The 1929 Stock Market Crash Caught Nearly Everyone Off Guard. Are We
The Brooklyn Daily Eagle headline on “Black Thursday,” Oct. 24, 1929, proclaims, “Wall St. In Panic As Stocks Crash.”
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The supreme authorities from Chase National Bank, Harvard University, and Barron’s were as dumbfounded as everybody else.
Chase’s chairman and Harvard’s treasurer were among the market experts enlisted by Barron’s to judge its 1927 write-in contest that asked, “How would you invest $100,000 for a business man?” From 16 finalists, whittled down by Barron’s staffers from hundreds mailed in by market pros and amateurs around the world, the judges awarded the $1,000 first prize to Hazel Freeman.
In her first year with investment firm Shaw, Loomis & Sayles, Freeman chose a strategy that “falls somewhere between the two extremes of traditional conservatism,” she wrote Oct. 24, 1927, “and reckless speculation.” It put 70% in stocks, the largest portion in blue-chips like New York Central Railroad and
AT&T
,
and 30% in short-term bonds.
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“May he live long and prosper!” Freeman wrote, and the businessman did prosper, for a while. Follow-up articles showed Freeman’s model portfolio gained more than 25% the first year and, by 1929, the $100,000 (about $1.5 million today) had doubled.
There were no follow-up articles in 1930; the businessman was on his own. The Great Crash that began Oct. 24, 1929, demolished every investing strategy that didn’t include stuffing cash into mattresses. The doyens of the market knew no better than the man in the street.
Like watching a horror movie, looking back at the months and years before the crash instills an urge to scream, “Look out! Don’t you see what’s coming for you?” Dazzled by a skyrocketing stock market and consumer marvels introduced seemingly daily, investors—like hapless slasher-flick teens—never saw the killer approaching.
The Roaring ’20s come to mind with the recent Federal Reserve report showing America’s richest 1% now own more wealth than the entire middle class. Economic inequality is at its highest since that decade—and some, including Jesse Colombo at the…
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