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Quote of the Day

 “Regarding the Great Depression, … we [The Federal Reserve] did it. We’re very sorry. … We won’t do it again.”

-Ben Bernanke, in a speech in 2002, regarding the causes of the Great Depression. On this day in 1932, after the Dow Jones Industrial Average had already fallen 75%+, the Federal Reserve announces that it will embark on an “easier money policy”.

January 13th – This Day in Stock Market History

January 13th, 1932 – The Dow Jones Industrial Average rises 6.26%, or 4.97 points, as the Federal Reserve announces that it will enact an “anti-deflation” campaign and an easier credit policy.

At the time this would be the 6th best day, on a percentage basis, in stock market history.

New York Times coverage of the sharp rise in stock prices on this day in 1932
New York Times coverage of the sharp rise in stock prices on this day in 1932

Despite this positive news, the Dow Jones Industrial Average (which was already down more than 75% from its 1929 highs), would fall another 50% before bottoming out at 41.22 on July 8th, 1932.

January 13th, 2000 – Bill Gates steps down as Microsoft’s CEO. Gates was in charge of Microsoft from its founding in 1975 until this day in 2000.

Under his rein, Microsoft’s stock did pretty well:

Source: Macrotrends

Steve Ballmer, Gate’s former college classmate, would take over as CEO. Microsoft’s stock would fall nearly 4% the next day.

January 13th, 2016 – The Dow Jones Industrial Average falls 364 points, or 2.2%, as oil closes below $30 per barrel for the first time in 12 years.

Chart from MacroTrends
Chart from MacroTrends

The rapid decline in the price of oil from 2014 to 2016 would lead to a wave of defaults and bankruptcies in the energy sector.

Over a 18 month period from the start of 2015 to mid 2016, 64 oil companies would declare bankruptcy. 27% of all high yield bonds in the oil exploration and production field would default.

The decline would be a major factor in the energy sector returning the lowest returns of any sector during the 2010 decade:

Source: CNN Money

Best January 13th in Dow Jones Industrial Average History

1932 – Up 6.26%, or 4.97 points.

Worst January 13th in Dow Jones Industrial Average History

2016 – Down 2.21%, or 364.81 points.

Read of the Day

Ben Bernanke, the Federal Reserve Chairman during the 2008-2009 financial crisis was a student of the great depression, and the Federal Reserve’s actions in particular. His studies of the great depression led him to act the way he did during the great financial crisis. He has been critical of the Federal Reserve’s actions between 1929 and 1932, even saying: “Regarding the Great Depression, … we [The Federal Reserve] did it. We’re very sorry. … We won’t do it again.”

What did the Federal Reserve do wrong from 1929 to 1932? The news clipping from this day in history is one example. The Federal Reserve was very slow to act as the economy deteriorated at the start of the great depression.

If you are interested in more, there are a couple sources of information regarding the Federal Reserve’s actions in time of crisis:
The Economics of the Great Depression: A Twenty-First Century Look Back at the Economics of the Interwar Era

And, Bernanke’s memoir of his time as Federal Reserve Chairman:
The Courage to Act: A Memoir of a Crisis and Its Aftermath

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