Stock Market Mania

Stock Market Mania

For much of the 1920s, the United States economy was a great success story. Leaders declared that the nation had entered a new era. Everyone would prosper, they said.

Success in the Market

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A stock is a share in the ownership of a company

​Companies sell shares to people to get the money they need to grow. People buy stocks as investments, or ways of possibly earning money.

What is it?

Why buy stock?

Multiple Select

What company can you buy stock in today?

• McDonald's

• Dollar Tree

• Rich Life

• Walmart

If you a person buys a share of stock for $5. In a few months, it might be worth $7.50. Often, it kept climbing. If the person sold the stock at a stock exchange, he or she would make money.

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How does it work?

Multiple Choice

If I buy a stock at $17 a share, then sell two years later at $86 a share. How much would I profit?

• $70

• $69

• $86

• $17

Many investors bought stocks "on margin." This means they borrowed money to buy the stock.

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Buying on Margin

Buying on Margin Pros...

Say a stock cost $10 a share. An investor might pay $2 in cash and borrow the rest. When stock prices went up, buying on margin worked well. If the investor could sell the share for $15, he or she could pay off the $8 loan—with $7 left over.

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Buying on Margin Cons

If the stock price dropped to $5, however, the investor would still owe $8. If the investor sold at $5 a share, he or she would have to come up with another $3 to pay off the loan. The investor would lose the $2 paid for the stock, plus $3 more.

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Multiple Choice

What are the pros of buying on margin?

• Your stock could go up and you could pay off your loan and still make money.

• Your stock could go down and you could lose your money and still owe.

• Your stock could stay the same and you would not lose money by selling.

Multiple Choice

What are the cons of buying on margin?

• Your stock could go up and you could pay off your loan and still make money.

• Your stock could go down and you could lose your money and still owe.

• Your stock could stay the same and you would not lose money by selling.

Some investors began to worry that stock prices were set to fall. They began to sell their stocks.

September 1929

Many experts thought there was no need to worry. Investors did not listen. Stock prices plunged as investors sold millions of shares each day.

October 1929

Panicked traders sold almost 13 million shares. That day became known as "Black Thursday."

October 24th 1929

Stock prices plummeted. The New York Stock Exchange closed for a few days to prevent more panic selling.

October 29th, 1929

Poll

Do you think it was wise to invest in the stock market?

• Yes, they had potential to make money.

• No, because they were betting what they couldn't afford to lose.

• It could go either way really.