Back to 1920s Events and News
The stock market boom of the 1920s,
with further irrational speculation in 1928, fueled the stock market crash of
1929. A widespread idea that anyone could become rich through the stock
market led numerous ordinary Americans into the market. Prices of stocks
began rising beyond the real worth of the company in earning and assets.
Yet people continued to pay extreme prices, believing that a profit could be
earned, as stock prices persistently rose. Moreover investors bought
shares on margin, without using other assets as collateral. This scenario
was based on investor confidence, and is known as classic bubble scheme.
In
early 1928 the Dow Jones Industrial Average was 191; by September 3 of the
following year, the Dow Jones reached an all-time high of 381. In 1928 the
price of stock in the Radio Corporation of America, multiplied by nearly five
times, with other stocks doubling and tripling. After the market peak in September,
prices began sliding as professional market veterans sought to unload. On
October 24, 1929 investors began to sell as 12,894,650 shares were exchanged,
setting off further tremors to other investors. Stock prices bottomed out
with General Electric falling from $400 to $283 a share and U.S. Steel dropping
from 261 3/4 to 193 1/2. Bankers pooled money to stabilize the situation
and within a few minutes, $20 to $30 million was spent leading to a recovery.
This day would become known as Black Thursday, along with the Black Monday to
come and the devastating Black Tuesday. On October 28 losses were more
severe although trading was lighter than Thursday. General Electric ended
losing $48, Westinghouse down $34, and U.S. Steel sliding $18. Yet on this
day there was no recovery and market support was dashed against the overwhelming
desire to sell. As soon as the market opened the next day, massive selling
occurred with a volume of 16,410,030 shares. Entire blocks of stocks were
offered, without any buyers. The Times Industrial Average fell $43,
canceling the entire gain of the last year. Stocks lost approximately $10
to $15 billion in value that Black Tuesday. Though there was a small
rebound in prices for a few days, but the collapse continued to November.
By November 13 the Dow Jones Industrial Average had fallen to 198.7 and losses
mounted to around $30 billion. Countless Americans had their savings wiped
out in one swoop and many wealthy families lost nearly everything they owned.
-Chris Chan
Copyright 1999 by Chris Chan, Greg Ryslik, and Haig Altunian