How did the stock market crash in 1929?
（We’re learning this in school, but I don’t quite get it. My teacher said everyone was buying bank loans for stocks. The higher the stock prices rose, more loans people bought. The day the stock market crashed, 12.9 million stock were sold. Why were they all of a sudden sold? Could you please explain this to me?)
Answer:
Back in those days people were able to buy with 10:1 margin, meaning if you have $10,000 you could have bought $100,000 worth of stock.
In 1929 stock prices had risen way beyond their true value and were bound to pull back.
When they did people paniced afraid that they were going to lose all of the money they originally invested with or more because of margin. So there was a lot of selling that took place, mostly because people were afraid of what would happen if they hung onto their positions.
Posted: July 29th, 2010 under US Stock Market.
Tags: stock market crash