The Dow Jones Industrial Average (INDEX: ^DJI) reached a record high of 381 at the beginning of September 83 years ago. The year was 1929. Brokers watching the tickers on Sept. 5, 1929, found their confidence shaken by the "permanently high plateau" predicted by economist Irving Fisher that summer as automatic stop-loss orders hastened the declines of several notable stocks. None could have then suspected that they were experiencing the first small drop of the worst bear market in history.
A broad decline hit at the end of the trading day on Sept. 5, 1929. United States Steel (NYS: X) , AT&T (NYS: T) (then known by its original, longer name), General Electric (NYS: GE) , and DuPont (NYS: DD) were among the worst performers, some losing as much as 10%. There were rumors that GE might split its stock after the tremendous run-up it had enjoyed over the course of the year, having nearly doubled from its 1929 lows to its price on Sept. 5. GE's market cap at the time was about $2.8 billion, which amounted to nearly 3% of U.S. GDP.
The New York Times then noted that total stockbrokers' loans totaled $7.9 billion. At the time, this represented nearly 8% of the country's GDP. One stock exchange sought to calm investor fears with a reassuring telegram to all members, which was reprinted in the Times. It read:
We would not be stampeded into selling stocks because of a gratuitous forecast of a bad break in the market by a statistician. The market has been advancing for three years, in spite of the bearish utterances of such authorities. No sane man expects widespread advances to continue indefinitely.
The market itself will furnish the best clue as to its future course, and will give warning of its culmination in plenty of time for the average trader to protect himself if necessary; but it seems to us idle to cite as a bearish factor the circumstance that the market does not act as a unit. It never has acted as a unit since 1924 and it never will again, because with 2,000 issues creating turnovers daily of 5 million shares, the rules and habits of speculation that govern a 400,000-share day with 300 active stocks no longer apply. Money will check speculation some time in the future and nothing else will. It is anyone's guess as to when this will happen.
The warnings of this statistician consumed market commentary on this day in 1929. With many automatic trades triggered by inexplicable declines, he became a lightning rod, an oracle "whose utterances appeared to have put fear into the hearts of timid holders of stocks."
The declines were just beginning. Stay tuned for more history from the Crash of 1929 and other notable events in the long history of the Dow Jones Industrial Average. If you're looking for a stock that's outlived the Dow and can survive any crash, take a look at the Fool's report on "The Only Big Bank Built to Last." It's fun, it's informative, and it's free -- click here to find out more.
The article The Start of the Worst Crash in History originally appeared on Fool.com.Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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