10 th American History Daily Lessons

This Day in History and Current Events This Day in History the U.N. General Assembly passed a resolution calling for Palestine to be partitioned between Arabs and Jews. Current Event Winning Powerball tickets sold in Missouri, Arizona- $579 million –Powerball is held in 42 states, the U.S. Virgin Islands and the District of Columbia –It was unclear early where in Arizona or Missouri the tickets were purchased –The prize is the largest in Powerball history

While you were gone 10 th American HistoryMake-up Assignments Nov. 29 While you were gone 10 th American History- Make-up Assignments Mr. Cook Room 214 Student-______________ Date Absent Nov. 29 Date Due-______ Please attach your make-up work to this sheet when you hand it in! Homework: –Chapter 11 Section 1 Notes- Pages – due Dec. 4 –Chapter 11 Section 2 Notes- pages due Dec. 6 –Chapter 11 Section 3 Notes- pages due Dec. 10 –Chapter 11 Test- Dec. 12 In Class Work: Activities- 1) How will you spend your money? 2) Who Can Buy More? 3) Bulls, Bears and Pigs 4) Looking Back and the Crash of ) Black Days Lecture Examination: Date and Period you will take the exam-__________ Signature:______________

Day #68 Homework due today – none In Class Work- Activities- 1) How will you spend your money- worksheet 2) Bulls, Bears and Pigs 3) Reasons for the Crash of ) Black Days Lecture Unit III A Modern Nation How will you spend Looking back And the Black Days Bulls, Bears, And Pigs

How will you spend your money?

You have $2,000 in your life savings at the bank, where it is earning 5% interest per year. Your friend Harry has invested in the Stock Market, and he says he has made a lot of money. He recommends Radio Corporation of America (RCA) stock. RCA is selling currently for $95 a share. Look at the following options and decide what you would like to do.

Options.: #1- Leave your money in the bank and earn 5%- $2000. #2- Buy 21 shares of RCA stock- $2000.

Options.: #3- Buy 42 shares of RCA stock on Margin. That is you can borrow $2000 at 20% interest from a broker so you can buy twice as much stock. The Broker holds your stock as collateral for the loan. If the price goes down and your can’t pay when the loan is due, the broker will sell your stock to get back the money he loaned to you plus interest. If the price of the stock goes up, though, you will make roughly twice as much profit. And the price of RCA stock along with most other stock, has gone up consistantly.

Options.: #4- Buy 210 shares of RCA stock on Margin. That is you can borrow $18,000 at 20% interest from a broker. It is March 3, 1928.

Decide Now!!

Two and ½ weeks have passed. RCA- $178 per share Bank- 5% - $ Shares – Stock is worth $3,738 minus your $2,000 investment = $1,738 profit if you sell now. 42 Shares – Stock is worth $7,476 minus your $2,000 investment and $2019 owed to broker = $3,457 profit if you sell now. 210 Shares – Stock is worth $37,380 minus your $2,000 investment and $21,767 owed to broker = $13,613 profit if you sell now. March 20, 1928

Decide Now!!

Three months have passed. RCA- $155 per share Bank- 5% - $ Shares – Stock is worth $3,255 minus your $2,000 investment = $1255 profit if you sell now. 42 Shares – Stock is worth $6,510 minus your $2,000 investment and $2019 owed to broker = $2,491 profit if you sell now. 210 Shares – Stock is worth $32,551 minus your $2,000 investment and $21,767 owed to broker = $8,783 profit if you sell now. HARRY SAYS DO NOT QUIT NOW IT WILL GO UP. June 12, 1928

Decide Now!!

Ten months have passed. RCA- $420 per share Bank- 5% - $ Shares – Stock is worth $8,820 minus your $2,000 investment = $6,820 profit if you sell now. 42 Shares – Stock is worth $17,640 minus your $2,000 investment and $2019 owed to broker = $13,621 profit if you sell now. 210 Shares – Stock is worth $88,200 minus your $2,000 investment and $21,767 owed to broker = $64,433 profit if you sell now. HARRY SAYS DO NOT QUIT NOW IT WILL GO UP. Dec. 31, 1928

Decide Now!!

19 months have passed. RCA- $101 per share Bank- 5% - $ Shares – Stock is worth $2,121 minus your $2,000 investment = $121 profit if you sell now. 42 Shares – Stock is worth $4,242 minus your $2,000 investment and $2019 owed to broker = $181 profit if you sell now. 210 Shares – Stock is worth $21,210 minus your $2,000 investment and $21,767 owed to broker = -$557 profit if you sell now. HARRY SAYS DO NOT QUIT NOW IT WILL GO BACK UP. It is Sept. 3, 1929

Decide Now!!

21 months have passed. RCA- $28 per share Bank- 5% - $ Shares – Stock is worth $588 minus your $2,000 investment = -$1,412 profit if you sell now. 42 Shares – Stock is worth $1,176 minus your $2,000 investment and $2019 owed to broker = -$843 you owe to broker if you sell now. You lost your life savings. 210 Shares – Stock is worth $5,880 minus your $2,000 investment and $21,767 owed to broker = -$15,987 you owe to the broker and he will sell now. Do not sweat the life savings they are history HARRY has left the country or jumped out of a tall building. It is Nov. 13, 1929.

Do you think you were safe to keep the money in the bank? Where do you think the broker got the money to loan on margin? And he can’t pay it back. Ever heard of a run on the bank. Well by the time you figure it out the bank will be out of money and closed for good. Goodbye life savings. Thanks Harry.

What is “buying on margin”? Why you buy on margin, how much of the purchase price must you put up? Who determines the percentage? Why do you think there is a limit on the amount of money that brokers can lend? What are the advantages of buying stock on margin?

Situation 1 Mrs. Jones buys on margin 100 shares of Coca-Cola at $30 per share. The total market value of the stock Mrs. Jones buys is -$__________ $3,000 The amount of money that Mrs. Jones must pay for this purchase (her initial margin requirement) is- $__________________ $1,500 (50% of stock price.) The maximum amount of money that a brokerage firm could lend Mrs. Jones (her debt) is $1,500 Mrs. Jones’ equity is $1,500

Situation 2 The value of Mrs. Jones 100 shares of Coca- Cola rises to $40 per share. The market value of Coca-Cola in Mrs. Jones account is now $______________________ $4,000 The amount of money that Mrs. Jones owes her brokerage firm (her debt) is $____________ $1,500 The Mrs. Jones’ equity is $____________________________ $2,500

Situation 3 The value of Mrs. Jones 100 shares of Coca- Cola falls to $20 per share. The market value of Coca-Cola in Mrs. Jones account is now $______________________ $2,000 The amount of money that Mrs. Jones owes her brokerage firm (her debt) is $____________ $1,500 The Mrs. Jones’ equity is $_______________________ $500

Bulls, Bears and Pigs Bull Market- is a stock market with rising prices over an extended time. Buying on Margin can increase gains in a bull market.

Bulls, Bears and Pigs Bear Market- is a stock market with falling prices over an extended time. Short selling (profiting from a fall in a share) can increase gains in a bear market.

Bulls, Bears and Pigs Pigs- are greed animals. Stock buyers who try and make every last cent of gain on a investment may end up with losses.

PresidentYear Minimum Wage Consumer Price Index BreadMilkCandy Bar GasolineNew CarHome FDR1938$.25$14$.08$.17$.05$.11$1,500$6,300 Truman1945$.40$18$.10$.22$.05$.34$2,000$8,031 Eisenhower1950$.75$24.10$.13$.29$.10$.45$2,700$ Eisenhower1956$1.00$27.20$.15$.33$.10$.51$3,034$12,136 Kennedy1963$1.25$30.60$.17$.37$.15$.57$3,413$13,653 LBJ1967$1.40$33.40$.19$.40$.17$.62$3,725$14,902 Nixon1968$1.60$34.80$.19$.42$.17$.85$3,881$15,527 Ford1975$2.10$53.80$.30$.65$.27$.75$6,001$24,004 Carter1979$2.65$72.60$.40$.87$.36$.95$8,098$32,392 Reagan1981$3.35$90.90$.51$1.09$.46$.85$10,139$40,557 Bush1991$4.25$136.20$.76$1.63$.68$.99$15,192$60,769 Clinton1997$5.15$166.60$.90$1.92$.81$1.25$17,902$71,611 Present % 8% Who Can Buy More?

Reasons for the Stock Market Crash. Causes:Explanation: Buying on Margin Borrowing money from brokers to purchase more stock than you can afford. Money is loaned on call. Many people had an overconfidence from the 20's which influenced a search for easy money and made many people greedy. (This brought many people into a situation they did not understand.) Overpriced stocks Inflated stock prices because of the unreal preception of huge gains. Slowing economy High inflation, low buying, yet high spectulation. Rising umemployment The desire for consumer durable goods went down. Too much overproduction. Massive fraud and illegal activities There probably was little actual insider trading or illegal manipulation. Public Officials repeated statements Things are doing very well and will continue. Some said prices were too high and overvalued but that caused some people to be encouraged Unwillingness of financial analysts to recognize any theories. People in general did not want to hear anything that might suggest an end to the wealth of the stock market. Some statisticians predicted a crash but no one wanted to listen. Ignoring these theories may have resulted in the crash. Sticky Prices/Sticky Wages Prices wanting to go up but wages remaining low. People buy less and employers hire less, thus causing cut backs in production and employment. Hoarding money Putting it away for the rainy day took money out of circulation and the Fed did little to solved the problem Gold Standard Fluctuating Gold prices kept changing the value of money. As the situation worsened countries dropped their gold standards. Smoot-Hawley tariff act. Created an international tariff war which hurt everyone. Federal Reserve Board No real strong leadership. No one knew really what to do. Acted to late. Didn’t reduce money supply or increase it. Didn’t reduce or increase interest rate. Federal Reserve policies were causing disagreement and problems

The Great Stock Market Crash The Beginning of the End- Black Thursday, October 24, Black Thursday was the first sign of the end of a great bull market. What goes up, must come down. And come down it did. However, Black Thursday was not the nail in the coffin (that comes on Black Monday and Tuesday). In fact, Black Thursday involved a great comeback. Let’s get straight to the story… 12.9 million shares changed hands on Black Thursday (a new record – 4 million shares was considered a busy day back then). Most of the panic took place in the morning hours. The ticker tape machine fell behind by an hour and a half leaving investors madly scrambling to sell their investments without even knowing the current prices. Panic set in. People gathered outside the exchanges and brokerages, police were dispatched to insure peace. Rumors were flying. By 12:30 PM, the Chicago and Buffalo Exchanges closed down, eleven well-known speculators had already killed themselves and the NYSE closed the visitor’s gallery on the wild scenes below.

The Great Stock Market Crash The Beginning of the End- Black Thursday, October 24, The market moved up a bit after Lamont’s statement, but the real recovery came at 1:30 PM, when self-confident Richard Whitney, vice-president of the NYSE and floor broker of J.P. Morgan and Company, walked into the exchange floor. The crowd went silent. Everyone expected an announcement that the NYSE would be closed. Instead, Richard Whitney surprised everybody… Whitney asked for the latest bid on U.S. Steel. “195” someone shouted. Then he promptly announced that he was buying 10,000 shares of U.S. Steel at 205. He immediately received 200 shares and then left the rest of the order with the specialist. He continued to make similar orders for over a dozen more stocks. Fear evaporated as investors became worried that they would miss the new boom. The market would have closed much higher if stop loss orders from earlier that day hadn’t been triggered during the upward surge. Needless to say, the recovery on Black Thursday was impressive, but so was the massive sell off earlier in the morning that gave it its name. Friday and Saturday morning sessions held steady as everyone became optimistic with the market’s ability to recover. These feelings were squashed on Black Monday.

Black Monday (October 28th, 1929) Following Black Thursday 1929, the stock market was much calmer - it was up a bit on Friday and down a little on Saturday. People were optimistic, knowing that the market could bounce back from Thursday and that the bankers had stepped in. This false sense of hope would end on Monday. Black Monday was a terrible day in the market. Unlike the Black Thursday, no "hero" stepped in to regain investor’s confidence. Volume levels were very high (around 9.25 million shares) as speculators began to realize that no one could save the market. Speculators could only hope that the damage wouldn’t be too bad. Black Monday was the 2nd worst day in U.S. stock market history. The worst day in history wouldn’t come for 58 more years (October 19th, 1987), which also happens to be a Monday and is also referred to as "Black Monday." Black Monday is usually considered a precursor to the worst day in stock market history – the nail in the coffin, Black Tuesday.

Worst Day in Stock Market History - Black Tuesday - October 29th, 1929 Black Tuesday is notorious for being the worst day in the U.S. stock market, but in terms of percentage loss, the honor goes to Black Monday (1987 and 1929). Combine the worst features of Black Thursday with the worst features of Black Monday and you get Black Tuesday. On Thursday, Oct. 24, a record 12.9 million shares traded and the ticker tape fell behind one and a half hours. On Black Tuesday, a new record of 16.4 million shares were traded and the ticker tape fell behind by two and a half hours! On Monday, the stock market suffered a record one- day loss of around 13 percent. On Black Tuesday, the market suffered a loss of about 12 percent. Like the previous "Black Days," the top bankers held a meeting during the day about the market. By the end of November, investors had lost $100 billion in assets in what was later called "The Great Stock Market Crash." In just two months, September and October, the stock market had lost 40 percent of its value. Black Tuesday usually marks the point where the Roaring 20’s ended and the Great Depression started. The stock market would continue to fall until bottoming out in July of 1932 with the Dow at 41.22, down 89.2% (from to The stock market wouldn’t recover for another 22 years