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Paying ten cents on the dollar for stock
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∙ 12y ago
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What did buying stock on margin mean in the 1920's?
"Buying on Margin" meant that you would only have to put down a small percentage of money (10%) and the broker would cover the rest. If the stock price dropped too low the broker could issue a "Margin Call" which means that the person has to repay all of the money that the broker put down. People often used this in the 1920s in order to buy more stock for less. i.e. Instead of buying 5 stock for $10, he could buy 50 stock for $10 and a loan from the broker. If you were to sell the stock, the broker would get his money back plus a portion of the profits.
What happened to farmers debts during the 1920s?
the debts were erased because of the dsl tarrifs
100000000 dollar bill?
There's no such bill in the U.S. The highest denomination ever issued was $100,000. However other countries have issued enormous-denomination bills during periods of hyperinflation; e.g. Germany during the 1920s and Zimbabwe today. These bills are essentially worthless for buying anything and have a very small collector value - normally a couple of U.S. dollars at most.
What were some of the causes of the 1929 stock market crash?
The biggest reason for the stock market crash was margin trading. It's not the ONLY reason for the crash, but it's the biggest. Margin trading is where an investor buys stock with borrowed money. In the 1920s margin trading was unregulated. If you were a really good stock picker and you could convince your broker to loan you 90 percent of the sale price on this super hot stock you wanted to buy a million shares of, it was perfectly legal to do it. Let's talk of maintenance margin. When you buy on margin you have to maintain a certain amount of equity in your account - cash, stocks, pig futures, whatever. If the value of your equity drops below that maintenance margin value you have to put more money in your account. In 1929 the demand to put more money in was called the Broker's Call; today it's a Margin Call but it's the same thing: get down here with a lot of cash in your briefcase or we'll close your account. When stocks started dropping a lot of broker's calls were made to people whose entire net worth was in stocks bought on margin. And a lot of THOSE people were banks, who were leveraged up to their necks in margin-bought stocks.
Why were financial experts issuing warnings about business practices during the 1920s?
The banks would close because nobody could pay back their loans
1920s buying on credit?
Margin
Industrial growth in the 1920s?
during the 1920s people bought on margin and factories boomed
What where two reason for poverty in the 1920s?
Stock market crash due to buying on margin and overextention of credit to buy consumer goods.
Buying on margin in the 1920s?
When investors could buy stocks for as little at 10% down-payment and then when the stock rose in price they could sell it and make a profit.
Two economically unsound business practices used by corporations during the 1920s?
Buying on margin because it would only work if the demand continued to rise. Stock because if the marked crashed then everyone involved in the bank would lose their money.
Which BEST describes the presidential leadership in economic matters during the 1920s?
Presidents were actively "pro business".
What describes the policies of republicans during the 1920s?
They acted to support big businesses or something like that - apex
What are the two factors that played a major role in the start of the Great Depression?
The first factor was a series of downturns in the economies of individual nations during the second half of the 1920s. The second factor was an international financial crisis involving the U.S. stock market.
What best describes the 1920s?
The 1920s included:The Great Depressiontension between modernism and fundamentalismrebellion
Why did people buy stocks on the margin in the 1920s?
Same reason they do today....leverage. Buying say $1,000 of stock that you believe is going up...and it does say 20% earns you $200. On margin, the same $1,000 may get you 3 times as much stock, so the same events makes you $600 - or 60%, (minus a small interest and carrying expense). The numbers aren't quite right, but the theory is. The SEC won't allow you to borrow more than half the purchase price of the stock you're buying on margin. If you have a margin account with a $5000 maintenance margin (the amount of money you MUST leave in the account) and you have $15,000 in there, you have $10,000 of usable cash. You may then borrow up to $10,000 on margin. The reason for this rule is, of course, because buying stock on margin is one of the major factors in the Great Depression.
Why was buying stocks popular in the 1920s?
To get rich quicker
What word describes Americans economy in the 1920s?
fluctuating
