I know you may be thinking "how can a stock market crash be funny" well you are right in the fact that the aftermath of one is not (unless of course you shorted the market) , yet the build up to one in some circumstances can certainly be baffling and slightly comical.
The one that I am referring to is the financial crash of 1901 in which lasted one week and it was due to one company.
Now we may of heard of companies being overvalued but I think this took the biscuit.
To begin with the company in question is Northern Pacific railroad, who were at the centre of a bidding war between E.H.Harriman and James Hill, along with their banks Kuhn and J.P Morgan.
So in 1901 when a company wanted to take over another business they would secretly start buying up the shares of a company, hoping no one would catch on, therefore they were able to gain ownership without having to pay a premium for the shares.
Now back in 1901 you didn't have the SEC which meant you didn't have to say how much you owned of a specific company, therefore all cards being close to E.H. Harriman's chest he would start the process of buying up the shares of North Pacific railroad (NPRR).
At this time James Hill was also interested in acquiring NPRR but didn't make a push for majority control, this would begin to change though as Harriman began buying the shares up of NPRR the stock price began to rise accordingly, at this time the general public thought nothing of it except that the stock may have gone up to fast too quickly, therefore they started shorting the stock hoping for a drop in price.
Therefore as the weeks went on there was a sudden spike in price for the stock again, yet no one knew why, banks didn't know, NPRR didn't know, everyone was in the dark, people started talking of market manipulation, so again people began shorting the stock again.
Little did they know that only a day later the stock would have risen from $117 to $143 a share, at this moment it was known that Harriman was making his final push to take control of the company, however James Hill and J.P Morgan had other ideas and they began buying every and any available NPRR stocks on the market.
The next day on May 8th it became known to everyone what was happening.
This meant that two of the elites were going head to head bidding up the price, yet those who were short Northern Pacific did not hedge there positions and to be able to afford to buy back the shares they shorted they would be forced to sell all their other shares, take out loans and sell their assets just to pay there dues.
This lead to banks raising there loan rates to as high as 60% in an effort to combat losing money to people who won't be able to pay there debts back.
So on May 9th due to the lack of shares of NPRR that were being sold, the price of Northern Pacific rose to $1000 a share.
This lead to a liquidity crisis because traders were caught in a short squeeze.
In the end because of what happened other investors began selling their shares and backing out of their positions out of sheer fear that their companies were in the same boat.
Even though this all occurred in 1901 we still see similar situations in the past quarter century that resemble this fear and illogical buying and selling, 2000 is a great example in which sound analysis goes missing just because of fear of what others are doing and just goes to show "history doesn't repeat itself, but it rhymes".
Anywho I'd love to hear your thoughts on this odd moment in Financial history and wonder if you may know of any odd circumstances like this one that others may not know.
Gratzi for reading!