When the closely watched Dow Jones industrial average closed above the 4,000 "barrier" for the first time yesterday, many people wondered exactly what that event meant to Wall Street and, more importantly, to their pocketbooks, pension funds, mutual funds, 401(k) plans and other accounts.
Is the move significant?
"Every move the Dow Jones average makes has significance," )) says Kenneth Battye, veteran Legg Mason stock broker, adding, "The Dow sank as low as 41 back in 1932 and today it's up around 4,000. That tells you where to put your money, doesn't it? Just look at the Dow's long march upward; that's answer enough. I started in this business when I was 14, back in 1928, so I've seen a lot of 'thousand-marks' passed."
So have I. And although I wasn't around when the Dow first closed above 100 in 1906, I well remember when the popular average first closed over 1,000 in 1972 (after coming tantalizingly close in 1966), climbed above 2,000 in 1987 and over 3,000 in 1991. And few people will forget the 508-point plunge in the Crash of 1987, when the Dow plummeted from 2,236 to 1,728 in one day.
But for the most part, these "thousand marks" are just statistical landmarks without much financial significance.
Still, they are important -- symbols of achievement, mileposts in our fleeting memories. And while we play little part in the world's great tragedies or momentous accomplishments in politics or finance, these events always allow us to feel some connection with history.
Let me tell you a story about a Dow Jones episode that happened back in 1929, when the Dow reached a then-peak of 380 -- 66 years and 3,623 points ago.
I was a teen-ager working afternoons and Saturday mornings for my father's New York Stock Exchange brokerage firm -- Westheimer & Co. at 211 E. Redwood St. -- when I saw a mild commotion break out in the overcrowded, smoke-filled "board room" where sharply rising stock quotations were scribbled on a huge wall-sized blackboard.
(Speculation was rampant in the late 1920s, as stock market players -- including taxicab drivers, elevator operators, beauticians, shoe-shine men, etc. -- needed only 10 percent "margin," or deposit, to make their purchases, compared with the required 50 percent today.)
As a "board boy" in those heady days, I was dutifully scrawling the climbing quotations of the Dow Jones and other stocks on the blackboard when my father's older brother, Henry Westheimer, walked into the noisy room with a fistful of pink "sell" orders and loudly instructed old Morris Tannenbaum, the "telegrapher," to shoot them off to the floor of the New York Stock Exchange for immediate execution.
What? "Sell" orders in a booming market that could only go up? Unthinkable. But, as my Uncle Henry explained to everyone who gathered around him, "The Dow Jones average broke through 380 today -- an all-time high -- and I read in this morning's Wall Street Journal that automobiles are backing up in Detroit's factories and showrooms, and I'm turning bearish. There's trouble ahead for Wall Street."
Trouble ahead? The rest is history. The bellwether Dow Jones average, in a plunge that set off the Great Depression of the 1930s, slowly sank a whopping 89 percent, to 41, on July 8, 1932 -- its lowest point in decades -- and then struggled for a quarter of a century (until Nov. 23, 1954) to regain its pre-crash level of 381.
Families were wiped out, as many people could not supply more "margin," and brokerage firms sold out heartbroken customers for whatever prices their stocks would bring.
(Dad later told me, "Son, I wish I had listened to your Uncle Henry, and taken his advice. I would have saved a bundle.")
Many things have changed since those boom-and-bust stock market days and today's situation appears quite different than in 1929. In addition to my father's firm -- Westheimer & Co. -- Baltimore had dozens of local brokerage firms in the 1920s and 1930, but only a few remain today, including Alex. Brown, Legg Mason and Ferris Baker Watts. Former names included Mackubin Goodrich, John C. Legg, Stein Bros. & Boyce, Simon Block & Son, Frank B. Cahn, Baumgartner Downing, Mittendorf Colgate, Mead Miller, W. W. Lanahan and others.
Some firms failed during the Depression, and others merged. My father and his brother, then both in their late 60s, decided to retire in 1938, and sold our family firm to Stein Bros. & Boyce.
Julius Westheimer is a columnist for The Evening Sun.