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Stock Market Speculation

Page history last edited by Mr. Hengsterman 3 years, 11 months ago

 

 

 

 

 

 

“Dimes for Dollars”

As speculation increased, many began buying stocks on margin (Margin requirements were as low as 10% during the 1920’s) paying only a small percentage of the stock’s value and paying the rest on installment). 

 

 

Stock Market Speculation-speculation in the stock market, the practice of buying stocks and reselling for profit, reached its highest levels during the 1920s.  As speculation increased, many began buying stocks on margin (Margin requirements were as low as 10% during the 1920’s) paying only a small percentage of the stock’s value and paying the rest on installment). Investors depended that the price of the stock would increase so that they could repay the loan.  When stock prices dropped, the market collapsed, and many lost everything they had borrowed and invested.

 

 

 

 

 

 

 

On September 5, 1929 economist Roger Babson gave a warning ‘Sooner or later, a crash is coming, and it may be terrific’. He had predicted a crash several times before but this time it really happened. Over the next few weeks the prices began to move downward. In the last hour of trading on October 23, the stock prices began to fall sharply. People were taken by surprise and panic set in. The next day, known as Black Thursday, saw prices drop drastically. Newspapers reported losses as high as $5billion. The following day President Herbert Hoover reassured Americans that business was sound.

 

 

 

 

Call Money - a term used for funds used to finance stocks held on margin. At this time a speculator could buy stocks for a little as 10 percent margin, borrowing the rest from the broker.

 

 

Reading on the Stock Market Crash 

 

 

DJIA graph from 1920 to 1940'

 

 

 

Black Tuesday’s record of 16.4 million shares being traded lasted for nearly 40 years

It is said that on October 29 (‘Black Tuesday’), the opening bell was never heard due to the shouts of “Sell! Sell! Sell!” 16.4 million shares were traded on the day as panic selling reached its crescendo. Trades happened so quickly that people couldn’t calculate how much money they had lost. Many investors lost their life savings in an instant.

 

There were fistfights and false rumors of investors jumping from building further accelerating the market slide. The volume of stocks traded on October 29, 1929 was a record that was not broken for nearly 40 years. By the end of the day the Dow fell further by 12%.

 

https://www.history.com/news/what-caused-the-stock-market-crash-of-1929

 

 

 

 

File:Billboard for the Sale of Subdivision Real Estate Lots WDL4030.png

 

Other forms of Risky Speculation

The draining of swamp lands, continued penetration of rail lines, and expansion of highways all paved the way for the Great Florida Land Boom of the mid-1920s. This image, taken a few years before the speculative rush reached its peak, shows the promotion of Florida as both a paradise for residents and a cash engine for potential investors. Cities such as Miami and St. Petersburg grew tenfold in population in less than two decades as the amount of money being invested in home construction and hotel development began to soar into the tens of millions of dollars. In 1924, Florida amended its constitution to prohibit taxes on income and inheritance, thereby providing further incentives for wealthy investors and entrepreneurs to look toward the state. Inflated land values and rampant issuing of ill-advised loans led to a speculative bubble that burst in 1925. The collapse of the Florida Land Boom was one of a series of portentous events that heralded the onset of the Great Depression in 1929.

 

 

 

 

 

 

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