Mass speculation went on throughout the late 1920's. In 1929 alone, a record volume of 1,124,800,410 shares were traded on the New York Stock Exchange(end note 38). From early 1928 to September 1929 the Dow Jones Industrial Average rose from 191 to 381(end note 39). This sort of profit was irresistible to investors. Company earnings became of little interest; as long as stock prices continued to rise huge profits could be made. One such example is RCA corporation, whose stock price leapt from 85 to 420 during 1928, even though it had not yet paid a single dividend(end note 40). Even these returns of over 100% were no measure of the possibility for investors of the time. Through the miracle of buying stocks on margin, one could buy stocks without the money to purchase them. Buying stocks on margin functioned much the same way as buying a car on credit. Using the example of RCA, a Mr. John Doe could buy 1 share of the company by putting up $10 of his own, and borrowing $75 from his broker. If he sold the stock at $420 a year later he would have turned his original investment ofjust $10 into $341.25 ($420 minus the $75 and 5% interest owed to the broker). That makes a return of over 3400%! Investors' craze over the proposition of profits like this drove the market to absurdly highlevels. By mid 1929 the total of outstanding brokers' loans was over $7 billion(end note 41); in the next three months that number would reach $8.5 billion(end note 42). Interest rates for brokers loans werereaching the sky, going as high as 20% in March 1929(end note 43). The speculative boom in the stock market was based upon confidence. In the same way, the huge market crashes of 1929 were based on fear. Prices had been drifting downward since September 3, but generally people where optimistic. Speculators continued to flock to the market. Then, on Monday October 21 prices started to fall quickly. The volume was so great that the ticker fell behind(end ...
