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Posted on 10 April 2011 | 9,377 views

Joseph P Kennedy 1929 Stock Market Crash Timing

In 1919, Joseph P. Kennedy joined the prominent stock brokerage firm of Hayden, Stone & Co. where he became an expert in dealing in the unregulated stock market of the day, engaging in tactics that would later be labeled insider trading and market manipulation.

He happened to be on the corner of Wall and Broad Streets at the moment of the Wall Street bombing on September 16, 1920, and was thrown to the ground by the force of the blast. In 1923, he left, and set up his own investment company, becoming a multi-millionaire during the bull market of the 1920s and even more wealthy as a result of taking “Short Positions” in 1929.

Many firms whose securities were publicly traded published no regular reports or issued reports whose data were so arbitrarily selected and capriciously audited as to be worse than useless. It was this circumstance that had conferred such awesome power on a handful of investment bankers like J.P. Morgan, because they commanded a virtual monopoly of the information necessary for making sound financial decisions. Especially in the secondary markets, where reliable information was all but impossible for the average investor to come by, opportunities abounded for insider manipulation and wildcat speculation.

Kennedy formed alliances with several other investors and he helped establish the Libby-Owens-Ford stock pool, an arrangement in which Kennedy and colleagues created a scarcity of Libby-Owens-Ford stock to drive up the value of their own holdings in the stock, using inside information and the public’s lack of knowledge. Pool operators would bribe journalists to present information in the most advantageous manner. Attempts to corner stocks were made that would cause the price to go up, and “Bear Raids” could cause the price to collapse downward. Kennedy got into a bidding war seeking control of founder John Hertz’s company Yellow Cab.

Kennedy later claimed he knew the rampant stock speculation of the late 1920s would lead to a crash. It is said that he knew it was time to get out of the market when he received stock tips from a shoe-shine boy. Kennedy survived the crash “because he possessed a passion for facts, a complete lack of sentiment and a marvelous sense of timing.” During the Depression Kennedy vastly increased his financial fortune by investing most of it in real estate. In 1929, Kennedy’s fortune was estimated to be $4 million (equivalent to $51.3 million today). By 1935, his wealth had increased to $180 million (equivalent to $2.88 billion today).

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