With the recent volatility in the stock market, I thought I would look at a bit
of the history. I was particularly interested to find out what actually happened
in 1929. For those of you who might be interested, this is my summary of events.
In 1929, the Dow Jones reached its peak of 381 on September 3. According to
several sources including this
one, it started the year, on January 2nd, at exactly 300. This coresponds
to an increase of 27% from the start of the year to September. The bubble is
even more pronounced though as the index hovered pretty much between 300 and
320 until the last week of June when it began its spectacular two month rise.
During the following month the market lost 17% of its value but after a brief
recovery, the ‘Crash’ as it has become known, began on Black Thursday when
a record 13 million shares were traded. The worst single day however was the
following "Black Tuesday". According to this New
York Times article of the time, the market lost $14 billion on that one
day – a 13%
drop. The NYT reported a total volume of just over 9 million shares were
traded on the day. However more up to date reports such as this
one and Gold
Eagle suggests a new record of 16 million were traded.
The world did not see a single day fall as big as this until October 1987
(what is it about October?) when the Dow
Jones Industrial Average slumped 22.6%. However while the 1987 decline
was short lived, recovering to its October peak of 2662 within two years, the
1929 crash continued for years. From its peak of 381, it fell to a low of 42
in 1932 – a fall of 89% – and did not recover its September 1929 high
until about 1957. I’m not an historian, and even less do I pretend to have
a command of financial history but these numbers are sobering. Before I continue
with the main discussion, here are some of the sources I used to gather this
information:
- The New York Times on the web
- Stockcharts.com
- US
Federal Reserve publications - The
Crash and its Aftermath by
Barrie A. Wigmore - Investopedia
- The Market Oracle
- Gold
Eagle (Including an interesting discussion on Louis
McFadden and the evils of the Federal Reserve system)