1920 Stock Market
On Thursday, October 24, 1929, 2.6 million shares of stock were sold in only one hour and caused a record decline for the stock market. This even was history in the making and caused a $4 million dollar loss in paper. This day came to be known as “Black Thursday” and for many was the beginning of the Great Depression.
Because of this one time occurrence, the Securities Act of 1933 and the Securities Exchange Act of 1934 were put in place to prevent any type of loss similar to this tragedy from happening again.
For many the “Roaring 20’s” was a time of jazz music, dancing and celebration. The Charleston and the Fox Trot were the favorite dances and everyone seemed to be living the high life, until the stock market began its downward spiral. The prices of many stocks had dropped considerably on Tuesday and some investors began selling their shares immediately. It’s said that on this initial day alone, more than 16 million shares were sold. No one expected the prices to continue to fall, but they did. By Thursday, everyone who owned a share was selling and selling fast. A lot of stocks were worthless causing consumers to lose their investments and homes. The AT&T stock alone had dropped from $304 per share to only $197 per share.
It all began when many Americans decided to invest heavily in the market. Because of the millions of people who invested, it drove the prices of all stocks upward. Banks began lending like never before in an effort to increase their holdings as well. Yet all of the hype and expectation was merely speculation. Black Thursday became known as the Bull Market, one in which losses was expected.
What many consumers did not know during that time was that because of the huge increase in the sales of stocks, the ticker tape could not keep up with all the shares that was being purchased and so it fell behind; which in turn, made investors think that they were losing their hard earned money, when in actually they were not. As expected, people panicked and began to unload their shares at the opportunity. Word spread quickly to businesses and other consumers, and soon everyone was trying to get rid of what they thought was a bad investment.
Consumers found themselves broke and banks regretted the decision to lend on the previous days. Because of the frenzy, the stock market crashed and burned, banks failed and entrepreneurs lost their businesses.
Never before had American seen or experience such an event and to secure such a thing from ever happening again, when markets notice a rapid decline in stock pricing, they will temporarily suspend trading to prevent another panic as Black Thursday.