A Classic Wall Street Tale – Soon To Be Repeated
October 29 is an important anniversary date that many do not remember because they did not live through it. On that date in 1929 the stock market crashed to an astonishing level.
Major media outlets are praising Aaron Ross Sorkin’s forthcoming book 1929: Inside the Greatest Crash in Wall Street History–and How It Shattered a Nation, (Random House, November 4 2025).
Coincidentally I was just finishing an older book about the same subject. It is among the best books ever written about Wall Street.
The Day the Bubble Burst: A Social History of the Wall Street Crash of 1929 by Gordon Thomas and Max Morgan-Witts (Doubleday, 1979) is a masterful work of storytelling.
While John Kenneth Galbraith’s 1955 book The Great Crash 1929, remains the seminal work on the economic causes of the crash, Thomas and Morgan-Witts examine the human aspects of the financial calamity which ushered in the Great Depression.
Threading together the lives of movers and shakers of Wall Street and the ordinary citizen, the authors lay out stories that resonate today. Events unfolding before us now, have similarities to the great crash of 1929.
Because this book was released 46 years ago, the authors had the advantage of being able to conduct interviews with many eyewitnesses and participants of the events leading up to the crash.
While many other books focus upon the economic causes of the crash, The Day The Bubble Burst is about people. And there is the hook that sucks the reader in, for this does not read like history but a novel.
The crash itself occupies less than a quarter of the book. The lead up to the crash and the individuals, circumstances and their lives and times is what drives the story.
The People
The personalities of these personalities come to life within the pages. Authors Thomas and Morgan-Witts deftly move from person to person, chapter after chapter to weave a tale of greed and innocence.
Well known key figures such as Henry Ford, A.P Giannini (founder of The Bank of America), J.P. Morgan Jr. and Joseph Kennedy, father of future President John F. Kennedy play a large part throughout the narrative.
Then there are the stories of people known usually only to financial history buffs.
Jesse Livermore; one of the great bears of all time, who made a career of shorting the stock market to make millions.
Will Durant; the founder of General Motors who is as much of a bull as Livermore is a bear.
John J. Raskob; the man responsible for building the Empire State Building as beacon to America before the crash occurs.
Richard Whitney; the boorish, wealthy acting-President of the stock exchange who makes poor investments for himself and is continually bailed out by his brother.
Described in intriguing detail are the backgrounds and movements of some of the other financial powerhouses of the time like Michael Meehan, Charles MItchell, Clarence Hatry, Arthur Cutten and Percy Rockefeller.
And finally there are the unknown folks such as Jolan Slezak a poor, 15-year-old Michigan girl with a $400 trust fund in a bank being embezzled by its workers who play the stock market and lose.
The Flint Michigan bankers; who rationalize their embezzling to themselves.
Pat Bologna; a shoeshine boy who plies his trade on Wall Street with a powerhouse customer base giving him valuable insider tips on the market.
Charlton McVeigh; an up and coming broker, recently married to a socialite and working at the House of Morgan who has an inside view of the most influential private bank in the world.
Edith Stone; a modern woman of the twenties and the daughter of a wealthy broker, seeking her own way as an author in a world about to unravel in many ways.
The Crash of October 29
The idea that “everyone should be rich” caught on during the 1920s. And people with no stock experience were not investing, but purely speculating.
What many people assume today is that the 1929 crash was a one day event. It was not. There had been indications for two years that the market was overvalued and did not reflect the true price of companies. There were steep drops in the market and a curbing of financial growth on multiple occasions in 1928 and 1929.
The huge losses of Tuesday, October 29 were preceded by record setting losses on Thursday, October 24.
A main reason for the ultimate tumbling of the market was that many investors had purchased their stock on margin, usually ten percent, but sometimes as little as three percent. When brokers called investors to put up more margin as stock prices plummeted, most could not and the investors were sold out.
The authors write:
There was a great deal of talk about the market being the ultimate gambler’s den; about it being the world’s first example of financial mass-psychology manipulation in action; about it being the product of a unique era, the Roaring Twenties.
Seeking a historical explanation, some intellectuals traced the origin of the Crash back as far as World War I and to the merry-go-round of money that resulted from the war reparations imposed on a defeated Germany. Many saw the Boom which had to precede the Crash as an integral part of the times; church leaders later pointed to the fact that the arrival of the bull market coincided with a national relaxing in morals, a reduction in religious worship, the emergence of the Ku Klux Klan, and much else. Such post-mortems were a very reassuring and necessary salve to a still basically puritanical national conscience.
On reflection, there were millions of ordinary men and women who decided the “stock market craze” had resulted from breaking faith with the great Puritan tradition that an honest day’s pay came only from an honest day’s work. They came to the comforting conclusion the Crash was the inevitable product of a craze spawned by the belief that money no longer had actually to be earned; that the stock market, for a brief period of time, had acted as a substitute for the normal method of acquiring wealth.
Could it Happen Again?
Obviously there will be another crash.
The question is when?
While the scenarios and people that caused the 1929 crash are different from today, many of the underlying causes remain. The stock market is once again clearly overvalued when you examine price to book ratio for many of the top stocks. The overvaluation of stocks now, is eerily similar to 1929.
The removal of investor guardrails and regulatory failure is not a good formula for investor safety.
Cryptocurrency which has dubious value is is now used by millions of investors who do not comprehend what it actually is. There are proposals by government officials and crypto companies of questionable motives to legitimize and sanction crypto for 401ks and retirement accounts. The SEC has formed a task force to create a regulatory framework for cryptocurrencies..
Another sign that the market will crash are jobs are declining and the cost of living is rising. According to Forbes more than one in four Americans has less than $1,000 in savings.
In 1979 when the book was published, Thomas and Morgan-Witts asked if a crash would happen again. They did not foresee the three crashes that subsequently occurred in 1987, 2000 and 2007-09. But they did warn:
Professor Kenneth Galbraith, secure in the position of preeminent financial Cassandra, believes that many of the lessons, having been digested, are in danger of being forgotten; or that, even if never forgotten, man may be incapable of taking corrective action in the present to offset financial disaster in the future.
What will be the catalyst for our next financial disaster? To venture a guess would be foolhardy. But by reading The Day The Bubble Burst, maybe you will be able to recognize some of the signs.
