This was due to growing concerns with weakness occurring in the U.S. economy. The Dow came back the nest day and added 0.5 percent or 72.44 points. The SAP added 0.8 percent or 13.31 points. The Nasdaq rose by 0.9 percent of 34.56 points. All major markets dropped due to a weak manufacturing activity reported that stoked fears that growth was slowing.
Although this day is considered the trigger to the massive economic fallout, the American and global economies had been in turmoil for six months prior to Black Tuesday, and many other factors contributed to what’s known as the worst economic crash in modern history. With few regulations on the stock market in the years leading up to the Great Depression, investors were able to buy stocks on margin, only requiring them to put down ten percent. This caused for wild speculation, and many people funneling their life savings into the stock market, which led to artificially high prices. After Black Tuesday, many people began to believe that the banking system in America was going to fail. Thousands flocked to the banks to withdraw their money.
The crash has started; everyone began selling because the earnign ratio was so high, but no one was buying. The more that was sold, the less the value, and bankers had to buy the stocks as they fell to try and slow them down before they hit rock bottom. The root cause of this was Dow Jones Industrial, one of the leading companies to invest in at the time. Because of their fall, many Americans lost money, everyone was trading. The market sold 12.9 million shares lost $5 billion dollars, and this was all over the course of one day.
At first everybody panicked, but then most people withdrew their money from the market and saved most of their money. The ones who bought margins were not so lucky. What seemed like a recovery, most people were buying stocks again by the end of the day but the market would crash again 4 days later. The Crash of 1929 would send the U.S. into a long depression. The economy was at an all time low, businesses were ruined, banks were destroyed, and much more damage that had an effect on the people.
The crisis has contributed to the failure of key businesses, substantial financial commitments incurred by governments, declines in consumer wealth estimated in the hundreds of billions of US dollars and a significant decline in economic activity. Many different causes have been suggested by financial experts howev... ... middle of paper ... ...tility. The banks seemed to be happy with the fair value accounting method when it was producing profits however as soon as the markets collapsed and the banks began losing money, accusations began to arise that the method was not worth the problems it had caused. The fair value method did not directly cause the crisis however its weaknesses where highlighted due to the declining market. The FCAG are in the process of investigating and improving the current accounting method which should once again restore the confidence in the markets.
The case highlights Simon’s great knowledge of the business with a quote from a colleague who said “he knows the figures like the night sky.” His honesty and integrity were show... ... middle of paper ... ...ng. When the oil industry started faltering this caused big problems and as a result there profits started decreasing. In 1992, a decrease in profits by 85% from the previous year, in addition employees complained that they had become so diversified that they were unsure of what the company goals were triggered the directors of BP to push Horton to resign and ultimately set in motion the cultural change that took place at BP. References Alternative Energy Lifestyles. .
Bierman concludes that the stock prices were too high in October of ’29 and that a crash in the market was bound to happen. “The Reasons Stocks Crashed in 1929” by Harold Bierman Jr. reviews a small set of possible causes for the crash and reaches specific conclusions about the events that led to the biggest stock market crash in history. The 29th of October will always be known as Black Tuesday but it was not the only day the stock market struggled. The New York Times of October 4th headed a page one article “Year’s Worst Break Hits Stock Market”, but almost all reported business news was still very optimistic. On October 23rd the market declined by four billion dollars and if the events of the 29th did not happen then the 23rd would have gone done in history as the major stock market event.
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