The Day the Dow Hit Bottom

On this day in economic and business history...

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has been around since 1896, which has given it thousands of opportunities to set a new all-time high. However, its all-time low will almost certainly never be reached again. The Dow's lowest-ever close of just 28.66 points has held strong ever since Aug. 7, 1896, and it was most closely approached at the end of the first crash of the Great Depression. That closing level, 36 years later, was still 44% higher than the 1896 low point.

What happened that day to send the Dow to its lowest ebb? If The New York Times is to be believed, fears of a William Jennings Bryan presidency sent bears on a rampage through the market. One wizened trader seemed Pro-Bryan, but the majority was clearly afraid of Bryan's support of "bimetallism":

One of the oldest operators in the Stock Exchange voiced the sentiments of many when he said: "Wall Street is simply discounting the boom that Bryan and his followers are likely to stir up in this city next week. ... The sensitive nerves of Wall Street are simply anticipating that effect. You may be sure that the condition of the stock market is worse today than it will be on the day after Bryan's speech in this city."

To help along the downward course of prices, the bear operators circulated a number of rumors, both financial and political. One was that [leading Democrat but anti-Bryan political boss] William C. Whitney had expressed the belief that New York State was a doubtful state -- i.e., that it was as likely to go for silver as for sound money. The rumor was worked with considerable effect until Mr. Whitney heard of it.

Bryan, known as "The Great Commoner," and fresh off his momentous "Cross of Gold" speech at the Democratic National Convention, which propelled him to the party's candidacy. Bankers and financial types feared Bryan's promotion of "free silver," which would place the United States on a bimetallic monetary standard using both gold and silver, thus generating inflationary pressure on the currency. The battle over inflation raged just as fiercely between the political parties in the 1890s as it has in recent years. However, as the Bryan campaign became an increasingly long shot to win the presidency, investors rushed back into the markets. By the time Republican William McKinley took office in 1899, the Dow had grown 44% from its Aug. 7, 1986 low.

Fun fact: The Dow would have to decline by more than 99.8% from current levels to return to its all-time low.

Mark I, compute!
IBM (NYSE: IBM  ) presented the Automatic Sequence Controlled Calculator, or ASCC, to Harvard University on Aug. 7, 1944. IBM President Thomas J. Watson, Sr. offered the massive machine to the university with a bit of humble understatement :

I ask you to accept this IBM Automatic Sequence Controlled Calculator for Harvard University in the name of the International Business Machine Corporation. It is my earnest hope that the results accomplished by this machine and the future cooperation of our two institutions will contribute to further scientific development and will prove mutually satisfactory.

The ASCC was renamed the Harvard Mark I by its university, and it was the both the first and the largest digital electromechanical calculator ever built in the U.S. "Consisting of 78 adding machines and calculators linked together, the ASCC had 765,000 parts, 3,300 relays, over 500 miles of wire and more than 175,000 connections," according to IBM. The 55-foot-long, 8-foot-tall, five-ton monster made noise not unlike a "roomful of ladies knitting," according to those who operated it.

IBM first partnered with Harvard physician Howard Aiken on its development in 1930, and by the time it was completed the company had invested $300,000 on its construction and upkeep. Acrimony between Aiken (who tried to hog all the credit) and IBM led to a split between the company and the university, and the Mark I was eclipsed by ENIAC two years later. IBM's experience in constructing this proto-computer gave it a leg up years later in the development of more advanced machines. By 1952, IBM was ready to assume leadership of the fledgling computer industry with the launch of the 701, its first commercially available computer.

Package delivery takes to the skies
FedEx (NYSE: FDX  ) became the world's largest all-cargo airline on Aug. 7, 1989, when it completed integrating the acquired assets of Flying Tigers into its own operations. That line, which was founded by fighter pilots (the Flying Tigers had been the name of a China-based U.S. volunteer group) after World War II, had grown into a diversified cargo and passenger airline by the 1970s, but it had begun to flounder in the 1980s. By the time FedEx acquired it for $880 million in late 1988, Flying Tiger operated 43 aircraft flying into 21 different countries. That wide network helped FedEx significantly expand its international presence.

At the end of the year, FedEx reported a fleet of 311 aircraft. Many of these were smaller aircraft, and Flying Tiger's additions were primarily large-bodied jets, so the move did help FedEx bulk up its major routes. After a quarter-century of growth, FedEx has more than doubled the size of its fleet to 647 aircraft, all but 66 of which are owned by the company. These aircraft combine to offer FedEx a possible 45 million pounds of cargo-carrying capacity -- equal to about a fifth of an aircraft carrier. That fleet travels about half a million miles each day to get packages to their destinations.

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