1929 Crash Today the market very nearly tanked as we all know. A very similar thing happened in 1929 and was a prelude to the big crash. Folks if you're still in the market, today was your warning signal. Time to get out.

The summer of 1929 was not too bad. It hearkened somewhat of the good old days of optimism. And even though there still was an air of nervousness, the market appeared to be stable. It was on September 3, right after the holiday, that a bear market became firmly established. The roller coaster was on its final descent.

Panic. It is a word that describes a highly intense, contagious fear amongst a large number of people. It is a phenomenon which social psychologists are fond of studying, yet at the same time they themselves are just as prone to it as the rest of us are. Panic is far more serious than a frenzy, and it is hard to describe without reference. In the crash of 1987, it may be safe to say it was a day of frenzied selling, and arguably far short of true panic. One week in October 1929, there was a true panic, and many rich people became poor people in one single day.

It began on Thursday, October 24, 1929. 12,894,650 shares changed hands on the New York Stock Exchange-a record. To put this number in perspective, let us go back a bit to March 12, 1928 when there was at that time a record set for trading activity. On that day, a total of 3,875,910 shares were traded. As you can see, Wall Street was a very, very busy place, as were markets world-wide. A big problem not mentioned so far in all this was communication.

The ticker tape machine had gone through great amounts of perfections since its early applications in the 1870s-80s by Edison and others. Even at telegraphic speed, the volume was having an effect on time. Issues were behind as much as one hour to an hour and a half on the tape. Phones were just busy signals on hooks. It was causing crowds to gather outside of the NYSE trying to get in the communication. Police had to be called to control the strangest of riot masses; the investors of business. It is not yet noon.

The habit of lunch eased the panic somewhat and New York paused for a breath. There were rumblings of bargain grabbing to come in the afternoon, so maybe something could be salvaged. And it did comeback to regain much of the losses. For example, a stock like Montgomery-Ward opened at 83 and dropped to 50 and recovered to 74. This was typical for the big name companies. On Friday, the mixture of margin call bargains combined with sells that were waiting from the late tickers on Thursday led to a bit of a gain. The trading was about 6 million shares. There was a short session on Saturday which brought everything back to the level of Thursday.

The weekend was indeed welcome relief. It gave investors a chance to sort out their portfolios and plan for what might be a rough week. If we go back to our 100 shares of Red Wagon shares is worth about $13500-that's better than $9800 we were faced with before noon on Thursday the 24th! I think we wouldn't mind just sitting. Don't think I want to buy anymore right now. Our broker has called us and asked if we want to sell or put up the margin. Well we paid $1500 for the thing, why not cover the margin with $2500? It keeps our investment viable. We'll raise the cash somehow.

Others though had cleverly planned for the crash and kept their money out and were ready to pick up some real bargains. They got set up for even worse ruin. On Monday, October 28, 1929 the volume was huge-over 9,250,000 shares traded. The losses were great as well. But unlike Thursday, there was no dramatic recovery; it was the prelude to Black Tuesday. The most infamous day in Wall Street history.

There is a reckoning that occurs every so often in world history. It is a time when debts are paid, when wars are fought, when disease ravages and passes through a land, when the corn does not grow like it used to, or when the forces of nature itself delivers a brief catastrophic blow. On Black Tuesday, the reckoning of several years of boom, which was based in large part on credit, came due.

-- John Ainsworth (ainsje@cstone.net), September 28, 1999

Answers

The market didn't really come very close to tanking today, though I agree this should be a warning and a wakeup call. There is a day of reckoning coming soon but it's not quite here yet. This whole bloated bubble of speculation based on credit is just about to burst...but not just yet.

-- cody varian (cody@y2ksurvive.com), September 28, 1999.

I have to agree with Cody. Not yet, but coming soon to a market near you.

It may bounce back and forth with downward tilt, and after people stop listening to those who have been crying wolf, it will be the real wolf that shows up and eats their lunch.

A bear market tries to take as many down with it as possible. Right now too many are looking at these dips as buying opportunities. Little do they know that they are the dips in the market.

Someone once told me that when the stupid people are making money (what he meant were people who had no business in the markets,) you are near, or at the top. This was true when easy money was being made in real estate in the 80's and it applies to the stock market of the last few years. The people who don't know what they are doing, will most likely have their heads handed to them.

So much of the money in the market today is the sheeple's retirement money, and retirement funds should not be 100% exposed to stocks (depending on the age of the investor,) but the gains have been so good, a lot of people are overexposed with funds that should not have been put at risk. They will learn the hard way, unfortunately.

-- Bill (bill@tinfoil.com), September 28, 1999.

Unless something huge happens, one of our cities get nuked for example, I dont believe that we will ever see the PANIC that was present during the 29' sell off. Why?

Information is instant today. In the 29' selloff, panic was largly due to the unknown effect of the correction. "Issues were behind as much as one hour to an hour and a half on the tape." This as much as anything freaked out the stockholders. And besides, the breakers that are currently in place will give breather room, unlike 29'. ww

-- wayne witcher (wwitcher@mvtel.net), September 28, 1999.

Wayne,

Does that mean that bad news also travels as fast :-) ?

Those who do not learn from history are doomed to repeat it ....

-- merville (merville@globalnet.co.uk), September 28, 1999.

It has also been said that we learn from our parents mistakes, but not from our grandparents mistakes. Many times those mistakes we are doomed to repeat, skip a generation or two. OOOPPPPS, that makes 1929 possible to repeat once again I guess.

Famous last words in 1929, we are too advanced to have a crash. These are the best of times, and will last forever. Sounds familiar doesn't it?

-- already ran out the exit (bill@tinfoil.com), September 28, 1999.

The Tape=The Net?

Today I noticed that the net was running behind alot! Things took a long time to load even from servers that are not popular. The net can "back-up" just like the tape did...

News travels at lightning speed, then dries up...

"Got Gold"tm

Things will get worse before they get better....

-- Helium (Heliumavid@yahoo.com), September 28, 1999.

It still isnt't "instant". All quotes are delayed 15 or 20 minutes and that time is still enough to "freak out" people

-- (..@....), September 28, 1999.

One thing that was rather interesting this morning . . . normally, CNN shows DOW and NASDAQ gains and losses as an ongoing ticker. This morning, however, they were just showing levels -- not gains and losses. Attempting to manipulate perception? Instant information given just the way people need to see it? It is all about managing perceptions and expectations...until even perceptions cannot cover up the emergant truth.

Dave

-- Dave (dave@nospam.pls), September 28, 1999.

The market of today is a perfect example of the Kondratieff Cycle. It has been about seventy years since the last real crash. That crash was brought about in large part by credit over use. The current market is driven by the similar usage of credit. It is not credible to believe that this prosperity is permanent given the current set of circumstances. There are several good articles on the internet about Kondratieff. From the readings I have come to believe that this mess can only be fixed when the over use and misuse of credit has been repudiated. The question of a market crash is not if but when.

-- rcw (cwiowa@uiowa.edu), September 28, 1999.

They may not have time to panic but fear always wins over greed!

-- 298799 (ron_wiebe@bc.sympatico.ca), September 28, 1999.

Gawd, I just hope that those day traders have enough decency to just jump out windows rather than blasting away at everyone else like that one dude the other month!

-- King of Spain (madrid@aol.cum), September 28, 1999.

Consumer confidence is wavering, and when that happens corporate America wakes up and listens. I personally believe that there are people who are just now becoming GIs and secretly preparing. There will be a big upswing in the purchase of Y2K consumable goods, and people will be laying out the credit cards like you wouldn't believe for those products, because THEY DO NOT HAVE CASH to purchase these items! Cars, boats, houses, luxury items for the middle class are not in their vocabulary. Christmas sales will be very bleak but hot ticket items will be survival gear (sleeping bags, blankets, warm weather clothing, etc). Many items will be in short supply like propane cylinders, camping cook stoves, etc. I am predicting this because I believe it to be so.

-- no kidding (nokidding@nokiddinggg.com), September 28, 1999.

Anyone who stays in this market are insane. Life always repeats itself. There is always a time to pay the pipper and I think the time is near. Greed has been what is driving this market. People who only care about their on selves. Most of the people in this country are making minimin wage or a little above and who saids the ecomony is great, I want to know just who is it booming for. Poeple seem not to see beyond their noises. It's been bad for most people in this country for years. Check out the stock prices on dicount places.

-- ET (bnevile@zebra.net), September 29, 1999.

"The fate of the world economy is now totally dependent on the growth of the U.S. economy, which is dependent on the stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings..." Former Fed Chairman Paul Volcker, Friday, May 21, 1999

"Stock prices have reached what looks like a permanent high plateau... I expect to see the stock market a good deal higher than it is today within a few months" Irving Fisher, Professor of Economics, Yale University, Oct 15, 1929

-- (1929@lloveragain.com), September 29, 1999.

The economy is cyclical, people. Good times, noodle salad!

-- mil (millenium@yahoo.com), September 29, 1999.