Black Tuesday – The Intelligent Collector Magazine

herbert-hoover-classic-ok-america-button — This “OK America!” button from Herbert Hoover’s 1932 re-election campaign sold for $2,500 at a September 2015 Heritage auction.

By Jim O’Neal

Herbert Hoover aspired to the presidency of the United States strictly for the opportunity to serve the public. When elected in 1928, he was universally recognized as the greatest living humanitarian. He helped organize the return of thousands of Americans stranded in Europe before the outbreak of World War I (taking no salary) and also directed the program for relief to millions of Belgians and French (after Germany invaded Belgium) as head of President Wilson’s Food Administration.

For several years after the war, he continued to serve without salary as Secretary of Commerce for presidents Warren Harding and Calvin Coolidge until he resigned to run for president in 1928. He won by a large margin and in his inauguration speech on March 4, 1929, he described the future of the country as being “bright with hope.”

Three and a half years later, Republican prosperity had vanished, beginning with the stock-market crash seven months after Hoover took office. Protesting veterans of the Bonus Army were camped out in sight of the Capitol and milling around the White House to display their frustration and bitterness.

Hoover was on a tour of the Midwest the day the stock market crashed. For seven rainy days, he plodded from town to town on his train, proclaiming prosperity to anyone willing to listen. He arrived home on Oct. 4, 1929, and at a press conference the next morning, he assured newsmen the country’s businesses stood on a solid foundation.

Days later, on Oct. 19, Black Tuesday, the stock market fell sharply, but the president earnestly believed this was only a tough patch, like the Panic of 1907. Like most people, he seems to have had little idea of how bad the worst would be. The plan he presented to Congress in December was totally unorthodox by calling on the federal government to save the day through a series of programs that included education reform, housing for the underprivileged, jobs in long-term construction, lower taxes and a balanced budget … while making government more effective and efficient.

To add to the gloom of 1929, the Executive Office burned to its walls on Christmas Eve as carolers serenaded. The destruction of the Executive Office was a better symbol for the Hoover presidency than the White House, since virtually all the programs failed and the country started a downward spiral that would continue until we had to gear up for the next world war.

In the summer of 1932, Franklin Delano Roosevelt was nominated by the Democratic National Committee in Chicago. On Aug. 11, Hoover formally accepted the Republican nomination that had been offered several months earlier. But he chose to bury himself in work for the balance of August and all of September. By then, the Democrats were in full stride and FDR became the president-elect.

However, the transfer of office from Republican to Democrat was chilly. At best, the feeling between the two men was of mutual contempt. The Hoovers declined to host the traditional March 3 dinner for the incoming president, and the Roosevelts had no intention of attending. Hoover was frustrated that FDR did not accept any of his advice and Roosevelt had grown weary of listening. (This would lead to changing the inauguration of March 4 to January 20, since it was too long to have a lame duck badgering the new guy.)

A small awkward tea ceremony was finally negotiated and that was that. A quiet, peaceful transfer of the most powerful political office in the world.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

The Roaring Twenties as depicted in Everett Shinn’s 1925 Curtain Call. This oil on canvas realized $119,500 at a May 2007 Heritage auction.

By Jim O’Neal

One man poisoned himself, his wife and their two young children. Another dropped dead in his stockbroker’s office. Still another (in North Carolina) went into his garage and shot himself. Both the rich and poor were affected.

Winston Churchill woke up in a New York hotel room to a loud commotion. “Under my very window, a gentleman cast himself 15 stories and was dashed to pieces.” Irving Berlin explained it this way: “I had all the money I wanted for the rest of my life. Then suddenly I didn’t!”

It was Black Tuesday, Oct. 29, 1929.

The “Roaring Twenties” conjures up Prohibition, gangsters, flappers and bizarre fads: flagpole sitting, dance marathons, talking movies, the Marx Brothers … and the greatest fad of all … playing the stock market.

Previously a rich man’s game, by the 1920s one million Americans owned 300 million shares of stock, much of it bought on margin. And why not? There were all these new things like radios, telephones, affordable cars and, especially, the ticker tape machine allowing individuals to buy and sell stocks almost instantly.

A person would have to be crazy to stick their money in a bank when you could make a small fortune buying “on the margin.” Calvin Coolidge said: “The business of America is business” and business was booming!

New technologies for refining oil allowed companies to produce more iron, steel, gas and chemicals. Then Treasury Secretary Andrew Mellon cut corporate taxes and previously marginal companies had more money to spend. Many of them spent it buying stocks, driving the stock market even higher (and also boosting their profits).

During the summer of 1929, the stock market reached an all-time high with a record number of shares purchased. However, astute investors noticed a number of troubling warning signs. First was the ever-increasing number of shares bought on margin, a key indicator of increased leverage and a tell-tale sign of speculation versus investing. Second, only 400 of the 1,200 companies listed on the NYSE were actually increasing their revenues and profits fast enough to justify the higher stock prices. Lastly, “Stock Trusts,” pools of money by wealthy investors, could manipulate individual stocks by simply investing heavily in them.

The stock market was being rigged in plain sight, but only a few like business theorist Roger Babson was warning about an impending crash.

Throughout September and October, market volatility increased sharply and on Oct. 24, a near-crash occurred (Black Thursday) when there was a sharp, terrifying plunge. When the market opened, it went straight down and by mid-afternoon stocks had lost $11 billion. But brokers managed to stabilize it and it recovered 75 percent.

On Monday, there was another plunge as those who had survived decided to try and salvage what they had, despite many calls of reassurance. And on Tuesday, Oct. 29, the carnage really began.

The day started with thousands of people congregating on Wall Street, as if they needed to be present for some historic event. All of the major stocks began to crash.

Brokers were flooded with sell orders.

In two hours, eight million shares were sold. Then more margin calls were made and people began to literally fall into shock. By 3 p.m., after five hours of trading, the market closed. Sixteen million shares had been traded at an estimated loss of $15 billion.

Then stories of suicides began. Will Rogers wrote, “You had to stand in line to get a window to jump out of.” Then businesses began to die as well. First to go were the investment firms, followed by the companies who over-speculated on stocks, and then finally the banks.

Like a house of cards, the Roaring Twenties tumbled to an end and the country was entering the first phase of the Great Depression. It would continue for another 12 long years until we entered World War II.

Nothing like a nice little world war to get the economy humming again.

Tag: Black Tuesday

Transfer of Power Between Hoover, Roosevelt Tense but Peaceful

The Roaring Twenties were Outrageous, and Then … Black Tuesday