The Stock Market Timeline From The Pen Of Lynda Penn.
The Stock Market Crash of 1929 still remains to become a huge event in those history of stock trading after 80 years of its incidence. The excellent depression of 1929 rocked the lifetime of investors all over the world. Timeline – The day was Sept 4th, 1929 when the stock economy saw a huge high. This high encouraged banks to investing heavily in stocks. Even many investors got into investment together with the expectation of fully exploiting this high. However the high wasn’t there to stay. And on October 29th, 1929 those stock economy saw a big drop in the Dow.
That day the Dow had fallen by 11.5%. That may be a 39.6% if measured from the high stage of Sept 4th the same year. Now the stock market started inspiring very slow and steadily. But in July 1932, the market fell to a stage like that of 1929. And the Dow was recorded to be over 50% beneath the largest drop that had happened on 29th October 3 years back. Causes of the Crash – There are many causes that caused the excellent depression of 1929. The foremost reason is overvalued stocks. Analysts tell that the stocks were priced much and the P\/E ratios were quite high.
The P\/E ratio of the traded stocks in 1929 averaged around 60. One more reason which has been deduced is the of margin buying. The stock market couldn’t stay stabilized when such a big amount of cash was borrowed from it. Analysts found out that in 1929, nearly 5% of those total value of those stock economy was due to margin buying. The federal policies are also to become blamed according to the analysts. The prevailing president of those Federal Reserve Board, Mr. Adolph Miller introduced very strict monetary policies. The interest rates on the broker loans are unnaturally increased making all of it the more strenuous for the investors.
Bad banking structure may also be blamed for the excellent depression of 1929. There was a big number of new banks which were cropping up each and every day. The constraints which are imposed by those Federation werent good enough. They didnt have any regulation to determine those minimum capital required to start up a bank or any rules on the number of reserves which was allowed to be lent. Clearly, almost all these banks are insolvent and are closing at an equally faster rate as they are opening. When the market collapsed in 1929, the situations became worse. These banks that had invested in stocks heavily couldnt become perished due to those economy crash.
Reforms Following The Crash – The stock economy crash of 1929 led to a loss of approximately $14 billion of wealth.