20 July 1933: A speculative rally hits a wall

The Dow fell about 7 percent in one of the worst days of the 1930s, as an overheated rally collapsed. Stocks had soared since the spring on hopes for recovery, and speculators had piled into anything tied to the coming end of Prohibition, including liquor stocks, often on borrowed money. Margin calls did the rest, and the ticker ran far behind the trading. Even in a real recovery, leverage turns a stumble into a fall.

The lesson: Borrowed money makes even a justified rally fragile; leverage punishes timing errors very quickly.