Thursday the 24th and Tuesday the 29th of October, 1929, have been nicknamed “Black Thursday” and “Black Tuesday” respectively. The United States stock market grew tremendously in the 1920s and reached its peak in August 1929, when prices started to decline while speculation increased. October 24th, also known as “Black Thursday”, was the first day of the panic when 12,894,650 shares were traded. In result of this, banks and investment companies bought large blocks of stocks to branch the panic. Later to follow, “Black Tuesday” is the day the stock market crashed, 16 million shares were traded and prices crumbled. The causes of the stock market crash were cited to be the expansion of the stock market in the 1920's, speculation and overpricing. The stock market crash of 1929 began a 10-year economic depression (Wall Street Crash of 1929). From its high of 386.10 in September of 1929 to a low of 40.60 om July 29th, 1932, the stock market had lost a total of 89 percent. (Lancaster).
“Black Thursday” and “Black Tuesday” are major events that occurred within the history of the stock market. The expansion of the stock market during the prosperous 1920's was a proposed cause to the crash of the stock market. On September 3, 1929, the Dow Jones Industrial Average reached a high of 381.2. By the end of the market day on “Black Thursday,” the market was at 299.5. This was a 21 percent decrease from the high. On “Black Thursday,” the market fell 33 points, which was a drop of 9 percent. By November 13, 1929, the stock market had fallen to 199. At the finish of the crash in 1932, stocks had lost approximately 90 percent of what they were worth. (Black Tuesday). “Black Thursday” is known as the start of the stock market crash from 1929-1932, however, the events leading to the crash started before that date.
“To summarize: There was little hint of a severe weakness in the real economy in the months prior to October 1929. There is a great deal of evidence that in 1929 stock prices were not out of line with the
real economics of the firms that had issued the stock. Leading economists were betting that common
stocks in the fall of 1929 were a good buy. Conventional financial reports of corporations gave cause for optimism relative to the 1929 earnings of corporations. Price-earnings ratios, dividend amounts and changes in dividends, and earnings and changes in earnings all gave cause for stock price optimism.” (Bierman).
Many arguments have been made to identify the exact cause of the stock market crash of 1929. One of the main proposed arguments was the attempt of the important people and media to stop market speculators. A second possible cause was the great expansion of investment firms and the amount of margin buying. This fed the purchase of public utility stocks and increased their prices. Public utilities, utility holding companies and investment firms were highly divided using debt and preferred stock. These factors are suspected to have caused the crash. In October 1929, utility stocks fell drastically. After the prices in utilities declined, margin buyers had to sell at the time when their was a panic selling of all stocks. (Bierman). “Black Thursday” and “Black Tuesday” are major events that occurred within the history of the stock market. The expansion of the stock market during the prosperous 1920's was a proposed cause to the crash of the stock market.
The stock market crash of “Black Tuesday” and “Black Thursday” contributed to the depression of the 1930's. There is some evidence that speculation caused the stock market crash. Once the media said something enough, a large proportion of the public would believe it. The Federal Reserve Board and the United States Senate, among others, felt the market price of equity securities had increased too much. This proposition was reinforced by the media and statements by government officials. It was not obvious that the market was to high. The activities of the Federal Reserve cannot be associated with the October stock market crash and business productivity was steady with few anticipations of a depression approaching. (Bierman).
“In 1930, the Federal Reserve Bulletin reported production in 1920 at an index of 87. The index
went down to 67 in 1921, then climbed steadily (except for 1924) until it reached 125 in 1929. This is an annual growth rate in production of 3.1%. During the period commodity prices actually decreased. The production record for the ten-year period was exceptionally good.” (Bierman).
The Smoot-Hawley Tariff Activities, passed in hopes to protect American jobs and farmers from foreign competition, did not affect the October 1929 market. Short sellings were not large enough to move the whole market, therefore, major decade to decade stock market movements arise from assessment of fundamentals. This is evident in October 1929 when they changed greatly. (Bierman). The stock market crash of “Black Tuesday” and “Black Thursday” contributed to the depression of the 1930's. Speculation was a proposed cause to the stock market crash in October 1929.
“Black Thursday” and “Black Tuesday” are major events that occurred within the history of the stock market. Economic indicators indicated that stocks were overpriced in 1929. From 1925 to the third quarter of 1929, stocks increased in price by 120 percent in four years, which was an annual increase of 21.8 percent. This was to be expected during the prosperous decade of the 1920's and to continue. The stock market lost 90 percent of its value during the three year crash, indicating the market was overvalued in 1929. John Kenneth Galbraith states that there was a speculative change and that the stock market crash was able to be predicted.
"Early in 1928, the nature of the boom changed. The mass escape into make-believe, so much a part of the true speculative orgy, started in earnest." (Galbraith.)
The increase in stock prices leading to October 1929 were also driven by knowledgable investors who were buying and selling stocks in September and October of 1929. Leading economists are not able to predict the decline in the stock market of 1929. The nation's total income rose from 1921 to 1923 by 10.5 perfect per year and from 1923 to 1929 it rose 3.4 perfect per year. For that period, wholesale prices decreased by 0.9 percent per year. This was a result from the stable growth in money during the Progressive Era of the 1920's. “Black Thursday” and “Black Tuesday” are major events that occurred within the history of the stock market. Indication that stocks were overpriced was an underlying cause to the stock market crash in 1929. (Bierman).
Thursday the 24th and Tuesday the 29th of October, 1929, have been nicknamed “Black Thursday” and “Black Tuesday” respectively. The United States stock market grew tremendously in the 1920s and reached its peak in August 1929, when prices started to decline while speculation increased. The causes of the stock market crash were cited to be the expansion of the stock market in the 1920's, speculation and overpricing. The stock market crash of 1929 began a 10-year economic depression (Wall Street Crash of 1929). The value of the stocks of all public utilities declined by 5.1 billion. Public utility stocks appear to be a very probable cause for the start of the stock market crash. The sell of utility stocks weakened prices and established “margin selling” and withdrawing of capitol money. To follow this was “Black Thursday” and “Black Tuesday.” (Bierman).
Works Cited
Bierman, Harold. “The 1929 Stock Market Crash.” The Economic History Association. 5 Feb. 2005. 22 May. 2011. http://eh.net/encyclopedia/article/Bierman.crash.
“Black Tuesday.” NYSE Euronext. 2001. 22 May. 2011. http://www.nyse.com/about/history/time
Galbraith, John. “The 1929 Stock Market Crash.” The Economic History Association. 5 Feb. 2005. 22 May. 2011. http://eh.net/encyclopedia/article/Bierman.crash.
Lancaster, Richard. “Black Tuesday October 29th Revisited?” Gold-Eagle. 29 Oct. 2002. 22 May. 2011. http://www.gold-eagle.com/editorials_02/lancaster102102.html.
“Wall Street Crash of 1929.” Britannica Concise Encyclopedia. 2011. 22 May. 2011. http://www.answers.com/topic/black-tuesday.
