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Archive for the ‘Stock Market Crash’ Category

In words that I will be able to understand, can anyone explain to me the correlation between the banks, the housing crisis, and the stock market. And how does the stock market affect the economy itself? I am just beginning to understand what the stock market is, so numbers and statistics are really not helpful.

Basically it comes down to this:

1. Banks loaned money or gave credit to so-called ‘high risk’ people who were less likely to pay their debts, hoping that they would run into difficulty and be forced to pay a higher interest rate on the loans and increase the profitability of the loan.

2. Instead of being able to pay when the interest rates increased, lots of these people were unable to continue to pay the higher interest payments, so they defaulted on their loans and were forced into bankruptcy.

3. The banks, who expected customers to keep paying the high interest, were faced with credit cards and loans that were losing money due to huge amounts of bankruptcy.

4. The banks had no money to loan to home buyers.

5. As businesses get into deeper credit trouble, they start laying people off in an attempt to cut costs. As they lose money, the stock market, which is basically a betting shop based on confidence in businesses, is filled with people selling their stock.

6. As the stock prices go down, the companies are perceived as being worth less. That means they will not be able to get loans as easily. In order to stop this, a company may lay off even more people in an effort to appear more profitable.

The result – people and businesses owe more interest than they can pay, businesses go under, the housing market collapses, banks go under, the stock market crashes, unemployment goes through the roof creating a vicious circle (i.e. even more people defaulting on credit and loans) that could have (and still could) result in a 1929-style crash.

He plans to raise the capital-gains tax from 15 percent to as much as 28 percent, which is nearly doubling it. This will cost investers of stock to sell it to prevent getting taxed at what will be the new high rate, once it gets passed. Once the stocks are sold, if no one buys it, the stock market will crash, isn’t it awsome?

http://www.adjunct.diodon349.com/Attack_on_USA/president_obama_and_the_coming_stock_market_crash.htm

How could you possibly view that as awesome? Have you thought that through? Do you realize what will happen to your wages and the prices you will pay for good and services under those circumstances?

i dont understand the whole point of the stock market crash please help?!?!?!?!

ok, well

in 1929, you could make purchases of stock using what is pretty much a older version of a credit card.

so insted of the company actually getting cold hard cash, they were getting IOU’s for parts in their company.

people would do this because they figured that if i put 50$ into this company, i will easily get that back and be able to pay off the share i put on credit.

so if their company died out a little bit, or lost value…all the people who had IOU’s with the company were not able to pay the credit off they used to buy stock.

so companies who were worth say, 1000$ dollars actually onl had maybe 300$ in actual cash, the rest in IOU’s.

and a company cant run on IOU’s, they have to have cash.

so all these companies who thought they had so much cash, really didnt….but the market was just inflating so much because of all the IOU’s people were making, insted of cash. there was alot of money used and there wasnt the money there to back up the spending, causing it to crash

IOU
i
owe
you

IF anyone, who foreshadowed the world about the recent ongoing stock market crash?

A number of people did and they were mocked and ridiculed by the Right leaning media like CNBC.

Up to just a few months ago they were even denying we were in a recession.

How about ME? haha. I predicted it, sorta.

All I needed to see was that the market looked more likely to go down than up when it was hitting new highs. That got me out and as things turned worse I stayed out as "down" looked like the most likely direction.

I didn’t need to predict exactly the horrible Bear Market, all I had to do was see that the most likely risk/reward view almost two years ago was leaning to risk more than upside reward.

The market hitting new highs in ‘07 was contrary to the rising problems with home mortgages. Some hedge funds were already collapsing. The first shock came in July of 2007. Home prices started falling over THREE YEARS AGO.

This was not only foreseeable, it was foreseen. But I have always had trouble telling people to sell at the highs. They definitely don’t want to hear that the market is likely to fall if they are making money at that moment.

There is a market crash going on, what are some ideas that may help stable the stock again. I’m only 10 and I don’t understand that much about this whole thing. Thanks

Give it time. The the government can’t manipulate markets. Buyers will come in when the considers stocks to be good value.

what does the stock market crash mean in laymonds terms? hypothetically if the stock market in america went from where it is at now which is around 9000 points, and plunged to 6000 or even to zero, what does that REALLY mean? would a candy bar cost like 20 dollars? would we go into chaos, or would everything kind of stay normal? is this the end of days? haha just kidding. but really? what does this mean? thanks..

Right now all of the turmoil is caused by companies having a hard time barrowing money and investors are panicing and selling their stocks. If the market were to crash to 0 that would mean bankruptcy of all the companies. Fear not, this is not going to happen. I think we will see the averages fall a bit more and then things will slowly return to normal. Too many people out there will be interested in getting bargain stocks, the market will return in time.

Is there anyone that has foreshadowed the stock market crash?
If so who was it?
It is the recent stock market crash that is going on in this very minute.

which crash?

edit:
u need to be specific. officially, the stock market has not crashed since 1987, unless you count the 1997 "mini crash."
http://en.wikipedia.org/wiki/October_27,_1997_mini-crash

The "97 mini crash has had similar impact over the last 2 years, but the media refuses to call it what what is:

A 9 year Bear Market that started on or about March 2000 with a double top on or about 2006/2007.

I need a timeline about the great stock market crash of 1929 please!

take your pick

http://www.pbs.org/wgbh/amex/crash/sfeature/images/sf_rca_chart.gif

http://mutualfunds.about.com/cs/history/l/bl1929graph.htm

http://www.lowrisk.com/crash/crashcharts.htm

How did the stock market crash effect small town famers in places such as saskatchewan, and their families?
CANADIAN FARMERS **

well wasn’t u,s economy connected to that of canada and britain so technically the depression not only affected u.s but also countries that depended on u.s for trade

I’m desperately trying to understand the stock market and the Great Depression, so my question is this: What, exactly, is a stock market "crash," and how did/does it happen? Explain this to me like you would with a mentally retarded first-grader.

The crash and the Depression had a common cause, shocks transmitted through gold because of the gold standard. A crash is a simultaneous attempt of a very large number of people to sell something. Even on its busiest day, the market only exchanges 1.5% of the shares outstanding. The market is very illiquid. That is a very busy day. If you wanted to sell 2% of the shares you would have trouble finding buyers, that is 33% more stock than on the ordinary busiest day. It is unlikely extra money would show up, so prices must decline. The ‘29 crash was worsened by margin calls. At that time you only had to have 10% down payment on margin loans, rather than the 50% down payment currently required (except for pattern day traders). As stocks declined, brokers were forced to "call" loans on stocks. They literally called their customers and said bring cash. Since most people are illiquid, or had already put everything they owned in the market, the brokers seized their accounts and sold them at any price. The Fed New York organized a bailout, but the system overall fought them over it. The failure to bail out Wall Street, in part, triggered a 3% contraction of the money supply.

While 3% doesn’t sound like much, investment in the United States at that time, and I think actually today, is only 4% of the money supply. That is a 75% reduction in investment in plants, equipment and inventory. The nation ate its investments almost overnight, converting them into cash and not repairing machinary, building capacity, buying inventory or raw materials. A 3% shift in the supply of money resulted in a 24% unemployment rate within 12 months.

The crash of ‘87 was different. It was more like a statistical run. Prices skyrocketed quickly. Everyone who was going to get in, got in, which meant there was no one else to sell to. Brokers walked into the market with hand fulls of sell orders, but none of them were holding buy orders. This set off a panic because a "market order" is an order for a broker to stand at the auction and continue to bid until they are the low bidder if selling or the high bidder if buying. So you had an entire market of brokers bidding as low as they can to find buyers and none would appear because everyone interested in owning stocks already was in the market.

It is rather like having a house that fifty elephants want into. They won’t fit all at the same time, so they crash the building by all rushing in at once.

Panics happen just like fear happens anywhere. If you cannot predict the future, then you can be afraid. People are loss averse and will flee in the face of potential losses. If everyone flees at the same time, you have a crash.

If you had invested in 1929, it would not be until 1962 that you would break even with the 90 bill rate, essentially a savings account. In the 1987 crash it only took a few months.