Archive for the ‘Stock Market Crash’ Category
How have each of the following topics contributed to the stock market crash of 2008 and the subsequent financial crisis and recession?
The Gramm-Leach-Bliley Act of 1999
Housing Bubble
Short Selling
Buying on Margin
Subprime/adjustable rate mortgages
Thank you!
The GLB Act repealed the Glass-Steagall Act of 1932 and allowed commercial banks to behave like investment banks.
Teh Housing Bubble started in 2007 when those who couldn’t afford mortgages were given adjustable rate mortgage ARM and eventually foreclosed.
Short Selling is a Wall Street technique to take advantage of a stock going down and it’s a bet that stocks would go down further
Buying on a margin I think is a hedge bet
Subprime/adjustable rates change if the mortgage taker fails to pay on time.
Why exactly did the stock market crash of 1929 happen? what made it suddenly drop so much?
The Wall Street Crash, also commonly referred to as "Black Thursday" took place on 24 Oct 1929, when the NYSE collapsed and continued to fall for a whole month. It is the worst market crash in history. The Dow Jones lost $30 billion in a week.
The decade before the Crash [commonly known as the "Roaring Twenties"] was a time of lavish lifestyles, excessive consumer spending [and debt!] and wealth and plenty. This led to millions of Americans speculating in stocks with people borrowing money to buy more stocks. There was more money out on loan than the entire amount of currency circulating in the US at the time. The rising share prices encouraged more people to invest; people hoped the share prices would rise further. From 1921 to 1929, the Dow Jones rocketed from 60 to 400! Millionaires were created instantly. Soon stock market trading became America’s favorite pastime as investors jockeyed to make a quick killing. Investors mortgaged their homes, and foolishly invested their life savings in hot stocks, such as Ford and RCA. To the average investor, stocks were a sure thing. Few people actually studied the fundamentals of the companies they invested in. Thousands of fraudulent companies were formed to hoodwink unsavvy investors. Most investors never even thought a crash was possible. To them, the stock market “always went up”. Speculation thus fueled further rises and created a credit-inspired economic bubble.
When the market turned downward suddenly, the "panic-selling" started, bringing the market to its knees. After this Crash, the differentiation between commercial banks and investment banks.
There are still debates between economists about what caused such devastation and more than one reasons is given. It is however rather generally agreed that the "stock boom" of the 1920s went too far and caused the Crash.
We’re learning this in school, but I don’t quite get it. My teacher said everyone was buying bank loans for stocks. The higher the stock prices rose, more loans people bought. The day the stock market crashed, 12.9 million stock were sold. Why were they all of a sudden sold? Could you please explain this to me?
People bought on margin during those days. This means you can take a loan out for a percentage of the trade. Today some brokers will let you buy on 2:1 margin, meaning if you have $10,000 they will let you buy $20,000 worth of stock.
Back in those days people were able to buy with 10:1 margin, meaning if you have $10,000 you could have bought $100,000 worth of stock.
In 1929 stock prices had risen way beyond their true value and were bound to pull back.
When they did people paniced afraid that they were going to lose all of the money they originally invested with or more because of margin. So there was a lot of selling that took place, mostly because people were afraid of what would happen if they hung onto their positions.
If 10% of stock holders sell their stock holdings, what happens to these stock holdings? If someone is willing to buy the holdings, then another stock holder will end up owning the stock holdings. But if nobody is willing to buy the holdings, then what happens? (This would be the case that leads to a big stock market crash?)
If no one wants to buy it then it won’t get sold. The stock market works by sellers stating an asking price and buyers stating a bidding price. When a seller can’t find a buyer for the price he wants he can A) lower his price or B) hold on to it. When a buyer can’t find a seller with the price he wants he can A) raise his price or B) don’t buy anything. A crash begins when sellers are forced to lower their price to sell (they may be facing a margin call and have no other choice). Likewise the opposite can happen to buyers. For the crash to be sustained, the market would have to lose a significant amount of value over a several day/week period with no immediate signs of recovery (i.e. the value of the stocks really is low).
A crash cannot happen if the stock does not change hands, of course, the market won’t rise either.
There has been quite a bit of discussion in various forums and on radio talk shows about a possible link between investors (and even governments) outside the US triggering the stock market decline last September and October. However, I have seen little or no evidence to back these assertions.
Last I heard it was several huge hedge funds that were getting losses in other areas and needed to raise capital quickly. They were dumping their stocks like crazy which drove the DOW way down.
Hedge funds are still unregulated today!!!!!
But it is a great time to buy those companies that should be around for awhile…..
I’m 25 years old and have a 401k, Roth 401k, and Roth IRA. With the recent events in the stock market, should I increase/decrease/continue my contributions to these plans? Why?
Today my stocks went up 5%; yesterday down 5%. Keep it the same for oneyear. This market is too crazy.
What are the causes of the stock market crash in 1929
There were many causes to the crash of wall street but the main ones were:
-Overproduction
-The banking system
-Income Distribution
-International Economy
For more details look at the site below.
okay so when the dollar went down now one lost there money because from what i understand thats what happen when the stock market crashed
No. You are taking a risk when you invest in the stock market. Therefore, you are not being robbed if the stock market goes down.
Good question.
Can you list three causes of the 1929 stock market crash?
Short answer will do, or any for that matter (as long as there helpful!)
thanks soo much!!
1. Overproduction and Underconsumption of consumer goods and farm products.
2. Consumer’s debts
3. Widening gap between the rich and the poor; uneven distribution of income; wealth was not being shared fairly.
4. Wages did not keep pace with the growth of production.
5. Heavy increases in stock speculation and gambling; buying stocks on margin.
6. Shaky banking contributed to speculation and an overexpansion of credit.
7. Depressed conditions on the farms (overproduction of farm products; falling prices, and farmers’ debts.)
8. Laissez-faire economic approach by the government (the consolidation of corporations was not challenged under antitrust laws; tax policies that favored the wealthy).
9.The Business Cycle: The economy was bound to go down eventually; it can only be prosperous for a certain period of time.
10. The federal government introduces a tight money policy in order to control credit.
what are some events that led up to the stock market crash? please any help would be greatly appreciated!
Your answer…I took this direct quote from wikipedia…
"The crash followed a speculative boom that had taken hold in the late 1920s, which had led hundred of thousands of Americans to invest heavily in the stock market, a significant number even borrowing money to buy more stock. By August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying.[citation needed] Over $8.5 billion was out on loan, more than the entire amount of currency circulating in the U.S.[8] The rising share prices encouraged more people to invest; people hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929,[9] clearly above historical norms. Most economists view this event as the most dramatic in modern economic history."
..So, the idea of "what goes up must come down" applies in the stock market. When it started plummeting people panicked and sold stocks as rapidly as they bought them. This made prices drop more and more, till the market crashed.