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On this day in economic and financial history...
A growing bearishness took hold on Wall Street today in 1929, as the Dow Jones Industrial Average (INDEX: ^DJI ) dropped just over 3% on fears that broker loans were becoming excessive. The widely reported increase of $192 million (equal to $2.6 billion today) was unexpected after the previous day's weakness. With total loans to stockbrokers by now well in excess of $8 billion, the strain on the country's financial system would prove to be immense when those loans would finally be called in.
All eyes were on United States Steel (NYSE: X ) on Sept. 27, 1929. The bellwether stock's 4% decline added to the day's worries, since the consensus was, "If they won't support Steel, they won't support anything."
The New York Times reported of Sept. 27, 1929's drop that "the money situation ... is more confused now than at any time this year." However, the day's sell-off was greeted with equanimity by most Wall Street traders, who told the Times that "the distress selling ... was about complete. It is expected that there will be some minor liquidation this morning because of the large number of margin calls."
Despite the turbulence of the day, "Stock exchange brokers were congratulating themselves at the comparatively small number of margin calls ... this was due to demands that customers keep their margins at 30% to 50%. Even in such markets as those of the last few days ... the customer with a 50% margin has little to worry about."
How wrong they were.
A major acquisition
Philip Morris, now Altria (NYSE: MO ) , agreed to buy General Foods on Sept. 27, 1985 for $120 per share, or $5.6 billion, which at the time represented the costliest non-oil merger in history. When the merger closed, it would create the largest consumer-products company in the United States. General Foods was then well-known for products like Jell-O and Maxwell House Coffee, and it would later be combined with Kraft (NYSE: KFT ) when Philip Morris acquired that company in 1990.
General Foods has an interesting history. Founder C. W. Post founded the company after a stay in John Harvey Kellogg's sanitarium. Kellogg, apparently a firm believer in the curative powers of breakfast, inspired Post to create a grain-based coffee substitute called Postum because the latter felt that caffeine was unhealthy. Kellogg's recently developed cornflakes also inspired Post to create Grape Nuts.
Happy Birthday, Big G
In other news, Google (Nasdaq: GOOG ) celebrates its official 14th birthday today, although there's some confusion over the actual date of its creation. The search engine leader may claim Sept. 27, 1998 as its birthday, but it first filed for incorporation on Sept. 4 of that year.
Google's annual revenue was only $220,000 a little over year later, in 1999. In 2000, its annual revenues were $19.1 million. By 2003, it was generating nearly a billion dollars in revenue per year. The company continues to grow rapidly in all directions and has earned $43.2 billion over the past two months. All other search engines have long since been left in the dust.
Happy birthday, Google -- no matter what day it really is.
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