Unit 5.1a The Crash

When the Market Crashes

What caused it??

Long and short of it, people weren't making as much actual money. Wages were low for most people, meaning they didn't have a lot of money to spend of "stuff" and certainly not on investing.  This started to make the markets start to drop in the weeks before "Black Monday" and "Black Tuesday".  On those two days investors finally panicked because of slow downs in sales and production of goods and immediately sold off everything they could, thus driving prices lower. 

Effects???

The short term effect was obvious. People lost money...big time.  Collectively, a few billion dollar in losses.  Remember, stocks have value, but they aren't worth anything until you sell them.  If you bought for $100 and sold for $200, you make money.  If you bought for $100 and sold for $50, you lose. Anyone that bought on margin now either loses all of their money, and in some cases, those that loaned money can't get paid back, so they lose their money too.

On top of all of that, the banks saw hundreds of people run to them to take money out of the bank.  If the bank runs out of money, what can get give you when you are the last to show up?  (Nothing).  The bank will want to recall their loans from the people that borrowed, but if those people don't have money, or jobs, any longer, the bank will get no money back either. Thus, a chain of events that leads to everyone having nothing.

1929 

2020 2022

Buy and hold investing does not guarantee long term gains.

Paying heavily for growth can be risky.

A crash may come when it is completely unexpected.

A crash may occur despite rising corporate profits.

It may take years for stocks finally to hit bottom.

Required:    Read and watch this.       History Channel gives their take on The Crash

******Bonus material if there's time******

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