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Bubble Spotting - The Great Wall Street Crash of 1929


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The roaring twenties (1920's) ended with a bang - the 1929 Great Wall Street Stock Market crash wiped out many investors, and had an impact that could be felt around the world. This presentation (which forms part of a larger series on Market Bubbles) gives a short overview on what happened.

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Bubble Spotting - The Great Wall Street Crash of 1929

  2. 2. This short presentation on the 1929 Wall Street Crash forms part of a larger series of presentations on Market Bubbles Front page graphic -
  3. 3. BACKGROUND The period after World War 1 was known as the Roaring Twenties. This period, in specifically the USA, was characterised by significant economic growth, industrial development and urbanisation. life magazine
  4. 4. Between 1921 to 1929, the Dow Jones rocketed from 60 to close to 400. This highly profitable growth created many new millionaires and caught the attention of the public. life magazine
  5. 5. Investors aggressively invested in shares, trusting the recommendations of economists based on the never ending economic boom. Speculating became a popular past time. life magazine
  6. 6. Countless investors invested not only their own money, but also bought shares on margin (leveraged), took out second mortgages on their property, even investing all their life savings.
  7. 7. As can be expected, some shady characters saw the perfect opportunity for a quick buck, forming fraudulent companies to trick investors into investing.
  8. 8. By August 1929, brokers were routinely lending money to small investors to buy shares with – to the total tune of $ 8.5 billion.
  9. 9. The Federal Reserve tried several times to cool the market, raising interest rates during the year to curb the access to cheap finance.
  10. 10. In September, the market became jittery and unstable, after high profile arrests took place in London for fraud and forgery on the London Stock Exchange.
  11. 11. Finally, on 24 October, panic selling ensued as investors FINALLY realised the boom was actually an over-inflated speculative bubble. Major investors tried calm the market by buying stock above market price.
  12. 12. Over the weekend, the news spread like wild fire countrywide via newspaper, and many investors decided to pull out.
  13. 13. On October 28, "Black Monday", the Dow dropped another 13%, to be followed by another drop of 12% on "Black Tuesday", October 29.
  14. 14. DOW JONES
  15. 15. During November of 1929, the Dow dropped from almost 400 down to 145.
  16. 16. Many millionaires, and even more ordinary investors, were wiped out as a result.
  17. 17. To make matters worse, some banks had invested their clients’ deposits in the stock market, wiping out these savings as the Stock Exchange plummeted – leading to a run on the banks.
  18. 18. The financial markets were in chaos. Many desperate investors committed suicide.
  19. 19. Some savvy investors pulled out in time, eg pres. Kennedy's father, Joseph Kennedy, decided to sell his stocks because he overheard shoeshine boys and other novices swopping advice tips speculating on stocks.
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  21. 21. This presentation is provided in the sake of public interest, and has been compiled based on publically available information sources on the web. While great care has been taken in the preparation and compilation of information indicated here, the author does not accept any legal or other liability for any inaccuracy, mistake, misstatement or any other error of whatsoever nature contained herein. This presentation is not investment advice, not a solicitation for any type of investment, financial or otherwise, nor is this presentation an opinion expressed on, nor endorsement of markets, commodities or investments. Any names, trademarks and images are copyright their respective owners and rights in the graphic artwork and photos used in this presentation belongs to, and are courtesy of the respective owners thereof. Unless where otherwise indicated, I don’t claim to have any rights therein.
  22. 22. 1929 Wall Street Crash- Sources and further reading http://globaltre _Street_Crash_of_1929 ket%20Crashes.pdf 6/28/fridays-not-so-fun-fact-the-1929-stockmarket-crash/