Today, October 24, is the 84th anniversary of “Black Thursday,” the great stock market crash of 1929. (Today is also a Thursday, incidentally–1929 and 2013 are calendrically identical). But if you follow “today in history” mentions, you may be confused come Tuesday, the 29th, when you hear that that day is also the 84th anniversary of the great stock market crash of 1929. The reason for this is simple, but often obscured in history: there were two separate crashes. This article is the story of the first one.
To a certain extent, even claiming there were only two crashes is erroneous. The “stock market crash of 1929” really began in March of that year, when the Dow Jones Industrial Average, after nearly a decade of steady gains, had a sudden terrible day of inexplicable selling. A few economists and market watchers had warned that the stock market was abnormally high and that the boom times of the Roaring 20s couldn’t continue, but few listened. In September, the market achieved its peak. It closed at 381.17 on September 3. Then the market roller-coastered for the next few weeks, until the big crash on Thursday, October 24.
The proximate cause of the sell-off was the sudden collapse of the London Stock Exchange. Speculators in Europe were beginning to realize that prices were too high and production–especially of steel and other needed industrial goods–was becoming sluggish. American investors tried to extend the party by a couple of weeks, but at the opening bell on October 24, brokers started selling. The market lost 11% of its value almost immediately.
Herbert Hoover, President during the crash, ran for office in 1928 on a “prosperity” platform. Rather ironic, considering.
Let’s put that in perspective. Today, October 24, 2013, the DJIA closed at 15,509.21. For there to be an 11% drop in the whole market, the Dow would have to collapse over 1,700 points almost immediately. Even in the collapse that began the Great Recession in October 2008, the market only lost 7%. We’re talking absolutely catastrophic losses.
Wall Street responded to try to staunch the bleeding. Before the day was over a group of financial wizards, including the heads of Morgan Bank and Chase National Bank, met and agreed to pool considerable funds to prop up the market by buying a bunch of blue chip stocks at above-market prices. This had worked during the financial panic of 1907 and might just work again. It did work–for a time. The market recovered, and “Black Thursday” ended with only a 6 point net decline for the day. This was enough to avert financial disaster.
Unfortunately it was only temporary. Newspaper coverage of the narrow escape on Black Thursday, which circulated over the weekend, started to gnaw away at investors’ confidence. It would be a few more days before the real disaster struck–the second of the two crashes that plunged the world into the Great Depression.
I’ll cover that second part of the story next Tuesday, the anniversary of the second crash.