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I've referred to this in the past as The Principle of Maximum Ruin --"In the autumn of 1929 the New York Stock Exchange,
under roughly its present constitution, was 112 years old. During
this lifetime it had seen some difficult days. On September 18,
1873, the firm of Jay Cooke and Company failed, and, as a more or
less direct result, so did fifty-seven other stock exchange firms
in the next few weeks. On October 23, 1907, call money rates
reached 125 percent in the panic of that year. On September 16,
1920 -- the autumn months are the off season in Wall Street -- a
bomb exploded in front of Morgan's next door, killing thirty
people and injuring a hundred more.
A common feature of all these earlier troubles [[previous panics]]
was that having happened they were over. The worst was reasonably
recognizable as such. The singular feature of the great crash of
1929 was that the worst continued to worsen. What looked one day
like the end proved on the next day to have been only the
beginning. Nothing could have been more ingeniously designed to
maximize the suffering, and also to insure that as few as possible
escaped the common misfortune.
The fortunate speculator who had funds to answer the first margin
call presently got another and equally urgent one, and if he met
that there would still be another. In the end all the money he
had was extracted from him and lost. The man with the smart
money, who was safely out of the market when the first crash came,
naturally went back in to pick up bargains. ... The bargains then
suffered a ruinous fall. Even the man who waited out all of
October and all of November, who saw the volume of trading return
to normal and saw Wall Street become as placid as a produce
market, and who then bought common stocks would see their value
drop to a third or fourth of the purchase price in the next
twenty-four months. ... The ruthlessness of [the stock market was]
remarkable. ...
Monday, October 28, was the first day on which this process of
climax and anticlimax ad infinitum began to reveal itself.
It was another terrible day. Volume was huge, although below the
previous Thursday -- nine and a quarter million shares as compared
with nearly thirteen. But the losses were far more severe.
... Indeed the decline on this one day was greater than that of
all the preceding week of panic. Once again a late ticker left
everyone in ignorance of what was happening, save that it was bad.
On this day there was no recovery."
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