Originally published on Torontoist on August 12, 2011.
Bay Street, looking south from City Hall in 1929. City of Toronto Archives, Fonds 1244, Item 7010.
Given the recent turmoil in markets both international and domestic, it seems like a good time to look back at our city’s history for tips on how to handle a stock market crash. One story goes that, following the harrowing experience of trading shares on Black Tuesday in 1929, a Toronto investor arrived home with news for his wife. He told her that due to the heavy losses he incurred that day he resigned from six of the seven clubs to which they belonged, sold their second car, advertised that their garage was for rent, and cancelled nearly all of their charge accounts. He promptly fired the maid and went to sleep. As Doug Fetherling asked at the end of this tale in his book Gold Diggers of 1929, “What else was a gentleman to do?”
The Telegram, October 29, 1929.
This investor reacted as extremely as anyone else who found their financial worth diminished after the markets closed on October 29, 1929. Contrary to stereotypical images, there weren’t any bodies to scrape off the sidewalks of the Financial District in the immediate aftermath of the crash, no Canadian banks collapsed, and newspaper headlines weren’t doom-filled predictions like current headlines about the global financial mess. Indeed, Toronto papers were equally or more concerned with the provincial election held on October 30, which Premier G. Howard Ferguson’s Conservatives won by a landslide.
Cartoon depicting Ontario Premier G. Howard Ferguson’s electoral victory and a stock ticker. Illustration by Harold S. Johnston. The Mail and Empire, November 1, 1929.
“In the heady days of 1929,” noted Fetherling, “ordinary folks discussed playing the market the same way people in 1969 spoke of scoring dope; in elevators, on trains, and at parties they bored everyone silly with talk of their portfolios the way today people chatter about their RRSPs.” People were taken by magazine stories with inspiring accounts of those who built their fortunes by playing the stock market for six months.
At the time, Toronto was home to two trading temples: the reputable Toronto Stock Exchange (TSE) on Bay Street and the corrupt Standard Stock and Mining Exchange (SSME) on Richmond Street. The latter was a hive of activity for scam artists who bilked investors through phoney mining operations, short-selling, and bucket shops, as well as shady characters who took advantage of the widows of deceased mining executives. Virtually non-existent securities regulations helped those who traded on the SSME lessen investor pockets to the tune of $100 million in the years leading to the crash. Immediately following the crash, the Financial Postpublished a 10-week series of exposés on the shady dealings at the SSME, which resulted in the arrest of 27 still-wealthy stockbrokers in early 1930. Regulations were tightened and the SSME was forced to merge with the TSE in 1934.
Financial Post, November 7, 1929.
Though on the surface all appeared well for local investors in 1929, behind the scenes nervousness, such as warnings the Bank of Nova Scotia sent to its branches urging managers to watch out for over-speculation, took hold. The prelude to the crash came on October 24 (“Black Thursday”), when safe stocks like those of Loblaws, Massey-Harris, and the Steel Company of Canada tumbled amid rumours of total panic in New York. The following week began badly and, as Fetherling later recounted, some TSE traders had premonitions on October 28 that the worst was yet to come.
C.W. Stollery, a floor trader at the TSE, had been returning to his office late Monday afternoon when he met an acquaintance, Jack Meggeson, of Hickey, Meggeson and Company. They had exchanged pleasantries. “It was pretty bad today,” Stollery had said grimly. “Yes,” Meggeson had replied, “and it will be worse tomorrow.” For years to come the two men would recall this brief conversation not with pride in their clairvoyance but with amazement at the depth of their understatement. When the markets opened at ten Tuesday morning it was apparent that this was the crash. There was no up and down this time, no shoring up of prices. From the start there was little of anything but panic. This was the day that proved all the doom-sayers wrong. The doom-sayers had never been pessimistic enough.
Mail and Empire, November 2, 1929.
Chaos ensued in the Financial District. Men fainted in brokerages. Switchboard operators at the daily newspapers couldn’t cope with the volume of calls from hysterical investors wanting the latest news (the Mail and Empire’s line shut down altogether). Trading volume was so high that wire clerks developed blisters from handwriting so many orders. Late into the night, limousines were seen in the vicinity of King and Bay dropping off people hoping to cover their margins. Some brokerages pulled a 24-hour shift, for which tired employees were rewarded with an extra week’s pay.
Raising last stone to top of Canada Life Building, 1929. City of Toronto Archives, Fonds 1244, Item 3182.
Despite the crash, some quarters remained optimistic; as industrial stocks recovered up to 70 per cent of their pre–Black Tuesday level by the weekend, the Star believed that “commerce has not been shaken; Canada’s outlook continues to be a promising one.” But as November 1929 wore on, the markets took further tumbles and the Great Depression began in earnest. A spate of towers that were underway at the time of the crash such as the Canada Life Building and Commerce Court were completed or modified, but few skyscraper projects still on the drawing board went forward. Proposed mergers of local businesses, like one between grocers Dominion and Loblaws, didn’t take place. What else were gentlemen to do but hang onto whatever money they had?
Additional material from Gold Diggers of 1929 by Doug Fetherling (Toronto: Macmillan, 1979), and the November 2, 1929 edition of the Toronto Star.