Our online stock trading and trading options online group met this morning. Mr. Callahan was a guest today. Actually, he has been visiting on a regular basis. We in the group are starting to see that history may be about to repeat itself, as Mr. Callahan relates how the markets have behaved in the last 70 years.

Mr. Harry Callahan was a young man, 20 years old, when the Panic of 1929 happened. This was the so-called “Black Tuesday”, the famous — or infamous– day when the stock market dived and ushered in the very hard times that became known as The Great Depression. There was no online stock trading or online options brokers then, of course. He is now 101, and is still trading online. He brought his Apple notebook with today.

Callahan was a young trader at the time. He was also a stock broker. He made his first riches when the market crashed. In 1929, it happened really over the period of about a week, with the first downturn on the previous Thursday, then on the following Monday and then a complete rout on Black Tuesday.

He related that many people at the time thought that the markets would continue to go nowhere but up and that the good times would last forever. People were enthralled with the new tech-nologies of the time — radio and the telephone– and were buying any stock in any company that claimed it made radios or telephones. There were many manufacturers at the time. Most of the stock bought at that time was on margin, so people bought large shares with as little as 10 percent down. This worked okay as long as the stock kept rising. It was a classic bubble.

Another area of speculation sounds more familiar to us now, and that is in the area of real estate. The railroads made transportation into the major cities easier, and soon land developers were creating whole subdi-visions from former farm land. Some of these subdivisions never existed anywhere but on paper, but those who had made a “fortune” on the upward movement of the stock market took that money and made a deposit on the land.

Of course, when the buyers ran out for stocks and the markets started to tumble, brokers called their customers who had purchased on margin and asked them to make the purchase whole.

It was just a downward spiral.
The thing is, most didn’t realize how badly the consumer was stretched. Just like today.

The markets became very bearish and stayed that way until after World War II. At the time, though, investors were being advised to just hang on until better times.

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