One year ago today:
[Note: Ending the recap of the 1929 Great Crash - the summary below describes Oct. 29, subsequently known as Black Tuesday.
Epilog: The market fluctuated violently for the next two weeks. For example, on Wednesday John D. Rockefeller, Sr. announced he was actively buying stocks; the Dow on Wed. and Thurs. was up 28.40 and up 15.04. After this the market was closed for two days to allow the overwhelmed Exchange facilities to catch up. When it reopened Monday, the plunge resumed with drops of 15.83 and 25.55 in the next two sessions. The 1929 low was hit on Nov. 13, at 198.69 on the Dow; this held almost a year until October, 1930, as covered in the blog. The fall panic was followed by a very strong rally into the following spring, now known as the sucker's rally - the high for the rally was reached on April 17, at 294.07, and the blog starts as this rally is wearing off in June.
The Sept. 3, 1929 Dow peak of 381.17 wasn't passed until Nov. 1954.
Black Tuesday's record volume of 16.410M shares traded stood until 1968.]
Market wrap: “Necessitous liquidation” resulted in further bad breaks in “the main body of stocks.” Wholesale margin calls were sent out overnight due to the extraordinary decline in Monday's session; this caused heavy early liquidation for those accounts “unable or unwilling” to add funds. The market ignored positive morning announcements on lower call rates and margin requirements. An avalanche of selling proceeded through the morning, leaving no stocks untouched, though the decline was again orderly; bankers were said placing bids to prevent “demoralization from overwhelming the market.” Ticker quotations again fell far behind. Bankers were reportedly urging affliliated interests to buy stocks at current levels. In addition to banking support, substantial buying was reported from investment trusts, utility operators, large individual investors, and odd-lot (small) investors. This support finally checked the urgent selling in early afternoon, and some good recoveries from the day's lows were scored by leading issues.
Volume Tuesday was 16.410M shares, breaking the record just set Thursday of 12.895M. Largest individual stock volume was GM at 971,300 shares. There were no new yearly highs and 551 new lows.
The bankers' group met early in the day and after the close. After the second meeting a spokesman announced the group had been and would continue to support the market; however, the group would not bid stocks up but step in to prevent “hysteria.” The spokesman also expressed optimism, saying public seemed to be coming back to its senses, and a considerable amount of “first class investment buying” was in the market Tuesday. R. Whitney, NYSE VP, said the Exchanges board of governors had met but decided no action was necessary.
Broad Street Gossip: Many stocks are down 50% or more. “All of which means that bargain days are near ... look over the list and you will find many good common stocks that are yielding 6% to 8% or more. ... And some of these stocks are earning 50% to 100% or more above dividend requirements.”
Baar, Cohen & Co.: “There is no question but that a preponderance of stocks are now quoted many, many points below even a conservative market valuation. We believe the time is not far distant when we will look back upon these prices as a golden opportunity to buy something for less than its true worth.”
A. Conway, State Superintendent of Insurance, recommended leading insurance cos. put a substantial amount of assets into leading stocks at current levels.
Many brokers report a good increase in odd-lot (small) buying for cash; seen as “bargain hunters” taking “long pull” positions.
The break in stocks over the past two months will probably go down as the “shortest and most drastic major bear movement on record.” Decline was 39%, about the same as in 1920 and 1907, but those took about a year. This slump differs from past ones in that many more individuals were ruined, though there “has been no institutional difficulty as yet.” There's no inflation in commodities or inventories, and industry is on a “sound basis with no real indications of a depression in prospect.” Slump was apparently caused by over-issuance of stocks, a moderate letdown in business starting several weeks ago, and bear operations; these caused a panic among the speculative public; no one can now guess if “liquidation will be completed in a matter of hours or days.” While industry is sound, the market slump may worsen the letdown. However, in the long run the decline should be beneficial by releasing funds from speculation to industry and foreign borrowers.
Heard on the street: “It was blue Monday with a vengeance. And then some.” “We are now convinced that some things were selling too high.”
“It is impossible to get a prediction on the market. All observers admit that one guess is as good as another under the prevailing circumstances.”
Economic news:
The Stock Exchange announced before the open that call rates had been cut from 6% to 5%.
The bankers' group issued a statement in the morning reassuring the financial community that “There is plenty of money and it will be loaned freely.” They also announced that leading New York banks would reduce margin requirements on loans to customers to 25% of closing quotations from the previous practice of 40%, and would only enforce the margin at the close, not during a session.
Rail freight loadings for the week ended Oct. 19 were 1.186M cars, up 6,503 from last week and up 22,375 from 1928.
US Steel and American Can each declared an extra $1 dividend, with American Can also raising the regular rate from $3 annually to $4.
US Steel Q3 earnings were $5.57 vs. $6.68 in Q2 and $3.31 in Q3 1928; first 9 months were $15.82 vs. $8.17 in 1928.
Allis-Chalmers expects 1929 earnings substantially ahead of 1928, though recent business is slightly behind that in the first half.
E. Reeser, Amer. Petroleum Inst. Pres., says believes Calif. producers who slashed crude prices 40%-50% two weeks ago will restore old schedule at once, and other producers won't cut prices to avoid disrupting the general industry price structure.
K. Kingsbury, Standard Oil of Calif. Pres., says knows nothing to account for extraordinary break in oil stock prices; on contrary, believes prospects for effective conservation (cutting production to match demand) are better now than ever.
Cotton exports for first 9 months were $546.3M vs $619.8M in 1928.
Other stuff:
Editorial: Recent news from Russia is disturbing. Until recently it was barely possible to excuse use of “officially organized terrorism for political reform” due to dire necessity, and as characteristic of major revolutions. But the revolution is now 10 years old and almost as bloody as ever. Opposition is coming largely from peasants previously successful at providing for themselves. Summary trials and executions on a large scale, as many as 50 a day, are being used to impose political and economic ideas that millions of Russians abhor; these actions are “almost cheerfully” reported by official communique. This kind of government offers nothing on which friendly relations with Washington can be built.
NY Gov. Roosevelt says next great political issue will be regulation of public utilities; says Democrats would have been blamed for stock market panic if in power, but Republicans have received little blame.
Movie: Harold Lloyd in his first talking film, Welcome Danger, plays the son of a famous detective investing an opium den in San Francisco's Chinatown.
Amusing observations:
“'Never sell America short,' remarked one trader. 'All of which is true and a good thing to remember,' remarked another trader. 'But some traders are now so bearish they would sell America, the Treasury, Bank of England, Europe, Brooklyn Bridge, and the Federal Reserve Board short if they could borrow them.'”
Comment from London, Berlin, and Paris called the market break “inevitable” or “as expected”; based on this, “great fortunes must have been made by foreigners on the short side.”
Tobacco companies considered promising - it was noted that many Wall Streeters who prefer not to smoke during business hours “have abandoned their policy and are consuming cigarettes rapidly.”
The Trader's Lament:
[Note: This actually appeared a couple of days later, but what the heck ...]
“They'd said: 'Your list is long and wide and also well diversified.'
Later: 'Margin! Send it quick! Your holdings look a little sick.'
O, boil me well in Standard Oil! I'd slipped from Anaconda's coil
when Purity touched fifty-five - down forty-four, O Man Alive! ...
They'd sold my Motors, sold my Copper; when Adolf Gobel came a cropper
they backed me up against the wall and pickled me in Alcohol. ...
Farewell to old AT&T and all I owned from A to Z
had vanished like the morning dew (they had to take my IOU).
I'm sick and tired of raids and marches; I've nothing now but fallen arches.
Alas, that this should come to pass - Garcon, turn on that Brooklyn Gas!”
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