Walter Thornton Background
The investors of 1929 were Americans of all backgrounds, each of whom sought to secure a financial future in a world where the value of the dollar was newly put into question. Millions of first-time investors flooded the market prior to the October crash, which was a leading factor contributing to the crash. The impact of the crash was felt by investors and non-investors alike (though the popular story about investors jumping out of windows is untrue), with many losing their jobs and being unable to afford necessities. Some investors, however, turned a profit.
The Investors of 1929
- The booming stock market of the late 1920s America drew millions of first-time investors. These investors tended to buy stocks on margins, meaning they would borrow money from a broker to buy more stock.
- Stocks bought on margin at the time required 10-20 percent down while the broker floated the rest, and were a good option when the market was going up. If the market went down, however, the broker could make a "margin call" and immediately demand the difference from the investor.
- Others invested their full life savings, leaving them with no financial cushion whatsoever.
- The rampant belief that fortunes could be made on the stock market and the ensuing flood of new investors drove the price of stocks up far more than they were worth, thus precipitating the crash itself. In other words, the sheer number of new investors and the amount they invested caused the market to collapse when the larger investors realized the values were so inflated.
- Virtually everyone in the U.S. wanted in to the stock market in early 1929 in part due to the large amount of media hype related to the personal fortunes being made by people from all backgrounds. Participants included chauffeurs and cooks and banking and industrial magnates. Companies also invested, and banks invested the money of their patrons (without the knowledge or consent of the patrons).
- "Nothing like the participation in the market that the nation experienced in the 1920s can be found in previous eras of history," writes Brian Domitrovic at Forbes.
- The frenzy for stocks was driven in part by Americans who saw, for the first time, the value of the dollar declining. An alternative was required to create a lasting investment in the future, and stocks appeared to offer that potential (prompting scenes of steady activity as shown below).
What Happened to Investors After the Crash
- On October 18, 1929, stocks went into a free fall, setting off an initial wave of panic selling. Those wanting to buy were quickly out-shouted by those wishing to sell as the days progressed. On October 24, called "Black Thursday", 12.9 million shares were traded in a frenzy of activity. On "Black Tuesday", October 29, 16 million shares were traded.
- Banks and other large investors attempted to buy up as much stock as they could during these mass sell-offs as smaller investors sold as quickly as they could to recoup whatever money remained.
- Contrary to popular belief, Black Tuesday did not lead to mass suicides (or even an increase in suicides) in New York. The ensuing Great Depression, however, did see an increase from 17 to 21.3 suicides per 100,000 deaths (between 1929-1932).
- The effect of the crash was felt across the country. Bob Aden remembers how his father had bought shares in General Motors stock while he was growing up on a farm in Nebraska. After the stock's value plummeted well below what Bob's father had paid for it, "There were slim pickings around the dinner table."
- Just as nearly everyone was an investor in the stock market, nearly everyone suffered from the fallout of its collapse. Millions of workers (particularly 67 percent of construction workers and 40 percent of factory workers) lost their jobs in the ensuing depression.
- In rural areas, the toll was felt outside of those who invested. There was higher unemployment, higher costs of goods, and a pronounced fear of the unknown.
- Farmers were forced to price their goods well below cost, and consumers were still unable to afford them.
- Some investors made a profit on the 1929 crash. Among the most famous is Jesse Livermore. He bought his first stock at 15 and continued playing the market through the bull market of 1901, making $3 million by 1908. Prior to the October crash, Livermore had a sense that the market was fading and sold a great deal of his stocks early — making $100 million when the crash itself happened as a result.