The stock market landscape has evolved dramatically since the notorious crash of 1929, a subject explored in depth by Andrew Ross Sorkin in his new book titled “1929.” Sorkin highlights the stark contrasts between the trading environment of the late 1920s and today, painting a vivid picture of how changes in information access and market regulations have influenced trading behaviors.
In 1929, the scene outside the New York Stock Exchange (NYSE) was bustling, in stark contrast to today’s relatively sedate atmosphere, even during periods of market volatility. Sorkin notes that individuals flocked to the streets to see the status of their investments firsthand. This reliance on physical presence was due to limited communication technologies; there were no mobile apps or quick methods of relaying market changes. As Sorkin explained on Bloomberg’s Odd Lots podcast, “People had gone down there physically because they wanted to see what was actually happening… you couldn’t call somebody.”
Sorkin’s book outlines seven major differences that illustrate the evolution of the market leading up to the infamous crash and its aftermath:
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Gender Inequality on the Trading Floor: Until 1943, women were barred from the NYSE floor. Initially, women were only allowed to take on roles such as “quote girls” or “carrier pages.” The early 20th-century trading environment was overwhelmingly male-dominated, a stark contrast to today’s leadership, which includes two female presidents of the NYSE since 2018.
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Licensed Manipulation of Stocks: The practice of paying actors to simulate trading activity on the exchange floor was legal at the time. For example, a specialist named Mike Meehan had been known to orchestrate insider trading rings where he would orchestrate trades to inflate stock prices artificially before selling off at the peak.
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Widespread Physical Brokerage Locations: The trading environment was vastly different, with brokerage offices scattered throughout New York City. People would physically visit these locations to conduct trades. With the nationwide prohibition prohibiting the sale of alcohol, speculation on the stock market became a favored pastime.
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Easier Margin Trading: Margin trading was prevalent, with individuals often able to trade on ten times margin. This meant that ordinary Americans could invest a fraction of the stock’s price while borrowing the majority, leading many to feel rich as the market ascended.
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Lack of Financial Transparency: In contrast to today’s regulatory environment where companies must disclose extensive financial information, the late 1920s saw minimal requirements for transparency. Documentation such as 10-K reports was absent, allowing for considerable ambiguity around a company’s financial health.
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Absence of Regulatory Oversight: Prior to the establishment of the Securities and Exchange Commission (SEC) in 1934, the market operated without formal oversight. Regulations that are standard today simply did not exist, enabling risky and often fraudulent practices.
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Influence of Market Astrologers: The period even saw the emergence of stock market astrologers like Evangeline Adams, who had a significant following. Her stock recommendations, based on astrological insights, were highly sought after, showing the extent of the market’s vulnerability to speculative belief systems.
Sorkin’s exploration highlights how accessibility to reliable information, regulatory frameworks, and even gender inclusivity in finance have drastically altered the fabric of the stock market, contrasting sharply with the speculative nature and chaotic trading environment of the late 1920s.
