Chapter 42

October 24, 1929, is known as Black Thursday in the future.

From the summer of 1919, the stock market had been steadily climbing until 1928 when it reached an unprecedented peak of 449 points. More and more Americans invested their lifelong savings into the stock market, and stock market tycoons emerged in large numbers. The stock market was experiencing a scorching hot summer.

Unfortunately, summer is here, can winter be far behind?

In June, seven prestigious universities in the United States, including Brown University, Columbia University, Cornell University, Harvard University, Princeton University, the University of Pennsylvania, and Yale University, jointly released an infamous statement: "The evaluations of millions of investors have influenced the remarkable market of the New York Stock Exchange. Their unanimous judgment indicates that current stock prices are not overvalued... Stock prices will reach and maintain a permanently high plateau."

By August, broker loans had reached 17 billion dollars, and the mad spectacle on Wall Street showed no signs of stopping. People naively believed that the market's prosperity had no end. However, all prosperity comes to an end; only risks are endless. And precisely because the risks were unknown, they were all the more terrifying.

In the first week of September, the market suddenly started to fluctuate wildly. Although the bulls temporarily held their ground in the battle, the clouds of market collapse silently loomed over Wall Street.

On September 5, a relatively unknown "statistician" named Babson delivered a speech at the National Business Conference in the United States: the crash would inevitably occur, and it would be difficult to contain. Like a curse, at 2 p.m. that afternoon, the New York Stock Exchange experienced a massive plunge.

Who was this Babson, possessing such mysterious power?

In fact, Babson was not a renowned stock commentator at all. His various titles were dazzling: educator, philosophy enthusiast, devotee, statistician, astrology enthusiast, economics enthusiast, supporter of the law of universal gravitation... In short, he was a "great charlatan"!

In hindsight, the market decline was not due to Babson's genius prediction but because, after the market downturn, people discovered that Babson had made such bombastic statements in the past.

Wall Street also organized efforts to counterattack Babson, but the U.S. real economy encountered some issues. With the decline of industrial production index, steel production, and transportation volume, the possibility of a depression became an inevitable topic of discussion. Some astute individuals began selling off their holdings, while others planned to buy at low levels. Many hoped that the speeches of important figures would help the stock market avoid disaster.

Because the dark cloud hanging over Wall Street was becoming increasingly visible, two events put an abrupt end to the prosperity and marked the beginning of a four-year depression.

On September 20, 1929, Clarence Hatry's company in England suddenly collapsed. Hatry was an interesting character who did not fit the typical English mold. Despite his reassuring experience in the financial industry in previous years, he was often considered inferior by the English. In the 1920s, Hatry built an impressive industrial and financial empire. The most notable core business of this empire was the manufacturing and sale of coin-operated cameras. Later, Hatry abandoned these inconspicuous enterprises and ventured into investment trusts and large-scale financing. His rise to power was largely due to unauthorized stock issuances, accumulating assets through illegal stock issuance and similarly irregular financing activities. According to legends in 1929, Hatry's exposure in London was believed to have severely affected confidence in New York.

Another event that circulated simultaneously with the Hatry incident was on October 11 when the Massachusetts Public Utilities Commission denied Boston Edison the opportunity to split its shares into four. As the company pointed out, stock splits were very popular at the time. For Boston Edison, not pursuing progress could mean regressing to the era of gas lamps. Prohibiting the split was unprecedented. The Massachusetts Public Utilities Commission immediately struck back, announcing an investigation into the company's credit rating and stating that the present value of the company's stock "had been realized through speculation" and had reached a point where "in our judgment, no one would consider it profitable to buy this stock based on its earnings."

These were irresponsible words. It can be imagined that such words could have serious consequences, similar to the exposure of the truth about Clarence Hatry. However, the already unstable balance could also be shattered simply by the spontaneous decision of investors to exit the market. On September 22, the financial sections of various New York newspapers prominently featured an investment service advertisement in bold letters: "Don't linger too long; the bull market opportunity won't reappear." This advertisement could be understood as stating that "most investors who made money in the bull market, will eventually have all their profits wiped out by the subsequent stock market adjustment, and some may even suffer net losses." The decline in the Federal Reserve Industrial Index, Hatry's exposure of the truth, and the abnormal difficulties presented by the Massachusetts Public Utilities Commission have raised concerns among tens, then hundreds, and finally thousands of investors about the imminent end of the bull market. . We don't know the exact reason that initially raised concern among investors. However, we understand that the reason for their concerns is not important.

These two events dominated the headlines and caused a huge uproar. Their exposure reminded people that stock prices may indeed be in a bubble, delivering a resounding slap to those who were asleep. However, stock prices did not collapse in response. The elites of Wall Street, along with Charles Mitchell, the president of the National City Bank of New York, declared that the stock market was healthy, and the upward momentum was unstoppable, and so on. The only unsettling factor was the continuous decline in stock prices.