The Day John Cranley Saved the Market

On May 29, 1962, John J. Cranley may have single-handedly saved the stock market...

The market was in the midst of a crash... a big one. A selling frenzy of unknown origin led to a full-on panic.

It started a day earlier, on Monday, May 28. The Dow dropped 34.95 points. At the time, that was the second-largest one-day drop ever. It was behind only the 38.33-point drop on October 28, 1929... the "Black Monday" that kicked off a major stock market crash and the Great Depression.

The pain of those days was still fresh. Many people – including lots of professional floor traders, investment bankers, and mom-and-pop investors – had lived through the stock market crash of 1929.

Feeding the frenzy... a lack of information. At the time, ticker-tape machines stationed all over Wall Street printed out every trade, one at a time. The machines could only print 500 characters per minute. So when volume surged, the tape got behind.

After the market closed on Monday, the tape took an extra 90 minutes to print the trades for the day. The prior record for a delay was 34 minutes.

That meant if you were looking to sell, the price you saw was already more than an hour old. That's a lifetime when prices are plummeting. And the growing uncertainty and poor access to information led to even more panic.

In those days, American Telephone and Telegraph – or just "Telephone," as it was known then – was the market's bellwether. For those trying to divine the health of the market, Telephone was the pulse.

When the market "opened" the next day, Tuesday morning's trades backed up. Telephone shares didn't even start trading until an hour after the market opened. When it finally did, shares opened at $98.50 – down 2.1% overnight.

The collapse continued.

Shares of Telephone bounced around throughout the morning. They dropped as low as $98.125 but eventually squeaked their way back to $100.

No one knew it then, but the market-maker in Telephone shares, George M. L. La Branche Jr., had orders in his books to sell 20,000 shares of American Telephone and Telegraph at $100.

That was a massive amount at the time, and it created an oversupply of shares at that price. Telephone wasn't going to trade for more than $100 per share until those shares got cleared out.

Enter our hero, John J. Cranley, a partner in Dreyfus and Company. For whatever reason, Cranley calmly placed an order to buy 10,000 shares of Telephone at $100 (equivalent to a $7.8 million buy in today's money).

The oversupply of shares to be sold disappeared... and Telephone started surging. It hit $106.25 within an hour.

Cranley never revealed his motivations. To this day, we don't know if he was buying for himself, his firm, or the Dreyfus mutual fund. (These funds were a relatively new force on Wall Street.)

One other factor helped Telephone's stock trade strongly that day...

While the ticker tapes were again hours behind in printing all the trades, a few select stocks received priority in line. Whenever Telephone traded, it jumped the queue, and tape readers got a quick flash update. When "T 100" printed out across town, the markets came to life. General Motors and Standard Oil jumped $5. U.S. Steel jumped $3.

About an hour after Cranley's big trade, the Dow Jones news service printed out the notice: "The market has turned strong." Indeed, it had. The panic was over. Stocks doubled over the next few years.

"Telephone" was, of course, the company we now know as AT&T (T).

As you can imagine, had you bought AT&T for $100 a share in 1962, you'd be exceedingly rich today.

And Cranley knew it. He understood that in the middle of a panic, he could get a bargain on a stock that would reward him for years.

Today, folks often complicate investing.

"Pros" spend hours a day looking at technical stock charts and sifting through reams of data, trying to find the next big money-maker.

I'm not one of those traders. I tell my team all the time: KISS – Keep It Simple, Stupid. Look for companies that will pay you regularly for years to come, and you'll set yourself up for a wealthier future.

It's one reason folks around the office call me the "codger." I'm often old-fashioned when it comes to investing.

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Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 12, 2023