1920s boom & crash the stock market. origin of the term stock comes from the early days when...
TRANSCRIPT
1920’sBoom & Crash
The Stock Market
Origin of the term “stock”Comes from the early days when corporations were called “joint stock” companies
“Stock” mean the total sum of goods or raw materials on hand for trade
Men “pooled” their “stock” such as ships, goods, employees, building to form a large business
Today the word “capital” is used to describe what once was called stock
What is a “share?”
A share is a “certificate” of partial ownership in a “joint stock” company
A share can be bought and sold
StockA certificate of ownership in a corporation
Definition of the
Stock MarketA place where stocks and bonds are bought and sold.
Economic growth
An extended period of time during which the economy expandsexisting businesses expand
new businesses are created
more jobs are created
RecessionA prolonged period in which the economy contracts
DepressionA recession that is especially long and severe
RecoveryEconomic contraction stops and expansion once again takes place
Recession
Recovery
Depression
Stock Market TerminologyGrowth
Rate
Time
Growth
The Bear Market
A market in which prices fall over a period of 6 months
The Bull Market
A market in which prices rise over a period of 6 months
They need money to:
StartRunExpand
Why do businesses sell stock?
Wendy’s wants to build more restaurants or add a buffalo wings to its menu. It takes money to buy land, build restaurants, and develop and advertise new menu items.
Example:
Where Wendy’s get money?
Use own capital ($)Borrow from bankSell stocks on the stock market
Why not use your own money?
Not enoughToo risky
Why not borrow from a bank?
High interest ratesStringent regulationsCollateral required to guarantee the loan
Why sell shares of stock?
Fewer regulationsShare risk with investors
•Savings account •Invest in Stock Market
How can you use your money to make
money?
Why a Savings Account?Earn interest Low riskGovernment Insurance - FDIC (Federal Deposit Insurance Corporation)
Invest in the Market?
Earn dividends - share of the profit
Speculate - buy low/sell high
RiskNo insurance
1920’s MarketNo government regulationsBuy on margin (Borrow $)Easy credit from banksSpeculation v. investments
1920’s Market Rise & Fall