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Quote of the Day

“I can calculate the movement of the stars, but not the madness of men”

– Sir Isaac Newton, after losing 20,000 pounds (adjusted for today’s inflation – well over $50 million) on Sea Sea Company Shares.

 

September 19th – This Day in Stock Market History

September 19th, 1720 – A run begins on Sword Blade Bank, official banker of the South Sea Company, as the South Sea Bubble finally pops.

The panic started as shares of South Sea Company were cratering, shares had fallen 70% over the previous 3 months.

Share price of South Sea Company stock

At the time, depositors at Sword Bank were able to exchange banknotes for silver, and depositors began exchanging their Swords Bank notes for silver coins.

Sword Bank tried to delay the redemption of silver by paying out withdrawals in small denomination coins very, very slowly. The tactic would only delay the inevitable as the bank was forced to close its doors September 24th.

Source: Manias, Panics and Crashes

September 19th, 1873 – One day after Jay Cooke & Co. failed, the markets open with strong selling. Cornelius Vanderbilt, America’s richest railroad tycoon, had crafted a plan during a secret meeting with his allies the night before. After the markets dropped at the open, Vanderbilt attempted to keep the market afloat by buying select stocks such as New York Central.

But unknowingly at the time, Vanderbilt had some unwanted help that day. Jay Gould, one of Vanderbilt’s fiercest rivals was quickly accumulating positions in Vanderbilt’s companies in an attempt to gain control. Over the next year Gould would quietly gain control of Erie Railroad from Vanderbilt.

The trading day closed without a large drop, and New York bars were filled with traders who drank to celebrate the “end of the panic”. However the celebration was premature, the panic would resume the next day and result in the closure of the NYSE for 10 days.

Source: Panic on Wall Street: A History of America’s Financial Disasters

September 19th, 1881 – President Garfield dies as a result of being shot July 2nd.

Stock markets had been expecting the President’s condition to worsen, as stocks rose modestly the next day.

(Stocks fell 4.5% on July 2nd on the news that Garfield had been shot.)

Source:  Wall Street and the Stock Markets: A Chronology

New York Times front page coverage of President Garfield's death on September 19th, 1881.
New York Times front page coverage of President Garfield’s death on September 19th, 1881.

Best September 19th in Dow Jones Industrial Average History

1974 – Up 3.40%, 22.14 points.

Worst September 19th in Dow Jones Industrial Average History

1931 – Down 2.90%, 3.34 points.

Read of the Day

The New York Federal Reserve’s blog has a nice piece on Sword Bank, it’s role in the South Sea Bubble and general early 1700s finance here:

Crisis Chronicles: The South Sea Bubble of 1720—Repackaging Debt and the Current Reach for Yield

<– Go To Previous Day: September 18th, 1873 – Jay Cooke & Company announces its bankruptcy, igniting the Panic of 1873.

Go To Next Day: September 20th, 1873 – Massive panic forces the NYSE to close for the first time in history. –>