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Saturday, November 5, 2011

What investors can learn forex stock market crash of 1929

It may be fair to say that in the worst day of the awards mentioned, it was still a market, a space for the installation on the buyer and seller.

The brokerage community because it is composed of experts expect that the penalty could be a problem, the more skeptical of the weaker economic environment properly reflected in the high market prices, but very few really treat the risk air spring 1929th The euphoria was common. The change was not Giddi customers.

Is briefly recall some of the events of those turbulent days of writing violent and exaggerated in the fall of the consequences of ignoring the basic principles of good investment. This does not mean that only idiots lost money in 1929. Or had read of the wise, the right signals at the same time, the illusion of endless prosperity, much of the nation's pixelated. Do not insist on investing in the long nightmare as a warning against today.

But read in its gross outlines of many hard lessons that every investor should know by heart.
The accident, as every economist and historian sifts the ashes of the company quickly tell us, is a classic case of wanting to transcend reality. First, of course, came the boom. After several years of uncertainty after the First World War, the economy has entered a new period of prosperity happy.

The automotive industry, the producer of the brightest symbols of a new golden age. There was good news for the company's own network of subcontractors and suppliers of rubber, glass and steel, batteries, spark plugs, brake pads, and gasoline. Construction of office buildings, houses and roads on the rise, and the wood they produce electricity, cement, electricity and household appliances. Everywhere power is needed.

The bar was to give the refrigerator, the tank. And households has grown in the back office, allowing them to refine the wonderful world of radio. The increase in profits, companies merged, the giant pyramids. The films were in full bloom. Everywhere there was money and progress.

The stock market reacted violently.

In 1924, prices steadily to the top. Each year was better than last year. An impressive number of people it was important that it now seems clear that the American people had the secret of perpetual motion of the mobile capitalists found. The words varied, but the message was the same: a wise Providence has seen fit to generously to the things of this world. All that is needed to bring prosperity without some confidence in the United States and its scope. We were on the Walk of Fame.

In retrospect, the bankers, industrialists, government leaders, and the participants, a variety and the rest of us who were listening said, do not believe, given, it seems ridiculous, pointless and naive. But in the twenties, it was difficult to be pessimistic, be tough, realistic. For the United States was due to the increased prosperity, and seemed never to end.

In fact, we now know the signs and anticipate future problems were the cause, and they were there for all to see. In 1927, he was known as speculative securities. Loans to brokers and will amount to a total of 3700000000 €, a clear indication that many, perhaps even to the edge.

Margin buying was then and remains a common practice. The customer pays only part of the purchase price of the shares and take the balance of your party to get people to buy as collateral for the loan. In a bull market, the buyer to purchase up to $ 2,500 is for 100 shares of 50, for a profit of ten years to repay their loans and sell $ 1,000 in front, would be two advantages for the purchase of 50 shares directly to its origin would command $ 2,500. Office problems, but when the population was covered the point in time were not sufficient to cover the loans.

Then, the formal "margin" of funds to the loan to a new level as the background value of the population or if the customer does not reduce to answer the call, no.

If financial intermediaries borrowed all the money available to their customers is too high? The years do not know, but do not worry. President Coolidge do not think too much. Mellon Treasury not. And as the market rose as helium, they were right.

Apparently did little to reduce the impact of a general market decline and mitigate what they consider to speculators a diversion.

Eyes of the people who place little attention to events under his feet. Early 1928, the companies have symptoms of anxiety. Overproduction and high strains were accompanied by high unemployment. And the reaction of the market. Again and again was short, but intense shock, indicating that all was not good that the bull market is not waterproof, which raised a very good chance to grow.

However, it is also true that the market with surprising force, was filed after the intervention. increased significantly following the election of President Hoover and took in March. Most analysts now say firmly and unequivocally that the market was dangerously high level, but his warnings were in the anvil chorus of optimism that Wall Street and the swollen military customers lost penetrated. Ready to play now on the market for everything.

Late 1928 and early months of 1929 new shocks, but the market is downloaded once, and stocks had unexpectedly risen summer season and decreased anxiety.
Loan officers are over 6 billion, according to a post-mortem, some 300 million shares is expected to place in the margins.

But why? The values are so astronomical in September came, there seems no reason why it should not go higher. Faulty logic? Sure. But who can blame people for Montgomery Ward, who bought 150 and 450 a year and half believe that the other 50 points were the chances?

It is regrettable that the price increase.
Knowing when to sell is always difficult to tell in the months before the case very hard, it was an accident just around the corner.

Now we have the experience of the past to be more careful.
A good software, some notes about the stock market and currencies, in particular.

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