Americans Speculate and Buy Stocks on Credit;
America experienced an era of great peace and prosperity during the 1920s. After World War I, the so-called “Roaring Twenties” economic and cultural boom was fueled by industrialization and the popularization of new technologies such as radio and the automobile. Air flight was becoming common as well.
The Dow stock average soared throughout the Roaring Twenties and many investors aggressively purchased shares, comforted by the fact that stocks were thought to be extremely safe by most economists due to the country’s powerful economic boom. Investors soon purchased stocks on margin, which is the borrowing of stock for the purpose of gaining financial leverage. For every dollar invested, a margin user would borrow nine dollars worth of stock. The use of leverage meant that if a stock went up 1%, the investor would make 10%. Unfortunately, leverage also works the other way around and amplifies even minor losses. If a stock drops too much, a margin holder could lose all of their investment and possibly owe money to their broker as well.From 1921 to 1929, the Dow Jones rocketed from 60 to 400, creating many new millionaires. Very soon, stock trading became America’s favorite pastime as investors jockeyed to make a quick killing. Investors mortgaged their homes and foolishly invested their life savings into hot stocks such as Ford and RCA. To the average investor, stocks were practically a sure thing. Few people actually studied the finances and underlying businesses of the companies that they invested in. Thousands of fraudulent companies were formed to hoodwink unsavvy investors. Most investors never even thought a crash was possible – in their minds, the stock market “always went up.”
Directions: Answer the following questions:
- How did Americans get financial backing to purchase stocks in the 1920's?
- Why did those who invested in the Stock Market believe the stock prices would go up?
- What does it mean that people invested in stocks on margin?
- Do people still use margin, if so how?
1. they bought stocks on credit.
ReplyDelete2. stocks were thought to be extremely safe by most economists due to the country’s powerful economic boom and were practically a sure thing to the average investor.
3. the borrowing of stock for the purpose of gaining financial leverage
4. People still use margin today to get more money buy borrowing moeny
1.How did Americans get financial backing to purchase stocks in the 1920's.
ReplyDelete-Americans would borrow stock and hope that the would make some good money off of them.
2.Why did those who invested in the Stock Market believe the stock prices would go up?
-If the stock went up 1% then the investors would make 10%.
3.What does it mean that people invested in stocks on margin?
- When people invest in stocks on margin the borrow money to buy stocks and hope that the stock goes well to pay of the money they borrowed.
4.Do people still use margin, if so how?
- Yes people still use margin. They use the margin in order to buy stocks.
-Brett Gereau III
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ReplyDelete1.Americans got financial backing to purchase stocks in the 1920s by buying them with credit.
ReplyDelete2.People believed that stock prices would go up because economists told them that they were safe because of the economic boom.
3.Investing in stocks on margins means that people would only put in a percentage of the price for the number of stocks they were buying.
4.People can still use margin to buy stocks. It is a loan from the stock brokerage to increase the number of shares. Bitcoin can also be bought on margin.
1. Americans got financial backing to purchase stocks in 1920s by purchasing them on margin.
ReplyDelete2. People believed that stocks are safe because of the economic boom.
3. Buy stocks on margins means the borrowing of stock for the purpose of gaining financial leverage
4. People still use margin today to gain more money with less.
1. Americans bought stocks on credit by buying on a margin.
ReplyDelete2. People were convinced stock prices would increase since they were told it was safe with the economic boom.
3.This means that you borrow stocks for your financial benefit of a few percent.
4. Yes people use margin today to get better prices on stocks.
1. Americans got financial backing by buying stock on credit.
ReplyDelete2. Stock prices increased because people were convinced that it was safe with the economical boom.
3. Investing in stock markets means that you borrow some stock for your own personal gain.
4. People still use stock today. For example they could borrow money from the bank.
-Lorien Mahon
How did Americans get financial backing to purchase stocks in the 1920's?
ReplyDeleteBuy stocks on credit
Why did those who invested in the Stock Market believe the stock prices would go up?
Investors thought stocks were extremely safe by most economists due to the country's powerful economic boom and throughout the time, financial leverage became a part of stocks and investing.
What does it mean that people invested in stocks on margin?
The borrowing of stocks for the purpose of gaining financial leverage, and the use of leverage meant stock went up 1% and the investor would make 10% of it. Yet, the downside also works the other way around, to where you can lose money and owe the broker money as well.
Do people still use margin, if so how?
Yes, people still do use margin in working with stocks. You borrow money from a broker to purchase and buy your stock and it allows you to buy more stock than you would be able to normally.