by Gary Alexander
October 24, 2023
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August & February.”
— Mark Twain, in “The Tragedy of Pudd’n’head Wilson” (1894)
When we say that the fourth quarter is historically strong, we don’t mean to say that this traditional year-end bonanza starts on the opening day of October. Quite often, in history, the market has reached its cyclical low during the last week of October – which we enter this week, and into next Tuesday.
Here are some major 20th Century bull markets which began in late October – and what happened next.
Market Bottom Date:And what the Dow did next
- October 27, 1923:The Dow then went up 345% by September 1929.
- October 22, 1957:The Dow then went up 63% by January 1960.
- October 25, 1960:The Dow then went up 30% within one year.
- October 23, 1962:The Dow then went up 78% by February 1966.
- October 20, 1987:The Dow then went up 73% by July 1990.
- October 29, 1990:The Dow then went up 382% by early 2000.
- October 28, 1997:The Dow then went up 64% in just over two years.
Data Source: Stock Trader’s Almanac, 2010: Page 131
Also, two great market-panics happened on this date early last century – in 1907 and 1929. They were each deemed Black Thursday: one was rescued by J.P. Morgan, Sr., one was ruined by J.P. Morgan, Jr.
Black Thursday, October 24: One Rescued (One Ruined) by The House of Morgan
The Panic of 1907 began on Tuesday, October 22, 1907, when Charles T. Barney, President of the Knickerbocker Trust Company, bravely opened the doors of his troubled bank, the third largest trust company in the city. That was not a wise move. Within a few hours, depositors withdrew $8 million.
By mid-afternoon, the Trust announced its insolvency and closed its doors. The next morning, the streets of lower Manhattan were choked with anxious bank depositors lined up in front of even the soundest of banks. The U.S. Treasury (before the Fed was born) was not authorized to bail out banks, so J.P. Morgan (Sr.) deposited $35 million in troubled banks and told those banks to lend that money out, “or else.”
Then came Black Thursday. Quoting from “The House of Morgan,” by Ron Chernow (page 198):
“On Thursday, October 24, with stock trading virtually halted, New York Stock Exchange president Ransom H. Thomas crossed Broad Street and told Morgan that unless $25 million were raised immediately, at least fifty brokerage firms might fail. Thomas wanted to shut the Exchange [but] Pierpoint wagged an admonitory finger, ‘It must not close one minute before [normal].”
“At two o’clock, Morgan summoned the bank presidents and warned that dozens of brokerage houses might fail unless they mustered $25 million within 10 or 12 minutes. By 2:16, the money was pledged. Morgan then dispatched a team to the Stock Exchange floor to announce that call money would be available. Pierpont heard a mighty roar across the street. Looking up, he asked the cause; he was being given an ovation by the jubilant floor traders” (House of Morgan, p. 198).
That night, Morgan called every important banker in the city to his private library on East 36th Street. After hours of haggling, they came up with a plan to use clearinghouse certificates instead of cash to settle all transactions, in effect increasing the money supply by a then-huge $84 million.
Just like that, the Panic of 1907 was over – in a week. This was Morgan’s shining moment, like a great general commanding troops in the heat of battle. Even President Teddy Roosevelt, who had railed against “the malefactors of great wealth” in early 1907, now said, “Those substantial businessmen acted with wisdom and public spirit.” The Dow didn’t bottom out until November 15, 1907, but then it gained 90% in two years, while J.P. Morgan, at age 70, was worn out, so he promoted the creation of a central bank.
There was another “Black Thursday” on today’s date, October 24, 1929, the first big down-day of the Crash of 1929. Sell orders piled up the night before and the morning brought panic selling at any price. Terrified investors sold a record 13 million shares. The panic was stemmed at 1:30, when Dick Whitney, the Exchange President, stepped to the center of the floor and said loudly, “I will buy 10,000 shares of U.S. Steel at $205.” Buyers were also inspired by J.P. Morgan, Jr., who said this was merely a passing phenomenon, but he did not buy much. The ticker tape did not stop spitting out prices until 7:08 p.m.
Friday, October 25 was an almost exact replay, with record losses, on record volume (13 million shares), but by the end of trading, this was the only “up” day between Black Thursday and Black Tuesday, next week. The big difference between 1929 and 1907 was that Morgan, Jr. had no follow-through on Black Tuesday, when he basically said, “Let these speculators go broke. This is a normal cleansing process.”
The Associated Press report on October 29 said, “powerful financial interests stepped aside today and let the stock market drop.” Morgan, Jr., didn’t muster the leadership and prestige of his illustrious father.
(*Main source for this section: “The House of Morgan,” by Ron Chernow.)
Cold War Milestones During This Week in the Postwar Era
The term “Cold War” entered our vocabulary 75 years ago today, when Presidential advisor Bernard Baruch was speaking to the Senate War Investigating Committee on October 24, 1948, and he stumbled on the term, “Although the war is over, we are in the midst of a cold war, which is getting warm.”
Here are some examples of what Baruch was talking about, and some of the market repercussions:
- On October 23, 1956, Hungary launched its David vs. Goliath resistance against Soviet occupation, which soon escalated into a full-scale national revolt. The Hungarian government first supported the rebels, under Premier Imre Nagy, but then Janos Kadar formed a counter-revolt, and asked the Soviets to intervene, which they did, with tanks, in early November. The Dow rallied from 481 to 499 by year’s end.
- P.S. Hungary became a free nation on this date in 1989, leading directly to the fall of the Berlin Wall.
- October 22, 1957 formed a major Dow bottom at 419.79, reflecting national gloom after the launching of the Soviet satellite, Sputnik, earlier that month. But then, the Dow rose 63% by the end of 1959, starting with the biggest daily gain of the 1950s the next day, October 23, 1957, rising 17 Dow points (+4.1%). Why such a rise? President Eisenhower launched a speaking tour to lift America’s gloomy spirits, and to generate support for his economic policies, plus a vigorous new launch of America’s own space program.
- On October 22, 1962, the day after he was supposed to appear at the close of the Seattle World’s Fair, President Kennedy addressed the nation on TV concerning Russian missile bases in Cuba. He announced a naval blockade, beginning the Cuban missile crisis. On this date, October 24, the tensest moments of the crisis began, as Soviet ships mostly reversed their course as they approached the U.S. blockade, with the exception of one tanker, Bucharest. At the direction of the Joint Chiefs of Staff, all U.S. military forces went to DEFCON 2, the highest military alert ever reached in the postwar era, poised for full-scale war.
Ironically, October 24 marked the day the Dow rose the most (+3.3%). The U.S. and the USSR were each in a state of nuclear readiness. That day, Adlai Stevenson, the U.S. Ambassador to the U.N., demanded of USSR Ambassador Zorin to admit that their Cuban missile bases existed. The once mild-mannered, twice-losing President candidate declared, “I am prepared to wait for my answer until hell freezes over.”
And the market rose! War and tough words energized the markets. The Dow rose over 10% in November, and +78% from October 23, 1962, to February 9, 1966, in the height of Bernard Baruch’s Cold War
- On October 26, 1973, Israeli forces reached the Suez, trapping the Egyptian army, thus ending the Yom Kippur war after just 20 days. That war had resulted in an Arab oil embargo, tripling the price of crude oil within a few months, but the Dow actually rose 7.8% during September and October 1973, so war once again seemed to be good for the stock market, despite the OPEC oil embargo imposed on October 20.
- On October 23, 1983, Lebanese suicide commandos drove trucks packed with explosives into two Beirut bases where U.S. and French troops were stationed. The attacks killed 241 U.S. Marines and Navy personnel and 58 French soldiers. There were very few survivors found in the rubble.
This attack was far worse, from an American perspective, than the recent Hamas attacks on Israel, where perhaps a dozen Americans were killed and a handful maybe taken hostage, but President Reagan did not respond directly to the terrorists in Lebanon in 1983. Instead, two days later, on October 25, U.S. Marines invaded Grenada, where Cuban advisors were building a 12,000-foot airstrip to accommodate Soviet long-range bombers, similar to the airfields that precipitated the 1962 Cuban crisis 20 years previously.
Ironically, there was also a big (-7%) market crash on Friday the 13th of October 1989, but it had more to do with an airline financing problem, not a cold war crisis. Less than a month later, the Berlin Wall fell on November 9-10, and the Cold War was suddenly over. October market crises from then on had more to do with global financial situations – most notably an Asian Currency Crisis (October 22-26, 1997) and the Great Financial Crisis of September and October 2008. Other than that, October has receded from our “pain index” in recent decades, but we still continue to look forward to the dawn of November, much like the morning after any Halloween haunts, even if the current global news seems dark and dismal yet again.