The Stock Market Crash of 1929 – Part 1: To The Moon!

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Hello and welcome to Conflicted, the history podcast where we talk about the struggles that shaped us, the tough questions that they pose, and why we should care about any of it.

Conflicted is a member of the Evergreen Podcast Network, and as always, I’m your host Zach Cornwell.

Guys, I am very excited about today’s episode. It’s honestly a topic I’ve had my eye on for a while, but because it’s such a sprawling and complex subject, I’d been a little nervous to really dive in and tackle it. But now seems like the right time.

Over the next few episodes, we will be examining one of the most notorious events in American history. Arguably, in world history.

During the course of one week in October of 1929, 30 billion dollars of wealth vanished into thin air. What began as a tremor of panic in downtown New York mutated into a financial shockwave that rippled across the entire United States and out into the wider world.

This event destabilized the world economy. It impoverished entire generations. And it marked the beginning of the long, collective trauma we now call the Great Depression. One historian called this event “the most climactic financial disaster in history”. Another called it “the worst economic collapse in the history of the modern industrial world.” Another said that “Few man-made events, short of the World Wars, created so much pain and bitterness, and the fear it could occur again.”

I am referring, of course, to the Stock Market Crash of 1929. Sometimes it’s called the Great Crash, or the Wall Street Crash of ’29.

I am referring, of course, to the Wall Street Crash of 1929. Sometimes it’s called the Great Crash, or the Stock Market Crash of ’29.

This is a story that most of us are vaguely aware of, at least on a surface level. When we hear phrases like “Wall Street” and “Crash” and “1920s”, we tend to picture guys who look like the Monopoly Man leaping to their deaths from the tops of tall buildings; Men who, in their ravenous greed, lost it all on the stock market, and faced with the petty humiliations of poverty, chose to end their lives. Men who would rather die than be poor.

That mental image, however, like a lot of pop-history imprints, is a misleading one. You might even say it’s completely false.

The story of the 1929 Stock Market Crash is much more than bulls, bears, and suicidal brokers. It’s not about line graphs, spreadsheets, or stock prices. Underneath all those drab, grainy snippets of black-and-white photography is a story absolutely bursting with color. It is a rich, human drama on an international scale; One that completely reshaped the world. This financial disaster represents a crucial fork in the road on the path that led to where we are today.

But as important and infamous as the 1929 Stock Market Crash is, it is also a source of intense controversy. For decades, economists, historians, and financial analysts have been performing autopsies on the corpse of the Great American Bull Market, trying to explain why exactly the Crash happened. And everyone has a different theory. Some ideas are more widely accepted than others, but to this day, there is no universally-accepted explanation for what caused the most cataclysmic financial disaster in history. And that mystery is what we will attempt to untangle over the course of the next several episodes.

Now at this point you might be wincing and bracing yourself for an avalanche of complicated financial jargon, stock market lexicon, and economic concepts. Wall Street famously has its own byzantine and confusing language, one that people have dedicated their entire lives to becoming fluent in. And while we definitely will be crossing that language barrier to some extent, this is not going to be a vocabulary lesson, I promise.

This topic, like every topic on Conflicted, is about people.

I wanted this series to be a human history of the Crash. We will experience this event not through bone-dry numbers, or stats, or stock market abstractions, but through the eyes of real, flesh-and-blood people that lived through this thing. Good people and bad people and everyone in between. We’ll meet bootleggers and bankers. Career criminals and crusading prosecutors. We’ll meet swindlers and charlatans and shoe-shine boys. Farmers and fortune tellers. The truth is, the 1929 Crash affected every strata of American society, and our cast of characters will reflect that reality.

This is a big story, guys. It is a clock with many moving pieces. And over the course of the next three episodes, we will disassemble that machinery, pick it apart, and lay out all the components in an attempt to understand why the Great Crash happened. And to understand the people that it happened to.

I am very excited to share this story and these characters with you. So, without further ado, let’s do this thing.

Welcome to The Stock Market Crash of 1929, Part 1:

(Wall Street Crash of 1929)

To The Moon.

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It’s Tuesday, October 29^th, 1929.

We’re in Manhattan, on the floor of the New York Stock Exchange. And for millions of people, the world is ending.

On a normal day, the trading floor of the New York Stock Exchange was a prim, proper, and orderly place. A well-greased machine in which men in fitted suits bought and sold shares on behalf of clients from as far away as London, Athens, and Tokyo. Two thousand employees – clerks, analysts, and telephone operators – scuttled in pre-destined paths along the 16,000 square foot trading floor like so many obedient bees.

And there was a lot of honey in this hive. The stock market was, as historian Karen Blumenthal writes “the greatest fountain of wealth in the history of America.”

On a normal day, three million shares might change hands in this room. On a good day, an investor could watch the stock prices of American companies climb up and up and up.

In the past six months, millions of dollars had become billions of dollars in a gravity and logic-defying bull run the likes of which no one had ever seen. It was what one contemporary called “a magic carpet ride”.

But Tuesday October 29^th, 1929 was not a good or normal day.

On Black Tuesday, as it came to be known, the New York Stock Exchange looked more like a mosh pit than a trading floor. People are screaming. They are crying. The stock brokers are having their fitted suits ripped and shredded to pieces by desperate investors trying to sell their stocks. The floor is covered with an ankle-deep layer of paper – buy orders, sell orders, ticker tape, notes, scrap. Dead paper as thick as snow, that people are wading through to get to a broker who can sell their shares. Outside the Exchange, ten thousand people have crowded along Wall Street trying to squeeze closer, trying to understand what the hell is happening.

At this point, stock prices are falling almost vertically. “Like cans off of a supermarket shelf”, one trader remembered. It’s happening so fast that the by the time the clerks can scribble the current prices on the board, they’ve already fallen by another five, ten, twenty points. In the first thirty minutes of the trading day, $2 billion dollars has evaporated. Life savings, pensions, nest eggs, rainy-day funds – all gone. Like cotton candy dissolving in a puddle, it’s just gone.

People are feinting. Literally collapsing. And those that are conscious are getting angry and inconsolable. As Blumenthal writes: A middle-aged man with a tear in his jacket broke out from the crowd, moaning, “I’m sold out! Sold out!” Another man, screaming at the top of his lungs that he had been ruined, grabbed a messenger by the hair and lifted the youngster off his feet. The messenger twisted and screamed, but the man wouldn’t let him go. Finally, the youngster broke free and fled the Exchange crying, leaving the yelling man with a fist full of hair.

There is no other word for the mood than panic. Animal, caught-in-a-trap, panic.

As one Stock Exchange employee named William Crawford remembered: “they roared like a lot of lions and tigers. They hollered and screamed, they clawed at one another’s collars. It was like a bunch of crazy men.”

And what’s worse, the panic is spreading from its epicenter at the NY Stock Exchange. Just down the street, at Trinity Church, the pews are packed with people of every faith and creed, Catholics, Protestants, Jews, even atheists; all praying together. the church is flooded with frightened, despondent people seeking some sense, any sense, of comfort.

All across America, banks large and small are filled with angry customers demanding to withdraw their money. And all across America, banks are saying ‘We can’t. We don’t have your money anymore’.

By the time the closing bell rang on Black Tuesday at 5:32PM, 16,383,700 shares had been sold at the New York Stock Exchange, representing a loss of 10 billion dollars in value. In one day. As historians Gordan Thomas and Max Morgan-Whitts point out with sobering clarity: “That was twice the amount of currency in circulation in the entire country at the time.”

But in the midst of all this fear and misery, there was at least one person making money in New York that day. Making a fortune when so many other people were losing everything.

His name was Jesse Lauriston Livermore. And he had seen this coming.

While Wall Street was gripped by hysteria, Jesse Livermore was seven miles uptown, on the 18^th floor of a lavish office overlooking 5^th Avenue. It was not an easy place to gain access to. As Thomas and Morgan-Whitts write:

The Livermore suite in the Heckscher Building on Fifth Avenue was protected at street level by a doorman who denied its existence. Only those whose names appeared on an approved list were allowed past, and then they were whisked up by elevator to the eighteenth floor. All visitors were there further screened by a burly Irishman, famed for his ham-sized fists, before being allowed to enter the unnumbered door of Livermore’s citadel.

And if you were lucky enough to gain access to Jesse Livermore’s office on that Tuesday morning, you would have seen a slim, 52-year-old man with a thinning head of slicked-back blonde hair. With his sharp suit and weak chin, he looked a little bit like a very well-dressed turtle. Not that the show girls and starlets he routinely slept with cared.

Another thing you would’ve noticed about Jesse Livermore is that he seemed perpetually suspended in a roiling haze of cigar smoke. He was a chain-smoker, but a chain-smoker with very expensive tastes. He had over 300 hand-rolled cigars flown in directly from Havana, Cuba every single month. The best money could buy.

And Livermore had plenty of that to spare. He was a self-made multimillionaire who delighted in ostentatious displays of wealth and excess. As Thomas and Morgan-Whitt write: “He bought champagne by the truck, caviar by the case, suits by the dozen.” He owned two yachts, multiple houses, and a distinctive, canary yellow Rolls-Royce that ferried him around the city like a modern-day Pharaoh.

Appearances, however, can be deceiving.

Livermore may have been, in his own words, “disgustingly rich”, but he wasn’t a snooty or pompous or pinky-out kinda guy. He didn’t come from money. He talked with the thick accent of a Boston dockworker and was armed with dirty jokes to match. He had no interest in art, or culture, or music. He thought it was all a waste of time, unless of course it could help you get laid. The only literature he could quote by heart was the King James Bible. 

But beneath this weird, off-putting, paradoxical package of obscene wealth and blue-collar New England charm was an astonishingly intelligent human being. Livermore was easily the smartest man in any room he walked into. He was both a math guy and a words guy, which in my experience is as rare as a unicorn and twice as impressive. He had a natural gift for language and verbiage; As Thomas and Morgan-Whitt write:

Livermore could speak as well as he could write; despite his lack of sophistication and social polish, he possessed a natural command of the language. Much of what he dictated was good enough to go straight into print.

And Livermore bent that formidable intellect towards his one true love. The thing he cared about more than any car or yacht or showgirl or box of Cuban cigars. In his heart of hearts, Livermore didn’t really love any that stuff. He didn’t even love being rich. Livermore was in love with the game. The market. The adrenaline rush of fortunes banked and broken. The rollercoaster thrill-ride of the stock exchange.

And he was good at it. How good, you ask?  Well, on Black Tuesday, after a week that had snapped the spine of the American economy, rocked banks and brokerages from coast to coast, driven some millionaires to financial ruin and shocked the international community, Jesse Livermore walked away with a profit of 100 million dollars. That’s about 1.5 billion today.

So - How did he do this? How he able to predict what so blindsided so many people?

Well to answer that, we need to go back. Way back. Before 1929. Before the Roaring Twenties. Before World War 1. Before anyone on Main Street had even heard of Wall Street. We have to go back to where Livermore’s love affair with the stock market first began.

Jesse Livermore’s fortune started with a $5 bill and a tiny corn farm in Massachusetts.

When Laura Livermore gave birth to her third child in a small farmhouse in 1877, the timing was not great. It was an unplanned pregnancy, money was tight, and her husband Hiram was extremely not psyched about having yet another mouth to feed. But when the baby boy came bouncing into the world, they named him Jesse and hoped for the best.

Laura Livermore was a simple, kind-hearted woman who loved all three of her children dearly, but almost immediately she noticed something was different about her youngest son, Jesse.

The kid was freakishly smart. By the age four he could read and write as well children twice his age. One day, when he was six, Laura found Jesse fishing the crumpled pages of a newspaper out of the trashcan and smoothing them out. He was reading the financial pages.

Numbers came naturally to Jesse. Grade after grade, year after year, he amazed his teachers at his school with his ability to formulate complex equations in his head. No pen, no paper, he could just crunch the numbers on the fly. When he was around 10 or 11, he challenged his math teacher to an arithmetic competition – and won. It was also around this age that Jesse started to notice he was very popular with the opposite sex. The girls loved him. There was just something magnetic about him, too subtle for words.

At home, Laura Livermore could see her son was growing into someone very special. On the surface, Jesse was a pale, skinny kid with a mop of strawberry blonde hair. But his mind was like a hummingbird, flitting from problem to problem with ease. As long as Jesse could continue to get an education, there was no telling how far he could go.

But Jesse’s father had other plans. To Hiram Livermore, his youngest son Jesse was just the soft, runt of the litter. Pampered by his indulgent mother and obsessed with useless books and arithmetic. Math couldn’t pull a plow. Math couldn’t plant crops. Math couldn’t make money. And the Livermores were always desperately short of that. So when Jesse was 14 years old, Hiram pulled him out of school, and put him to work on the family farm.

For a time, it seemed like Jesse’s sparkling intellect might die on the vine. That this blossoming prodigy would be lost and adrift in the soul-crushing, back-breaking manual labor of a common field hand. But Laura believed her son deserved something more. She didn’t want to see him turn out just like his Dad - tired, unimaginative, and bitter. So according to one historian:

Unwilling to squander her son's glowing potential, she packed him a satchel filled with some food and a few changes of clothes, and she slipped him a $5-bill. As per his mother's instructions, Livermore snuck out the front door late one evening, flagged down a passing wagon, and hitchhiked out of town.

Over the course of his life, Jesse Livermore would love many, many, many, many women. But the most important and influential woman in all the long years of his life was his Mom. Laura didn’t know it yet, but her son would use that $5 bill to become one of the richest men on planet earth.

But the baby-faced 14-year-old that snuck off the corn farm in 1891 was a long, long way from Fifth Avenue riches. Thankfully, the young math whiz knew exactly where to get started. When his hitchhiking ride asked him where he wanted to be go, Jesse didn’t hesitate: The local stock brokerage.

Back in Livermore’s time, the stock market worked more or less exactly the same as it does today. Investors can buy shares – or little pieces - of publicly traded companies. The price of those shares fluctuates based on the value of the company, real or perceived. If the stock rises above the price you paid for it, you make money. If it goes down, you lose money. In a perfect world, you invest in a company because you believe in its long-term future, and by extension, you believe it’s value will rise over time. In return for your confidence and cash, that company uses the money you’ve invested to fund research, expansion, innovation, all that good stuff.

In theory, anyone can invest in stocks and make money. But the stock market in the last days of the 19^thcentury was much less accessible than it is today.

There is no RobinHood app. There is no E-Trade. If you wanted to play the stock market, you had to go to a stock brokerage and speak with a stock broker. You say ‘hello good sir, I would like to buy this many shares of this particular company’. The broker would say, why yes sir, it would be my pleasure.’ The broker would then place the order on your behalf, and you would receive a paper certificate that proved your ownership of those shares at that price. If you ever lost confidence in the health of that company, or just wanted to bank a profit, you could simply sell your shares to a new buyer; a transaction that was facilitated by a broker for a small fee.

At the turn of 20^th century, the vast majority of Americans did not even know what the stock market was, much less how to buy and sell stocks. Most people in the United States were living below the poverty line, so the idea of having enough extra money to invest in something as intangible and abstract as the stock market was a completely alien concept. As a result, the Stock Market was a big boys club, limited to the ultra-rich, ultra-connected, and ultra-bored with plenty of fun money to burn.

It was not a club that looked kindly on outsiders.

And 14-year-old Jesse Livermore was most definitely an outsider when we walked into a brokerage firm in Boston called Paine Webber & Co. But Jesse didn’t want to buy any stock – not that he could have with a five-dollar bill – no, he wanted a job. The skeptical Boston brokers took a chance on the pasty, soft-spoken farm boy, and just like that – Jesse Livermore had his foot in the door.

It was not a glamorous gig. Jesse’s job was to sit at a chalkboard, all day long, and record the stock prices of certain companies as they fluctuated throughout the day. Not a challenging task for a mind as sharp as his. A few years earlier he’d made a fool of his math teacher on a chalkboard just like this one. Now he was working as a glorified printing press.

It seemed like mindless, robotic, drudgery at first. Scribble the price. Wait for the change. Erase the price. Write the new one. Repeat. Repeat. Repeat.

But as the weeks turned into months, Jesse started to see something. Something that no one else could. He was seeing patterns. Trends. Correlations. He soon discovered that he could read the ticker tape like a sheet of music. He could see rhythms and melodies and motifs that were all but invisible to everyone else. Jesse looked around at all these brokers and buyers and realized they had no system. They were just guessing. Gambling. Working off of bogus tips and meaningless hunches.

Jesse Livermore, barely on the other side of puberty, decides to create his own system. He gets a little notebook and starts recording the stock prices at the end of each day. He does this for six months. It meant nothing at first, but with each passing day, he got more and more data. Like standing an inch away from a painting and slowly backing away, it all started to come into focus. As Livermore remembered years later:

“Those quotations did not represent prices of stocks to me, so many dollars per share. They were numbers. Of course, they meant something. They were always changing. It was all I had to be interested in the changes. Why did they change? I didn't know. I didn't care. I didn't think about that. I simply saw that they changed. That was all I had to think about five hours every day and two on Saturdays: that they were always changing.”

Over the course of his data gathering, Jesse starts trying to guess what the price of particular stocks would do over the course of a day, a week, a month. He makes predictions, and then he records which of his predictions were correct or incorrect. This meticulous data-gathering, combined with an indescribable gut instinct, is what set Jesse Livermore apart. And after months of doing this, Jesse decides to put his system to the test.

One thing Americans have always excelled at…. is gambling. There’s nothing we won’t gamble on. Some people bet on horses, others bet on boxing or football, but all over the United States in the early 20^th century, there were places where you could gamble on the fluctuations of the stock market itself.

These were called bucket shops. As mentioned earlier, very few Americans had enough cash to buy actual shares on the stock market, but bucket shops were a place you could go to get in on the action without the steep price of admission. Bucket shops allowed you to bet on the movements of particular stocks without having to buy actual shares. Think of it like a dog track or a horse race or a casino; you’re picking winners. Or losers. And if you guess correctly, you get a nice little payout.

These were not exactly the most respectable joints, so imagine their surprise when a baby-faced, blue-eyed teenager walked in on his lunch break looking to make some money. As Jesse Livermore remembered:

“I had never bought or sold anything in my life, and I never gambled with the other boys. But all I could see was that this was a grand chance to test the accuracy of my work, of my hobby.”

Equipped with his notebook, Jesse placed his very first bet on a railroad stock that he believed was due for an upswing. He put down $5; the same amount his Mom had given him the night she’d helped him leave the farm. Lo and behold, Jesse was right about that stock. He made a profit of $3.12 on the trade. From that moment on, Jesse Livermore fell truly, madly, deeply in love with the stock market.

He was addicted. What began as an experimental side-hustle became a full-blown infatuation. Jesse placed bet after bet after bet at bucket shops all over Boston. And more often than not, his predictions were dead-on. He discovered he could make several months’ worth of wages in a single day’s plunge into the bucket shops.

When he was sixteen, two years after he’d left home, Jesse Livermore went back to the farmhouse and slapped $1000 bucks on the kitchen table. His father, who’d underestimated him all his life, was stunned into silence. His mother Laura was proud, but worried about where this path might lead her teenage son.

But as Jesse’s hot streak continued, he started to look suspicious to the operators of these bucket shops. They grew resentful of this wunderkind people were starting to call the “boy plunger” or the “boy trader”. No one was right that often, they whispered. No one was that good. This kid and his little notebook were screwing up their profit margins. So the bucket shops, one by one, start to permanently ban Jesse from coming in.

They won’t take his money. They won’t place his bets. Some places won’t even let him through the front door. Jesse became persona non grata at every bucket shop in New England. But Jesse Livermore was not to admit defeat so easily, and in an attempt to outwit the bucket shops, eh gets…creative. As one historian wrote:

He donned a number of disguises, among which included false beards, oversized coats, wide-brimmed hats that shielded part of his face, and so on, before entering the shops, and he provided clerks with various aliases. Unfortunately, the clerks cottoned onto his real identity almost every time, whereupon he was promptly booted from the premises.

Just when he’d found his life’s calling. Just when he’d found a way to use his skills, it had all dried up in front of his eyes. What would he do now? Go back to the farm? Become just like his Dad? Or toil away day-after-day in his monotonous 9-to-5? Jesse Livermore wasn’t scared of much, but the thing that terrified him more than any other was a life of mediocrity.

But as they say, when life closes a door, it opens a window. As Livermore reflected decades later:

“If it hadn't been for [bucket shops] refusing to take my business, I never would have stopped trading in them. And then I never would have learned that there was much more to the game of stock speculation than to play for fluctuations of a few points.”

Jesse decided he was going to make real money. Big money. And the only place to do that was in New York City. Jesse Livermore was heading to Wall Street. It was the year 1900, a new century had arrived, and Livermore was 22 years old. So much had changed since he’d left the corn farm at the age of 14. He wasn’t a boy anymore.  

But the world was changing too. And it was changing fast.

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It’s the fall of 1923.

We’re in a doctor’s office in Berlin, the capital of Germany. And for weeks, a strange, baffling illness has been spreading across the country.

As far as German physicians could tell, it was some kind of mental affliction, which would suddenly seize people with no history of psychological illness. According to financial historian Liaquat Ahamed:

Those afflicted were apparently normal in every respect except, according to the New York Times, “for a desire to write endless rows of ciphers and engage in computations more involved than the most difficult problems in logarithms.” Perfectly sensible people would say they were ten billion years old or had forty trillion children. Apparently cashiers, bookkeepers, and bankers were particularly prone to this bizarre disease.

The German doctors called it “cipher stroke”.

It was a vague, inadequate name, but they didn’t know what else to call it. One thing was clear, however; anyone who had to regularly calculate the rapidly-falling value of German currency was at a high risk of developing cipher stroke.

Five years earlier, in 1918, Germany had lost World War 1 – The Great War. And when you lose a war that has killed something like 20 million people, there are consequences. In particular, financial consequences.

When the young men of Germany had marched off to fight in a slurry of mud and viscera on the French frontier in 1914, they did so with the iron conviction that, as Ahamed writes: “the war would be short, that the Reich would prevail, and that it would then present the bill to the vanquished.”. Instead, the opposite happened. The war dragged on for four long years. The Kaiser was defeated and exiled. And the principal victors of that war – Great Britain, France, and United States, flung a massive, insurmountable reparations bill at Germany’s feet with smug satisfaction.

The artillery barrels had barely cooled before the Allies began drawing up a plan to make Germany pay through the nose. To, as one British newspaper put it, “squeeze Germany until the pips squeak”. This was punishment, pure and simple. After many months of political wrangling in Paris, it was decided that Germany would pay 33 billion dollars in reparations for their role in the Great War.

It was money they did not have. In an attempt to keep pace with the bottomless appetites of their own war machine, Germany had begged, borrowed, and inflated its currency to stay in the fight. So when the bill came due, all Germany had in its pockets was 2 million dead men and some clumps of lint.

The consequences were catastrophic for Germany’s economy. The wartime inflation, combined with the staggering reparations bill and a post-war treasury that printed money like skeeball tickets, essentially made Germany’s currency worthless. It was, as one historian colorfully put it, “a voyage of fantasy into the outer realms of the monetary universe.”

Before WW1, a German mark was worth about 25 cents. So 1/4^th of a US dollar. By 1923, according to one publication: “42 billion marks was worth 1 American cent.“

As Liaquat Ahamed writes:

Basic necessities were now priced in the billions—a kilo of butter cost 250 billion; a kilo of bacon 180 billion; a simple ride on a Berlin street car, which had cost 1 mark before the war, was now set at 15 billion.

It became meaningless to talk about the price of anything, because the numbers changed so fast. Economic existence became a race. Workers, once paid weekly, were now paid daily with large stacks of notes. Every morning big trucks loaded with laundry baskets full of notes rolled out of the Reichsbank printing offices and drove from factory to factory, where someone would clamber aboard to pitch great bundles to the sullen crowds of workers, who would then be given half an hour off to rush out and buy something before the money became worthless.

He goes on in a later chapter:

Those with money, desperate to be rid of it before it became worthless, indulged in giddy frenzies of spending, while those without sold what few possessions remained to them, including their bodies, in the struggle to survive.

It was no wonder people started wandering into doctor’s offices with “cipher stroke”. Scribbling computations and equations because the basic value of money, the basic meaning of numbers themselves, had become so unstable. Were you 40 years old, or 42 billion? Did you get married three years ago, or 100 million?

It was a very dark time for Germany, with darker times still ahead. As the writer Stefan Zweig remembered: “How wild, anarchic, and unreal were those years, years in which, with the dwindling value of money, all other values in Austria and Germany began to slip. It was an epoch of high ecstasy and ugly scheming, a singular mixture of unrest and fanaticism.”

But across the Atlantic, a very, very different mood was in the air.

In America, the mid-to-late 1920s was the wildest, rip-roaring party of all parties. WW1 had transformed America’s fortunes too. But while Germany was suffering through apocalyptic inflation and societal instability, America was experiencing the greatest windfall in its history.

As historian Scott Nations puts it, for American industrialists: ‘It became nearly impossible to not make money during the war years.”

Before WW1, the city of London had been the center of the financial universe, but all that changed with the guns of August in 1914. As Liaquat Ahamed explains in his book, Lords of Finance:

To pay for the four long, destructive years just past, every country in Europe had tried to borrow as much as it could from wherever it could. The effect was to create a seismic shift in the flow of capital around the world. Both Britain and France were forced to liquidate a huge proportion of their holdings abroad to pay for essential imports of raw materials, and both eventually resorted to large-scale borrowing from the United States. By the end of the war, the European allied powers—sixteen countries in all—owed the United States about $12 billion, of which a little under $5 billion was due from Britain and $4 billion from France.

Gold flowed out of Europe, across the Atlantic, and to New York City banks in what our friend Jesse Livermore later called a “colossal suction pump”. Any money that Germany could scrounge up for reparations went to Great Britain and France, who in turn, paid back their debts to the US.

As Europe got poorer, America got richer. When a suggestion was made to President Calvin Coolidge that the US forgive the war debts owed by their allies, he scoffed: “They borrowed the money, didn’t they? They need to repay it”. The sun was finally setting on the British empire, and in its place, the United States was basking in the glow of newfound relevance.

It was a good time to be an American. But the good times weren’t happening just because of a change in the status quo of international banking.  A tsunami* of technological innovation was happening in the US, one that would revolutionize the basic fabric of American life forever.

It was a change that was clearly evident to a man named Nate Shaw.

Nate Shaw was a black sharecropper from Alabama. He couldn’t read or write. His father had been a slave. But in 1926, Nate Shaw bought his very first car, a Ford Model T – with cash. And he didn’t buy it as a crucial need for his life or business – it was a leisure purchase. As Nate remembered telling his buddies:

I told em, “Yes, I’m thinkin of buyin me a car, get me a new Ford. Thinkin about it; I haven’t done it yet but it’s my thorough aim—my boys, anyway, they done got big enough to go and correspond with girls and I think I’ll just buy me a new Ford to please them.”

The fact that the illiterate son of a slave, living in the Deep South, could afford a brand-new car, just for fun, was not only striking evidence of the wave of prosperity America was experiencing in the twenties; It was exactly what Henry Ford had dreamed of when he’d first conceived of the Model T.

I will build a motor car for the great multitude. It will be large enough for the family but small enough for the individual to run and care for. It will be constructed of the best material, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one—and to enjoy with his family the blessing of hours of pleasure in God’s great open spaces.

These days, you can throw a rock in any direction and hit a car. But we take that ubiquity for granted; the automobile completely changed American life. It connected communities in unprecedented ways. People who had never left their hometown were now able to travel hundreds of miles at a whim, cross entire states, in a single day. That in turn drove infrastructure development – roads, highways, bridges. And that in turn created more jobs, which provided the wages, to pay for more cars, and on and on and on.

But crucially, for our story at least, the rise of the automobile also introduced many Americans to the notion of buying things on credit. It was a transformative concept. Being able to buy something you wanted now, and pay for it later over the course of small installments. And at the height of the Roaring 20s, there were so, so many things to buy. It was a time of breathless technological innovation in consumer goods. As historian Charles R. Morris writes:

Big-ticket items like cars and furniture led the parade, but there were “easy” payment plans for pianos, radios, phonographs, vacuum cleaners, and even impulse items like jewelry and clothing, which by themselves accounted for half the total borrowing.

Measured by its economic impact, the evolution of consumer credit was nearly as portentous as the light bulb or the internal combustion

It was, as Charles R. Morris writes: “the world’s first consumer paradise.”

Change was in the air. Literally.

Across the airwaves, the recent invention of radio was bringing a dizzying flow of information, entertainment, and advertising into American homes. In 1865, an editorial in the Boston Post had made a prediction about the future of then-embryonic radio: “Well-informed people know it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value.”. A Scottish mathematician named William Thomson had put it more bluntly in 1897: “Radio has no future”.

Boy, oh boy, were they wrong.

By the early 1920s, the technology had really come into its own, and Americans were buying radio sets in droves. It was now possible to hear your local mayor, your governor, even the President himself speak, directly to you, in your home. But that was just the tip of the iceberg. Americans could listen to the orchestra, band performances, boxing matches, dramas, soaps and comedy skits. Mass entertainment of every form and function was percolating into households from coast to coast.

Across the Atlantic in post-war Germany, formerly middle-class families were being driven to prostitution and crime just to make the rent. But in America, pleasant Sunday drives with the wife and kids became a cultural mainstay.

And nowhere was the sense of blue-sky optimism and boundless prosperity stronger than in New York City. If America was a party, New York was the VIP room. And Wall Street was the DJ booth, setting the tone for it all. As Charles R. Morris writes, the city was “swimming in money”.

“Global monetary rivers had rechanneled to run through New York. The deepening sediments of gold dust provided the loose change to pay for great advances in broadcasting and publishing, in advertising and popular entertainment, in couture, in culture and the arts, and finally for the decade’s great building boom that established skyscraper art deco as the characteristic New York City design standard.”

As the 20s roared on, everything in New York seemed to be going up. Skyscrapers, real estate value, even skirts.

Flapper fashion had taken hold in the form of boyish bob haircuts and revealing, skin-thin party dresses. As Morris writes: A business newspaper calculated in 1928 that, since the war, the material required for a woman’s clothing had dropped from 19¼ yards to only 7.” That skimpy new style even radiated out into small town America, as one mother from Muncie, Indiana said: “The dresses girls wear to school now used to be considered party dresses.”

It was boom time in America, baby.

And within this cultural context, in a country awash in excitement, prosperity, and positivity, the American public first became acquainted with a seductive new mode of wealth creation:

The Stock Market.

A toxic, self-destructive love affair was about to begin.

--- MUSIC BREAK ----

It’s the spring of 1929.

We’re in Flint, Michigan, and a 34-year-old mail man named Homer Dowdy is making deliveries along his daily route.

Homer had been a mail man for about 4 years. In that job, he made 60 cents an hour, for an annual salary of $2,100. It wasn’t the most glamorous job, but it was stable, free from the threat of unexpected layoffs. As Homer assured his wife: “It’s a permanent job. Everybody else can get laid off, but they still like to get letters.”

But on that fine spring day in 1929, Homer Dowdy had more than just letters in his mail bag. He noticed that it was stuffed with distinctive manila envelopes. As he went to drop off one of those envelopes to a particular house, he noticed that a woman was waiting outside the front door for him.

Everybody liked to get letters, but this woman was chomping at the bit to receive her mail that day. She was hopping around like a kid on Christmas morning. When Homer handed her a manila envelope with her name on it, she: “ripped open the envelope in front of him, “and then danced up and down with excitement.” She explained to Homer she had “just made a killing in General Motors.”

The envelopes, all of them, contained checks from brokerage houses. Profits from the stock market, making their way from Wall Street to Flint, Michigan. And as time went on, Homer noticed more and more manila envelopes for people on his route. It seemed to him, “a lot Flint folk were winning in the market.”

And they were. For almost 7 incredible years, starting around 1923, the stock market had seen an astronomical rise in share prices. Everywhere Homer looked, it seemed like people were getting rich. For months, people had been telling him that he was a fool for not throwing some money down himself. It was easy, they said. To not play the stock market was like leaving stacks of money on the table.  And although the FOMO was strong, Homer resisted the urge to join the party.

The financial sorcery practiced on Wall Street seemed vague and risky and shady to him. Homer was a traditional guy, very conservative. The best way to make money was honest pay for honest work; and he believed that the safest place for his money to be was at the local bank, not in stocks.  

But very few people shared Homer’s hesitation about the stock market in the Spring of 1929.

A decade earlier, the concept of investing in anything, much less the stock market was a strange and mysterious notion to the American public. But all that changed when the United States entered WW1 in 1917 on behalf of the Allies. To finance a rapid military build-up, the government needed to raise loads of quick cash, so they started issuing something called Liberty Bonds.

A bond is a contract with your government. When you buy a bond, you’re essentially loaning your government a small amount of money in the short term; and then, if you’re patient, they will pay you back a slightly larger amount after 10, 20, 30 years. It is one of the safest investments you can make, because it’s backed by the inherent stability of a government.

During World War 1, the US government marketed Liberty Bonds to the American public as a win-win type of product. Not only are you supporting the war effort like a good patriot, you also get a small profit from your investment in the form of interest down the road.

The Liberty Bond introduced the fundamental concept of investing to millions of Americans. It was the first investment many people ever made.

Around this same time, Americans were introduced en masse to another concept that we’ve already talked about: Credit. Pay-as-you-go. Buying stuff with borrowed money. People bought cars, furniture, refrigerators, jewelry, even cosmetics on credit. A little money down, and some interest along the way, and you can have whatever you want instantly. It’s a lending system that still drives the engine of our economy today.

Well, in the mid-1920s, these two concepts – investing and credit - met, got drunk, hooked up and had a baby from hell. Allow me to explain.

If Homer Dowdy had ever gotten tired of his 60 cents an hour job and decided to make some real money on the stock market, he would’ve gone down to one of the local brokerage offices in Flint. And once there, he would’ve been presented with an amazing opportunity.

Homer, homey, holmes, my guy! A slick broker would’ve said, “for just a little money down you can get make an obscene profit”. “How do I do that?”, the humble mail man might have replied. And the stock broker would’ve preceded to blow his mind. He would’ve explained to Homer the magic of “buying on margin”.

‘Buying on margin’ essentially means that you do not have to pay for a share of stock in full to enjoy the potential upside of it. To keep things simple, imagine you want to buy 1 share of General Motors stock, priced at $50. Well in 1929, $50 is a lot of money for the average person. For Homer that’s more than week’s wages. His wife will kill him if gambles fifty bucks on the stock market.

Not a problem, says the broker. You don’t need $50. I only need 10% from you today, or $5. I’ll loan you the other 90%. That loan, that’s called your margin. Buying on margin.

Well that’s interesting…Homer thinks. Go on…he says to the stock broker. The salesman’s eyes glitter and shine, and he proceeds to tell the mail man more.

Now imagine GM’s stock goes up, which it will, everything’s going up these days. Imagine It goes up to 55 dollars a share, or 60, or hell 70 dollars a share. You’ve still only paid 5 dollars down, the rest you are borrowing from the bank, with a little interest. As the stock rises in value, it’s paying off your loan. If you decide to cash out and take profits at 70, I keep the chunk of the loan you haven’t paid off yet, but you still make the profit from the stock’s rise, which in this scenario, is $20.

You’ve just turned $5 into $20 by doing nothing. And the more money you put down, the more these effects are compounded.

The magic of margin.

‘What happens if the stock goes down?’, the cautious and conservative Homer might’ve asked. At this point the stock broker would’ve had to suppress a laugh. What a simple rube, nothing goes down in this market. We’re in the middle of the most gravity-defying bull run in history. But he humors the misinformed mail man.

Well, he would say, if the price of GM stock goes down, below the price you initially bought it at, the value of your down-payment shrinks with it, proportionally. Which means you will need to pay more money to maintain the requirements of your loan. If you can’t cover it, I will take your stock away from you and sell it to somebody else who can pay. You will lose your initial $5 investment. In fact, you might owe me a little money in interest for giving you the loan in the first place.

The entire system was a very sharp double-edged sword, as historian Michael Perino summarized: “Margin magnified the stock buyer’s gains. A 10 percent rise in price would give the investor a 100 percent return. Of course, a 10 percent decline would wipe the investor out.”

But trying to explain the potential downside of margin buying was like explaining the potential downside of a foot massage. What could go wrong? The market was only going one way: up. Every expert, every banker and politician and broker from Muncie to Manhattan believed the stock market would continue to soar. How could an average joe not trust people who knew this stuff backwards and forwards?

Homer Dowdy never went into any brokerage firm and he never bought any stock. But millions of Americans heard that deeply seductive sales pitch and said, “Ya know what? Here’s $500. Put me down fifty shares of GM or RCA or US Steel. I could make a years’ salary in a few good weeks on the market. Let’s see how fast and far this gravy train can roll.” Many banks and brokerages required slightly higher deposits – 20%, 30% - but the result was the same. Millions of over-leveraged investors buying huge sums of stock on borrowed money.

If they’d asked our friend Jesse Livermore what he thought about all of that, he would’ve pulled a drag on his hand-rolled Cuban cigar and told them in a thick Boston accent that they were stupid son-of--bitches. These small-time investors were “minnows” as Jesse called them, people who knew nothing about these companies, nothing about how this all worked, who just blindly handed over the life savings on the fairy-tale promises of a stock salesman…they were setting themselves up for a lot of pain.

As Livermore said years after the Crash: “People who look for easy money [invariably] pay for the privilege of proving conclusively that it cannot be found on this earth.”

Making money on the stock market was not – is not - easy. It required discipline, intelligence, and good old-fashion gut instincts. Jesse Livermore had all three. Since he’d ran away from the corn farm in 1891 with five bucks in his pocket, the Boy Trader had been on quite the wild ride.

Banned from every bucket shop in New England, Jesse arrived on Wall Street with the ambition of an emperor and the face of a 12-year-old. But trading with the big guys was not like scraping up penny profits in the bucket shops. The aspiring twentysomething day trader experienced a very steep learning curve. As he reminisced years later: “The game taught me the game. And it didn't spare me rod while teaching.”

Over the course of the next decade, Jesse Livermore’s net worth was like a golden elevator. It went up and up and up, but then he accidentally pushed a wrong button and it would go drop like a rock. But then he’d have a great idea, a great trade, a great instinct, and the elevator would climb skyward once again.

When WW1 ended in 1918, Livermore was 41 years old, and he had been a multimillionaire multiple times. He’d gone bankrupt twice. He’d been in debt. He’d owned yachts and cars and mansions, then had to sell it all to cover his losses. When he was back up, he’d buy it all back, all over again. To most people, that sounds like a hellish ordeal of stress and uncertainty. But Jesse loved every single minute of it. Jesse Livermore didn’t care about security or stability, he lived for the adrenaline rush – the highs, the lows, the white-knuckle rollercoaster that only Wall Street could provide. Anything to avoid the fate he considered worse than death – a life of mediocrity. Of boredom. The life of a corn farmer’s son.

The one modicum of stability Jesse did allow into his life was… marriage, to a young woman named Dorothy Fox-Wendt. She was, according to one historian, a ”Brooklyn-born beauty, who had glossy auburn curls, bottle-green eyes, candy-red pout, and lovely hourglass figure.” She half his age and full-on gorgeous. “Perfect wife material” a mutual friend said.

Jesse had been married once before, but that union had collapsed faster than a poorly-timed investment.  This time though, Livermore assured himself, this was for real

Less than a month after the guns fell silent on the Western Front in France in 1918, wedding bells were ringing at the St. Regis Hotel, as Dorothy (or “Dotsie”, as Jesse called her), became Mrs. Jesse Livermore. Engraved onto the ring he slipped on her finger that day was the phrase “Dotsie, forever and ever.” She called him “JL”.

Jesse loved Dotsie for a lot of reasons. At only 22 years old, she was a knockout, she was fun, and she had a vivacious, firecracker personality that could light up any cocktail party in New York. Jesse took his auburn-haired trophy all over the world. They went yachting in Europe, summering in Palm Beach. She was the jewel in his crown.

But Jesse Livermore was not the kind of person to ever be satisfied with what he had. His intelligence and ambition, combined with an almost self-defeating love of risk and excitement, soon drove a wedge between he and his young wife.

Jesse Livermore loved three things. Making money on the stock market, having sex with beautiful women, and spending time with his new wife Dotsie, in that order. The only thing that could rival Jesse’s appetite for success was his appetite for women. New women, strange women, exciting women. He would cruise around New York in his yellow Rolls-Royce, hopping from party to party until he found a flapper that struck his fancy. He’d whisk them away to one of his secret love nests around the city, while Dotsie waited at their Fifth Avenue apartment for a husband who wasn’t coming home that night. The next day, Jesse would do it all over again. Wham-bam-rinse and repeat.

As one contemporary wrote: “when Livermore is speculating he is thinking of screwing; when he is screwing he is thinking of speculating.”

It wasn’t long before Dotsie found out about Jesse’s infidelity. As Gordon Thomas and Max Morgan-Whitts write:

A proud and possessive woman, she loved her husband deeply; the thought that he found sexual solace elsewhere was a cruel blow, one she could not cope with. She would never have understood that Livermore’s complex personality required him regularly to pursue his sexual peccadilloes outside the marriage bed. He had a roving eye, a fat wallet, and he did not see why marriage should hamper his freedom.

She confronted Jesse about his side pieces constantly, but he’d just take a puff on his cigar, run a hand through his ash blond hair and blow her off. He didn’t think he was doing anything wrong; or at least not enough to stop. Jesse’s cheating took a heavy toll, and Dotsie eventually found comfort in one of the few things that she could control: alcohol.

Dotsie drank and drank and drank. What began as a coping mechanism eventually mutated into a crippling addiction. BY the mid-1920s, Jesse and Dotsie Livermore were trapped in a marriage where the addictions of one partner drove the other deeper into their own. She drank because he cheated. And he continued to cheat because she drank.

But Jesse and Dotsie Livermore weren’t the only ones losing control as the 20s roared on.

By 1927, the American public’s timid flirtation with the stock market was well on its way to becoming a hot-and-heavy affair. From Chicago to Miami to Atlantic City, brokerages and banks sold tens of millions of stocks, on margin, to first-time investors who desperately wanted a piece of the action. President Calvin Coolidge, who didn’t usually say much, had famously proclaimed in 1925 that “the business of American is business”, and business was most definitely booming.

The American economy seemed unstoppable. Gold was flowing in from Europe. Interest rates were low. People were buying buying buying, and the banks were lending lending lending. Big companies like General Electric, AT&T, General Motors and US Steel were going up and up. Picking a winning stock started to seem as easy as closing your eyes and throwing a dart at the blackboard. Big bankers like JP Morgan Jr. and day-trading pirates like Jesse Livermore became celebrities in their own right.

People looked at successful financiers, stock brokers, and investors like we might look at actors or musicians today. They were the rock stars, the titans, the folk heroes of the American dream. Something to emulate and aspire to. They had made their fortunes on Wall Street, why couldn’t a housewife from Yonkers or a bellhop from Detroit?

And the soundtrack to this growing obsession was the constant whirring of a little device called the Western Union Stock Ticker.

Today, we can track the fluctuations of stock prices in microseconds, but back in the 1920s, how were you supposed to follow and monitor the minute-to-minute changes in the stock market? Did they publish every company’s stock price in the paper, or announce them on the radio? Well, sometimes, but that wasn’t fast enough.. Every brokerage office, every bank, every post office, even barber shops had something called a stock ticker. Odds are you’ve heard that phrase before, but what exactly is a stock ticker?

Essentially, it’s a printer.

Imagine an oversized snow globe. Or a glass container with a solid base, kinda like the one that holds the magic rose in Beauty & the Beast. Now imagine within that glass is an intricate brass machine, with axles, cogs, and wheels, all attached to a thin spool of paper. The stock exchanges would transmit the changing prices by telegraph lines, and the ticker machines would print out those prices in real time on this thin spool of paper. The long coil of paper, constantly printing, would twist like snake skin in a waste basket positioned below the ticker.

It sounds quaint today, but the psychological effect of the stock ticker was profound. Remember, this is an era where almost all-important information is transmitted on a delay. If something big happens – a fire, a riot, a rally, an election result, whatever – you have to wait to read about it in the paper the next day. Or wait until the radio can broadcast a report about it.

But the stock tickers were different. They were spitting out information almost instantaneously. Telegraph operators in the New York Stock Exchange would spend every minute of every trading day updating the prices as fast as humanly possible and relaying them to every corner of the country.

Essentially, it’s a primitive version of a scrolling feed. The ticker never stops ticking. It never stops updating. And much like we are glued to our phone screens in the 21^st century, anxiously awaiting the next like, the next comment, the next quick hit of dopamine – Americans in the 1920s were glued to the stock ticker. Waiting to see how their investments were performing. It was constant, never-ending, instantaneous information. Look away for a second, and you might miss something big.

The tendrils of the ticker weren’t confined to the shores of the USA either, those signals went out to Warsaw and Shanghai, Vancouver and Lisbon. Anywhere in the world people were buying and selling stock, a ticker was somewhere close by, spitting out yards upon yards of paper every day.

The stock ticker was the heartbeat, the pulse, of the national, the international, economy. And as the 1920s hurtled towards the close of the decade, that pulse was quickening. As one Italian newspaper wrote:

“With more authority than the League of Nations, and with more subtlety than Bolshevism, another world power is making a direct appeal to the strongest instinct of human nature. The new power is Wall Street.”

---- MUSIC BREAK -----

It’s the summer of 1929.

We’re in New York City, in a studio office above Carnegie Hall.

Outside the door, dozens of people are crammed into a waiting room, as the sound of stock tickers whir and rattle in the background. To pass the time, they’re talking and chattering, reading the Wall Street Journal or other financial publications.

Many of these people had been waiting for hours, but they were all assured that their brief consultation with the person behind the door would be well worth the wait. Inside the studio, calling in clients one by one, was a 61-year-old woman named Evangeline Adams.

Evangeline Adams was the most famous fortune teller in America.

When you picture fortune tellers, we tend to think of long-haired, witch-in-the-woods types, dressed in flowing robes and wearing occult talismans. But Evangeline Adams looked more like an attorney or a psychiatrist than a fortune teller.

Her wavy brown hair was cut short. She wore a plain black suit, with strands of pearls coiled high around her neck. When you sat down across from her, she would peer at you over the rims of oval spectacles and then run a wrinkled hand across her crystal ball.

Most people who visited Evangeline Adams in her studio above Carnegie Hall, didn’t do so to contact dead loved ones, or find out when they were going to die. Most people went to Evangeline Adams for advice on how to play the stock market.

As Gordon Thomas and Max Morgan-Whitts write:

Since 1927, coinciding with an upsurge in the market, Evangeline had concentrated on predicting its future. It had made her even richer, even more sought after. Four thousand people a day wrote to her.

At twenty dollars a reading, she claimed to predict how the Dow Jones Index and the New York Times Industrial Averages would behave.* Her clients numbered some of the most famous in the land. Movie queen Mary Pickford always consulted Evangeline before investing; steel tycoon Charles Schwab was said to base his buy and sell orders largely on her predictions.

For those who could not visit her studios above Carnegie Hall, Evangeline produced a monthly newsletter, explaining how the changing position of the planets would affect stocks and shares. Over 100,000 people paid fifty cents each for these forecasts, advertised as “a guaranteed system to beat Wall Street.”

The “Seer of Wall Street” as she was later called, read palms and consulted the heavens; she seemed to be able to predict events before they happened with unnerving accuracy. She had successfully foreseen stock market upswings and breaks, hotel fires and natural disasters. She’d predicted the exact flight time of Charles Lindbergh’s famous transatlantic voyage and was off by just 22 minutes. She’d once intoned about a terrible earthquake that would level Tokyo, and in 1923 it did.  In one especially creepy flourish, she had even supposedly foreseen her own death, which she firmly believed would come in 1932.

But that was three long years away, and in the meantime, Ms. Evangeline Adams didn’t prophesize for free. Once, in a restaurant, a waiter had asked her for a quick stock tip. She coldly replied: “You do not work for nothing. Why expect me to?”

As her subscriber list swelled and her fame grew, Evangeline Adams became a go-to resource for investors in search of stock market riches. And whatever dark arts Evangeline had at her disposal, they were heralding a very bright future. Asked what she thought the remainder of 1929 held for investors, she cooed: “The Dow Jones could climb to heaven.”

To the moon, she might’ve said. And everything seemed to indicate that she was right.

Since 1924, the Dow Jones Industrial Average had risen by 300%. General Motors stock was worth twenty times what it had been a few years earlier. RCA – Radio Corporation of America – was worth seventy times what it had been worth a few years earlier. Conventional wisdom dictated that, to paraphrase historian Maury Klein, a stock should sell at no more than 10 times earnings. But now the bulls were saying that 15 times earnings was a more apt figure for modern times. Now few speculators blinked at stocks selling as high as 30 times earnings.

There were occasional dips and downturns in the market of course, but nothing significant. Nothing that lasted long enough to cause any serious concern. As one Boston Investment Trust cheerfully told its clients: “temporary breaks come, indentations in the ever-ascending curve of American prosperity.”

And everyone wanted to get in on the action. As a stock speculator named Bernard Baruch remembered:

“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar, who regularly patrolled the street in front of my office, now gave me tips—and I suppose spent the money, I and others gave him, in the market. My cook had a brokerage account.”

As Maury Klein writes:

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.

One stock trader joked that: “maybe the Exchange should be moved to Yankee Stadium.”

Celebrities like comedian Groucho Marx leapt headfirst into the market too. Groucho invested almost every penny he earned in stocks, and enjoyed month after month of handsome returns. As he told a newspaperman one day: “What an easy racket. [Stock] went up 7 points since this morning. I just made myself $7,000!”

Liaquat Ahamed explains the scope of the phenomenon:

By 1929, anywhere from two to three million households, one out of every ten in the country, had money invested in and were engaged with the market. Trading stocks had become more than a national pastime—it had become a national obsession.

A British Journalist who visited America at the time named Claud Cockburn agreed, writing:

“You could talk about Prohibition, or Hemingway, or air conditioning, or music, or horses, but in the end you had to talk about the stock market, and that was when the conversation became serious.” Anyone trying to throw doubt on the reality of this Promised Land found himself being attacked as if he had blasphemed about a religious faith or love of country.”

Nothing encapsulated the mood of the times quite like an article that appeared in Ladies Home Journal in August of 1929, entitled “Everybody Ought to Be Rich”. In it, the famous businessman John. J Raskob told the American public that the secret to wealth and security could be found in stocks. His argument, summarized by a historian, was that “fifteen dollars a month, “wisely invested,” would make them wealthy within twenty years—except, perhaps, that twenty years was a long time to wait.”

+What Raskob failed to mention was that this easy path to wealth was built on the assumption that the market would never fall or correct for the next two decades.

There were some naysayers on the fringes of the speculative orgy, of course. Financially comfortable Senators like Tom Heflin of Alabama tut-tutted from the sidelines: “Wall Street has become the most notorious gambling center in the whole universe . . . the hotbed and breeding place of the worst form of gambling that ever cursed the country.”

Harper’s Magazine cautioned that the stock market was no place for amateurs, reporting that the market was: “becoming a children’s crusade, not an adventure for a few hard-boned knights; a place for the butcher and the barber and the candle-stick-maker.”

But opinions like that were in the minority. Most felt that America was on the cusp of a new era of unprecedented prosperity. It wasn’t gambling to bet big on the bright future of America. As the New York Daily Mirror wrote that same year:

The prevailing bull market is just America’s bet that she won’t stop expanding, that big ideas aren’t petering out, that ambition isn’t tiring in the wings, that tomorrow is twitching with growth pains. Graph hounds, chart wavers and statistic quoters may shout their pens hoarse with contrary sentiment—financial Jeremiahs may rave of days of doom, but these minority reports are drowned by the hurrahing ticker tape and the swish of skyrocketing securities. We’re gambling on continued prosperity, full employment, and undiminished spending capacity—on freight loadings, automobile output, radio expansion—on aviation development, crop yields, beef prices—on mail order sales and sound retailing.

Anyone with lingering doubts just had to listen to the sunny proclamations of recently-elected President Herbert Hoover. Privately, the President was concerned about the stock markets astronomical and in some ways non-sensical rise, but on the campaign trail in 1928 he had assured voters that:

‘We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us…. We shall soon with the help of God be in sight of the day when poverty will be banished from this earth.”

Even pop culture reflected the effervescent exuberance of the times. The #1 hit song of 1929 was entitled “Blue Skies”, the lyrics of which were:

Blue skies Smiling at me / Nothing but blue skies Do I see

Bluebirds Singing a song / Nothing but bluebirds All day long

Never saw the sun shining so bright / Never saw things going so right
Noticing the days hurrying by / When you're in love, my how they fly

But while most Americans saw blue skies, there were a few who sensed dark clouds on the horizon.



In the late summer of 1929, Jesse Livermore was 52 years old. The farmer’s son who had made his name on Wall Street as the “Boy Trader” had not been a boy for a very long time. Age had accentuated his weak chin and dulled his eyes, forcing him to adopt thick round glasses. His strawberry blonde hair had faded to a receding tellow

Even his unquenchable womanizing was on the wane. Jesse’s rocky marriage to Dotsie had been limping along for 10 years, but it was on life support, and in an effort to save it, they had both agreed to stop indulging in their respective addictions, cold turkey. Jesse promised he would stop cheating. Dotsie promised she would stop drinking.

Despite all their problems, they did love each other. They were tired of hurting each other. And this was a last-ditch attempt to salvage their marriage from an inevitable implosion.

So, Jesse came home every night like a model husband, and the two played house as best they could, trying to suppress the thoughts that creeped into their minds as they went to bed. Dotsie dreaming of the whiskey bottle hidden in the pantry, and Jesse fantasizing about the names in his little black book. For the sake of their marriage and their two kids, they would try their best to make it work.

But there were other things racing through Jesse Livermore’s mind that summer.

The stock market’s spectacular run had made rich men like Jesse even richer. Just like his early days at the Boston brokerage, he had impeccable timing and a Spidey sense for which stocks would dip, which would climb, and when they would it. And now that Spidey sense was telling him that something was seriously wrong with the stock market.

As he said later: “For the professional, the most dangerous time of all is when the market see-saws under the influence of unknown forces.”

He couldn’t quite put his finger on it, but he had a hunch. Something very, very bad could happen with this seemingly-unstoppable market, and it might happen very soon. It was: “a jigsaw which did not have all the pieces.”

But unlike the famous fortune teller Evangeline Adams, Jesse Livermore didn’t rely on crystal balls and tarot cards. The next morning, he hopped in his yellow Rolls-Royce and had his chauffeur take him to his massive command center above Fifth Avenue. He walked past the doorman and whisked up the elevator to the 18^thfloor, it was already buzzing with activity.

His staff of 60 traders, statisticians, analysts and typists – all hand-picked by Livermore – were hard at work. Livermore’s investigation into the health of the market had begun months earlier in the spring, and his staff was very much up to the task, as biographer Tom Rubython writes:

His research team was vastly superior to that of the U.S. government or even that of J. P. Morgan. Livermore led the team personally and knew that his information was better than almost anyone else’s in America.

As they aggregated more and more data and research, it became clear to Livermore that a massive correction, maybe even a Crash, was on the horizon. It was just a matter of when and ‘how bad’.

There were hints beneath the surface. Seemingly unrelated events that converged like pieces of red string toward Jesse’s conclusion. In London, a powerful British industrialist had just been arrested for criminal fraud. American real estate development and steel production had not risen at all in the previous month. The Bank of England was bleeding its gold reserves dry. American automobile production was down, in a booming economy – which was extremely odd.

Plus, the stock market was flush with millions of inexperienced investors, “minnows” as he called them, who were investing blindly on borrowed money. As Jesse said: “A get rich quick scheme is being played at an increasing break neck speed across America. It is a new national sport that can be played for the price of an evening paper.”

All of these factors coalesced in Livermore’s mind. He could see it; just like he could see the patterns in the prices as a 14-year-old kid, going from bucket shop to bucket shop with his trusty notebook. “Events were at a decisive stage” he said. Something big was coming, and when it happened, he was going to be ready.

On September 2^nd, 1929, while Jesse Livermore and his staff were hard at work assembling the jigsaw pieces of coming catastrophe, America was taking the day off. It was Labor Day.

With record temperatures as high as 95 degrees on the East Coast, the beaches were packed with hundreds of thousands of people from the Hamptons to Coney Island. Because it was a national holiday, the New York Stock Exchange and all its little cousins across the country were closed for the day. The tickers were silent, and the market was strong.

The Dow Jones Industrial average was one day away from a record high of 381.17. Only five years earlier, in 1924, the record high had been 98. Just as Evangeline Adams had foreseen in her crystal ball, the Dow Jones had indeed climbed to Heaven.

But what no one in America, or the rest of the world, knew - not Jesse Livermore or Evangeline Adams, not Herbert Hoover or Homer the mail-man - was that while the Labor Day weather was setting records, the stock market had too.

The Dow Jones had just its peak. This was the top.

In the coming months, the Roaring Twenties would finally boil over and send the Dow Jones plummeting down and down and down until it reached a rock bottom of 41.22 in 1932. For those doing the math at home, that’s 89% of its value – gone. The stock market would not reach the highs of 1929 for another 21 years.

September 3^rd, 1929 was the day the music stopped. And no one knew it yet.

Wall Street would keep dancing for another six weeks, but in late October, investors watched in disbelief as their profits evaporated, their savings disappeared, and their world collapsed.  In a few short years, many of those happy Labor Day beachgoers would be standing in lines at a soup kitchen.

It was the beginning of the end.

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Well guys, that is all we have time for today.

I hope you enjoyed Part 1 of what will be a three-part series on the Crash of 1929. I hate to end an on a cliffhanger, but it’s not really a cliffhanger if you already know what happens.

This first episode was really about establishing the cultural context of the crash, the mood of the times, and meeting a few of the key players involved, specifically Jesse Livermore. Next episode, Jesse will return, but we’ll also be expanding our cast of characters quite a bit.

We’re going to peel back Wall Street’s candy coating and look at the rot underneath, the bad behavior and predatory practices that contributed to the 1929 Crash. We’re going to examine the sickness in the system, and along the way we’ll meet a venal rogue’s gallery of liars, cheats, swindlers and hucksters.

But it would disingenuous to suggest that bad things only happen because of bad people. There were good-intentioned people in this story as well. Tragic figures who tried to make the world better and ended up breaking it instead. We’ll meet some of them too.

So goodbye for now, and look out for that next episode in the next few weeks.

But before I go, though; a quick favor. If you enjoyed what you heard today, please consider taking a quick second to give the show a five-star rating or a nice review on Apple Podcasts or Spotify. If you really enjoyed what you heard today and you’d like to support the show, you can join the small but loyal crew of patrons on the show’s Patreon. You can find that at www.patreon.com/conflictedhistorypodcast.

Not only will you receive my eternal appreciation, but also the occasional bonus episode. There are two up right now on the site. They’re not locked behind any membership tier, they’re just fun little extras that are my way of saying thank you when I have the downtime and the material.  

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Anywho! That’s all for me, but as always – and I know I say this every time, but thank you so much for spending your valuable time with me. I’ll see you next time.

This has been Conflicted. Thanks for listening.

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