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Market Crashes - the Black Thursday of 1929

The 1920s were marked by the intense discussion of the conditions of the stock market. No matter what topic a group of people attempted to converse at the end it was all about the performance of the stock market. No matter whether you were speaking about books, music or sports it all led to talks about investing and the expected behavior of the stock market.

All the expectations of the people were directed to the market going up. The bad consequences of the Florida real estate crash in the mid 1920s were easily forgotten, and most investors failed to implement the morals they have retrieved from there. Despite the many falls of the market that were occurring during 1929, especially in September, investors continued to argue that the market will go up. It was not until the 24th of October the same year that all their expectations were turned to dust. This day will be remembered as the Black Thursday in the stock market history.

During this time the so called bull market was experienced. But, it is generally known that after each increase a decline in the business cycle follows. The Black Thursday was not the first market crash in the financial history. It just represented a lesson revised.

A new record regarding the number of shares that were sold during the Black Thursday was done. Nearly 12.9 million shares were traded back then, which significantly exceeded the 4 million shares, which were considered as huge number during a busy day. A failure on the tape machine caused a big panic during the morning hours of the day, since investors were unable to view the current prices at which they were selling their shares. This led to huge gatherings of people in front of brokerages and exchanges, which required the assistance of the police in order to avoid eventual riots. By noon, the NYSE was forced to close the visitor's gallery. The Chicago and Buffalo Exchanges terminated their activities. Many famous investors committed suicide due to the great losses.

Later that day, a meeting among banking officials took place at J.P Morgan and Company. The latter was successful in the stopping of the financial crisis in 1907. The senior partner at Morgan later made a press release stating that the market has had some technical problems, the removal of which was currently worked on.

After the announcement of Lamont, a slight recovery of the market was observed. However, the rescue came with Richard Whitney, who was a vice-president of the NYSE and J.P Morgan and Company's floor broker. The investors interpreted his appearance as a sign for the closing of the NYSE. Everyone kept their breath in suspense.

How Whitney actually saved the day?

He announced his intentions of purchasing 10,000 shares of US Steel at a price of $205 per share. At that time the latest bid was $195. After receiving 200 shares at the price he announced, he left the floor and left the rest of the purchase to be completed by the specialists. He didn't stop there and executed several dozen similar purchases of stocks. Worry replaced fear and the investors embarked on purchasing shares in order not to miss the eventual boom. During the upward surge stop loss orders from the beginning of the day caused the lower close of the market. The effect of the massive sell of shares from the beginning of the day was lowered by the remarkable market recovery.

Optimistic expectations guided the actions of the investors during Friday and Saturday. As a result, the morning sessions were marked by stability.

Unfortunately, another storm was on the horizon with the nearing of the Black Monday.

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