Digital History (2)

I first started blogging on ideas relating to economics, finance, investments and housing following an invitation from Business Spectator Please note that I may have an economic interest in any of the items discussed here. The stock market crash of 1929 is often associated with stories of investors and traders jumping out of windows after losing everything. As long as the stock market continued to increase in value, these investors did stand to make a profit. The market continued to soar during 1928 and much of 1929, with these twenty-five leading industrial stocks reaching the 452 point mark in early September 1929, almost doubling the stocks’ selling price in less than two years. The average trading volume on NYSE in 2007 was about 3.1 billion shares per day.

In 2008, the failure of some financial institutions in the United States lead to a global crisis that resulted in the failures of some European banks and sharp declines in the global stock market. That’s because when the stock market started falling, brokers suddenly called in their loans.Stock Market CrashStock Market Crash

This mass hysteria and negative sentiment on the stock market fuels a craze of selling which keeps on driving stock prices down, thus causing the stock index to suffer. He stock-market crash of 1929 is perhaps the most memorable crash in the history of the stock market. However, a stock market crash is often sudden and dramatic occurring over several days.Stock Market Crash

That kind of panic selling tends to feed upon itself, sending the market spiraling lower for an extended period of time. Brokers in the 1920s were allowing their investors to borrow on average of up to 66% on margin , and this was an unprecedented amount of margin that the market ever experienced. See period from July 2007 until May 2008 and period from August 2000 until March 2002. In the fall of 1928 and the spring of 1929 (see Table 1) 8 more stock splits occur, causing the Dow Divisor to drop to 10.77.

But despite the government’s efforts to prevent another stock market crash, in theory, a free market society isn’t supposed to have any intervention in its economy. The Dow Jones Industrial Average (DJIA) Index is the oldest stock index in the United States. Taking into the account that we had extremely high volume surges during the recent crash we may expect very strong up-trend. For example, if the current year is 2008 and a journal has a 5 year moving wall, articles from the year 2002 are available. A commission was established called the Pecora Commission which would research the reasons for the crash. Another reason that the stock market crash so suddenly in 1929 is that short sellers were allowed to do short any stock no matter how hard it was going down. That reveals that we see slow change in the sentiment on the stock market and we could be in the beginning of the new uptrend.