"Rich Man, Poor Man. . . ."

On Dec. 1, 1928, John Smith, U. S. citizen, decides that he may as well collect some of the easy profits available on Wall St.'s bull market. From the bank he draws his life savings of $15,000. A study of margins shows him that with this $15,000 and a friendly broker he can purchase $150,000 worth of stocks. From a study of market news he picks any five stocks which seem to be favorites of the bull operators. For example: Curtiss Aero, International Harvester, Montgomery Ward, Radio, Victor. So Speculator Smith speculates in 100 shares of each of these stocks.

Speculator Smith calculates that if, in the next week, these stocks each rise even only 20 points (and all have been known to rise 20 points in a few hours) he will have a profit of $10,000. He feels akin to Arthur Cutten and the Fishers.

Unfortunately, the stocks do not rise.

The Market opens the week wavering, progresses into a slump, ends with a crash. At the end of the week Speculator Smith's investments have shown the following results:

Dec. 1 Dec. 8 Decline Stock closing closing Curtiss Aero 148 129 19 International Harvester 372 1/2 307 65 1/2 Montgomery Ward 420 340 80 Radio 376 1/2 296 80 1/2 Victor 138 114 24 1455 1186 269

The market value of Speculator Smith's stocks has dropped $26,900.

Speculator Smith had committed the imprudence of buying at the top of a tremendous bull market which last week came to an end. In the last three days of trading the market value of listed securities fell off $6,000,000,000. The average of 100 representative stocks (compiled by the New York Times), fell off 15.61 points. In the last 10 minutes of the week's trading, Radio broke 20 points, in the last three days market valuation of radio stock went from $485,268,000 to $341,998,400.

What caused the collapse? The immediate inciting force appears to have been "tight" money. Loans to brokers had advanced to $5,394,590,000. Call money had climbed higher and higher until it reached 12%. At this point, apparently, the market, so long inflated, suddenly realized its unsound condition. Once the decline had begun, there was nothing to stop it. Indeed, as it continued, forced selling by many small operators with dwindling margins accelerated its fall.

The week closed with no signs of a rally. There were stories of a bankers' conference in the offices of J. P. Morgan--stories that the bankers might support the market to prevent a stock panic. It was thought that "bargain hunters" (shrewd traders who pick up stocks at low prices after a deflation) would start a buying movement that would rally the market. On the whole, the bear market was considered a local hurricane, not at all reflecting the condition of the nation's soundly prosperous industrial life.