"It was in the early summer of 1928, with the Dow at around 200, that the market truly seemed to break free of its anchor to economic reality and began its flight into the outer reaches of make-believe. During the next fifteen months, the Dow went from 200 to a peak of 380, almost doubling in value.
That it was so obviously a bubble was apparent not simply from the fact that stock prices were now rising out of all proportion to the rise in corporate earnings - for while stock values were doubling, profits maintained their steady advance of 10 percent per year. The market displayed every classic symptom of a mania; the progressive narrowing in the number of stocks going up, the nationwide fascination with the activities of Wall Street, the faddish implications of a new era, the suspension of every conventional standard of financial rationality. and the rabble enlistment of an army of amateur and ill-informed speculators betting on the basis of rumors and tip sheets.
By 1929, anywhere from two to three million households, one out of every ten in the country, had money invested in and were engaged in the market. Trading stocks had become more than a national pastime - it had become a national obsession. These punters were derisively described by professionals like Jesse Livermore as 'minnows.' But while the bubble lasted, it was the people who were the least informed who were the ones making the most money. As the New York Times described it, 'The old-timers, who usually play the market by note, are behind the times and wrong,' while the 'new crop of speculators who play entirely by ear are right.'
'The city that was most obsessed was New York, although Detroit, home to so many newly enriched 'motor millionaires' came a close second, followed by two other new-money towns, Miami and Palm Beach. The infatuation with the market took over the life of New York City sucking everything into its maw. As Claud Cockburn, a British Journalist, newly arrived in America observed, '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.
As the crowd piling into the market grew, brokerage house offices grew more than doubled - from 700 in 1925 to over 1,600 in 1929 - mushrooming across the country into such places as Steubenville, Ohio; Independence, Kansas; Amarillo, Texas; Gastonia, North Carolina; Storm Lake, Iowa; Chickasha, Oklahoma, and Shabbona, Illinois. These 'board rooms' became substitutes for the bars shut down by Prohibition - the same swing doors darkened windows and smoke-filled rooms furnished with mahogany chairs and packed with all sorts of nondescript folk from every walk of life hanging around to follow the projected ticker-tape flickering on the big screen at the front of the office. The grail was to discover the next General Motors, which had risen twentyfold during the decade, or the next RCA, which had gone up seventyfold. The newspapers were full of articles about amateur investors who had made fortunes overnight.
The old crowd on Wall Street had a rule that a bull market was not in full stampede until it was being played by 'bootblacks, household servants, and clerks'. By the spring of 1928, every type of person was opening a brokerage account - according to one contemporary account 'school teachers, seamstresses, barbers, machinists, necktie salesmen, gas fitters, motormen, family cooks, and lexicographers.' Bernard Baruch, the stock speculator who had settled down to a life of respectability as a presidential adviser, reminisced, 'Taxi drivers told you what to buy. The shoeshine boy could give a you 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.' The stock pronouncements of shoeshine boys would become forever immortalized as the emblematic symbol of the excesses of that period."
Ahamed, L. (2009). Lords of Finance: The Bankers Who Broke the World
