Is The Stock Market Good Or Bad

In the years leading up to 1929, the American economy was thriving and stock trade sales were at their highest peak. The majority of people were thriving in this newfound success, and had been constantly building off their fortunes. The people of the United States had never lived through such a time, so experiencing this for the first time they were ignorant of any negative effects that could occur. They never would have expected the economy to undergo such a drastic change in such a short period of time. According to credible sources, the unemployment that resulted from the Stock Market Crash of 1929 impacted choices and caused financial anxiety and panic.

Investors can also lose money by investing in the stock market. The two main ways to make money in the stock market is by buying a stock and it increasing in value and selling for a profit, or hold the stock you have and get paid dividends for owning a portion of the company (Sobczak 10). Owning stocks allow you to also sit in board meetings and vote on topics. There are many Cinderella stories about the stock market. Companies like Facebook, Apple, and Krispy Kreme doughnuts were once companies in someone’s garage that became publicly traded and became nationally known

During the 1920's millions of Americans began investing in stocks for the first time. They heard about how rich people were getting by investing so they all decided to do it. Many new investors entered the stock market using borrowed money. Stock market prices rose steadily as inflated market demand outpaced increases in the capital value of businesses. Investors began to realize that a large imbalance existed between stock prices and the amount of money needed to back them up, and began to sell. On October 29, 1929, great numbers of people tried to sell their stocks all at once. This created chaos in the accounting of stocks and for brokers. The New York Stock Exchange and other exchanges prices dropped so dramatically that this event became known as the crash of 1929. Millions of investors lost their savings in the crash and many were deeply in debt since

Many people believe the Stock Market crash and the Great Depression are one in the same. In the nineteen twenties the Dow Jones went from sixty to four hundred. People became instant millionaires. Trading became America’s favorite pastime and a quick way to get rich. There were Americans mortgaging their home and investing their life savings in stock such as ford. However, there were many fake companies that formed to deceive the inexperience investors. Many investors did not believe that a crash was possible; they all thought the market would always go up.

The United States signaled a new era after the end of World War I. It was an era of hopefulness when many people invested their money that was under the mattresses at home or in the bank into the stock market. People migrated to the prosperous cities with the hopes of finding much better life. In the 1920s, the stock market reputation did not appear to be a risky investment, until 1929.First noticeable in 1925, the stock market prices began to rise as more people invested their money. During 1925 and 1926, the stock prices vacillated but in 1927, it had an upward trend. The stock market boom had started by 1928. The stock market was no longer a long-term investment because the boom changed the investor’s way of thinking (“The Stock Market

Before the Stock Market crash of 1929, America went through a decade of prosperity and social change, or the Roaring Twenties. New fads and numerous inventions emerged throughout our country. Many people bought on credit and as a result, our economy flourished. However, American society failed to realize that this would be one of the underlying causes of the Great Depression. For instance, “Most people bought, but many couldn’t afford to pay the full price

Moreover, by mid-20s, stock market were the largest playground when about 3 million Americans bought stocks with money borrowed from the bank, also known as “buying on margin” which is the same method as the installment plans, but without having general knowledge about its real value nor their own profit value from the stocks they bought, there was just only one thing in their mind: “The more stocks you buy the faster you are going to be rich” and that is what matters to them, but the banks themselves favored real estate investment over commercial ventures, which was to open more opportunities for private businesses. Thus, if the market goes down and holders decide to sell his or her stocks then there would be more sellers than buyers and the

The prosperity of the 1920’s came to an abrupt halt when the stock market crashed in 1929. The cause of the Great Depression was triggered by a combination of reasons. Americans had been assured in their faith of a booming economy that they bought numerous items on credit. Ultimately the amount of products bought on credit reached an astounding $7 billion(4). With easy access to credit due to the government’s low interest rates, people had bought all of the new automobiles and radios without actually having the finances to pay for them. Beyond that, billions were poured into the stock market to make quick profit, which caused problems because it inflated the stocks to where they were selling for more than they were essentially worth. As if the stock market was not unstable enough, margin buying added to the danger of the stock market collapse because people were purchasing stocks with borrowed money. When the stock market collapsed, brokers demanded but were unable

In late October of 1929, the U.S. stock market crashed, setting our nation into the Great Depression. In an attempt to reveal the true catalysts of the event, the book “Causes of the 1929 Stock Market Crash” examines popular beliefs of what really caused the economic tragedy. The nine questionable causes that are discussed in this book are that the stock market was too high in September of 1929 due to “excessive speculation” (Bierman 32), there was a downturn in business activity, the Hatry affair, the Federal Reserve Board’s actions, a message that there was a “war” against speculators, excessive buying on margin and of investment stocks, excessive leverage in terms of debt, a competitively priced utility market segment paired with a setback in the public utility market, and an overreaction by the stock market.

The election of 1928 was between Herbert Hoover and Alfred E. Smith, in which Hoover became the 31st president of United States. He kept optimism of the 1920’s afloat, convincing majority of Americans that the economic health would remain stable. At the time, Dow Jones Industrial Average was the most commonly used barometer of the stock market’s success. With stock prices rising, people rushed to buy as many as they could. However, many fell into the trap of speculation, in which stocks were bought without thinking of the risks. People even began buying on margin, in which people would pay a little pick of the stock price, but then borrow the rest of the money. This not only caused many to go into debt, but caused the stock market to slowly decline.

It is often said that perception outweighs reality and that is often the view of the stock market. News that a certain stock may be on the rise can set off a buying spree, while a tip that one may be on decline might entice people to sell. The fact that no one really knows what is going to happen one way or the other is inconsequential. John Kenneth Galbraith uses the concept of speculation as a major theme in his book The Great Crash 1929. Galbraith’s portrayal of the market before the crash focuses largely on massive speculation of overvalued stocks which were inevitably going to topple and take the wealth of the shareholders down with it. After all, the prices could not continue to go up forever. Widespread speculation was no doubt a

A practice called “buying on margin” was used to buy stock. Buying on margin was the term for buying things on credit because they didn’t have enough money to pay upfront. The stock market allowed people to buy stock with credit and, in theory, the buyers would pay for the stock bit by bit with the money they earned from the stock until it was payed off. However, this resulted in over speculation in an unregulated stock market because more people were able to “buy” stock without being immediately able to pay for it. The more stock is sold, the higher the company’s worth. The buying on margin made the market inflate artificially and if the value doesn’t increase, the people who bought the stock expecting to pay for it with the money they make with the stock wouldn’t be able to afford it and the company would have to take back the stock but at that point it doesn’t really have much value at all anymore. It resulted in huge losses of money for the consumer and company and led to the stock market crash, even though just before it, the market was so falsely inflated that it looked like it was doing

Firsty, Gary Richardson, an author, educator, and researcher who obtained degrees from both UC Berkeley and the University of Chicago, states, the “financial boom” of the economy and stock market “occurred during an era of optimism,” which is referred to as the Roaring Twenties. Once the initial financial success ceased to exist, horrible events ensued. However, before the stock market imploded, “people bought shares with the expectation of making money,” which Tejvan Pettinger explains in the article “What Caused the Wall Street Crash of 1929?”. In addition, this buying of shares and investment in stocks lead to a “new industry of brokerage houses, investment trusts, and margin accounts,” allowing “ordinary people to purchase corporate equities” (Richardson, Gary). Soon enough, people were “borrowing 80-90% of the value of the shares,” which “left investors very exposed when prices fell” (Pettinger, Tejvan).

There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book “A Random Walk Down Wall Street”. What does a random walk mean? The random walk means in terms of the stock market that, “short term changes in stock prices cannot be predicted”. So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of “purchasing assets to gain profit in the form of reasonably

It was 1929, and in the United States things could not be better for those smart enough, or for that matter, brave enough, to gamble on the Stock Market. All of the big stocks were paying off handsomely, the little ones too. However, as much as analysis tried to tell the people that this period of great wealth would last, no one could imagine what would come of the United States economy in the next decade. The reasons for this catastrophic event in American 20th century history are numerous, and in his book, The Great Crash, John Kenneth Galbraith covers the period and events which lead up to the downward spiral in the fall of 1929 and the people behind the scenes on Wall Street who helped this fire spread.