Regulatory Impact Statement: August 26, 2003. This Form May Be Used By Persons Who A: Fill & Download for Free

The simple answer is science by government decree motivate by political gain that is unfounded. The lie for example that carbon dioxide is carbon pollution and the fudged temperature data erasing the Medieval Warming period and the Little Ice Age are false science by government decree taking us back to 1984. These blatant lies spouted by political leaders around the world including Barack Obama and JUSTIN TRUDEAU mislead millions into thinking that climate change was about pollution control and that there was an urgent climate crisis of catastrophic warming.CO2 is non-toxic, invisible gas that everyone breathes out at 35,000 ppm every second.Thursday, November 20, 2008Carbon Dioxide (CO2) is Not PollutionCarbon dioxide (CO2) is not a pollutant and the global warming debate has nothing to do with pollution. The average person has been misled and is confused about what the current global warming debate is about - greenhouse gases. None of which has anything to do with air pollution.People are confusing smog, carbon monoxide (CO) and the pollutants in car exhaust with the life supporting, essential trace gas in our atmosphere - carbon dioxide (CO2). Real air pollution is already regulated under the 1970's Clean Air Act and regulating carbon dioxide (CO2) will do absolutely nothing to make the air you breath "cleaner".They are also misled to believe that CO2 is polluting the oceans through acidification but there is nothing unnatural or unprecedented about current measurements of ocean water pH and a future rise in pCO2 will likely yield growth benefits to corals and other sea life.Thus, regulating carbon dioxide (CO2) emissions through either 'carbon taxes', 'cap and trade' or the EPA will cause all energy prices (e.g. electricity, gasoline, diesel fuel, heating oil) to skyrocket."CO2 for different people has different attractions. After all, what is it? - it’s not a pollutant, it’s a product of every living creature’s breathing, it’s the product of all plant respiration, it is essential for plant life and photosynthesis, it’s a product of all industrial burning, it’s a product of driving – I mean, if you ever wanted a leverage point to control everything from exhalation to driving, this would be a dream. So it has a kind of fundamental attractiveness to bureaucratic mentality."- Richard S. Lindzen, Ph.D. Professor Emeritus of Atmospheric Science, MIT"CO2 is not a pollutant. In simple terms, CO2 is plant food. The green world we see around us would disappear if not for atmospheric CO2. These plants largely evolved at a time when the atmospheric CO2 concentration was many times what it is today. Indeed, numerous studies indicate the present biosphere is being invigorated by the human-induced rise of CO2. In and of itself, therefore, the increasing concentration of CO2 does not pose a toxic risk to the planet."- John R. Christy, Ph.D. Professor of Atmospheric Sciences, University of Alabama"Carbon dioxide is not a pollutant but a naturally occurring, beneficial trace gas in the atmosphere. For the past few million years, the Earth has existed in a state of relative carbon dioxide starvation compared with earlier periods. There is no empirical evidence that levels double or even triple those of today will be harmful, climatically or otherwise. As a vital element in plant photosynthesis, carbon dioxide is the basis of the planetary food chain - literally the staff of life. Its increase in the atmosphere leads mainly to the greening of the planet. To label carbon dioxide a "pollutant" is an abuse of language, logic and science."- Robert M. Carter, Ph.D. Professor Emeritus of Environmental and Earth Sciences, James Cook University"Carbon dioxide is not a pollutant. On the contrary, it makes crops and forests grow faster. Economic analysis has demonstrated that more CO2 and a warmer climate will raise GNP and therefore average income. It's axiomatic that bureaucracies always want to expand their scope of operations. This is especially true of EPA, which is primarily a regulatory agency. As air and water pollution disappear as prime issues, as acid rain and stratospheric-ozone depletion fade from public view, climate change seems like the best growth area for regulators. It has the additional glamour of being international and therefore appeals to those who favor world governance over national sovereignty. Therefore, labeling carbon dioxide, the product of fossil-fuel burning, as a pollutant has a high priority for EPA as a first step in that direction."- S. Fred Singer, Ph.D. Professor Emeritus of Environmental Sciences, University of Virginia"To state in public that carbon dioxide is a pollutant is a public advertisement of a lack of basic school child science. Pollution kills, carbon dioxide leads to the thriving of life on Earth and increased biodiversity. Carbon dioxide is actually plant food."- Ian R. Plimer, Ph.D. Professor Emeritus of Earth Sciences, University of Melbourne"Carbon and CO2 (carbon dioxide) are fundamental for all life on Earth. CO2 is a colorless, odorless, non-toxic gas. CO2 is product of our breathing, and is used in numerous common applications like fire extinguishers, baking soda, carbonated drinks, life jackets, cooling agent, etc. Plants' photosynthesis consume CO2 from the air when the plants make their carbohydrates, which bring the CO2 back to the air again when the plants rot or are being burned."- Tom V. Segalstad, Ph.D. Professor of Environmental Geology, University of Oslo"To suddenly label CO2 as a "pollutant" is a disservice to a gas that has played an enormous role in the development and sustainability of all life on this wonderful Earth. Mother Earth has clearly ruled that CO2 is not a pollutant."- Robert C. Balling Jr., Ph.D. Professor of Climatology, Arizona State University"C02 is not a pollutant as Gore infers. It is, in fact essential to life on the planet. Without it there are no plants, therefore no oxygen and no life. At 385 ppm current levels the plants are undernourished. The geologic evidence shows an average level of 1000 ppm over 600 million years. Research shows plants function most efficiently at 1000-2000 ppm. Commercial greenhouses use the information and are pumping C02 to these levels and achieve four times the yield with educed water use. At 200 ppm, the plants suffer seriously and at 150 ppm, they begin to die. So if Gore achieves his goal of reducing C02 he will destroy the planet."- Tim F. Ball, Ph.D. Climatology"Many chemicals are absolutely necessary for humans to live, for instance oxygen. Just as necessary, human metabolism produces by-products that are exhaled, like carbon dioxide and water vapor. So, the production of carbon dioxide is necessary, on the most basic level, for humans to survive. The carbon dioxide that is emitted as part of a wide variety of natural processes is, in turn, necessary for vegetation to live. It turns out that most vegetation is somewhat 'starved' for carbon dioxide, as experiments have shown that a wide variety of plants grow faster, and are more drought tolerant, in the presence of doubled carbon dioxide concentrations. Fertilization of the global atmosphere with the extra CO2 that mankind's activities have emitted in the last century is believed to have helped increase agricultural productivity. In short, carbon dioxide is a natural part of our environment, necessary for life, both as 'food' and as a by-product."- Roy Spencer, Ph.D. Meteorology, Former Senior Scientist for Climate Studies, NASA"I am at a loss to understand why anyone would regard carbon dioxide as a pollutant. Carbon dioxide, a natural gas produced by human respiration, is a plant nutrient that is beneficial both for people and for the natural environment. It promotes plant growth and reforestation. Faster-growing trees mean lower housing costs for consumers and more habitat for wild species. Higher agricultural yields from carbon dioxide fertilization will result in lower food prices and will facilitate conservation by limiting the need to convert wild areas to arable land."- David Deming, Ph.D. Professor of Geology and Geophysics, University of Oklahoma"Carbon dioxide is not a pollutant. It is a colorless, odorless trace gas that actually sustains life on this planet. Consider the simple dynamics of human energy acquisition, which occurs daily across the globe. We eat plants directly, or we consume animals that have fed upon plants, to obtain the energy we need. But where do plants get their energy? Plants produce their own energy during a process called photosynthesis, which uses sunlight to combine water and carbon dioxide into sugars for supporting overall growth and development. Hence, CO2 is the primary raw material that plants depend upon for their existence. Because plants reside beneath animals (including humans) on the food chain, their healthy existence ultimately determines our own. Carbon dioxide can hardly be labeled a pollutant, for it is the basic substrate that allows life to persist on Earth."- Keith E. Idso, Ph.D. Botany"To classify carbon dioxide as a pollutant is thus nothing short of scientific chicanery, for reasons that have nothing to do with science, but based purely on the pseudo-science so eagerly practiced by academia across the world in order to keep their funding sources open to the governmental decrees, which are in turn based on totally false IPCC dogma (yes, dogma - not science)."- Hans Schreuder, Analytical Chemist"Atmospheric CO2 is required for life by both plants and animals. It is the sole source of carbon in all of the protein, carbohydrate, fat, and other organic molecules of which living things are constructed. Plants extract carbon from atmospheric CO2 and are thereby fertilized. Animals obtain their carbon from plants. Without atmospheric CO2, none of the life we see on Earth would exist. Water, oxygen, and carbon dioxide are the three most important substances that make life possible. They are surely not environmental pollutants."- Arthur B. Robinson, Ph.D. Professor of Chemistryhttp://www.populartechnology.net/2008/11/carbon-dioxide-co2-is-not-pollution.htmlTHERE IS NO CARBON FOOTPRINT TO REDUCEComedy: Science By Decree, Washington Tries To Declare A Science Settled And A Debate OverBy P Gosselin on 27. June 2013The President of the United States stepped up to the podium and announced to the land that he was hereby officially declaring climate science settled and the debate has ended. Unfortunately, science is never settled, and the remarks will go down in history as being among the most naïve ever expressed by the office of the President.Naïve and just plain stupid. Washington thinks it can declare a science as settled. Photo: US government, public domain=================================The Latest List of LiesBy Ed CarylOn Tuesday, June 25, in advance of President Obama’s Climate speech, David Simas, a White House presidential advisor, sent an email to the press corp outlining the government’s position on climate change. This missive was so unabashedly full of lies dressed as irrefutable statements that it would have made the most notorious dictator propagandist proud. The refutation is absurdly easy. Let’s break down each paragraph:The carbon pollution that causes climate change isn’t a distant threat, the risk to public health isn’t a hypothetical, and it’s clear we have a moral obligation to act.”…Here’s what President Obama is announcing today. Check it out, then help to spread the word.”Help spread the lies. But don’t think for yourself or investigate.First, he’s laying out a plan to cut carbon pollution in America — by working to cut pollution from power plants, protect the health of our kids, boost clean energy, and revamp our transportation sector for the 21st century. Second, he’s preparing the United States for the impacts of these changes — by building stronger, safer communities and developing resources to make our country more resilient. And finally, he’s leading international efforts to combat global climate change.”Raise the cost of energy. Raise government spending on more losing Alternative Energy Schemes. Make a case for more gun control. Give DHS more power. Raise the cost of health care. Make big government even bigger, and charge at international windmills.We’ve put together a graphic that breaks this all down — from the effects we’re already seeing to the specific actions we’re going to take to lead this fight.”The effects: food prices taking off, energy prices skyrocketing, and now more efforts to enhance both of those effects.No single step can reverse the effects of climate change, but that’s no excuse for inaction. We have a moral obligation to leave our kids a planet that’s not broken and polluted.None of those steps will have any effect on something that happens naturally. They will, however, increase costs, put more downward pressure on jobs, and further depress an already depressed economy. In the end, it will leave our kids a planet with poor job prospects, food prices they can’t afford, and energy prices that will reduce their standard of living, restrict mobility, and make it harder to heat their hovels. And that will really be a broken planet.https://notrickszone.com/2013/06/27/comedy-science-by-decree-washington-tries-to-declare-a-science-settled-and-a-debate-over/When Obama claims the science is settled, and the debate has ended he commits a grave error that ignores the open-minded attitude essential to the scientific method. Obama brings an arrogant attitude to a problem requiring loads of humility to succeed. Science issues are never settled, and the debate is never over.By erasing the warmer Medieval period and the colder Little Ice Mann made current warming appear unprecedented which it was not.He was called out by Dr. Tim Ball for fraud.Mann is a rogue scientist and his refusal to produce codes and data is unethical.THE AFFIDAVIT FILED BY DR. TIM BALL AS DEFENDANT IN THE LIBEL TRIAL IN THE SUPREME COURT OF BC.Ball exposes data fraud of Michael Mann in erasing climate history and refusing to produce “the codes, calculations and or data to allow proper verification of the results.”The Supreme Court of British Columbia has released the damning official final Judgment in the Mann-v-Ball ‘science trial of the century. SEE -Damning Ruling Posted in the Mann-v-Ball 'Trial of the Century' | PSI Intl“Michael Mann at Penn State should be in the state pen, not Penn State.”ALLEGED LIBEL OF DR. TIM BALL AFFIDAVIT FOLLOWSMANN lost the case by inaction that implied his libel case was a sham. This is the consent order agreed by both parties in 2017 where Mann agreed to deliver “any expert reports in response to the reports delivered by the defendants.” Mann failed to deliver anything.“ACTION NO. VLCS-S0111913VANCOUVER REGISTRY IN THE SUPREME COURT OF BRITISH COLUMBIABETWEENMICHAEL MANNPLAINTIFFANDTIMOTHY TIM") BALL, THE FRONTIER CENTRE FOR PUBLIC POLICY INC., and JOHN DOEDEFENDANTS.CONSENT ORDERBEFORE{A MASTER OF THE COURTFebruary 10, 2017ON THE APPLICATION of the defendants, without a hearing and by consent;THIS COURT ORDERS that:The date for delivery of particulars by the defendant Timothy Ball, to the plaintiff of the directly relevant background context referred to on page 35, paragraph 2 of Schedule A to the Order of Master Scarth entered January 3, 2017 in this action be extended from January 13, 2017 to February 1, 2017.2. The plaintiff, Dr. Michael Mann, shall deliver any expert reports in response to the reports delivered by the defendants Timothy Ball and the Frontier Centre for Public Policy Inc. on or before February 20, 2017.3. The plaintiff, Dr. Michael Mann shall provide particulars of the issues upon which his listed witnesses will testify on or before February 7, 2017.THE FOLLOWING PARTIES APPROVE THE FORM OF THIS ORDER AND CONSENT TO EACH OF THE ORDERS NOTED ABOVEBy the CourtSignature of ROGER MCCONCHIE Lawyer for the plaintiffDigitally signed by Sienature of MICHAELR. SCHERRMann has not appealed the judgment against him and time to do so has past.‘“Michael Mann "Hockey Stick" Update: Now Definitively Established To Be FraudAugust 26, 2019/ Francis MentonThe Michael Mann “Hockey Stick” is suddenly back in the news. It’s been so long since we have heard from it, do you even remember what it is?The “Hockey Stick” is the graph that took the world of climate science by storm back in 1998. That’s when Mann and co-authors Raymond Bradley and Malcolm Hughes published in Nature their seminal paper “Global-scale temperature patterns and climate forcing over the past six centuries.” A subsequent 1999 update by the same authors, also in Nature (“Northern Hemisphere Temperatures During the Past Millennium: Inferences, Uncertainties, and Limitations”) extended their reconstructions of “temperature patterns and climate forcing” back another 400 years to about the year 1000. The authors claimed (in the first paragraph of the 1998 article) to “take a new statistical approach to reconstructing global patterns of annual temperature . . . , based on the calibration of multiproxy data networks by the dominant patterns of temperature variability in the instrumental record.” The claimed “new statistical approach,” when applied to a group of temperature “proxies” that included tree ring samples and lake bed sediments, yielded a graph — quickly labeled the “Hockey Stick” — that was the perfect icon to sell global warming fear to the public. The graph showed world temperatures essentially flat or slightly declining for 900+ years (the shaft of the hockey stick), and then shooting up dramatically during the 20th century era of human carbon dioxide emissions (the blade of the stick).In 2001 the UN’s IPCC came out with its Third Assessment Report on the state of the climate. The Hockey Stick graph dominated, appearing multiple times, including being the lead graph in the “Summary for Policy Makers” that is the only part of an IPCC report that anyone reads. Here is the version of the Hockey Stick graph that appeared the the SPM of the IPCC’s Third Assessment Report:Now that is seriously scary! The Medieval Warm period — an era between the years of about 1000 and 1300 once generally accepted to have had temperatures warmer than the present — had disappeared. The clear implication was that the earth had had a benign and unchanging climate for about a thousand years, and now humans had entered the picture with their fossil fuels and were rapidly destabilizing the situation.I’m going to provide an overview of what has happened since, but first, here’s the latest. A prominent skeptical climate scientist in Canada named Tim Ball accused Mann of fraud in generating the Hockey Stick graph. The famous quote, from a February 2011 interview of Ball, was “Michael Mann should be in the State Pen, not Penn State.” In March 2011, Mann sued Ball for libel, focusing on that quote, in the Supreme Court of British Columbia in Vancouver. Here is a copy of the Complaint. (Note: In British Columbia, the Supreme Court is not the highest appellate court, but rather the trial-level court for larger cases.) The case then essentially disappeared into limbo for eight plus years. But on Friday, August 23, the British Columbia court dismissed Mann’s claim with prejudice, and also awarded court costs to Ball. As far as I can determine, this was an oral ruling, and no written judgment nor transcript of the ruling yet exists. I have asked Ball to send them along as soon as they exist.The story of Ball’s vindication, and of Mann’s shame, is a somewhat long one, and turns on Mann’s flat refusal to share publicly the data and methodology by which he constructed the Hockey Stick graph. In about 2003 a very talented Canadian mathematician named Steve McIntyre began an effort to replicate the Mann/Bradley/Hughes work. McIntyre started with a request to Mann to provide the underlying data and methodologies (computer programming) that generated the graph. To his surprise, McIntyre was met not with prompt compliance (which would be the sine qua non of actual science) but rather with hostility and evasion. McIntyre started a blog called Climate Audit and began writing lengthy posts about his extensive and unsuccessful efforts to reconstruct the Hockey Stick. Although McIntyre never completely succeeded in perfectly reconstructing the Hockey Stick, over time he gradually established that Mann et al. had adopted a complex methodology that selectively emphasized certain temperature proxies over others in order to reverse-engineer the "shaft" of the stick to get a pre-determined desired outcome.Then came the so-called ClimateGate disclosures in 2009. These were emails between and among many of the main promoters of the climate scare (dubbed by McIntyre the "Hockey Team"). Included in the Climategate releases were emails relating specifically to the methodology of how the graph was created. From the emails, skeptical researchers were then able to identify some of the precise data series that had been used by Mann et al. Astoundingly, they discovered that the graph's creators had truncated inconvenient data in order to get the desired depiction. A website called Just the Facts has a detailed recounting of how this was uncovered. As a key example, consider this graph:The bright pink plus the dotted line in between the two pink portions shows one of the data series used in the construction of the Hockey Stick graph; but the pink portions were deleted when the graph was presented. Obviously, inclusion of these pink portions would have thrown off the nice, flat "shaft" of the stick, while also revealing that this particular group of "proxies" had totally failed at matching the twentieth century rise in temperatures derived from the thermometer record, thus undermining the whole idea that these were valid proxies at all. In other words, Mann et al. had truncated inconvenient data that failed to match the narrative they wanted to present. Most would call this kind of data truncation a clearcut instance of "scientific fraud."This was the state of play in early 2011 when Ball uttered his famous line, “Michael Mann belongs in the State Pen, not Penn State.” Mann then immediately sued Ball for libel.Now, as readers here know, I spent my life in the litigation business. My practice was in the U.S. rather than Canada, but I have good reason to think that many of the basic ground rules would be the same. And one of the basic ground rules is that a plaintiff in civil litigation needs to provide “discovery” to the defendant of whatever factual information is in his possession that would either support or undermine his claims. When Mann brought his case, I was frankly amazed, because it was obvious to me that Ball would request as “discovery” the very data and methods that Mann had been aggressively resisting giving to anyone to check his work. How could Mann’s case survive if he refused to provide this information?Sure enough Mann absolutely refused to provide the underlying information in the Ball litigation. For better or worse, when a litigant does that, a court will try every possible avenue to try to get the parties to resolve the matter, before it will take the ultimate step of resolving the case against the non-compliant litigant. And that is in fact what happened in the Mann/Ball case. The court repeatedly tried to get an agreement that something would be produced that would satisfy Ball, and repeatedly gave Mann more time to comply. Could this really go on for eight years? In the U.S., that would be extraordinary, but not impossible. Maybe in Canada it is less extraordinary. It appears that in 2017 Mann actually agreed (under court pressure) to produce to Ball within 21 days the key technical information about construction of the Hockey Stick graph that Ball was requesting. But the information was not produced. Undoubtedly there have been multiple returns by Ball to the court since then to enforce compliance, finally seeking the dismissal of Mann’s claims as the ultimate sanction. On Friday, the court granted that relief.Here’s a twist that is simply beyond belief. On February 17, 2018, the American Association for the Advancement of Science — the largest professional association of scientists in the world, claiming to have more than 120,000 members — gave its supposedly prestigious “Public Engagement with Science” award to none other than Michael Mann. Here is its announcement of the award. Some choice excerpts:The honor recognizes Mann’s “tireless efforts to communicate the science of climate change to the media, public and policymakers.” In the past year, Mann has had 500 media interviews and appearances and directly reached public audiences via social media. . . . He has also advised actor Leonardo DiCaprio, who spoke about climate change during a 2014 speech delivered to the United Nations.The AAAS did this in the face of the clear demonstration of Mann’s misconduct from the ClimateGate revelations, and in the face of Mann’s ongoing obstruction of proper discovery in the Ball litigation. This whole “climate” thing is truly unbelievable in how it warps the minds of seemingly sane people.Anyway, the bottom line is that, after eight long years, Mann’s lawsuit against Ball has been dismissed “with prejudice” — meaning that he has no right to reinstitute the case. Also, the court has said that it will award at least some “costs” to Ball, although the amount has not yet been determined. Presumably, written opinions and a final judgment will follow, and I will update this post with links to those if and when I receive them. I would expect some triumphant claims of vindication from Ball and his supporters. In light of the court’s decision, Mann will be severely constrained in what he can do in response. Hey — why not produce your data and methods?Will any of this embarrass or rein in the likes of the IPCC, the AAAS, or any of the many mainstream climate-hoax-promoting outlets that continue to publish Mann’s screeds? (Examples: New York Times, USA Today, Washington Post). Don't bet on it. As of today, I can’t even find any coverage of the court result in any “mainstream” outlet.Meanwhile, note that this is only a trial court decision. Theoretically, Mann can appeal, and an appeals court might send this back. On the other hand, it’s hard to imagine that, even if an appeals court reverses and sends the case back, that it won’t condition further proceedings on Mann producing his data and methods. I can’t believe that he will ever do that. The only fair inference at this point is that the Hockey Stick is and always was a scientific fraud.Michael Mann "Hockey Stick" Update: Now Definitively Established To Be Fraud — Manhattan Contrarian”CLIMATE}CLIMATE CHANGE HOAX COLLAPSES AS MICHAEL MANN’S BOGUS “HOCKEY STICK” GRAPH DEFAMATION LAWSUIT DISMISSED BY THE SUPREME COURT OF BRITISH COLUMBIAAUGUST 27, 2019 KEN BILLINGSFacebookTwitterEmailShareNatural News – August 26, 2019 by: Mike AdamsFor the past two decades, much of the hysteria about global warming — later re-labeled “climate change” — has been based on the so-called “hockey stick” graph produced by Michael Mann. The graph, shown below, has been used by the IPCC, the media and governments to push global warming hysteria to the point of mass mental illness, where Democrat presidential candidates claim humanity only has 12 years remaining before a climate apocalypse will somehow destroy the planet.But the hockey stick graph is a fraud. A man-made computer software algorithm generated it, and the algorithm is rigged to produce a hockey stick shape no matter what data were entered. Like everything else found in the rigged world of “climate science,” the hockey stick graph was a fraud the day it was generated.Michael Mann didn’t like being called a fraud by his critics, so he sued them for defamation. And late last week, one of those lawsuits was concluded by the Supreme Court of British Columbia, Canada, which threw out Mann’s lawsuit against Dr. Tim Ball. But there’s more. According to Principia-Scientific:Not only did the court grant Ball’s application for dismissal of the nine-year, multi-million dollar lawsuit, it also took the additional step of awarding full legal costs to Ball. A detailed public statement from the world-renowned skeptical climatologist is expected in due course.This extraordinary outcome is expected to trigger severe legal repercussions for Dr Mann in the U.S. and may prove fatal to climate science claims that modern temperatures are “unprecedented.”Support our mission and enhance your own self-reliance: The laboratory-verified Organic Emergency Survival Bucket provides certified organic, high-nutrition storable food for emergency preparedness. Completely free of corn syrup, MSG, GMOs and other food toxins. Ultra-clean solution for years of food security. Learn more at the Health Ranger Store.Michael Mann refuses to turn over the data behind the graph, insisting on secrecy instead of transparencyThis court decision reportedly stemmed from the fact that Michael Mann refused to turn over “R2 regression numbers” to the court, which would have revealed the data manipulations that led to the rigging of the hockey stick graph. This unwillingness to disclose the graph algorithm and data points reveals the total lack of transparency and scientific integrity that has plagued Mann’s supposed “science” work for decades. As American Thinker explains:Real science, not the phony “consensus” version, requires open access to data, so that skeptics (who play a key role in science) can see if results are reproducible.More from Technocracy.news:Mann’s now proven contempt of court means Ball is entitled to have the court serve upon Mann the fullest punishment. Contempt sanctions could reasonably include the judge ruling that Dr. Ball’s statement that Mann “belongs in the state pen, not Penn. State’ is a precise and true statement of fact. This is because under Canada’s unique ‘Truth Defense’, Mann is now proven to have wilfully hidden his data, so the court may rule he hid it because it is fake. As such, the court must then dismiss Mann’s entire libel suit with costs awarded to Ball and his team.The spectacular rise and fall of climate alarmism’s former golden boy is a courtroom battle with even more ramifications than the infamous Scopes Monkey Trial of 1925. To much fanfare at the time, Mann had sued Ball for daring to publish the damning comment that Mann “belongs in the state pen, not Penn. State.” Dr Ball brilliantly backed up his exposure of the elaborate international money-making global warming scam in his astonishing book, ‘The Deliberate Corruption of Climate Science‘.In his books, articles, radio and television appearances, Dr. Ball has been resolute in his generation-long war against those who corrupted the field of science to which he had selflessly dedicated his life. Now aged 79, Ball is on the cusp of utter vindication. Despite the stresses and strains on himself and his family, Tim has stood at the forefront of those scientists demanding more openness and transparency from government-funded researchers.“Climate science community in crisis”Technocracy.news goes on to explain the ultimate ramifications of this court decision:A bitter and embarrassing defeat for the self-styled ‘Nobel Prize winner’ who acted as if he was the epitome of virtue, this outcome shames not only Michael Mann, but puts the climate science community in crisis. Many hundreds of peer-reviewed papers cite Mann’s work, which is now effectively junked. Despite having deep-pocketed backers willing and able to feed his ego as a publicity-seeking mouthpiece against skeptics, Mann’s credibility as a champion of environmentalism is in tatters. But it gets worse for the litigious Penn State professor. Close behind Dr Ball is celebrated writer Mark Steyn. Steyn also defends himself against another one of Mann’s SLAPP suits – this time in Washington DC. Steyn boldly claims Mann “has perverted the norms of science on an industrial scale.” Esteemed American climate scientist, Dr Judith Curry, has submitted to the court an Amicus Curiae legal brief exposing Mann. The world can now see that his six-year legal gambit to silence his most effective critics and chill scientific debate has spectacularly backfired.Principia-Scientific International also says a “criminal investigation” of Mann is now likely in the United States over allegations that Mann committed scientific fraud in faking his hockey stick chart:Penn State climate scientist, Michael ‘hockey stick’ Mann commits contempt of court in the ‘climate science trial of the century.’ Prominent alarmist shockingly defies judge and refuses to surrender data for open court examination. Only possible outcome: Mann’s humiliation, defeat and likely criminal investigation in the U.S.The defendant in the libel trial, the 79-year-old Canadian climatologist, Dr Tim Ball (above, right) is expected to instruct his British Columbia attorneys to trigger mandatory punitive court sanctions, including a ruling that Mann did act with criminal intent when using public funds to commit climate data fraud. Mann’s imminent defeat is set to send shock waves worldwide within the climate science community as the outcome will be both a legal and scientific vindication of U.S. President Donald Trump’s claims that climate scare stories are a “hoax.”As can be seen from the graphs below; Mann’s cherry-picked version of science makes the Medieval Warm Period (MWP) disappear and shows a pronounced upward ‘tick’ in the late 20th century (the blade of his ‘hockey stick’). But below that, Ball’s graph, using more reliable and widely available public data, shows a much warmer MWP, with temperatures hotter than today, and showing current temperatures well within natural variation.The perpetrator of the biggest criminal “assault on science” has now become clear: Dr Mann, utterly damned by his contempt of the court order to show his dodgy data.There can be little doubt that upon the BC Supreme Court ruling that Mann did commit data fraud, over in Washington DC, the EPA’s Scott Pruitt will feel intense pressure from skeptics to initiate a full investigation into Mann, his university and all those conspiring to perpetuate a trillion-dollar carbon tax-raising sting on taxpayers.}Climate change hoax collapses as Michael Mann’s bogus “hockey stick” graph defamation lawsuit dismissed by the Supreme Court of British Columbia - "We shall succeed" - Shiv Chopra‘THE MEDIEVAL WARM PERIOD : GLOBAL and PEER REVIEWEDACCORDING to multiple lines of “peer-reviewed science”, the Medieval Warm Period was indeed ‘global’ and was as warm, if not warmer than today.CLICK here for excellent interactive map of clickable peer-reviewed MWP studies in both North and Southern Hemispheres :THE Medieval Warm Period – A Global Phenomenon*THE ‘INCONVENIENT’ PASTTHERE is absolutely nothing unusual about today’s so-called aka Climate Change.LOOK at how many periods of warmth our planet has enjoyed during the past 10,000 years alone.CIVILISATIONS flourished during those warm periods (“climate optimums”), and collapsed when they ended.DID humans cause the Minoan warm period of about 3,300 years ago?DID humans cause the Roman warm period of about 2,100 years ago?DID humans cause the Medieval warm period of about 1,000 years ago?WHAT about all of those other warm periods? Should we blame Fred Flintstone, perhaps?via @BigJoeBastardi | TwitterIF the downward trend in temperature of the past 3,300 years continues, we could be in a heap of trouble. While our leaders keep on wringing their collective hands over global warming, we could be blindsided by an ice age.ALL this talk about human-caused global warming is sheer nonsense, if not downright fraud. The record shows that both periods of warmth – and periods of cold – hit our planet with almost consistent regularity.Peer Review studies that show the Medieval Warm Period was global and warmer than present :o Study: Earth was warmer in Roman, Medieval Times | The Daily Callero New paper finds more evidence the Medieval Warming Period was global — Published in Palaeogeography, Palaeoclimatology, Palaeoecologyo Latest Research: EU & Russian Scientists Confirm Medieval Period Warmer Than Modern Global Warmingo Antarctic warmer than today – An ikaite record of late Holocene climate at the Antarctic Peninsulao THE HOCKEY SCHTICK: New paper finds Medieval Warming Period was ~1°C warmer than current temperatureso New Paper Finds Ocean Temps Were Warmer During Multiple Periods Over Last 2700 Years Than Today | GWPFo Medieval Temps warmer than today : Jenny Lake, Southwest Yukon Territory, Canada – CO² Scienceo Medieval Warm Period was real, global, & warmer than the present’ – China & World – Chinadaily Forumo Evidence for a Global Medieval Warm Period | Watts Up With That?hockey stick graph | Search Results | ClimatismThe Greatest Scientific Fraud Of All Time -- Part XXFebruary 19, 2019/ Francis MentonSince last October, this series has been sitting at the rather awkward number of 19 (or “XIX”) posts. Time to round it off at an even XX.For those new to this topic, the Greatest Scientific Fraud Of All Time is the systematic downward adjustment of early-year temperatures in order to create a fake enhanced warming trend, the better to bamboozle voters and politicians to go along with extreme measures to try to avert the impending “climate crisis.” Prior posts in this series have documented large and unexplained downward adjustments at hundreds of stations around the world that are used by official government organizations (in the US, primarily NOAA and NASA) to wipe out early-year high temperatures and thereby proclaim that the latest month or year is “the hottest ever!” To read all prior posts in this series, go to this link.You might ask, with the extensive exposure of these unsupportable downward adjustments of early-year temperatures by official government organizations — accompanied by highly credible accusations of scientific fraud — haven’t the adjusters been cowed by now into a smidgeon of honesty? It sure doesn’t look that way.The latest news comes out of Australia, via the website of Joanne Nova. Nova’s February 17 post is titled “History keeps getting colder — ACORN2 raises Australia’s warming rate by over 20%.” “ACORN2” is a newly revised and updated temperature series for Australia, with temperatures going back to 1910 based on records from 112 weather stations on the continent, some 57 of which have records that go back all the way to the 1910 start date. “ACORN” stands for Australian Climate Observations Reference Network. The ACORN2 data compilation is so called to distinguish it from ACORN1, which was only released some 7 years ago in 2012. The people who put out these things are the Australian Bureau of Meteorology.According to Nova, the latest temperature adjustments were released “oh-so-quietly.” I guess that the plan is just to start using the new figures as the historical comparisons and bet that journalists will be too stupid or ignorant to figure out that the earlier temperatures have been altered. That’s actually a pretty good bet. However, down in Australia they do have a hard-working group of independent researchers who are on top of this issue. One of them is Nova, and another is Chris Gillham. Gillham has done his own very detailed analysis of the adjustments in the ACORN2 report, and has also put up a post on same at Watts Up With That. So there is plenty of information out there for intelligent people to make an independent judgment.A few excerpts from Nova:Once again we find that the oldest thermometers were apparently reading artificially high, even though many were newish in 1910 and placed in approved Stevenson screens. This is also despite the additional urban warming effect of a population that grew 400% since then. What are the odds?! Fortunately . . ., sorry scientists have uncovered the true readings from the old biased thermometers which they explain carefully in a 67 page impenetrable document. . . . The new ACORN version has nearly doubled the rate of warming in the minima of the longest running stations.Nova has put together several charts to show the magnitude of the adjustments, not only from ACORN1 to ACORN2, but also from the prior AWAP compilation to ACORN1. To no one’s surprise, each round of adjustments makes the earlier years cooler, and thus enhances the apparent warming trend. Here is Nova’s chart showing the amount of warming from the beginning to the end of the series, for each of AWAP, ACORN1 and ACORN2, and for minimum, mean and maximum temperatures:For example, the average minimum temperature had increased over the century covered by 0.84 deg C in the AWAP series. That increased to 1.02 deg C in the ACORN1 series, and to 1.22 deg C in the ACORN2 series.You need to go over to Gillham’s work to see how these changes derive mostly from decreases in early-year temperatures. Here is a chart from Gillham on the changes to minimum temperatures at the 57 stations that go back all the way to the 1910 start:As you can see, the “raw” and “v1” temperatures tend to be close — sometimes one higher, sometimes the other. But v2 is significantly lower across the board in the earlier years. Then, suddenly, in the recent years, it tracks the “raw” almost perfectly.Do they offer a justification for these downward adjustments? Yes, but nothing remotely satisfactory. The one-word explanation is “homogenization.” OK, we understand what that is. For example, sometimes a station moves, and that causes a discontinuity, where, say, the new location is systematically 0.1 deg C lower than the old. An adjustment needs to be made. But these sorts of adjustments should cancel out. How is it possible that every time some official meteorological organization anywhere in the world makes some of these “homogenization” adjustments, the result is that earlier years get colder and the supposed “global warming” trend gets enhanced — always to support a narrative of “climate crisis.”Well, fortunately, this time the Australian Bureau of Meteorology has put out a very long 57-page document explaining what they have done. Here it is. Is it any help?As far as I am concerned, this is the definitive proof of the fraud. If this were even an attempt at real, credible science, the proponents would put out a document complete with the details of the adjustments — and all of their computer code — so that an independent researcher could replicate the work. Nothing like that is here. This is pure bafflegab. Nova calls it “impenetrable,” which is way too nice a word as far as I’m concerned. Let me give you a small taste:3. HOMOGENISATION METHODS3.1 Detection of inhomogeneities - use of multiple detection methods in parallelIn version 1 of ACORN-SAT, a single statistical method for detection of inhomogeneities was used (Trewin, 2012). This method was based closely on the Pairwise Homogenisation Algorithm (PHA) developed by Menne and Williams (2009), and involves pairwise comparison of data between the candidate station and all sufficiently well-correlated stations in the region, with the Standard Normal Homogeneity Test (SNHT) (Alexandersson, 1986) used to identify significant breakpoints in the difference series. The test was carried out separately on monthly mean anomalies (as a single time series with 12 data points per year), and seasonal mean anomalies, with a breakpoint flagged for further assessment if it was identified in either the monthly series, or (within a window of ± 1 year) in at least two of the four seasons. Further details of the implementation of the PHA in the ACORN-SAT dataset are available in Trewin (2012).A range of other detection methods have been developed in recent years, many of which were the subject of the COST-HOME intercomparison project (Venema et al., 2012). Three of these methods were selected for use in ACORN-SAT version 2, the selection primarily based on ease of implementation. These methods were:• • HOMER version 2.6, joint detection (Mestre et al., 2013)• • MASH version 3.03 (Szentimrey, 2008).• • RHTests version 4 (Wang et al., 2010).All of these methods, which use different statistical approaches, have been successfully used across a range of networks since their development. Further details on their implementation are given in Appendix C.My favorite part is that reference at the end to “Appendix C.” This document has no Appendix C. There are three appendices, numbered Appendix 1, Appendix 2 and Appendix 3. That’s about the intellectual level we are dealing with.Anyway, try going to this document and see if you can figure out what they are doing. Believe me, you can’t.And finally: over the years as I have accumulated posts on this topic, several commenters have suggested that I must be alleging some kind of conspiracy among government climate scientists in making these adjustments. I mean, without that, how does it come about that the Australians just happen to be making the exact same kinds of adjustments as NASA, NOAA, and for that matter, as the Brits at the Hadley Center in the UK?If your brain is wondering how that could be, I would suggest that we have the same kind of phenomenon going on here as the hate crime hoax phenomenon. How does Jussie Smollett just happen to fake a hate crime playing right into the progressive narrative of the moment — just as did the Duke lacrosse team hoaxer, and the Virginia fraternity hoaxer, and the Harvard Law School black tape hoaxers, and many dozens of others? (Here is a compilation of some 15 recent hate crime hoaxes.) Did they all coordinate in one grand conspiracy? Or did they all just realize what was needed from them to support their “team” and its narrative?The Greatest Scientific Fraud Of All Time -- Part XX — Manhattan Contrarian”

The 1929 Stock Market CrashHarold Bierman, Jr., Cornell UniversityOverviewThe 1929 stock market crash is conventionally said to have occurred on Thursday the 24th and Tuesday the 29th of October. These two dates have been dubbed “Black Thursday” and “Black Tuesday,” respectively. On September 3, 1929, the Dow Jones Industrial Average reached a record high of 381.2. At the end of the market day on Thursday, October 24, the market was at 299.5 — a 21 percent decline from the high. On this day the market fell 33 points — a drop of 9 percent — on trading that was approximately three times the normal daily volume for the first nine months of the year. By all accounts, there was a selling panic. By November 13, 1929, the market had fallen to 199. By the time the crash was completed in 1932, following an unprecedentedly large economic depression, stocks had lost nearly 90 percent of their value.The events of Black Thursday are normally defined to be the start of the stock market crash of 1929-1932, but the series of events leading to the crash started before that date. This article examines the causes of the 1929 stock market crash. While no consensus exists about its precise causes, the article will critique some arguments and support a preferred set of conclusions. It argues that one of the primary causes was the attempt by important people and the media to stop market speculators. A second probable cause was the great expansion of investment trusts, public utility holding companies, and the amount of margin buying, all of which fueled the purchase of public utility stocks, and drove up their prices. Public utilities, utility holding companies, and investment trusts were all highly levered using large amounts of debt and preferred stock. These factors seem to have set the stage for the triggering event. This sector was vulnerable to the arrival of bad news regarding utility regulation. In October 1929, the bad news arrived and utility stocks fell dramatically. After the utilities decreased in price, margin buyers had to sell and there was then panic selling of all stocks.The Conventional ViewThe crash helped bring on the depression of the thirties and the depression helped to extend the period of low stock prices, thus “proving” to many that the prices had been too high.Laying the blame for the “boom” on speculators was common in 1929. Thus, immediately upon learning of the crash of October 24 John Maynard Keynes (Moggridge, 1981, p. 2 of Vol. XX) wrote in the New York Evening Post(25 October 1929) that “The extraordinary speculation on Wall Street in past months has driven up the rate of interest to an unprecedented level.” And the Economistwhen stock prices reached their low for the year repeated the theme that the U.S. stock market had been too high (November 2, 1929, p. 806): “there is warrant for hoping that the deflation of the exaggerated balloon of American stock values will be for the good of the world.” The key phrases in these quotations are “exaggerated balloon of American stock values” and “extraordinary speculation on Wall Street.” Likewise, President Herbert Hoover saw increasing stock market prices leading up to the crash as a speculative bubble manufactured by the mistakes of the Federal Reserve Board. “One of these clouds was an American wave of optimism, born of continued progress over the decade, which the Federal Reserve Board transformed into the stock-exchange Mississippi Bubble” (Hoover, 1952). Thus, the common viewpoint was that stock prices were too high.There is much to criticize in conventional interpretations of the 1929 stock market crash, however. (Even the name is inexact. The largest losses to the market did not come in October 1929 but rather in the following two years.) In December 1929, many expert economists, including Keynes and Irving Fisher, felt that the financial crisis had ended and by April 1930 the Standard and Poor 500 composite index was at 25.92, compared to a 1929 close of 21.45. There are good reasons for thinking that the stock market was not obviously overvalued in 1929 and that it was sensible to hold most stocks in the fall of 1929 and to buy stocks in December 1929 (admittedly this investment strategy would have been terribly unsuccessful).Were Stocks Obviously Overpriced in October 1929?Debatable — Economic Indicators Were StrongFrom 1925 to the third quarter of 1929, common stocks increased in value by 120 percent in four years, a compound annual growth of 21.8%. While this is a large rate of appreciation, it is not obvious proof of an “orgy of speculation.” The decade of the 1920s was extremely prosperous and the stock market with its rising prices reflected this prosperity as well as the expectation that the prosperity would continue.The fact that the stock market lost 90 percent of its value from 1929 to 1932 indicates that the market, at least using one criterion (actual performance of the market), was overvalued in 1929. John Kenneth Galbraith (1961) implies that there was a speculative orgy and that the crash was predictable: “Early in 1928, the nature of the boom changed. The mass escape into make-believe, so much a part of the true speculative orgy, started in earnest.” Galbraith had no difficulty in 1961 identifying the end of the boom in 1929: “On the first of January of 1929, as a matter of probability, it was most likely that the boom would end before the year was out.”Compare this position with the fact that Irving Fisher, one of the leading economists in the U.S. at the time, was heavily invested in stocks and was bullish before and after the October sell offs; he lost his entire wealth (including his house) before stocks started to recover. In England, John Maynard Keynes, possibly the world’s leading economist during the first half of the twentieth century, and an acknowledged master of practical finance, also lost heavily. Paul Samuelson (1979) quotes P. Sergeant Florence (another leading economist): “Keynes may have made his own fortune and that of King’s College, but the investment trust of Keynes and Dennis Robertson managed to lose my fortune in 1929.”Galbraith’s ability to ‘forecast’ the market turn is not shared by all. Samuelson (1979) admits that: “playing as I often do the experiment of studying price profiles with their dates concealed, I discovered that I would have been caught by the 1929 debacle.” For many, the collapse from 1929 to 1933 was neither foreseeable nor inevitable.The stock price increases leading to October 1929, were not driven solely by fools or speculators. There were also intelligent, knowledgeable investors who were buying or holding stocks in September and October 1929. Also, leading economists, both then and now, could neither anticipate nor explain the October 1929 decline of the market. Thus, the conviction that stocks were obviouslyoverpriced is somewhat of a myth.The nation’s total real income rose from 1921 to 1923 by 10.5% per year, and from 1923 to 1929, it rose 3.4% per year. The 1920s were, in fact, a period of real growth and prosperity. For the period of 1923-1929, wholesale prices went down 0.9% per year, reflecting moderate stable growth in the money supply during a period of healthy real growth.Examining the manufacturing situation in the United States prior to the crash is also informative. Irving Fisher’s Stock Market Crash and After (1930) offers much data indicating that there was real growth in the manufacturing sector. The evidence presented goes a long way to explain Fisher’s optimism regarding the level of stock prices. What Fisher saw was manufacturing efficiency rapidly increasing (output per worker) as was manufacturing output and the use of electricity.The financial fundamentals of the markets were also strong. During 1928, the price-earnings ratio for 45 industrial stocks increased from approximately 12 to approximately 14. It was over 15 in 1929 for industrials and then decreased to approximately 10 by the end of 1929. While not low, these price-earnings (P/E) ratios were by no means out of line historically. Values in this range would be considered reasonable by most market analysts today. For example, the P/E ratio of the S & P 500 in July 2003 reached a high of 33 and in May 2004 the high was 23.The rise in stock prices was not uniform across all industries. The stocks that went up the most were in industries where the economic fundamentals indicated there was cause for large amounts of optimism. They included airplanes, agricultural implements, chemicals, department stores, steel, utilities, telephone and telegraph, electrical equipment, oil, paper, and radio. These were reasonable choices for expectations of growth.To put the P/E ratios of 10 to 15 in perspective, note that government bonds in 1929 yielded 3.4%. Industrial bonds of investment grade were yielding 5.1%. Consider that an interest rate of 5.1% represents a 1/(0.051) = 19.6 price-earnings ratio for debt.In 1930, the Federal Reserve Bulletin reported production in 1920 at an index of 87.1 The index went down to 67 in 1921, then climbed steadily (except for 1924) until it reached 125 in 1929. This is an annual growth rate in production of 3.1%. During the period commodity prices actually decreased. The production record for the ten-year period was exceptionally good.Factory payrolls in September were at an index of 111 (an all-time high). In October the index dropped to 110, which beat all previous months and years except for September 1929. The factory employment measures were consistent with the payroll index.The September unadjusted measure of freight car loadings was at 121 — also an all-time record.2 In October the loadings dropped to 118, which was a performance second only to September’s record measure.J.W. Kendrick (1961) shows that the period 1919-1929 had an unusually high rate of change in total factor productivity. The annual rate of change of 5.3% for 1919-1929 for the manufacturing sector was more than twice the 2.5% rate of the second best period (1948-1953). Farming productivity change for 1919-1929 was second only to the period 1929-1937. Overall, the period 1919-1929 easily took first place for productivity increases, handily beating the six other time periods studied by Kendrick (all the periods studies were prior to 1961) with an annual productivity change measure of 3.7%. This was outstanding economic performance — performance which normally would justify stock market optimism.In the first nine months of 1929, 1,436 firms announced increased dividends. In 1928, the number was only 955 and in 1927, it was 755. In September 1929 dividend increased were announced by 193 firms compared with 135 the year before. The financial news from corporations was very positive in September and October 1929.The May issue of the National City Bank of New York Newsletter indicated the earnings statements for the first quarter of surveyed firms showed a 31% increase compared to the first quarter of 1928. The August issue showed that for 650 firms the increase for the first six months of 1929 compared to 1928 was 24.4%. In September, the results were expanded to 916 firms with a 27.4% increase. The earnings for the third quarter for 638 firms were calculated to be 14.1% larger than for 1928. This is evidence that the general level of business activity and reported profits were excellent at the end of September 1929 and the middle of October 1929.Barrie Wigmore (1985) researched 1929 financial data for 135 firms. The market price as a percentage of year-end book value was 420% using the high prices and 181% using the low prices. However, the return on equity for the firms (using the year-end book value) was a high 16.5%. The dividend yield was 2.96% using the high stock prices and 5.9% using the low stock prices.Article after article from January to October in business magazines carried news of outstanding economic performance. E.K. Berger and A.M. Leinbach, two staff writers of the Magazine of Wall Street, wrote in June 1929: “Business so far this year has astonished even the perennial optimists.”To summarize: There was little hint of a severe weakness in the real economy in the months prior to October 1929. There is a great deal of evidence that in 1929 stock prices were not out of line with the real economics of the firms that had issued the stock. Leading economists were betting that common stocks in the fall of 1929 were a good buy. Conventional financial reports of corporations gave cause for optimism relative to the 1929 earnings of corporations. Price-earnings ratios, dividend amounts and changes in dividends, and earnings and changes in earnings all gave cause for stock price optimism.Table 1 shows the average of the highs and lows of the Dow Jones Industrial Index for 1922 to 1932.Table 1Dow-Jones Industrials Index Averageof Lows and Highs for the Year192291.0192395.61924104.41925137.21926150.91927177.61928245.61929290.01930225.81931134.1193279.4Sources: 1922-1929 measures are from the Stock Market Study, U.S. Senate, 1955, pp. 40, 49, 110, and 111; 1930-1932 Wigmore, 1985, pp. 637-639.Using the information of Table 1, from 1922 to 1929 stocks rose in value by 218.7%. This is equivalent to an 18% annual growth rate in value for the seven years. From 1929 to 1932 stocks lost 73% of their value (different indices measured at different time would give different measures of the increase and decrease). The price increases were large, but not beyond comprehension. The price decreases taken to 1932 were consistent with the fact that by 1932 there was a worldwide depression.If we take the 386 high of September 1929 and the 1929-year end value of 248.5, the market lost 36% of its value during that four-month period. Most of us, if we held stock in September 1929 would not have sold early in October. In fact, if I had money to invest, I would have purchased after the major break on Black Thursday, October 24. (I would have been sorry.)Events Precipitating the CrashAlthough it can be argued that the stock market was not overvalued, there is evidence that many feared that it was overvalued — including the Federal Reserve Board and the United States Senate. By 1929, there were many who felt the market price of equity securities had increased too much, and this feeling was reinforced daily by the media and statements by influential government officials.What precipitated the October 1929 crash?My research minimizes several candidates that are frequently cited by others (see Bierman 1991, 1998, 1999, and 2001).The market did not fall just because it was too high — as argued above it is not obvious that it was too high.The actions of the Federal Reserve, while not always wise, cannot be directly identified with the October stock market crashes in an important way.The Smoot-Hawley tariff, while looming on the horizon, was not cited by the news sources in 1929 as a factor, and was probably not important to the October 1929 market.The Hatry Affair in England was not material for the New York Stock Exchange and the timing did not coincide with the October crashes.Business activity news in October was generally good and there were very few hints of a coming depression.Short selling and bear raids were not large enough to move the entire market.Fraud and other illegal or immoral acts were not material, despite the attention they have received.Barsky and DeLong (1990, p. 280) stress the importance of fundamentals rather than fads or fashions. “Our conclusion is that major decade-to-decade stock market movements arise predominantly from careful re-evaluation of fundamentals and less so from fads or fashions.” The argument below is consistent with their conclusion, but there will be one major exception. In September 1929, the market value of one segment of the market, the public utility sector, should be based on existing fundamentals, and fundamentals seem to have changed considerably in October 1929.A Look at the Financial PressThursday, October 3, 1929, the Washington Post with a page 1 headline exclaimed “Stock Prices Crash in Frantic Selling.” the New York Times of October 4 headed a page 1 article with “Year’s Worst Break Hits Stock Market.” The article on the first page of the Times cited three contributing factors:A large broker loan increase was expected (the article stated that the loans increased, but the increase was not as large as expected).The statement by Philip Snowden, England’s Chancellor of the Exchequer that described America’s stock market as a “speculative orgy.”Weakening of margin accounts making it necessary to sell, which further depressed prices.While the 1928 and 1929 financial press focused extensively and excessively on broker loans and margin account activity, the statement by Snowden is the only unique relevant news event on October 3. The October 4 (p. 20) issue of the Wall Street Journal also reported the remark by Snowden that there was “a perfect orgy of speculation.” Also, on October 4, the New York Timesmade another editorial reference to Snowden’s American speculation orgy. It added that “Wall Street had come to recognize its truth.” The editorial also quoted Secretary of the Treasury Mellon that investors “acted as if the price of securities would infinitely advance.” The Timeseditor obviously thought there was excessive speculation, and agreed with Snowden.The stock market went down on October 3 and October 4, but almost all reported business news was very optimistic. The primary negative news item was the statement by Snowden regarding the amount of speculation in the American stock market. The market had been subjected to a barrage of statements throughout the year that there was excessive speculation and that the level of stock prices was too high. There is a possibility that the Snowden comment reported on October 3 was the push that started the boulder down the hill, but there were other events that also jeopardized the level of the market.On August 8, the Federal Reserve Bank of New York had increased the rediscount rate from 5 to 6%. On September 26 the Bank of England raised its discount rate from 5.5 to 6.5%. England was losing gold as a result of investment in the New York Stock Exchange and wanted to decrease this investment. The Hatry Case also happened in September. It was first reported on September 29, 1929. Both the collapse of the Hatry industrial empire and the increase in the investment returns available in England resulted in shrinkage of English investment (especially the financing of broker loans) in the United States, adding to the market instability in the beginning of October.Wednesday, October 16, 1929On Wednesday, October 16, stock prices again declined. the Washington Post (October 17, p. 1) reported “Crushing Blow Again Dealt Stock Market.” Remember, the start of the stock market crash is conventionally identified with Black Thursday, October 24, but there were price declines on October 3, 4, and 16.The news reports of the Post on October 17 and subsequent days are important since they were Associated Press (AP) releases, thus broadly read throughout the country. The Associated Press reported (p. 1) “The index of 20 leading public utilities computed for the Associated Press by the Standard Statistics Co. dropped 19.7 points to 302.4 which contrasts with the year’s high established less than a month ago.” This index had also dropped 18.7 points on October 3 and 4.3 points on October 4. The Times (October 17, p. 38) reported, “The utility stocks suffered most as a group in the day’s break.”The economic news after the price drops of October 3 and October 4 had been good. But the deluge of bad news regarding public utility regulation seems to have truly upset the market. On Saturday, October 19, theWashington Post headlined (p. 13) “20 Utility Stocks Hit New Low Mark” and (Associated Press) “The utility shares again broke wide open and the general list came tumbling down almost half as far.” The October 20 issue of the Post had another relevant AP article (p. 12) “The selling again concentrated today on the utilities, which were in general depressed to the lowest levels since early July.”An evaluation of the October 16 break in the New York Times on Sunday, October 20 (pp. 1 and 29) gave the following favorable factors:stable business conditionlow money rates (5%)good retail traderevival of the bond marketbuying power of investment trustslargest short interest in history (this is the total dollar value of stock sold where the investors do not own the stock they sold)The following negative factors were described:undigested investment trusts and new common stock sharesincrease in broker loanssome high stock pricesagricultural prices lowernervous marketThe negative factors were not very upsetting to an investor if one was optimistic that the real economic boom (business prosperity) would continue. The Timesfailed to consider the impact on the market of the news concerning the regulation of public utilities.Monday, October 21, 1929On Monday, October 21, the market went down again. The Times (October 22) identified the causes to bemargin sellers (buyers on margin being forced to sell)foreign money liquidatingskillful short sellingThe same newspaper carried an article about a talk by Irving Fisher (p. 24) “Fisher says prices of stocks are low.” Fisher also defended investment trusts as offering investors diversification, thus reduced risk. He was reminded by a person attending the talk that in May he had “pointed out that predicting the human behavior of the market was quite different from analyzing its economic soundness.” Fisher was better with fundamentals than market psychology.Wednesday, October 23, 1929On Wednesday, October 23 the market tumbled. TheTimes headlines (October 24, p.1) said “Prices of Stocks Crash in Heavy Liquidation.” The Washington Post (p. 1) had “Huge Selling Wave Creates Near-Panic as Stocks Collapse.” In a total market value of $87 billion the market declined $4 billion — a 4.6% drop. If the events of the next day (Black Thursday) had not occurred, October 23 would have gone down in history as a major stock market event. But October 24 was to make the “Crash” of October 23 become merely a “Dip.”The Times lamented October 24, (p. 38) “There was hardly a single item of news which might be construed as bearish.”Thursday, October 24, 1929Thursday, October 24 (Black Thursday) was a 12,894,650 share day (the previous record was 8,246,742 shares on March 26, 1929) on the NYSE. The headline on page one of the Times (October 25) was “Treasury Officials Blame Speculation.”The Times (p. 41) moaned that the cost of call money had been 20% in March and the price break in March was understandable. (A call loan is a loan payable on demand of the lender.) Call money on October 24 cost only 5%. There should not have been a crash. The Friday Wall Street Journal (October 25) gave New York bankers credit for stopping the price decline with $1 billion of support.the Washington Post (October 26, p. 1) reported “Market Drop Fails to Alarm Officials.” The “officials” were all in Washington. The rest of the country seemed alarmed. On October 25, the market gained. President Hoover made a statement on Friday regarding the excellent state of business, but then added how building and construction had been adversely “affected by the high interest rates induced by stock speculation” (New York Times, October 26, p. 1). A Times editorial (p. 16) quoted Snowden’s “orgy of speculation” again.Tuesday, October 29, 1929The Sunday, October 27 edition of the Times had a two-column article “Bay State Utilities Face Investigation.” It implied that regulation in Massachusetts was going to be less friendly towards utilities. Stocks again went down on Monday, October 28. There were 9,212,800 shares traded (3,000,000 in the final hour). The Times on Tuesday, October 29 again carried an article on the New York public utility investigating committee being critical of the rate making process. October 29 was “Black Tuesday.” The headline the next day was “Stocks Collapse in 16,410,030 Share Day” (October 30, p. 1). Stocks lost nearly $16 billion in the month of October or 18% of the beginning of the month value. Twenty-nine public utilities (tabulated by the New York Times) lost $5.1 billion in the month, by far the largest loss of any of the industries listed by the Times. The value of the stocks of all public utilities went down by more than $5.1 billion.An Interpretive Overview of Events and IssuesMy interpretation of these events is that the statement by Snowden, Chancellor of the Exchequer, indicating the presence of a speculative orgy in America is likely to have triggered the October 3 break. Public utility stocks had been driven up by an explosion of investment trust formation and investing. The trusts, to a large extent, bought stock on margin with funds loaned not by banks but by “others.” These funds were very sensitive to any market weakness. Public utility regulation was being reviewed by the Federal Trade Commission, New York City, New York State, and Massachusetts, and these reviews were watched by the other regulatory commissions and by investors. The sell-off of utility stocks from October 16 to October 23 weakened prices and created “margin selling” and withdrawal of capital by the nervous “other” money. Then on October 24, the selling panic happened.There are three topics that require expansion. First, there is the setting of the climate concerning speculation that may have led to the possibility of relatively specific issues being able to trigger a general market decline. Second, there are investment trusts, utility holding companies, and margin buying that seem to have resulted in one sector being very over-levered and overvalued. Third, there are the public utility stocks that appear to be the best candidate as the actual trigger of the crash.Contemporary Worries of Excessive SpeculationDuring 1929, the public was bombarded with statements of outrage by public officials regarding the speculative orgy taking place on the New York Stock Exchange. If the media say something often enough, a large percentage of the public may come to believe it. By October 29 the overall opinion was that there had been excessive speculation and the market had been too high. Galbraith (1961), Kindleberger (1978), and Malkiel (1996) all clearly accept this assumption. the Federal Reserve Bulletin of February 1929 states that the Federal Reserve would restrain the use of “credit facilities in aid of the growth of speculative credit.”In the spring of 1929, the U.S. Senate adopted a resolution stating that the Senate would support legislation “necessary to correct the evil complained of and prevent illegitimate and harmful speculation” (Bierman, 1991).The President of the Investment Bankers Association of America, Trowbridge Callaway, gave a talk in which he spoke of “the orgy of speculation which clouded the country’s vision.”Adolph Casper Miller, an outspoken member of the Federal Reserve Board from its beginning described 1929 as “this period of optimism gone wild and cupidity gone drunk.”Myron C. Taylor, head of U.S. Steel described “the folly of the speculative frenzy that lifted securities to levels far beyond any warrant of supporting profits.”Herbert Hoover becoming president in March 1929 was a very significant event. He was a good friend and neighbor of Adolph Miller (see above) and Miller reinforced Hoover’s fears. Hoover was an aggressive foe of speculation. For example, he wrote, “I sent individually for the editors and publishers of major newspapers and magazine and requested them systematically to warn the country against speculation and the unduly high price of stocks.” Hoover then pressured Secretary of the Treasury Andrew Mellon and Governor of the Federal Reserve Board Roy Young “to strangle the speculative movement.” In his memoirs (1952) he titled his Chapter 2 “We Attempt to Stop the Orgy of Speculation” reflecting Snowden’s influence.Buying on MarginMargin buying during the 1920’s was not controlled by the government. It was controlled by brokers interested in their own well-being. The average margin requirement was 50% of the stock price prior to October 1929. On selected stocks, it was as high as 75%. When the crash came, no major brokerage firm was bankrupted, because the brokers managed their finances in a conservative manner. At the end of October, margins were lowered to 25%.Brokers’ loans received a lot of attention in England, as they did in the United States. The Financial Timesreported the level and the changes in the amount regularly. For example, the October 4 issue indicated that on October 3 broker loans reached a record high as money rates dropped from 7.5% to 6%. By October 9, money rates had dropped further to below .06. Thus, investors prior to October 24 had relatively easy access to funds at the lowest rate since July 1928.the Financial Times (October 7, 1929, p. 3) reported that the President of the American Bankers Association was concerned about the level of credit for securities and had given a talk in which he stated, “Bankers are gravely alarmed over the mounting volume of credit being employed in carrying security loans, both by brokers and by individuals.” The Financial Times was also concerned with the buying of investment trusts on margin and the lack of credit to support the bull market.My conclusion is that the margin buying was a likely factor in causing stock prices to go up, but there is no reason to conclude that margin buying triggered the October crash. Once the selling rush began, however, the calling of margin loans probably exacerbated the price declines. (A calling of margin loans requires the stock buyer to contribute more cash to the broker or the broker sells the stock to get the cash.)Investment TrustsBy 1929, investment trusts were very popular with investors. These trusts were the 1929 version of closed-end mutual funds. In recent years seasoned closed-end mutual funds sell at a discount to their fundamental value. The fundamental value is the sum of the market values of the fund’s components (securities in the portfolio). In 1929, the investment trusts sold at a premium — i.e. higher than the value of the underlying stocks. Malkiel concludes (p. 51) that this “provides clinching evidence of wide-scale stock-market irrationality during the 1920s.” However, Malkiel also notes (p. 442) “as of the mid-1990’s, Berkshire Hathaway shares were selling at a hefty premium over the value of assets it owned.” Warren Buffett is the guiding force behind Berkshire Hathaway’s great success as an investor. If we were to conclude that rational investors would currently pay a premium for Warren Buffet’s expertise, then we should reject a conclusion that the 1929 market was obviously irrational. We have current evidence that rational investors will pay a premium for what they consider to be superior money management skills.There were $1 billion of investment trusts sold to investors in the first eight months of 1929 compared to $400 million in the entire 1928. the Economist reported that this was important (October 12, 1929, p. 665). “Much of the recent increase is to be accounted for by the extraordinary burst of investment trust financing.” In September alone $643 million was invested in investment trusts (Financial Times, October 21, p. 3). While the two sets of numbers (from the Economist and the Financial Times) are not exactly comparable, both sets of numbers indicate that investment trusts had become very popular by October 1929.The common stocks of trusts that had used debt or preferred stock leverage were particularly vulnerable to the stock price declines. For example, the Goldman Sachs Trading Corporation was highly levered with preferred stock and the value of its common stock fell from $104 a share to less than $3 in 1933. Many of the trusts were levered, but the leverage of choice was not debt but rather preferred stock.In concept, investment trusts were sensible. They offered expert management and diversification. Unfortunately, in 1929 a diversification of stocks was not going to be a big help given the universal price declines. Irving Fisher on September 6, 1929 was quoted in the New York Herald Tribune as stating: “The present high levels of stock prices and corresponding low levels of dividend returns are due largely to two factors. One, the anticipation of large dividend returns in the immediate future; and two, reduction of risk to investors largely brought about through investment diversification made possible for the investor by investment trusts.”If a researcher could find out the composition of the portfolio of a couple of dozen of the largest investment trusts as of September-October 1929 this would be extremely helpful. Seven important types of information that are not readily available but would be of interest are:The percentage of the portfolio that was public utilities.The extent of diversification.The percentage of the portfolios that was NYSE firms.The investment turnover.The ratio of market price to net asset value at various points in time.The amount of debt and preferred stock leverage used.Who bought the trusts and how long they held.The ideal information to establish whether market prices are excessively high compared to intrinsic values is to have both the prices and well-defined intrinsic values at the same moment in time. For the normal financial security, this is impossible since the intrinsic values are not objectively well defined. There are two exceptions. DeLong and Schleifer (1991) followed one path, very cleverly choosing to study closed-end mutual funds. Some of these funds were traded on the stock market and the market values of the securities in the funds’ portfolios are a very reasonable estimate of the intrinsic value. DeLong and Schleifer state (1991, p. 675):“We use the difference between prices and net asset values of closed-end mutual funds at the end of the 1920s to estimate the degree to which the stock market was overvalued on the eve of the 1929 crash. We conclude that the stocks making up the S&P composite were priced at least 30 percent above fundamentals in late summer, 1929.”Unfortunately (p. 682) “portfolios were rarely published and net asset values rarely calculated.” It was only after the crash that investment trusts started to reveal routinely their net asset value. In the third quarter of 1929 (p. 682), “three types of event seemed to trigger a closed-end fund’s publication of its portfolio.” The three events were (1) listing on the New York Stock Exchange (most of the trusts were not listed), (2) start up of a new closed-end fund (this stock price reflects selling pressure), and (3) shares selling at a discount from net asset value (in September 1929 most trusts were not selling at a discount, the inclusion of any that were introduces a bias). After 1929, some trusts revealed 1929 net asset values. Thus, DeLong and Schleifer lacked the amount and quality of information that would have allowed definite conclusions. In fact, if investors also lacked the information regarding the portfolio composition we would have to place investment trusts in a unique investment category where investment decisions were made without reliable financial statements. If investors in the third quarter of 1929 did not know the current net asset value of investment trusts, this fact is significant.The closed-end funds were an attractive vehicle to study since the market for investment trusts in 1929 was large and growing rapidly. In August and September alone over $1 billion of new funds were launched. DeLong and Schleifer found the premiums of price over value to be large — the median was about 50% in the third quarter of 1929) (p. 678). But they worried about the validity of their study because funds were not selected randomly.DeLong and Schleifer had limited data (pp. 698-699). For example, for September 1929 there were two observations, for August 1929 there were five, and for July there were nine. The nine funds observed in July 1929 had the following premia: 277%, 152%, 48%, 22%, 18% (2 times), 8% (3 times). Given that closed-end funds tend to sell at a discount, the positive premiums are interesting. Given the conventional perspective in 1929 that financial experts could manager money better than the person not plugged into the street, it is not surprising that some investors were willing to pay for expertise and to buy shares in investment trusts. Thus, a premium for investment trusts does not imply the same premium for other stocks.The Public Utility SectorIn addition to investment trusts, intrinsic values are usually well defined for regulated public utilities. The general rule applied by regulatory authorities is to allow utilities to earn a “fair return” on an allowed rate base. The fair return is defined to be equal to a utility’s weighted average cost of capital. There are several reasons why a public utility can earn more or less than a fair return, but the target set by the regulatory authority is the weighted average cost of capital.Thus, if a utility has an allowed rate equity base of $X and is allowed to earn a return of r, (rX in terms of dollars) after one year the firm’s equity will be worth X + rX or (1 + r)X with a present value of X. (This assumes that r is the return required by the market as well as the return allowed by regulators.) Thus, the present value of the equity is equal to the present rate base, and the stock price should be equal to the rate base per share. Given the nature of public utility accounting, the book value of a utility’s stock is approximately equal to the rate base.There can be time periods where the utility can earn more (or less) than the allowed return. The reasons for this include regulatory lag, changes in efficiency, changes in the weather, and changes in the mix and number of customers. Also, the cost of equity may be different than the allowed return because of inaccurate (or incorrect) or changing capital market conditions. Thus, the stock price may differ from the book value, but one would not expect the stock price to be very much different than the book value per share for very long. There should be a tendency for the stock price to revert to the book value for a public utility supplying an essential service where there is no effective competition, and the rate commission is effectively allowing a fair return to be earned.In 1929, public utility stock prices were in excess of three times their book values. Consider, for example, the following measures (Wigmore, 1985, p. 39) for five operating utilities.border=”1″ cellspacing=”0″ cellpadding=”2″ class=”encyclopedia” width=”580″>1929 Price-earnings RatioHigh Price for YearMarket Price/Book ValueCommonwealth Edison353.31Consolidated Gas of New York393.34Detroit Edison353.06Pacific Gas & Electric283.30Public Service of New Jersey353.14Sooner or later this price bubble had to break unless the regulatory authorities were to decide to allow the utilities to earn more than a fair return, or an infinite stream of greater fools existed. The decision made by the Massachusetts Public Utility Commission in October 1929 applicable to the Edison Electric Illuminating Company of Boston made clear that neither of these improbable events were going to happen (see below).The utilities bubble did burst. Between the end of September and the end of November 1929, industrial stocks fell by 48%, railroads by 32% and utilities by 55% — thus utilities dropped the furthest from the highs. A comparison of the beginning of the year prices and the highest prices is also of interest: industrials rose by 20%, railroads by 19%, and utilities by 48%. The growth in value for utilities during the first nine months of 1929 was more than twice that of the other two groups.The following high and low prices for 1929 for a typical set of public utilities and holding companies illustrate how severely public utility prices were hit by the crash (New York Times, 1 January 1930 quotations.)1929FirmHigh PriceLow PriceLow Price DividedBy High PriceAmerican Power & Light1753/8641/4.37American Superpower711/815.21Brooklyn Gas2481/299.44Buffalo, Niagara & Eastern Power128611/8.48Cities Service681/820.29Consolidated Gas Co. of N.Y.1831/4801/8.44Electric Bond and Share18950.26Long Island Lighting9140.44Niagara Hudson Power303/4111/4.37Transamerica673/8201/4.30Picking on one segment of the market as the cause of a general break in the market is not obviously correct. But the combination of an overpriced utility segment and investment trusts with a portion of the market that had purchased on margin appears to be a viable explanation. In addition, as of September 1, 1929 utilities industry represented $14.8 billion of value or 18% of the value of the outstanding shares on the NYSE. Thus, they were a large sector, capable of exerting a powerful influence on the overall market. Moreover, many contemporaries pointed to the utility sector as an important force in triggering the market decline.The October 19, 1929 issue of the Commercial and Financial Chronicle identified the main depressing influences on the market to be the indications of a recession in steel and the refusal of the Massachusetts Department of Public Utilities to allow Edison Electric Illuminating Company of Boston to split its stock. The explanations offered by the Department — that the stock was not worth its price and the company’s dividend would have to be reduced — made the situation worse.the Washington Post (October 17, p. 1) in explaining the October 16 market declines (an Associated Press release) reported, “Professional traders also were obviously distressed at the printed remarks regarding inflation of power and light securities by the Massachusetts Public Utility Commission in its recent decision.”Straws That Broke the Camel’s Back?Edison Electric of BostonOn August 2, 1929, the New York Times reported that the Directors of the Edison Electric Illuminating Company of Boston had called a meeting of stockholders to obtain authorization for a stock split. The stock went up to a high of $440. Its book value was $164 (the ratio of price to book value was 2.6, which was less than many other utilities).On Saturday (October 12, p. 27) the Times reported that on Friday the Massachusetts Department of Public Utilities has rejected the stock split. The heading said “Bars Stock Split by Boston Edison. Criticizes Dividend Policy. Holds Rates Should Not Be Raised Until Company Can Reduce Charge for Electricity.” Boston Edison lost 15 points for the day even though the decision was released afterthe Friday closing. The high for the year was $440 and the stock closed at $360 on Friday.The Massachusetts Department of Public Utilities (New York Times, October 12, p. 27) did not want to imply to investors that this was the “forerunner of substantial increases in dividends.” They stated that the expectation of increased dividends was not justified, offered “scathing criticisms of the company” (October 16, p. 42) and concluded “the public will take over such utilities as try to gobble up all profits available.”On October 15, the Boston City Council advised the mayor to initiate legislation for public ownership of Edison, on October 16, the Department announced it would investigate the level of rates being charged by Edison, and on October 19, it set the dates for the inquiry. On Tuesday, October 15 (p. 41), there was a discussion in theTimes of the Massachusetts decision in the column “Topic in Wall Street.” It “excited intense interest in public utility circles yesterday and undoubtedly had effect in depressing the issues of this group. The decision is a far-reaching one and Wall Street expressed the greatest interest in what effect it will have, if any, upon commissions in other States.”Boston Edison had closed at 360 on Friday, October 11, before the announcement was released. It dropped 61 points at its low on Monday, (October 14) but closed at 328, a loss of 32 points.On October 16 (p. 42), the Times reported that Governor Allen of Massachusetts was launching a full investigation of Boston Edison including “dividends, depreciation, and surplus.”One major factor that can be identified leading to the price break for public utilities was the ruling by the Massachusetts Public Utility Commission. The only specific action was that it refused to permit Edison Electric Illuminating Company of Boston to split its stock. Standard financial theory predicts that the primary effect of a stock split would be to reduce the stock price by 50% and would leave the totalvalue unchanged, thus the denial of the split was not economically significant, and the stock split should have been easy to grant. But the Commission made it clear it had additional messages to communicate. For example, the Financial Times (October 16, 1929, p. 7) reported that the Commission advised the company to “reduce the selling price to the consumer.” Boston was paying $.085 per kilowatt-hour and Cambridge only $.055. There were also rumors of public ownership and a shifting of control. The next day (October 17), the Times reported (p. 3) “The worst pressure was against Public Utility shares” and the headline read “Electric Issue Hard Hit.”Public Utility Regulation in New YorkMassachusetts was not alone in challenging the profit levels of utilities. The Federal Trade Commission, New York City, and New York State were all challenging the status of public utility regulation. New York Governor (Franklin D. Roosevelt) appointed a committee on October 8 to investigate the regulation of public utilities in the state. The Committee stated, “this inquiry is likely to have far-reaching effects and may lead to similar action in other States.” Both the October 17 and October 19 issues of the Times carried articles regarding the New York investigative committee. Professor Bonbright, a Roosevelt appointee, described the regulatory process as a “vicious system” (October 19, p. 21), which ignored consumers. The Chairman of the Public Service Commission, testifying before the Committee wanted more control over utility holding companies, especially management fees and other transfers.The New York State Committee also noted the increasing importance of investment trusts: “mention of the influence of the investment trust on utility securities is too important for this committee to ignore” (New York Times, October 17, p. 18). They conjectured that the trusts had $3.5 billion to invest, and “their influence has become very important” (p. 18).In New York City Mayor Jimmy Walker was fighting the accusation of graft charges with statements that his administration would fight aggressively against rate increases, thus proving that he had not accepted bribes (New York Times, October 23). It is reasonable to conclude that the October 16 break was related to the news from Massachusetts and New York.On October 17, the New York Times (p. 18) reported that the Committee on Public Service Securities of the Investment Banking Association warned against “speculative and uniformed buying.” The Committee published a report in which it asked for care in buying shares in utilities.On Black Thursday, October 24, the market panic began. The market dropped from 305.87 to 272.32 (a 34 point drop, or 9%) and closed at 299.47. The declines were led by the motor stocks and public utilities.The Public Utility Multipliers and LeveragePublic utilities were a very important segment of the stock market, and even more importantly, any change in public utility stock values resulted in larger changes in equity wealth. In 1929, there were three potentially important multipliers that meant that any change in a public utility’s underlying value would result in a larger value change in the market and in the investor’s value.Consider the following hypothetical values for a public utility:Book value per share for a utility $50Market price per share 162.502Market price of investment trust holding stock (assuming a 100% 325.00premium over market value)Eliminating the utility’s $112.50 market price premium over book value, the market price of the investment trust would be $50 without a premium. The loss in market value of the stock of the investment trust and the utility would be $387.50 (with no premium). The $387.50 is equal to the $112.50 loss in underlying stock value and the $275 reduction in investment trust stock value. The public utility holding companies, in fact, were even more vulnerable to a stock price change since their ratio of price to book value averaged 4.44 (Wigmore, p. 43). The $387.50 loss in market value implies investments in both the firm’s stock and the investment trust.For simplicity, this discussion has assumed the trust held all the holding company stock. The effects shown would be reduced if the trust held only a fraction of the stock. However, this discussion has also assumed that no debt or margin was used to finance the investment. Assume the individual investors invested only $162.50 of their money and borrowed $162.50 to buy the investment trust stock costing $325. If the utility stock went down from $162.50 to $50 and the trust still sold at a 100% premium, the trust would sell at $100 and the investors would have lost 100% of their investment since the investors owe $162.50. The vulnerability of the margin investor buying a trust stock that has invested in a utility is obvious.These highly levered non-operating utilities offered an opportunity for speculation. The holding company typically owned 100% of the operating companies’ stock and both entities were levered (there could be more than two levels of leverage). There were also holding companies that owned holding companies (e.g., Ebasco). Wigmore (p. 43) lists nine of the largest public utility holding companies. The ratio of the low 1929 price to the high price (average) was 33%. These stocks were even more volatile than the publicly owned utilities.The amount of leverage (both debt and preferred stock) used in the utility sector may have been enormous, but we cannot tell for certain. Assume that a utility purchases an asset that costs $1,000,000 and that asset is financed with 40% stock ($400,000). A utility holding company owns the utility stock and is also financed with 40% stock ($160,000). A second utility holding company owns the first and it is financed with 40% stock ($64,000). An investment trust owns the second holding company’s stock and is financed with 40% stock ($25,600). An investor buys the investment trust’s common stock using 50% margin and investing $12,800 in the stock. Thus, the $1,000,000 utility asset is financed with $12,800 of equity capital.When the large amount of leverage is combined with the inflated prices of the public utility stock, both holding company stocks, and the investment trust the problem is even more dramatic. Continuing the above example, assume the $1,000,000 asset again financed with $600,000 of debt and $400,000 common stock, but the common stock has a $1,200,000 market value. The first utility holding company has $720,000 of debt and $480,000 of common. The second holding company has $288,000 of debt and $192,000 of stock. The investment trust has $115,200 of debt and $76,800 of stock. The investor uses $38,400 of margin debt. The $1,000,000 asset is supporting $1,761,600 of debt. The investor’s $38,400 of equity is very much in jeopardy.Conclusions and LessonsAlthough no consensus has been reached on the causes of the 1929 stock market crash, the evidence cited above suggests that it may have been that the fear of speculation helped push the stock market to the brink of collapse. It is possible that Hoover’s aggressive campaign against speculation, helped by the overpriced public utilities hit by the Massachusetts Public Utility Commission decision and statements and the vulnerable margin investors, triggered the October selling panic and the consequences that followed.An important first event may have been Lord Snowden’s reference to the speculative orgy in America. The resulting decline in stock prices weakened margin positions. When several governmental bodies indicated that public utilities in the future were not going to be able to justify their market prices, the decreases in utility stock prices resulted in margin positions being further weakened resulting in general selling. At some stage, the selling panic started and the crash resulted.What can we learn from the 1929 crash? There are many lessons, but a handful seem to be most applicable to today’s stock market.There is a delicate balance between optimism and pessimism regarding the stock market. Statements and actions by government officials can affect the sensitivity of stock prices to events. Call a market overpriced often enough, and investors may begin to believe it.The fact that stocks can lose 40% of their value in a month and 90% over three years suggests the desirability of diversification (including assets other than stocks). Remember, some investors lose all of their investment when the market falls 40%.A levered investment portfolio amplifies the swings of the stock market. Some investment securities have leverage built into them (e.g., stocks of highly levered firms, options, and stock index futures).A series of presumably undramatic events may establish a setting for a wide price decline.A segment of the market can experience bad news and a price decline that infects the broader market. In 1929, it seems to have been public utilities. In 2000, high technology firms were candidates.Interpreting events and assigning blame is unreliable if there has not been an adequate passage of time and opportunity for reflection and analysis — and is difficult even with decades of hindsight.It is difficult to predict a major market turn with any degree of reliability. It is impressive that in September 1929, Roger Babson predicted the collapse of the stock market, but he had been predicting a collapse for many years. Also, even Babson recommended diversification and was against complete liquidation of stock investments (Financial Chronicle, September 7, 1929, p. 1505).Even a market that is not excessively high can collapse. Both market psychology and the underlying economics are relevant.