Sunday, October 12, 2008

The Great Crash :

A Dose of Reality for Stock Markets

October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. Mark Twain

There are few real villains in this story - the greed of investors is the culprit - though there were many who indulged in sharp practices during 1929 stock market Great Crash.

A stock market Crash can affect not only those who deal in the market, but the general public and, in this case,the world's most industrialised economies.

No man is an island, entire of itself; every man is a piece of the continent, a part of the main. Any man's death diminishes me, because I am involved in mankind.

Organism do not exist isolated but interact with each other constantly within a complex ecosystem. The relationships between us are complex and multi-dimensional.

The good times had gone on for so long, however, that an increasing number of people were trying to get rich without making much effort. Stock market profits took less effort than income from employment.

YOUR truly conservative banker cannot be stampeded into unwary speculations by the hysteria of a boom.he sits tight in 1926, 1927 and 1928. Unfortunately, he begins to come into the market in 1929 . . .

In 1929, there were 600,000 margin accounts in the US ; owners of these put up a small proportion of the total cost of the shares and get loans from an investment banker for the rest. The concept is known as leverage. It has a multiplier effect and enables a dealer to use a relatively small amount of cash to cover substantially larger deals, sometimes 20 times larger. It is an excellent strategy if prices rise : large profits come from a small outlay.
Conversely, however, if prices fall and particularly fall catastrophically, losses can be enormous and frequently lead to ruin. Now we see the real thing.

1 comment:

uncle Dick said...

Pl see my comment in the previous post. Thanks.