The Great Crash of 1906

We recently celebrated the 100th anniversary of the start of the longest bear market in history.
What’s that, you say never heard of the Crash of ‘06?
On January 19, 1906, the Dow peaked at 103. That date may not ring throughout the annals of history, but it was pretty important for the stock market.
The stock market soon crashed and by 1907, the Dow bottomed out at 53. Now that’s a bear market! None of this wussy 1.8% nonsense.
The Dow eventually recovered, but the January 19, 1906 high haunted the market for years to come. Even by 1914, the index was still in the 80’s when the exchange was shut down due to troubles “over there.” Soon traders started doing business on the street, so the NYSE opened again that winter. And once again, the Dow plunged 53.
Nevertheless, the Great War was good business, and the Dow finally hit a new record of 103.11 on September 28, 1916. The Dow nearly got to 120 in 1919, but there were still some nasty corrections. The Dow fell below 70 in 1917 and again 1921.
By 1923, the market took off. The Dow broke 100 in 1924. In early 1928, it hit 200, and a year later it smashed through 300. Over the summer, the Dow peaked at 380.
Three years later, it was at 42.
After Pearl Harbor, there was another slow sell-off. On April 28, 1942, the Dow finally bottomed out at 92.92.
Wanna read something scary? This is from FDR’s fireside chat that day:

Yesterday I submitted to the Congress of the United States a seven-point program, a program of general principles which taken together could be called the national economic policy for attaining the great objective of keeping the cost of living down. I repeat them now to you in substance:
(1.) First. We must, through heavier taxes, keep personal and corporate profits at a low reasonable rate.
(2.) Second. We must fix ceilings on prices and rents.
(3.) Third. We must stabilize wages.
(4.) Fourth. We must stabilize farm prices.
(5.) Fifth. We must put more billions into War Bonds.
(6.) Sixth. We must ration all essential commodities, which are scarce.
(7.) Seventh. We must discourage installment buying, and encourage paying off debts and mortgages.

Whoa! I can’t imagine any politician talking like that today.
The market started to rise. July 2, 1942 was the last time the Dow closed below 103—an astounding 36-1/2 years after it first hit that level.
For comparison, 36-1/2 years ago was the time of Woodstock and the Moon landing. Today’s Dow is over 12 times higher than it was back then. That’s a good fact to keep that in mind the next time you hear someone complain.

Posted by on January 22nd, 2006 at 1:38 pm


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