For almost a decade, from 1915 through the end of 1924, the Dow Jones Industrial Average had moved very little. The deep bear market of 1921 had traumatized investors, and there was little interest in buying stocks. However, 1925 was a good year, with a rise of about 20 percent in the Dow Jones, but 1926 was flat. The Dow made up for this in 1927, when from the beginning of the year it began to march steadily upward with a firm step and little retreat. This momentum was supported by a good economy, with the Federal Reserve index of industrial production rising more than 50 percent. Corporate earnings were rising even faster, as were stock dividends. Interest rates were low. By late 1927, business was becoming very exciting at Mackubin, Goodrich.

The late 1920s were also a fun time for many in the United States, with the Jazz Age, flappers, and – due to Prohibition – speakeasies. The scientific discoveries and inventions of the late nineteenth century were yielding many important new products. The first mass‐produced automobiles were appearing on the road and airline transportation over short distances was becoming commercially feasible. The miracle of radio was coming to the average home and there was talk that even moving pictures might soon be transmitted over the air. Nothing seemed impossible in this new era of innovation.

Britain went back on the gold standard in 1925. As Chancellor of the Exchequer, and with no economic experience, Winston Churchill arbitrarily priced the currency in terms of gold at pre–World War I levels. This significantly overpriced the pound in world markets. British exports declined sharply and in spring 1927 the three other most‐developed world economies at the time – France, Germany, and the U.S. – reluctantly decided to pursue an easy money policy to bail out Britain. Many economists credit the subsequent powerful bull market of the late 1920s to this action.

In late 1927 the stock market rally did begin in earnest and stocks accelerated their advance. By December, the market had increased 69 percent from its lows. All of a sudden it seemed that making money was easy and not particularly risky. People began to notice the new automobiles in the driveways of those of their neighbors who were investing in the stock market. In 1928 came the even more expensive large additions on these neighbors' houses as the market gained increased momentum. Greed, driven by envy of the new riches of others, can often contribute to the second phase of a strong bull market.

When the Prices returned from their honeymoon in the fall of 1927, they found that the stock market was continuing the strong rally that had begun before they left and Mackubin, Goodrich was prospering in the ebullient upswing. If Rowe had his pole in the water, as he probably did during his absence, the fishing had been good.

Early that year, the Mackubin, Goodrich partners realized that they would soon outgrow their quarters at 111 East Redwood Street, their home since 1917. In 1929 they bought a large white Georgian marble building just down the street at 222 East Redwood for $750,000 ($10.7 million in 2018 dollars). The partners planned extensive renovations and a move early in 1930.

A further sign of the firm's optimism, at what proved to be near the peak of the market, Mr. Legg bought a twenty‐seven‐room mansion with seven bathrooms on University Parkway. That summer, he took a deluxe ten‐week European tour with his wife and daughter.

It can be argued that for the conservative investor in early 1928 the market remained reasonably priced. Earnings had continued to rise in the good business conditions of 1927 and dividends had followed suit. Ultimately, however, a major bull market usually needs a good dose of unreality – the belief that things are different now, that the rules of the past no longer apply, and that it is best to jump on the back of the sharply rising market rather than get left out.

The market started slowly in 1928. But the large gains in 1927 and the low valuations had drawn in more investors with increasing sums to invest. The stock market began to vault upward in great leaps. Following these jumps would be sharp corrections, but the sellers would prove to be wrong. The market would take off once again, with an even stronger spring upward.

A good example is the Radio Corporation of America (RCA), the AOL (a leader of the dot.com phenomenon in the late 1990s) of its day. After its stock reached $101 in 1927, it experienced a roller coaster of plunges and recoveries, until in 1928 it rose to $420, a 320‐percent gain.

As the boom continued to develop, some of those executives from Rowe's DuPont days gained increasing public popularity and admiration for their stock market prowess. John Raskob from DuPont and William Durant, who had co‐founded General Motors, began to move markets upward simply on their bullish pronouncements in the financial sections of newspapers.

In November 1928, Herbert Hoover, a well‐respected businessman, builder of companies, and a Quaker, was elected president of the United States in a landslide, with more than 58 percent of the electorate voting in his favor.

Bull markets that continue over years require a large supply of easy money to keep moving upward. There have to be large banks and other lenders willing to support the brokerage firms and their clients by lending ever‐increasing sums of cash as the stock market rises in value. The Fed has largely accommodated such explosions in lending to buy stocks and certainly did so with its monetary policies that began in 1927.

Easy money also directly supported the stock market itself. In the mid‐1920s it was common for investors to put up only 20 percent of a stock purchase in cash. The brokerage firm would supply the financing on the remaining 80 percent. The interest on such loans then was only 5 percent. If an investor remained fully invested and fully leveraged in the stocks of the Dow Jones during 1928, the return for the entire year would have been more than 200 percent. Not bad for a year's work. Of course, there would have been a few nervous moments during the year, as the market fluctuated violently over several days. These fluctuations would have been amplified for the average investor because of his leverage.

With the loans from brokers and banks supporting the huge gains, the rise in the value of investors' collateral brought more capital into the market. Interest rates rose to 12 percent at the end of 1928. Bankers, however, still considered these loans to be perfectly safe.

Not only were loans being supplied to the brokerage firms by banks of all sizes, but money also began to pour in from overseas. Even well‐run corporations that should have known better than to risk their shareholders' capital in the stock market began to borrow money and loan it to speculators at 12 percent and to invest in the stock market themselves. By early 1929, loans from corporations were equal to those from the banks and continued on to grow much larger.

With the stock market up some 10 percent in January and brokerage loans in step, 1929 got off to a strong start. As he was leaving office, President Calvin Coolidge said that business and the economy were “absolutely sound” and that stocks were “cheap at current prices.” Naturally, the stock market rose sharply on this pronouncement. Catherine Overbeck, a Mackubin, Goodrich employee, wrote in her diary, “The firm grew by leaps and bounds.”

But by the last week of March, the market seemed to hit a brick wall and fell sharply. On March 26, the first real wave of fear rippled through Wall Street. Eight million shares, more than double the trading on a normal day, changed hands. Panic took over as stocks dropped 20 or 30 points in a few seconds. To make matters worse, the ticker tape couldn't keep up, so no one knew how bad things were or how much money they had lost. With stocks so far down, margin calls went out at the end of the day, after the ticker finally caught up. Bank interest rates on such loans went up to an all‐time high, as bankers perceived risks in the market for the first time.

Charles E. Mitchell, president of the National City Bank (now Citibank), stepped into the fray and announced that he would do what the Federal Reserve would not do – lend money so as to create loans to prevent liquidations – and he would borrow from the Federal Reserve to do it. This stopped the decline and the market took off for the sky again. As John Kenneth Galbraith wrote in The Great Crash 1929, “Never before or since have so many become so wondrously, so effortlessly, and so quickly rich.”

To serve this huge demand for common stocks, investment trusts were formed – a vehicle that issued stock today to raise money to buy stocks of corporations over several years. In 1927, $400 million of the common stocks of these trusts were sold to the public ($5.72 billion in 2018 dollars), and in 1929, an amazing $3 billion ($42.9 billion in 2018 dollars). The trusts at that time were often valued in the market for more than twice as much as the total market value of their assets. Moreover, these trusts were highly leveraged, with bonds and preferred stock supporting the common stock. (Preferred stock is a class of stock that has a higher call on the corporate assets and dividends than the common stock. It also generally pays a dividend with the return greater than on the common shares. In these late 1920s trusts, the preferred stock was issued simply to increase the leverage for the common shareholder.) A typical trust in those days might have only 30 percent of its capital represented by common stocks.

Ultimately, a trust might also be held by a second trust with a similar leverage, producing a total leveraged gain on its common stock of 700 to 800 percent on a 50‐percent gain in the market price of its assets. If the investor also borrowed heavily from his brokerage house or bank, the actual gain to him would be magnified even more. Fully leveraged, $100,000 invested in January 1929 could theoretically grow to more than $7 million by the end of June, if the trust assets kept up with the stock market and the investor was adventurous enough to leverage himself to the maximum!

As the market rose, creating many instant millionaires, the stock market bonanza became, for a small subset of society overall, increasingly part of the culture. The progress of the Dow Jones, as well as of individual stocks, was widely reported in the press and hourly on the radio. Typical were stories of nurses making $30,000 in a day by following tips from patients, or a broker's valet who quickly made $250,000. In August, brokerage offices connected by wireless radio were installed on transatlantic passenger ships so trading could continue uninterrupted on the high seas. For a young man in the middle of it, as Rowe was at Mackubin, Goodrich, it must have been exhilarating stuff – even though his chief responsibilities then were in the bond department.

Such a gigantic bubble couldn't continue to expand forever and it didn't. Historians mark September 3, 1929, as the date that the great bull market of the 1920s peaked at 381. Andrew Mellon, U.S. Secretary of the Treasury, said, “There is no cause for worry. The high tide of prosperity will continue.” This might have been true in Mr. Mellon's eyes, but for Rowe and others in the market it certainly wasn't evident. The market continued to be extremely volatile with great swings in price on huge volume both up and down. Knowledgeable insiders continued to come out with optimistic statements. The same Charles E. Mitchell who had turned the market around from a severe slump in 1928 said on October 15, “The markets generally are now in a healthy condition.” On October 22, following a sharp decline, he said, “The decline had gone on too far. [Prices] were now at a very fair level and buying could begin.”

Under this veneer, the enthusiasm of the summer was turning into fear in the fall. The first really bad break hit Thursday, October 24, which came to be known as Black Thursday. Once more the ticker lagged far behind the trading in the morning, and panic began to set in. Large blocks of stocks sank into deep holes with no bidders. Toward noon, the market managed to come back, but soon the panic returned.

At noon, “a roar arose from the stock exchange floor that could be heard for blocks along Broad and Wall streets,” according to a contemporary Baltimore Sun article. Many investors were being sold out by margin calls. Rumors began to take over, such as “stocks were selling for nothing” and a “suicide wave was in progress.”

In the early afternoon of Black Thursday, a publicized meeting was convened of the chairmen of the four largest banks, National City Bank, Chase National Bank, Guaranty Trust Company of New York, and Bankers Trust, in the office of Thomas W. Lamont, the senior partner of J. P. Morgan and Company. Afterward, Lamont told reporters that there had been “a little distress selling on the stock exchange” because of “a technical condition of the market,” and that the situation would “result in betterment.”

As a representative of the group of bank chairmen, Richard Whitney, the vice president of the New York Stock Exchange, at 1:30 p.m. placed an order, later famous, for 10,000 shares of U.S. Steel at $205, the price of the last trade. Fear instantly vanished and greed again took over as the losses for the day were again mostly erased. The huge drop of the morning was reduced to a modest 6‐point decline for the day. The real losers were those who were sold out on margin calls in the morning panic. Optimistic statements became the rule of the day from business as well as financial leaders. On Sunday, just before the new week opened, there were rumors of large buy orders piled up in brokerage offices. Anonymous sources quoted in the Wall Street Journal called the market an “amazing buy.”

Then came Black Monday. On October 28, once again the ticker was hours late. Panic returned and fortunes were eliminated in a few minutes of trading, leaving only debts to brokerage firms that could not possibly be repaid. Matters became worse from there. The four bankers who had been represented by Thomas Lamont did not make another pronouncement and the market continued down all day.

Tuesday was even worse. A normal day's volume at that time would have been 3 or 4 million shares. This day, it was more than 16 million shares, with the ticker more than two and a half hours late at the close. The market had lost 33 points, or 12 percent of its value, in a single day. Lawyers, doctors, businessmen, and shoeshine boys came to watch the rapidly falling shares of their once‐favored stocks.

There was chaos at brokerage firms, and Mackubin, Goodrich was no exception. “Lawyers, businessmen, and doctors jammed into Mackubin, Goodrich to watch frenzied board boys mark the quickly changing stock prices,” the Baltimore Sun would recall. “The packed room was deathly silent as investors watched their wealth vanish…. When the selling stopped, the market had lost nearly $25 billion ($364 billion in 2018 dollars) in three days of trading, and some lost everything. ‘They were in a state of shock. The mood was despair,’ recalled Standish McCleary [retired senior vice president of Legg Mason Wood Walker, Inc.]. ‘The immediate effect was devastating.’”

The stock market had had sharp breaks before: the panic of 1907, which was only stopped by the intervention of J.P. Morgan, and produced a decline of 50 percent from its peak in 1905; an effective free fall at the outbreak of the First World War, which was ended by closing the major stock markets of the world for four months; and the nearly 50‐ percent break in 1921. These drops, however, were over relatively quickly. This time, after a brief rally in 1930, the stock market would seem to decline forever. The market finally hit bottom in July 1932, with the Dow closing at 4. From September 3, 1929, to July 8, 1932, the decline of the Dow of 345 points was 89.4 percent. No one at the time, of course, had any idea that it was indeed the bottom.

The market's collapse, coupled with the tremendous loss of liquidity, accelerated what had been forecast by the economists to be only a modest inventory correction into the Great Depression. In July 1932 Iron Age magazine announced that steel production was down to 12 percent of capacity and pig iron output was the lowest since 1896. Trading on the stock market was only 720,000 shares – quite a change from the 10 million share days of 1929.

By 1933, the U.S. Gross National Product (GNP) was 33 percent less than in 1929. Twenty‐five percent of the workforce was reportedly out of a job, although statistics were not precise in those days. It is estimated that perhaps 50 percent of the working population was either out of a job or was working only part time. Companies also sharply reduced pay levels to decrease costs and stay in business; as a result, not only were workers working fewer hours, but they were also being paid less per hour. On the other end of the income spectrum, the Crash directly affected the wealthiest Americans and thereby had a very significant indirect impact on the economy as a whole. In 1929, 5 percent of the population received 33 percent of all the income and accounted for more than 50 percent of all savings. The mood at the top quickly went from optimism and free spending in 1929 to pessimism and a propensity to save by 1932.

Corporations had invested heavily in the stock market near the top and now incurred huge losses. Holding companies collapsed under their heavy debt load. Foreign lending seized up and was replaced by an all‐cash payment system for imports. The liquidity of most industrialized countries was under question.

This huge collapse in liquidity had an outsized impact on banks. Because many were not only highly leveraged themselves but also had foolishly invested their depositors' money in the stock market, the collapse of the banking system thus affected most Americans in real terms.

Before 1933, the national banking system was loosely regulated and many financial institutions operated outside of it. The Federal Reserve System exercised control over only the biggest banks. When a bank failed, the depositors lost everything. In the 1920s there were only a few bank failures, and of these most were in small rural areas. In 1931 a significant number of banks suddenly failed. Alarmingly, many of them were large and located in major metropolitan areas. This development turned the spotlight on the banking system.

When depositors heard a rumor that their bank might fail, they would rush to withdraw all of their funds. Even the soundest bank couldn't pay off all of their depositors at once. Thus began the chain reaction of failed banks, creating rumors that brought down even more of them. Not only did individual depositors lose their money, so did businesses, charities, and even local governments. GM's Durant would declare bankruptcy in 1936, with his only assets the clothes on his back.

Without savings and with much less income to make purchases, people and businesses began to resort to barter. IOUs and scrip served as a substitute for money. In February 1933, the governor of Michigan called the first statewide bank holiday to provide shaky institutions time to secure new finances. By the end of 1933, 5,500 banks were closed, at least temporarily.

Without the grease of financial liquidity, the wheels of industry began to slow down and grind to a halt. Even the charities and volunteer organizations providing soup kitchens ran out of cash. In Baltimore and other cities, citizens stood in orderly lines to go into the garbage dumps in search of food. The apple season that year was a large one and created many apple sellers on street corners. At five cents each, the activity generated an estimated income of only $500 per year, but people were desperate.

The national mood was grim, with the economy in total collapse as Hoover's term ended. On March 4, 1933, the eloquent young Franklin Delano Roosevelt made his entry onto the world stage with his inaugural speech, saying, “The only thing we have to fear is …fear itself.” Thus began his hundred‐day New Deal program. Instantly, the country and the stock market began to recover.

The first item on Roosevelt's list was a national bank holiday on March 6, included in the Emergency Banking Act, presented the day after he was elected. On the first day it convened, March 9, in four hours a frightened House of Representatives passed the bill. The Senate passed it just as quickly. All banks were included. Under the act, they would be inspected by the federal government and reopened when the institution was determined to be sound

Within two weeks, the banks holding 90 percent of U.S. assets were found to be sound and reopened. Money stuffed under mattresses and in wall safes flowed quickly back into the banks. The worst of the Depression panic was past, but the GNP would not recover to its pre‐1929 crash level until 1941, twelve years later. The recovery was ultimately spurred on by the world's preparations for World War II. The Dow Jones Average would not surpass its 1929 high until November 24, 1954, more than twenty‐five years later!

Rowe was an initial supporter of Roosevelt and his New Deal. It was obvious that the country needed a strong leader, and in future letters to clients he gave the president full credit for “saving capitalism.” He originally thought that Roosevelt's intention was to “share, not give” the nation's resources to the underprivileged. As these programs shifted over time more to outright giving, FDR lost Rowe's support. He ultimately blamed FDR for creating a large population segment that was too dependent on government handouts.