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Quote of the Day

“Confidence and courage are the essentials of success in carrying out our plan. You people must have faith; you must not be stampeded by rumors or guesses. Let us unite in banishing fear. We have provided the machinery to restore our financial system; it is up to you to support and make it work. It is your problem no less than it is mine. Together we cannot fail.”

-Franklin D. Roosevelt, at the close of his first “fireside chat”, a national address to urge calm during the banking panic of 1933. This day in history represents the beginning of the banking crisis that would close banks nationwide.

October 31st – This Day in Stock Market History

October 31st, 1932 – Nevada declares a state wide bank holiday. In a sign of things to come, Nevada would become the first of many states to declare state wide banking holidays before a nationwide banking holiday is declared by FDR March 6th, 1933.

Declines in the mining and livestock industries hit Nevada hardest, which saw runs on more than a dozen Nevada banks the week prior to October 31st, 1932.

Source: It Was a Very Good Year: Extraordinary Moments in Stock Market History

nevada_bank_holiday_1932
New York Times coverage of Nevada’s 1932 banking holiday

Although this time in late 1932 and early 1933 represents the worst periods of panic during the great recession, the stock market had actually bottomed by late 1932. It is always easier said than done, but this is a perfect example of Buffett’s famous quote, “Buy when others are fearful..”. The Dow Jones Industrial Average would close the month at 61, a level it would briefly revisit in early 1933, then never see again.

Dow chart 1930-1940
Chart from Macrotrends

Best October 31st in Dow Jones Industrial Average History

1929 – Up 5.82%, 15.04 points.

Worst October 31st in Dow Jones Industrial Average History

1930 – Down 2.51%, 4.72 points.

Read of the Day

Ben Bernanke, before he became Federal Reserve chairman, gave a speech about the Federal Reserves’ role of popping asset price bubbles and how their policies in the 1920s that contributed to the great depression:

“As you know, the “Roaring Twenties” was a prosperous decade, characterized by extensive innovation in technology and in business practices, rapid growth, American economic dominance, and general high spirits. Stock prices rose accordingly. As early as the mid-1920s, however, various policymakers and commentators expressed concern about the rapidly rising stock market and sought so-called corrective action by the Federal Reserve

The corrective action was not forthcoming, however. According to some authors, this was in large part because of the influence of Benjamin Strong, long-time Governor of the Federal Reserve Bank of New York and America’s pre-eminent central banker of that era. Strong resisted attempts to aim monetary policy at the stock market, arguing that raising interest rates sufficiently to slow the market would have highly adverse effects on the rest of the economy. Some of our critics damn us vigorously and constantly for not tackling stock speculations,” Strong wrote about the debate. “I am wondering what will be the consequences of such a policy if it is undertaken and who will assume responsibility for it.”

The speech can be found in its entirety here: https://www.federalreserve.gov/boarddocs/speeches/2002/20021015/default.htm

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