Anything Goes_ A Biography of the Roaring Twenties - Lucy Moore [127]
By the late 1920s the automotive industry paid nearly a tenth of America’s manufacturing wages and made over a tenth of all her manufactured goods. Intoxicated by their own aggrandizement, automotive bosses had ceased, according to one commentator, “to worry about the saturation point.” Walter Chrysler triumphantly declared that he and his associates were “making the first machine of considerable size in the history of the world for which every human being was a potential customer.” “Our present progress is but a beginning,” he told the Chicago Tribune in 1928. “We have but culled the first fruits.”
The Bull Market began in the spring of 1928 when General Motors’ stock price rose dramatically against Ford’s, following the delayed introduction of the Model A. Observers realized that General Motors would profit from Ford’s slowness. John Raskob, then vice president and treasurer of General Motors, gave an interview in which he said he thought General Motors stock was undervalued. Its price rocketed ten points in a matter of days, accounting on Monday 5 March for a third of all stock trades.
Chrysler Motors stock was also soaring: the Maxwell Company stock which Walter Chrysler had bought for $16 when he took over the company in 1921, and which became the Chrysler Corporation four years later, was worth $563 in 1928. Financiers and industrialists like Raskob and Chrysler publicly pronounced that selling stock was “selling America short”—not just foolish but unpatriotic and possibly unchristian.
In the same month that Raskob kick-started the boom, and the same month that Cadillac sales in New York reached an all-time high, speculator Billy Durant headed a pool which invested heavily in the Radio Corporation of America (RCA). RCA had recently been acquired by the young buccaneer Joseph Kennedy. Durant’s well-connected consortium included John Raskob, committing $1 million; Walter Chrysler, investing $500,000; the steel magnate Charles Schwab; Percy Rockefeller, nephew of John D.; Joseph Tumulty, former aide to President Wilson; and the wife of the head of RCA. They raised a total of $12 million and made $5 million in a week. RCA stock went up from $85 at the start of 1928 to $420 by the end of the year.
Durant, the former head of General Motors, reportedly made $100 million during the boom years. He headed a group of Midwestern stock speculators with backgrounds in the Chicago grain pit or the automotive industry who became known as the “prosperity boys”; the press called him “the leading bull.”
Pools—essentially market manipulation—were a special feature of the suggestible 1920s Bull Market. In 1927 pools sold to the public $400 million worth of securities; the following year that number had almost doubled to $790 million. Techniques used to raise the price of pool stocks included hiring publicity agents to spread positive news about a company, paying financial journalists to promote specific stocks, distributing biased “tipster sheets” to investors and using prominent investors’ celebrity glitter to lure in smaller fish. Unscrupulous business practices were the norm in a virtually unregulated industry. Phrases like, “The possibilities of that company are unlimited,” and “Never give up your position in a good stock,” were repeated like mantras.
In late 1928 the National City Bank created a pool for Anaconda Copper (a Montana mine owned by investor Percy Rockefeller’s father, William) and started pushing its stock, then priced at $40, even though underwriters knew that copper was fetching weak prices in Chile. The share price leapt to $128 in three months and at its peak in October 1929 was selling for $150. Anaconda Copper became one of the magic phrases of the boom years, whispered like a talisman from one gullible investor to the next. A huge number of Anaconda’s ill-informed small investors went bust while benefiting members