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This Week in Trading History: Black Friday

This week in trading history sees the events of one of three Black Fridays in stock market history - this the result of gold hoarding in 1869. There's also another Buffett investing masterclass, plus the failure of Long Term Capital Management and Washington Mutual...

21st September

Great Britain stopped providing gold in exchange for bank notes. Others believed that the U.S. would follow suit so in a small panic many began converting their U.S. dollar assets to gold. This caused a large reduction in the gold supply and nine months later the U.S. abandoned the gold standard.

U.S. stock markets rose by 11.36%, at the time this made it the third best day in stock market history. The increase was due to a sharp rise in commodity prices which investors took as a sign of increased demand.

The effects of the depreciation of the Russian Ruble hit Long Term Capital Management hardest on this day. By the end of the day they had lost $553m and were continuing to lose more, creating a worldwide panic across the stock markets.

22nd September

CBS owned stations were fined $550,000 by the Federal Communications Commission after the Janet Jackson “wardrobe malfunction” during her SuperBowl performance with Justin Timberlake. Timberlake ripped off part of Jackson’s corset revealing her breast at the end of his song 'Rock Your Body.' However, the full $550,000 fine was voided, though Janet Jackson's songs were as a result blacklisted by MTV and Infinity Broadcasting.

23rd September

Nintendo was founded on this day. Originally the firm was marketed as a producer of playing cards, however as they started to become less popular in the mid 1950’s they quickly found new ideas. In 2020, Nintendo had a market capital of $49.7bn.

Long Term Capital Management finally reached the end of the line and declared bankruptcy. The company had a drop of 92% in value.

24th September

Jay Gould and James Fisk’s attempt to corner the gold market causes one of the three “Black Fridays” in stock market history. Around the 1st September Gould and Fisk began hoarding gold and by mid-September they owned contracts controlling $60m in gold. President Grant was tipped off about their illegal activities and ordered the Treasury Secretary to flood the market with $4m in gold. As a result, gold fell from $163 to $133 in 15 minutes. Many traders purchased gold with heavy margins, meaning many of them were ruined by the collapse. This ricocheted throughout the New York Stock Exchange, with selling in almost every asset class. Stocks fell 20% over the following week and wheat and corn prices fell nearly 50%. Remarkably, Gould and Fisk had been tipped off about the Treasury sale and sold most of their gold before the drop, netting $12m.

Berkshire Hathaway invested $5bn in Goldman Sachs easing investors concerns over the struggling company, and in the first hours of trading shares were up 10%. However, within the first six months of Warren Buffett’s investment, Goldman Sachs shares were cut in half. Although, in true Buffett style eventually his $5bn investments returned more than $3bn in gains and a large equity stake in Goldman.

25th September

Rupert Murdoch shut down the Sunday Times due to an industrial dispute, meaning 1,400 members of staff were suspended indefinitely without pay.

26th September

News of President Eisenhower’s heart attack caused the Dow Jones Industrial Average to drop 6.54%, at the time this was the 2nd largest single day drop in history.

Washington Mutual was seized by the FDIC and is the largest bank failure in U.S. history. Over the past nine days depositors had pulled out $16bn, or nearly 10% of the bank’s deposits and they had lost $6.6bn for shareholders. Washington Mutual’s assets, including $188bn in customer deposits, was bought by JP Morgan for $1.9bn.

27th September

Hurricane Gloria caused the New York Stock Exchange to close for the day.

Sony purchased Columbia Pictures for $3.4bn. The vision was to blend Columbia’s classic entertainment with Sony’s industry-leading consumer electronics. However, Columbia’s Hollywood success abruptly came to an end as the company released a series of costly flops and racked-up a $3bn debt.