American History as Never Told Before: A History of the United States in Five Crashes

Nations, a longtime trader, financial engineer, and CNBC contributor, has devoted his life's work to understanding and advising others on the stock market, and to making these topics approachable for everyone no matter their background of economic education. 

This book features all the elements of a great narrative: human flaws and decisions, moments of conflict, heroic saviors, and a lot of drama. Nations draws clear connections and lines between each of the crashes he addresses to show the larger narrative arc, and incorporates the broader history of American culture over the course of these events. 

This book is not simply a record of market losses and gains, written in numbers and percentages. This is the story of America, evoking strong emotions and passion from readers. This is the great saga of how a country has changed, failed, and grown. 

The history of the United States can be told in many ways, but the five crashes outlined in this book effectively show the hard lessons the country has had to endure in order to become the nation it is today. Politics, culture, and economy are all greatly impacted by the shifting sands of the stock market

Read an excerpt of A History of the United States in Five Crashes below!

There was now almost no place in the world where a speculator couldn’t play the market. And why not? Nineteen twenty-nine was just eight and a half months old, and the Dow was already up 20.5 percent. The Fed had even managed to raise rates, finally doing so on August 9, without stampeding the stock market. Even though the New York Times explained that the market was “caught entirely off balance by the suddenness of the decision,” and the Dow lost 4.0 percent that day, it regained half that amount on the next day and had regained all the losses just three trading days later, posting yet another all-time high on the sixteenth, a mere week after the anticlimactic increase and the same day Meehan was celebrating the arrival of the Berengaria with its floating brokerage office. Many investors wondered why the Fed had waited so long if the stock market was going to recover yet again.

Trading volume that month was the heaviest of any August on record and was the third-busiest month of the year so far. On September 1, the Times described the month’s action: “The stock market last month gave another remarkable demonstration of its recuperative powers. After one of the sharpest breaks on record . . . the New York Federal Reserve Bank raised its rediscount rate to 6 per cent, prices rallied and not only regained all their losses but continued climbing to the highest levels on record.”

Even though Labor Day, September 2, was supposed to mark the end of summer, the next day, September 3, was the hottest of the year in New York City. As laggards returned from Long Island and New Jersey beach towns, long lines leading to the bridges and tunnels into Manhattan led to overheated cars, blown radiators, and traffic jams. The stock market continued to overheat as well. The Dow closed that Tuesday at 381.17, up 0.2 percent for the day and up 27.1 percent for the year. It had more than doubled since the end of 1926, just thirty-two months before. It had nearly quadrupled during the 1920s. Nobody knew it yet, but this was the top. After a drop of 1.56 points the next day, it would take twenty-five years to regain the level reached on September 3, 1929.

The new all-time high on September 3 was just one of thirty-four posted that year, as Americans became investors at home, at sea, and on the golf course. Even children were getting involved. During the Labor Day weekend, newspapers around the country had carried the story of an unnamed girl from the American South who had sent four dollars to Standard Oil Company of New Jersey, asking that the company “please sell me as little an interest . . . in your Oil Wells as four dollars to start with, and then take what it makes for me and add to the four dollars until it amounts to a fifty dollar share for me.” The girl apologized for the small amount of her investment, explaining, “I would be glad to put more into your oil wells if I was able, but I am not able to put any more than that in it, as I am a poor girl and I work on a farm with my home people, and I hired out to work in Tobacco to get this money.” The girl was certain Standard Oil would make her rich, as the stock market had done for so many others.

Economist John Kenneth Galbraith would later agree with author Frederick Lewis Allen that the “striking thing about the stock market speculation of 1929 was not the massiveness of the participation. Rather it was the way it became central to the culture,” as it had for this girl. The crash began two days later, on September 5, 1929.

Roger Babson was an investor, entrepreneur, and businessman with the estimable habit of founding universities. Having graduated from the Massachusetts Institute of Technology in 1898, Babson was also an erstwhile inventor; he was one of the first to work on what became the modern parking meter. Unfortunately, Babson’s version was powered by a cable that the driver was supposed to plug into his car. When that predictably failed, Babson turned his attention to the stock market.

While in college, Babson had become enraptured by the work of Isaac Newton. Babson soon began to infuse his investing ideas with the teachings of Newton, with special emphasis on Newton’s Third Law—“For every action there is an equal and opposite reaction.”

Babson also relied heavily on the law of gravity, and beginning in 1927 he believed it alone would bring stocks back to earth, like Newton’s apocryphal apple falling from a tree. Babson had spent most of 1927 and all of 1928 renewing his prediction that “any major movement [in the stock market] should be on the downward side.” As the market rallied and Babson’s predictions continued to be wrong, wags on Wall Street began calling him “the Prophet of Loss.”

Despite his track record, Babson was asked to speak to the National Business Conference on September 5. He continued the bearish line he’d started more than two years before when he told those assembled, “Fair weather cannot always continue. . . . More people are borrowing and speculating today than ever in our history. Someday the time is coming when the market will begin to slide off, sellers will exceed buyers, and paper profits will begin to disappear. Then there will be an immediate stampede to save what paper profits exist.” Babson continued: “I repeat what I said at this time last year and the year before; sooner or later a crash is coming which will take in the leading stocks and cause a decline from sixty to eighty points in the Dow Jones barometer.”

Babson’s warning made its way to investors over the news ticker and reached Wall Street with one hour left in the September 5 trading day. The Associated Press reported the story with the flash headline “Economist predicts 60 to 80 points stock market crash,” though it did not say who the economist was or what he’d been saying for the past two years. Radio stations getting the news interrupted their programming to share news of Babson’s prediction, again without context.

More than two million shares traded in that final hour, and the Dow lost 2.6 percent on what had been a quiet day until the Babson story hit. It would become known as the “Babson Break.” While one paper described Babson as one “to whom Wall Street has not in past years paid any particular attention,” it pointed out that the market was likely overextended after gaining 9.4 percent in August.

The stock market lost 3.2 percent during the five days ending on September 10, 1929, and on the eleventh the Wall Street Journal printed its thought for the day. It was Mark Twain’s advice: “Don’t part with your illusions; when they are gone you may still exist, but you cease to live.”