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Black Tuesday October 29, 1929
I have to admit I do not know as much about investing as many of my friends. I do know that October 29, 1929 has earned the distinction of being the start of the Great Depression.
Technically October 29th was not the actual beginning of the decline of the stock market but it became the date that most people in America knew we had a problem. It became known as Black Tuesday.
The 1920’s were full of enthusiasm and on September 3, 1929 the NY Stock Exchange had a record close of 381.2 on September 3, 1929. There were signs leading up to October 29 that the market was headed in the wrong direction. On October 28, 1929 the market opened at 301.22 and closed at 260.64 which is a loss of over 13%. Things went south quickly on Tuesday October 29th when the market went from 260.64 to 230.07 another loss of 12%. In two days the market lost 25% of its total value.
The slide continued for three years when the market hit 41.22 on July 8, 1932 that was the low point. The NYSE had lost 90 percent of its value since its high on September 3, 1929. In fact, it didn’t reach that high again for 25 years, until November 23, 1954.
For many of our grandparents or even parents that stigmatized any faith they had in investing. To them cash was the new king. People were stunned to find out that banks had used their deposits to invest in the stock market. They rushed to take their money out of the bank. These bank “runs” forced even good banks out of business.
Losses from the stock market crash helped create the Great Depression. It resulted in half of all US banks failing, unemployment rising to 25%, and housing values plummeting 30%.
I hope that this country never sees an extended crash like the Great Depression but people have a tendency to not learn from history but to repeat it.