Wall Street Wall Street is located in lower Manhattan, New York. It is literally a name for a street that features many large financial office buildings and companies where stocks and shares can be traded to make profit. Some major stock exchanges in Wall Street are: - The New York Stock Exchange, - The National Association of Securities Dealers Automated Quotations - The American Exchange - The New York Mercantile Exchange - And The New York Board of Trade
Why buy stocks and shares? The answer is, people buy stocks and shares for money, they invest money in their stocks and shares to earn lots of money, back then they thought money would multiply, even now people put their entire savings onto stocks and shares and live off it. People buy stocks when their prices are sold at low and sell them at high, this is how they make money. People who are good at stocks and shares can turn 1 thousand dollars into 1 thousand five hundred in no time, but others who are inexperienced could well loose their entire savings just by doing stocks and shares.
Quotes “ If a man saves $15 a week, and invests in good common stocks, and allows the dividends and rights to accumulate, at the end of twenty years he will have at least $80,000 and an income from investments of around $400 a month. He will be rich. And because income can do that, I am firm in my belief that anyone not only can be rich, but ought to be rich.” From John J. Raskob, Everybody Ought to be Rich (June 1929) in the days before the crash.
Quotes (continued) Another major investor, Will Payne, stated that the Wall Street Stock Exchange had becomes such an easy way to make money that it ceased to be a gamble, because in a gamble, someone loses – but when invested in stocks and shares, “everybody wins”. Many people thought that the market could sustain the growing high prices. Irving Fisher, a highly-regarded American economist, said before the crash, “Stock prices have reached what looks like a permanently high plateau.”
The Stocks and Shares in the 1920’s During a period of time, stocks and shares rose at the phenomenal rate. Wages were increased, stocks were expensive and people went and invested most of their money and started borrowing off each other to make a fortune. Unfortunately in 1929, The Great Wall Street Crashed, a bomb was released in America’s largest bank and money was lost. People went bankrupt and America fell into debt. Not only America, but many countries, such as Weimar in Germany, were affected by this crash because they had built her economy on America’s loans.
Losses The loss from the crash was unbelievable: 12 million people went out of work, 12,000 people was made unemployed everyday, 20,000 companies and 1616 banks had gone bankrupt, and 23,000 people committed suicide in one year – the highest ever. The total loss by the end of the next week amounted to $30 million dollars, ten times more than the annual budget of the federal government, far more than the U.S. had spent in all of World War 1. The Great Wall Street Crash was probably also one of the major contributing factors to the event that followed – The Great Depression.
Us ch22 depression_2013
The Great Depression
1. She was the first to fly solo nonstop across Atlantic2. Added to the Constitution that legalized alcohol3. The women of the 20s became known as4. Term for an illegal bar or underground5. He was the first to fly solo nonstop across Atlantic6. The largest bootlegger that created an empire in Chicagoby killing his competition7. List three things that describes the women of the 20s8. Added to the Constitution that ban the sale andmanufacture of alcohol9. He was a baseball legend who hit 60 homers10. Term for smuggling alcohol illegally
What happens to the price of items as the demandincreases?What happens to the price if the demand decreases?Demand = PriceDemand = Price
The Law of Supply and DemandHonus Wagnerbaseball card(1909 )DemandOnly 50 – 60HonusWagnerbaseballcards exist inthe world.++Supply==PriceThe card isvaluablebecause of itsscarcity. In2007, a mintcopy wassold for$2.35million.
The Law of Supply and DemandHannahMontanastickersDemandAvailablealmosteverywhere.++Supply==PriceEven thoughthere is alargedemand,there is alack ofscarcity.Sells for$1.50.
The Law of Supply and DemandA small pile ofdirt.DemandAvailablealmosteverywhere.++Supply==PriceNo scarcityand nodemand.Therefore,this pile ofdirt isvirtuallyworthless.
The Law of Supply and DemandGI JoeAction Figure(1964 )DemandIn “good”condition.++Supply==PriceA 1964 GIJoe in goodcondition isrelativelyscarce. Thisone is forsale on Ebayfor $350.00
The Law of Supply and DemandBritish poster duringWWI asking peopleto preserve food.DemandU.S. farmerssold farmproducts tothe Europeanpowers inlargenumbers.++Supply==PriceDue to anincrease inscarcity, theprice of U.S.farm goodsincreased.
How does the stock market work?You buy 100 shares of stock ofx $5.00 per shareHow much moneyhave you invested? $500.00Scenario #1stock increases to $20 per share100 shares of stockx $20.00 per shareHow much are your 100shares of stock now worth?$2,000.00How much profit have youmade?$2,000.00 stock value- $500.00 initial investment$1,500.00 net profit
How does the stock market work?You buy 100 shares of stock ofx $5.00 per shareHow much moneyhave you invested? $500.00Scenario #2stock decreases to $1 per share100 shares of stockx $1 per shareHow much are your 100shares of stock now worth?$100.00How much money have youlost?$100.00 stock value- $500.00 initial investment$400.00 net loss
Buying Stocks on Margin: Scenario Ainvestor stock brokerHello, sir. Iwould like topurchase 100shares of stockin the FordMotorCompany. Howmuch is it goingto cost me?
Buying Stocks on Margin: Scenario Ainvestor stock brokerWell, Fordstock costs$10 pershare. Youwant tobuy 100shares?Figure it outyourself,smartguy!
Buying Stocks on Margin: Scenario Ainvestor stock brokerUmmm…100 sharesx $10 per share= $1,000.00Oh, well. I onlyhave $100. I can’tafford 100 shares.
Buying Stocks on Margin: Scenario Ainvestor stock brokerNo, problem!Just give me$100 and youcan owe methe rest!
Buying Stocks on Margin: Scenario Ainvestor stock brokerLike, how muchwould that be?Let me think…$1,000 worth of stock- $100 paid= $900 owedAlright, it’sa deal!!
Buying Stocks on Margin: Scenario Ainvestor stock brokerSix months later, Ford stock doubles to $20 per share.My 100 sharesare now worth...100 sharesx $20 per share$2,000
Buying Stocks on Margin: Scenario Ainvestor stock brokerNo problemo! Itwas a pleasuredoing businesswith you!
Buying Stocks on Margin: Scenario AinvestorNow let’s figure out howmuch money I made!$2,000 net worth- $900 owed$1,100 profit- $100 initial investment$1,000 net profitI’ll pay the debtorwhen I makemore…it’s only$900. I alreadyhave $2000anyway..
Buying Stocks on Margin: Scenario Binvestor stock brokerSix months later, Ford stock decreases to $1 per share.My 100 sharesare now worth...100 sharesx $1 per share$100
Buying Stocks on Margin: Scenario Ainvestor stock brokerBut I’m broke!What am I goingto do!
Located in lowerManhattan, New York.It is a street thatfeatures many largefinancial officebuildings andcompanies wherestocks are traded,including:NYSE New York Stock Exchange,NASDAQ,AMEX American Exchange,NYMEX New York Mercantile Exchange,NYBOT New York Board of Tradeetc.
Wall StreetNew York Stock Exchange. Stocks and sharesare bought and soldLocated in Wall StreetNation marketplace
People buy (and“invest”) stocks andshares to earn$MONEY$. Theybelieved money would“multiply”.Buying stocks at LOW,and selling at HIGH.For example, when1,000 shares of stocksis put into $1.00 worthstocks that rise to$1.50, $500 is earned.
“If a man saves $15 aweek, and invests in goodcommon stocks, and allowsthe dividends and rights toaccumulate, at the end oftwenty years he will have atleast $80,000 and anincome from investments ofaround $400 a month. Hewill be rich. And becauseincome can do that, I amfirm in my belief thatanyone not only can berich, but ought to be rich.”– John J. RaskobJohn J. Raskob
Major investor Will Payne,stated that the Wall StreetStock Exchange had becomesuch an easy way to makemoney that it ceased to be agamble, because in a gamble,someone loses – but wheninvested in stocks and shares,“everybody wins”. People thought the marketcould sustain the growing highprices, “Stock prices havereached what looks like apermanently high plateau.”– Irving Fisher.Irving Fisher
People begun tospeculate (buyingon stock in hope tomake quick profit,ignoring risk) people began tobuy stocks onmargin, (pay oninstallment).
Stocks rose by 65%.Wages increased by 25%.People began borrowingmoney to invest.• On Thursday, October 24,1929, some nervousinvestors began selling theirstocks and others followed,creating a huge sell-off withno buyers• Stock prices plunged,triggering an even greaterpanic to sell.• Black Tuesday, October 29,1929 Stock Market Crashes+65%+25%America’s wealth in the 1920’sUHOH!• On October 24th, 12,894,650 shareswere sold, setting the record in its time.Then, on October 29th, approximately16.4 million shares were traded,breaking the record that was set 5 daysearlier,
1. Unequal distribution ofincome, too little money inthe hands of workingpeople.2. Availability of easy credit(installment plans)3. Decrease in demand ofdurable goods (productthat last several years)4. More competition due tonew inventions5. Crisis in the farm sector–OVERPRODUCTION(produce more than theycould sell)Causes of the Great DepressionCauses of the Great Depression• The wealthiest onepercent income grew75 percent, but theaverage worker sawunder a 10 percentgain.• rising prices swallowedup any increase in salary• 70 percent of U.S.families had too low anincome for a goodstandard of living.• Four out of every fivefamilies couldn’t save anymoney during the so-called boom years.Credit allowedAmericans to buyexpensive goods,but by the end ofthe decade manypeople reachedtheir credit limits,and purchasesslowed.Warehousesbecame filledwith goods noone could affordto buy.
Effects on Banks• frightened depositors rushedto withdraw their money,draining the bank of funds.• When investors couldn’trepay margins, banks lostmoney, too.• 6,000 banks closed.•Many banks themselves had invested directly orindirectly in the stock market by buyingcompanies’ stocks or by lending brokers moneyto loan to investors on margin.•Bank closures wiped outbillions in savings by 1933.
12 million peoplewent out of work, 12,000 people wasmade unemployedeveryday, 20,000 companiesand 1616 bankshad gone bankrupt,and 23,000 peoplecommitted suicidein one year – thehighest ever. The total loss bythe end of the nextweek amounted to$30 million dollars,ten times more thanthe annual budgetof the federalgovernment, farmore than the U.S.had spent in all ofWorld War 1. Contributing to TheGreat Depression.
Migrants• By the end of the 1930s, 2.5 million people had left the Great Plainsstates.• Many headed along Route 66 to California, then settled in camps andsought work on farms.• The migrants were called Okies, after the state of Oklahoma, butmigrants came from many states.
Hand’s off PolicyMinimalgovernmentintervention
Questions of Credibility Hoover eventually saw the limitationsof his ideals and pushed for somedirect relief, but his optimistic claimsabout the economy undermined hiscredibility with voters. Early on, when millions lost their jobs,he said the nation’s basic economicfoundation was sound. Just a few months after the crash heannounced “I am convinced we havepassed the worst,” and he spokeglowingly about the relief efforts. Millions of Americans did not shareHoover’s viewpoint.Questions of Compassion Many Americans came to questionHoover’s compassion. As economic conditions grew worse,his unwillingness to consider givingdirect relief to the people becamehard for most Americans tounderstand. When Hoover finally broke his statedbeliefs and pushed for programs likethe Reconstruction FinanceCorporation, people wondered whyhe was willing to give billions ofdollars to banks and businesses butnot to individuals.
•Some who lost their homes lived inshantytowns, or Hoovervilles,
The Hoover Dam.•The dam harnessedthe Colorado River toprovide electricityand a safe, reliablewater supply to partsof seven states.•The federalgovernmentprovided the fundingfor the project($800m)