Today a crash could have been a warning.
When the New York Stock Exchange opened on this day in 1929, the market lost 11% of its value at the opening bell. The trading floor, normally busy on a normal day, was panicked as investors, many of them individuals, sent word to their brokers to cash out. A meeting of the largest banks was immediately convened, their interest being that they’d loaned the money to speculators to buy the stocks and drive up prices (small investors could easily borrow more and 2/3 of the face value of the stocks they wanted to purchase, and there was more money out on loan than there was currency circulating in the entire country). The bankers put in huge “buy orders” on blue chip stocks at prices above the fire sale numbers they were commanding, suggesting their confidence in the market. Selling subsided.
The problem was that it was a Friday — known in history as Black Friday — which allowed a weekend’s worth of newspaper accounts, telegraph messages, phone calls, and endless chatter at pubs, clubs, and dinner tables before the market opened again. When it did, it cratered another 13%, and then 12% the next day. It would seesaw but generally slide for another few years, then not regain its former peak until 1954. Everyone has a theory or belief about what caused it, or what it means for us today, from conservative accusations that the gyrations and fall were prompted by fears of protectionist trade legislation then in Congress (Smoot-Hawley), to progressive allegations that economic bubbles are mechanisms for transferring wealth from workers (or small investors) to big ones (i.e. capitalists).
I say stock markets are social media, and their meaning is defined by the intentions and foibles of its participants.