Then and now!
HAPPY DAYS ARE HERE AGAIN!
"Whereupon stocks not only ceased their precipitous fall, but cheerfully recovered. The lesson was plain: the public simply
would not be shaken out of the market by anything short of a major disaster.
But the speculative memory is short. As the people that summer looked back for precedents, they were comforted by the
recollection that every crash of the past few years had ultimately brought prices to a new high point. Two steps up, one step
down, two steps up again -- that was how the market went. If you sold, you had only to wait for the next crash (they came
every few months) and buy in again. And there was really no reason to sell at all: you were bound to win in the end if your
stock was sound. The really wise man, it appeared, was he who 'bought and held on.'
Time and again the economists and forecasts had cried wolf, wolf, and the wolf had made only the most fleeting of visits.
Time and again the Federal Reserve had expressed fear of inflation, and inflation had failed to bring hard times. Business in
danger? Why, nonsense! Factories were funning at full blast and the statistical indices registered first-class industrial health.
Was there a threat of overproduction? Nonsense again! Were not business concerns committed to hand-to-mouth buying,
were not commodity prices holding to reasonable levels? Where were the overloaded shelves of goods, the heavy
inventories, which business analysts universally accepted as storm signals? And look at the character of the stocks which
were now leading the advance! At a moment when many of the high-flyers of earlier months were losing ground, the really
solid and conservatively managed companies were precisely those which the most cautious investor would select with an eye
to the long future. Their advance, it appeared, was simply a sign that they were beginning to have scarcity value.
What the bull operators had long been saying must be true, after all. This was a new era. Prosperity was coming to a full and
perfect flower.
Still there remained doubters. Yet so cogent were the arguments against them that at last the great majority of even the sober
financial leaders of the country were won over in some degree. They recognized that inflation might ultimately be a menace,
but the fears of immediate and serious trouble, which had gripped them during the preceding winter were being dissipated.
This bull market had survived some terrific shocks; perhaps it was destined for a long life, after all.
On every side one heard the new wisdom sagely expressed. 'Prosperity due for a decline? Why, man, we've scarcely
started!'
'Be a Bull on America. Never sell the United States short.'
By the summer of 1929, prices had soared far above the stormy levels of the preceding winter into the blue and cloudless
empyrean. All the old markers by which the price of a promising common stock could be measured had long since passed; if
a stock once valued at 100 went to 300, what on earth was to prevent it from sailing on to 400? And why not ride with it for
fifty or a hundred points, with Easy Street at the end of the journey?"
Excerpted from "Only Yesterday," by Frederick Lewis Allen. Chapter XII: The Big Bull Market. Regarding September 3,
1929, the peak of the Bull Run of the 1920's. (Perennial Library; Harper & Row Publishers.) Copyrighted 1931.
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