October the cruelest month for stocks

Way Back When

Market plunges: The Great Depression, which began 70 years ago, is but one of many autumn skids.

October 23, 1999|By Frederick N. Rasmussen | Frederick N. Rasmussen,SUN STAFF

You know, the only trouble with capitalism is capitalists; they're too damn greedy.

-- Herbert Hoover to author Mark Sullivan

As Wall Street concludes yet another wobbly week, it can't help but serve as a reminder to investors that historically October, not April, may be the cruelest month.

It is, after all, the 70th anniversary of the Great Crash of 1929, which presaged the Great Depression and successfully wiped away all traces of the unbounded boom and prosperity that followed the end of World War I.

For those not quite old enough to remember the really big one, the 554-point skid in 1997 and the 191-point plunge in 1989 are recent reminders of the vagaries of Wall Street.

However, the 508-point decline on Oct. 19, 1987, remains, proportionately, the U.S. stock market's steepest one-day drop ever.

"In a frenzy of panicked trading, it wiped out fortunes, blew apart multi-million-dollar merger deals, and washed away $500 billion in value in a tidal wave of trading. This kind of devastation hadn't been seen since Oct. 28 and 29, 1929, when the Dow Jones industrial average crashed more than 24 percent," reported The Sun in a 1997 anniversary story.

The 1929 blowout didn't come overnight, however.

The Florida land boom of 1926 was followed by a bull market in common stocks that began in earnest a year later. By 1928, stock prices had doubled, which caused President Hoover to worry about such speculative excesses.

Not only were businessmen and stockbrokers speculating, so were college students, Pullman porters, housewives, clergymen, cowboys, elevator operators, doormen, waiters and office workers.

"Just how many people were speculating in stocks during those wild years is unknown, but probably a million or so were buying on margin -- putting up only a fraction of the price of the stocks they bought -- and a million or two more were paying cash in full for their purchases," wrote Frederick Lewis Allen in "The Big Change 1900-1950."

Prices climaxed in September1929, when the market hit the dizzying heights of 216.

On Wednesday, Oct. 23, a tidal wave of liquidation swept through the stock exchange when prices began to tumble. Some six million shares changed hands, eliminating $4 billion on paper.

The next day the exchange opened to a landslide of sell orders, with some 12,894,650 shares traded. By noon, losses had soared to $9 billion, and the ticker didn't stop clattering out the dire results until 7: 08 p.m., four hours after the close of the exchange.

"Brokers wept and tore off their collars trying to keep abreast of selling orders; sight-seers jammed the Wall Street district, ogled the arrival of great bankers in their limousines and under the rumor of mass suicide gathered to watch an ordinary workman on a scaffolding in morbid expectation of his plunge," observed Dixon Wecter in "The Age of the Great Depression 1929-1941."

Tuesday, Oct. 29, known to history as "Black Tuesday," was the day that Wall Street really hemorrhaged, when 16,410,000 shares were bought and sold.

Lights burned late in Wall Street brokerage houses as clerks recorded a one-day record sell-off that would stand for decades.

" `Black Tuesday' pulled down a cloak of gloom over Wall Street. Traders abandoned hope that the frightful shake-out could be averted. For two more ghastly weeks stock prices continued to plummet freely down the same celestial voids through which they had recently and so wondrously ascended," David M. Kennedy wrote in "Freedom From Fear."

Julius Westheimer, Sun financial columnist, remembers the crash as if it were yesterday.

At the time, he was a 14-year-old board boy working after school and Saturdays for Westheimer & Co., the Redwood Street brokerage firm in which his father and uncles were partners.

It was a daily occurrence for the 50 or more men who gathered in the firm's boardroom to smoke pipes, cigars and cigarettes while watching the board as prices were chalked on by the board boy.

"I'd tear pieces of tape off the ticker and post the rapidly plunging prices on a board," Westheimer recalled the other day.

"They were watching their stocks plunge as tears streamed down their faces. It was a horror story. People were watching their life savings vanish, and it was something that totally was unexpected," he said.

"It really kicked off the Depression," said Westheimer, who recalled men in business suits and overcoats selling apples at the corner of Calvert and Redwood, and businessmen who still had jobsbringing lunches to work in order to save the 30 cents it would cost for a meal in the Southern Hotel cafeteria.

"If you had no money and lost your money, there was no way to get it. That's how desperate people were. Some even jumped off of buildings in Baltimore, they were so distraught," he said.

As grim reality of what had happened began sweeping the land, Americans turned to humor.

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