One of the nice things about being a historian is that you get to play God. You know what the future holds, while the people you are studying don’t.
Consider Tuesday, September 3, 80 years ago today. It was a sunny and very hot day in New York after a very hot summer. As people headed back to work after the Labor Day weekend, there were no major news developments, unsurprisingly after a holiday, but four people had drowned at New York beaches over the weekend, seeking relief from the heat.
The stock market closed mixed that day, with big issues rising as they had been most of the summer. The Dow Jones Industrial Average, heavy with big issues, closed that day at 381.17. It was a new record high. But there had been many new records that summer, so it wasn’t big news. Indeed, the Times reported that brokers’ loans—which had financed so much of the speculation that had pushed the market ever higher—had increased markedly in August, reaching more than $7 billion for the first time, but it also noted that “the speculative community seems disposed to disregard record-breaking loan figures as being of purely academic interest.”
It wasn’t. No one knew it at the time, of course, but it would be 25 years before the Dow was that high again. The next day, the market drifted lower, and on September 5, Roger Babson, a bearish analyst of no great note, gave a lunch talk in Wellesley, Massachusetts, saying, “I repeat what I said at this time last year and the year before, that sooner or later a crash is coming.” Obviously no one had paid him the slightest attention in 1927 and 1928. But when a report of the talk now crossed the broad tape at 2:00 p.m., the market instantly nose-dived, with major issues falling 6 to 10 points and more by the close at 3 o’clock. Volume in the last hour of trading was a fantastic 2 million shares. The mood on Wall Street had changed in an instant, as it so often does. The sky had been the limit before, and greed the motivating emotion; now fear began to creep in like a miasma, and the market dumped lower and lower until the end of October, when the bottom fell out.
But that, of course, was just the beginning. For three and a half agonizing years, the American economy would spiral down and down into the abyss of the Great Depression, the Dow reaching as low as 41.22, down almost 90 percent. Only when a new president told the American people that fear, “nameless, unreasoning, unjustified terror,” was the enemy now, did the mood shift again and recovery begin.
But those people who made their way home in the stifling subways on the evening of Tuesday, September 3, 1929, knew only that the Dow had reached yet another record high. How much further up could it go? many of them must have wondered.