In the summer of 1929 much of America was on an artificial high. It was a high born not of drugs but of an illusion that the prosperity and the good times then being enjoyed were made of new miracle ingredients that would last forever. As one chronicler of the age explained, “The New Era. meant permanent prosperity an end to the old cycle of boom and bust, steady growth in the wealth and savings of the American people, continuously rising stock prices.” It also meant steady employment\ rising wages, and shorter workweeks, enabling even ordinary people to enjoy the good things of life while keeping the vast and intricate machinery of the new consumer economy humming smoothly. Nowhere was New Era thinking more evident than in the stock market.
“Every crash of the past few years had been followed by a recovery,” recalled Frederick Lewis Allen, “and . . . every recovery had ultimately brought prices to a new high point. . . . What the bull operators had long been saying must be true. . . . This was a new era. Prosperity was coming into full and perfect flower.”
Records of all kinds were being set, and not only atop flagpoles or in the stock market, In August the American Gas and Electric System, one of several mammoth power holding companies, proudly threw a switch placing in operation the last fink in the longest power transmission line in the world under single ownership. The new line carried a load of 100,000 horsepower across 980 miles from Lake Michigan to the Virginia—North Carolina border, where connections with other systems extended it to points south. The feat was cheered as one more symbol of progress in an economy that thrived on record numbers. That same month Henry Ford watched Model A number 2,000/000 roll off the assembly line less than seven months after number 1 had made its debut. Other figure happy individuals noted that 75 percent of the world’s radios bore the inscription “Made in America” and that an estimated 10,900,000 passengers rode one of Manhattan’s 28,104 elevators every day.
Progress was measured not only by numbers but by new amenities and conveniences as well. “The day is not far off when the casual motorist in New England will have a new joy,” reported Time that August. *’He will drive up to a handsome colonial edifice set in a little park with poplar trees about it and there he will satisfy both his machine and himself. For the machine there will be gasoline and oil; for the man there will be hot dogs.
In America during the New Era anything was possible. The stock market had demonstrated in its repeated comebacks an ability to turn the despair of the moment into ultimate triumph. Like the movies that enthralled rapt audiences across the nation, it transformed even mistakes into happy endings. No one better exemplified this spirit than Amandus J. Paulsen of Santa Cruz, California, a despondent quadriplegic who tried earnestly that August to kill himself by somehow turning on the gas, maneuvering himself into a tub of water, and struggling to cut his throat. Despite this dogged effort, he was discovered in time and rushed to the hospital. Not only was his life spared, but he awoke from his ordeal to find that his paralysis was gone.
Even some leading bankers, normally the most cautious of souls, subscribed to the doctrine of the New Era. One of the most prestigious bankers in America, the urbane Thomas W. Lamont of the House of Morgan, saw virtue in its tenets despite the skepticism of some of his colleagues. No one worshiped more ardently at the altar of the New Era or better exemplified the sheer energy behind it than Charles E. Mitchell, head of the powerful National City Bank. So potent and positive was his faith that he was known as “Sunshine Charley,” and never had the sun shone brighter for him than during the summer of fun. The bank had enjoyed record earnings this year and last, fetching Mitchell each time more than $1 million. Now the handsome, genial banker stood at the pinnacle of his career. National City had just opened its first office in Mexico, number 100 in its stable of foreign branches that extended from China to South America. Mitchell himself was busy negotiating a merger with the Corn Exchange Bank that would make National City the largest bank in the world and also planning a new office building that he hoped would be the tallest in the city.
The chorus of bulls on prosperity and the market which had been gathering volume through the ups and downs of a particularly hectic year, built a beguiling crescendo through the summer. Sunshine Charley’s strong and influential voice rose above the choir. “General situation looks exceptionally sound with very few bad spots,” he cabled an inquiring Bernard Baruch in mid-August, adding “l doubt if anything that will not affect business can affect the market, which is like a weather-vane pointing into a gale of prosperity.” The New York Times conceded that “to the speculating public, the picture has apparently come to be that of a continuous rise in prices which nothing can interrupt more than momentarily.” On Labor Day afternoon the voice of one who had gained peculiar notoriety for predicting the market reassured thousands of radio listeners: asked her view of the market’s future by a reporter from station WJZ, astrologist Evangeline Adams replied, “The Dow Jones could climb to Heaven.”
Major business figures had sung this hymn lustily all year long. Many of them shared the view of Alfred Sloan Jr. of General Motors, who had said in January, “Personally I believe it is going to be a very prosperous year — I do not see how it could be otherwise.” Tom Watson of IBM agreed that “we may look forward to the progress of business in 1929.”
Prominent professors, notably Irving Fisher of Yale and Charles Amos Dice of Ohio State, chimed in with arguments that the soaring bull market was rooted not in reckless speculation but in sound economic: fundamentals. Fisher noted that corporate earnings in the first nine months of 1929 had increased 20 percent compared with 1928, a comparison he found “eloquent in justification of a heightened level of common stock prices.”
These reassurances were music to the ears of the “minnows: as notorious speculator Jesse L. Livermore called them-the legions of small timers and outsiders who eagerly followed the market leaders for what they hoped would be a nonstop ride upward. No longer was the stock market merely the playground of the rich, the ambitious, and the professionals. For the first time it seemed as if anybody could play the Wall Street lottery in the hope of quick, effortless riches. “Smaller participants . . . were investing their savings in the expectation that the market was going indefinitely higher and . . . they would never have another chance to buy at such low prices . . .,” wrote one historian. “They had seen fortunes made in the market. They or their friends had indulged in this trading for several years without substantial loss. . . . They were assured on the highest authority that they were merely sharing in the lasting prosperity of the country.”
Earlier in the year steel magnate Charles Schwab had observed that “as long as the people remain enthusiastic and interested the market will hold up.” During the summer of fun, interest had elevated into obsession as stocks became the chief topic of conversation everywhere. “Literary editors whose hopes were wrapped about American Cyanamid B noted Frederick Lewis Alien, “lunched with poets who swore by Cities Service[;] the artist who had once been eloquent only about Gauguin laid aside his brushes to proclaim the merits of National Bellas Hess.” The market seemed to be everywhere. During the U. S. amateur golf championship at Pebble Beach! California, the E. F. Hutton brokerage firm erected a temporary office in a tent near the 18th green so that the spectators—and players—could follow their favorite stocks and execute orders. Thanks to Mike Meehan, who had just put branch offices aboard select ocean liners, the market even accompanied vacationers heading overseas.
Market madness sometimes invaded even the citadel of illusion, the movie lot. That spring the Marx Brothers were hard at work filming Cocoanuts in the mornings and afternoons while performing Animal Crackers every evening at a Manhattan theater. On occasion a weary Groucho found himself spouting lines from one show during the other, but he always found time to slip off the set to call his broker for the latest word on the market. All the brothers had caught stock market fever, but in many ways it hit the peripatetic Groucho, by far the most conservative of the brothers, harder than the others. When summer came on and Animal Crackers went into mothballs for the season, he rejoiced in having more time to devote to the market.
The mania also extended to small towns in the hinterland. Alexander Dana Noyes, the financial maven of the New York Times, was struck by what he called “a wholly new phenomenon. Workingmen whose imagination or covetousness had been aroused by the ‘New Era talk’ and to whom easy facility for speculating on a margin was offered by country banks or by the county-wide network of branch offices set up by Wall Street commission houses, had joined in the great speculation.” The vice president of a utilities company noticed the same thing upon his return from several months abroad. “Every vice president, every head of department, every clerk, male and female,” he reported, had loaded up on the company’s stock and were basking in “pleasing paper profits.” The same pattern held true elsewhere in his building. “The elevator man, the barber, the bootblack, the engineers, the porters, the newsstand man, and the help in the drug store were long of our stock.”
From Rainbow’s End – The Crash of 1929 by Maury Klein – 2001 (footnotes deleted)
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