought about things over the weekend, over Sunday, and decided maybe they might be safer to get out. real crash, which was on Tuesday, when the market went down and down and down without seeming limit. October 29th. Morgan's bankers could no longer stem the tide.

It was like trying to stop Niagara Falls. Everyone wanted to sell. AT&T down 50%.

RCA wants $110 a share. Couldn't find buyers at 26. Blue Ridge 100 plunged to $3 and still no buyers. On the floor, they had never seen anything like it.

And it was just like a nightmare, and I couldn't believe what was going on. In those days, every buy order was on a black pad, and every sell order was on a red pad. saw was members running around with a fistful of red orders just like chickens with their head cut off they didn't know which way to run they were panicking screaming everybody was bumping into everybody else Don't remind them.

Anyhow, this is what happened, and I tell you, and I'm supposed to answer everybody yelling at me. I said, what am I supposed to do? I mean, nobody knew what the hell to do.

William Durant, the bull of the bulls, now tried single-handedly to support the market. The further it plunged, the more of his millions he poured into it. He became truly convinced that he was omnipotent.

He thought that nothing could really unseat him. It was unfortunate. The forces were too great.

There was no one man that could have been so powerful to control the market. There were some people, however, whose investment strategies made money. On October 29th, Jesse Livermore's wife, hearing of the crash, ordered the servants to move all the furniture out of their mansion into a small cottage on the estate.

So when Mr. Livermore got home that night, he walked into a totally vacant house. When she told him that she had affected the move because... She was sure that they had lost all their money. He told her that he had made more money that day than he had ever made before. For most others, it was all over.

In brokers offices across the country, the small investors, the tailors, the grocers, the secretaries, stared at the moving ticker in numb silence. Hope of an easy retirement, the new home, their children's education, everything was gone. My father was ready to kill himself. So in the morning of the crash, he got a call and it was Max Gordon and... Max Gordon says, Groucho.

My father said, What? And Gordon said, Groucho, the jig is up. There were all sorts of rumors, and you'd see people going down the street looking up to see if they could catch somebody jumping out the window. Now, it turned out there weren't as many people jumped out the window as they reported, but some did. and others committed suicide otherwise 500 miles from wall street in the atlantic the luxury liner the berengaria was heading home from michael mehan's brokerage office word spread through the ship the bottoms fallen out of the market men came running out of their turkish baths and towels card games ended abruptly everyone tried to jam into the tiny office yelling sell at market They had left England wealthy men.

They docked in New York without a penny. There's nothing unique about this. It is something which happens every 20 or 30 years because that is about the length of the financial memory.

It's about... length of time that it requires for one new for a new set of suckers if you will a new set of people capable of wonderful self delusion to come in and imagine that they have a new and wonderful fix on the future In the 1930s, Charles Mitchell was hounded by Senate committees and the IRS. The crash had left him $12 million in debt.

This house was taken over, of course, and things changed. And I began to know what the real world was all about. It was about time. I was 19 years old.

Mitchell made a remarkable comeback. He paid off his debts and died in 1955, a highly respected figure on Wall Street. In 1936, William Durant filed for bankruptcy.

His only... assets which he valued at 250 dollars were the clothes on his back in the late 30s the founder of general motors tried his hand at everything from running a bowling alley to selling a cure for dandruff he died in 1947 still talking about making a comeback Herbert Hoover spent much of the early 1930s fishing. He explained in a speech that fishing is a constant reminder of humility and of human frailty. For all men are equal, before fishes.

The game on Wall Street had changed a great deal for Livermore. and the SEC was becoming a powerful factor and the rules were changed. He couldn't operate freely, buy and sell, the way he had in the past. And he couldn't adapt to the new regulations. So in a sense, his playing with the market was over.

And I think a great deal of his interest in life was over at that point. The game was gone. In 1940, the day before Thanksgiving, a photographer snapped this photograph of an old and very tired Jesse Livermore.

Several hours later, Livermore would go into a men's washroom and put a bullet through his head. At the end of 1929, as they celebrated New Year's Eve, all that lay in the future. Nobody knew that the Great Depression was coming. Unemployment, bread lines, bank failures. This was unimaginable.

But the bubble had burst. Gone was that innocent optimism, the confidence, the illusion of wealth without work. One era had ended.

They toasted the coming of the 30s. But somewhere, deep down, they knew.

Transcript for:The 1929 Stock Market Crash Analysis

Transcript for:
The 1929 Stock Market Crash Analysis