We are going through tough times. The coronavirus has brought the stocks down a lot because of the global pandemic. But things were way worse on 29th October, 1929, a day also known as ‘Black Tuesday’.
When times were good…
?During the 1920’s, things were going well. New innovations, new businesses, new cars, you name it. This caused the stock market to go up.
?In fact people thought it was so easy to make money that they borrowed money to invest in the stock market.
?This concept is called “buying on margin” which allowed ordinary people with little financial acumen to put down as little as 10% of the share value.
?This money in the markets caused stocks got wildly overvalued but alas, all good things come to an end.
BlackThursday (Oct 24, 1929)
?The Dow Jones dropped 11%.
(The Dow Jones is the average cost for all the businesses in the US, and if the Dow Jones goes up, then it means that stocks are doing well and vice versa).
?In the next couple of days, it got worse…way worse.
Black Tuesday (Oct 29, 1929)
?Over 16 million shares were sold and the Dow Jones dropped 12%.
?This was after Black Monday, in which stocks fell another 11%.
?In a period of one week, stocks were down over 30%.
?This eventually led to unemployment rates going up and the economy going down.
The Great Depression
The central bank policy at that time made things worse and eventually the US entered the ‘Great Depression’ – a tough economic period which lasted for about 10 years.
Some Interesting Facts:
?When stocks become overvalued it’s called a bubble.
?When a bubble’s bursts, it takes a long time to recover.
?Together, the 1929 stock market crash and the Great Depression formed the largest financial crisis of the