# The New York Times/1929/10/24/Prices of Stocks Crash in Heavy Liquidation

Layout 2
PRICES OF STOCKS CRASH IN HEAVY LIQUIDATION; TOTAL DROP OF BILLIONS
PAPER LOSS $4,000,000,000
2,600,000 Shares Sold in the Final Hour in Record Decline.
MANY ACCOUNTS WIPED OUT
But No Brokerage House Is In Difficulties, as Margins Have Been Kept High.
ORGANIZED BACKING ABSENT.
Bankers Confer on Steps to Support Market—Highest Break is 96 Points.
Frightened by the decline in stock prices during the last month and a half, thousands of stockholders dumped their shares on the market yesterday afternoon in such an avalanche of selling as to bring about one of the widest declines in history. Even the best of seasoned, dividend-paying shares were sold regardless of the prices they would bring, and the result was a tremendous smash in which stocks lost from a few points to as much as ninety-six.
Loss in Market Values.
The absolute average decline of active and so-called inactive issues yesterday as 2,995, or roughly three points. Using this figure as a base and taking the percentage of shares listed on the Exchange in relation to the percentage of issues traded in, the loss in value of listed securities amounted to $2,210,675,184. This, however, does not measure up to the full value of the loss, for the reason that many lesser-known issues of small capitalization did not figure in the sharp declines. It might be conservatively estimated that the actual loss in market value on the New York Stock Exchange ran to about $4,000,000,000.
Since there are 1,047,359,363 shares listed on the Exchange, a decline of one point a share would mean more than $1,000,000,000. Obviously all issues were not traded in, but those which were not declined in bid and asked representation, so that while no sales were actually recorded the market position of most issues was lowered.
In addition to the situation on the big board there was also the decline on the Curb market, where values were ruthlessly cut, and to this must be added declines in securities in other markets affected sympathetically by the New York Stock Exchange fluctuations and declines in the over-the-counter market. The wiping out of open-market values throughout the country therefore probably ranged as high as $6,000,000,000. The $4,000,000,000 decline on the New York Stock Exchange represented a loss of about one twenty-second in the value of all listed securities, which on Oct. 1 was rated at $87,073,630,423.
Crash in Final Hour.
The collapse of the market in the final hour of trading seemed the more violent because of its suddenness, the mystery which surrounded it, particularly as to the identity of the sellers, and the tremendous volume of the trading, which reached a total of 2,600,000 shares in the hour between 2 and 3 o'clock.
Statistically the market made a sorry showing. The railroad shares, as measured by The New York Times average of twenty-five representative stocks, were down 5.52 and the industrial shares 30.97. The total combined average of fifty representative issues was down 18.24, marking the largest decline since the start of the compilation fo these records in 1911. Sales on the Exchange were 6,374,960 shares, marking the eleventh time the sales on the Exchange have exceeded the 6,000,000-share figure. On the Curb they were 1,793,415 shares.
Stocks Opened Strong.
The day had opened calmly enough. Many prices were higher. Trading was quiet in mid-morning, but featured by a sudden and unexplained wave of liquidation in the motor accessory issues. When this burst of selling had spent its force the market wavered and began to slip, slowly at first and then faster. By 1 o'clock the decline had reached large proportions, but it was not until the last hour that the full force of the storm was felt.
Hitherto it had been weakly held shares, or the shares or corposations not especially prosperous, which had been hardest hit. In the late trading the blow struck them all alike and they crashed downward with a force that left Wall Street startled at the ​declines which had taken place, even in the best of stocks. Typical examples were United States Steel common 8$^5$⁄$_8$ off, General Electric 20 off, Kennecott Copper 11, Eastman Kodak 14$^7$⁄$_8$, Otis Elevator 43, Radio 11$^3$⁄$_4$, Simmons 30$^1$⁄$_2$, Timken Roller Bearing 13, Baltimore & Ohio 21$^5$⁄$_8$, Atchison, Topeka & Santa Fe 12$^5$⁄$_8$. Not a single group of stocks on the Exchange was immune to the storm and only a few scattered individual issues came through unscathed.
It became evident, as these wild scenes were being enacted on the floors of the country's exchanges, that there was no organized banking support in the market. Half-hearted endeavors were made to protect individual issues, but it was not a market smash which could be stopped, even with a bundle of buying orders, and those who tried it lost lots of money.
Going back to the causes for such a decline, the effects of which will be felt in every section of the country and abroad as well, they may be thus enumerated:
The necessity for the readjustment of price levels for many issues which have been selling at from 15 to 150 times their earnings, the result of over-enthusiastic public buying and pool manipulation.
The loss of confidence in the general market situation by the public because of the repeated sharp declines since Sept. 1.
The continued pressure on the market by liquidation, especially in the "blue chip" issues.
Selling by thousands of foreign holders, particularly in the railroad shares, and the return to their homes of the foreign funds which have been employed here.
Strategic selling for the decline by many powerful bears, who picked vulnerable spots for heavy selling.
Moderately lower ratios of operation in the basic industries, due to some extent at least to the high rate of business last Summer, reflected particularly in the decline in iron and steel production, in automotive production and in building operations.
Break Was Unexpected.
Even with these economic factors apparent, in view of the wide declines which have taken place since Sept. 1, there is still considerable mystery about why such an avalanche of stock should hit the market at the same time. The answer is probably to be found in a combination of circumstances. After the break on Monday the market recovered moderately on Tuesday due to a fresh flow of buying and on a statement made by Charles E. Mitchell, head of the National City Bank, on his return from abroad that the market in some issues had been oversold. This rally did not hold through the day, however, and many stocks lost their morning gains.
Yesterday, when they did not rally vigorously in the morning, many thousands of stockholders decided to get out of the market entirely, and as the decline progressed this selling was accelerated by the catching of stop-loss orders, bear selling and forced liquidation because of unanswered margin calls. It was the old market story of a startled public all trying to sell at the same time.
There were two additional factors which caused selling, adding to the confusion. One was that the wires to many Western cities were in difficulties most of the day due to snow and sleet storms. These cities got but partial and imperfect reports of what was going on in the New York market. Many holders in these cities did not want to "go it blind" and ordered their stocks sold at the market. The other consideration was that many pools, as well as individuals, who have been carrying their stocks with banking institutions, were called upon to put up additional collateral or, preferably, to take up their loans. Any number of pools, prosperous ten days ago, were wrecked on the shoals of yesterday's reaction, with a big loss staring them in the face.
Tickers Far Behind.
Such scenes as were witnessed on the floor of the New York Stock Exchange between 2 and 3 o'clock in the afternoon, and on the floor of the Curb market, too, have seldom been enacted in the market history of the present generation, accustomed to vigorous and rising markets. Every Stock Exchange house had its fullest available physical machinery at work; every broker was on the Exchange floor to handle the flood of orders and it developed a traffic that could not be coped with by even the improved facilities and the greater man power now employed.
The ticker tape of both the Stock Exchange and the Curb fell far behind, and it was not until 104 minutes after 3 o'clock that the final quotation of one of Wall Street's most disastrous days was printed. This added greatly to the confusion and there were many times when there was a gap of 10 points or more between the current selling price of a particular stock on the floor of the Exchange and the price on the ticker.
Many thousands of margin accounts, already impaired by the declines of the last few days, were wiped out by the break on the Stock Exchange. At the largest commission houses it was admitted that yesterday was the saddest day margin speculators have passed through in recent years.
There went out, last night, the greatest number of margin calls that has been produced in any phase of the current "shake-out" and the number would have been larger but for the great volume of distress selling. Where traders were not prompt enough in voluntarily liquidating, their brokers relieved them of the responsibility. The liquidation probably was of a volume not equalled in recent years, brokers said.
By methods that have become increasingly drastic as the decline gathered momentum, commission houses have kept margin accounts in a satisfactory condition and yesterday's acute decline was embarrassing only to speculators. Margin requirements have been tightened with each successive break of late, and in some instances houses have demanded 75 per cent of the market value of certain stocks.
No Failures Rumored.
It was not a day of personalities at all. One rarely heard the names of individual bulls or bears, of banking houses or brokerage houses mentioned. It was a day, in fact, in which the usual idle gossip of the Street appeared to have dried up and there was little talk of this or that operator being "taken over" by bankers, or this or that operator making a tremendous killing on the short side.
As a matter of fact, there were no rumors of failures, usually encountered in a day of such declines. Heads of important banking houses said that they had not been appealed to for assistance. There were several tales, however, of many large individual operators having to be helped out.
In brokerage offices, in Wall Street as well as throughout the land, the chairs were full of customers, but they were nervous, excited and tense crowds of men and women who watched their stocks whirled about in the market maelstrom, and the chatter and brightness of the usual brokerage office scene was entirely missing.
The opinion was expressed in many quarters last night, although, of course, entirely unofficially, that the market, after swinging too high, has committed the double error of swinging too low and that liquidation which might have been accomplished over a long period of time has been taken in a few days. It was the general opinion that while there might be some additional selling this morning because of the margin calls sent out last night, some support for the puvotal issues should make itself felt before the new market day has progressed very far.
Table of Largest Declines.
The largest declines were in the following issues:
Curb Market Declines.
The largest declines on the Curb Market were:
The investment trusts, which in the declines of recent years have been looked upon as stabilizing forces in the stock market, were reported yesterday to be pursuing a cautious policy during the current break. While a few trusts said that they had bought a few issues on a downward scale, many of the investment companies said they were waiting for lower prices or for indications of returning equilibrium.
The best-managed trusts are reported to have placed themselves in a fairly liquid position in recent months, and several well-known units declared that their cash and call loans ranged from 30 to 60 per cent of their resources. The decline is said to have made large inroads into the unrealized profits which many trusts had accumulated two months ago on their portfolios, but since conservative investment trust policy dictates the preservation of large cash reserves, Wall Street believes that the buying power of the most important trusts is unimpaired.
When this buying power will be placed behind the market, however, has not been indicated. If the decline progresses much further, however, scale buying by the trusts is expected to be an increasingly important factor. The cash reserves of the trusts are believed to total from $750,000,000 to $1,000,000,000, and if part of this total is placed behind pivotal stocks—the industrial leaders which the investment trusts have made their principal purchases in recent years—the effect of this buying will make itself felt upon the entire market, it is believed.
The president of one of the largest groups of investment trusts said yesterday that his company was prepared to buy in an increasing amount a group of selected stocks if the decline progressed further. He predicted that any period of depression would be of comparatively short duration, and next year many issues would sweep to new high marks, he said.
According to information obtained in high places yesterday, the stricken stock market had no organized banking support. This was so, it was said, because it was felt that the emergency was not great enough to warrant concerted action. The implication was that, should the market threaten to get out of hand, such support might easily be furnished.
It was said on the highest authority that individual stocks did have support on Tuesday from their usual banking sponsors, but the pressure became so intense yesterday that it would have been foolhardy to attempt to stem the tide. Bankers and so-called "insiders," it was pointed out, hesitate to resist selling as aggressive as that which took place in the late dealings yesterday. It was reasonable to expect, it was said, that powerful support would make its appearance when the market quieted down.
Bankers who were interviewed said, without reference to any particular stocks, that prices in many instances had reached levels yesterday that should encourage investment buying. This buying, they believed, would be felt shortly in the better grade of dividend-paying stocks. The point was emphasized that many issues at yesterday's close were selling on a basis that made them highly attractive to investors seeking safety and a high yield.
It was learned that some of the leading bankers of the city were in conference after the close of the market yesterday, discussing the desirability of some assuring word. Apparently, the view taken was that no statement was called for at this time. It was indicated also that no comment might be expected.
Careful inquiry yesterday elicited the information that no banking assistance had been sought or was needed by any concern identified with the stock market.