Stock Market Mania

For much of the 1920s, the United States economy was a great success story. Leaders declared that the nation had entered a new era. Everyone would prosper, they said.

Some text here about the topic of discussion

A stock is a share in the ownership of a company

​Companies sell shares to people to get the money they need to grow. People buy stocks as investments, or ways of possibly earning money.

What is it?

Why buy stock?

If you a person buys a share of stock for $5. In a few months, it might be worth $7.50. Often, it kept climbing. If the person sold the stock at a stock exchange, he or she would make money.

​

​Some text here about the topic of discussion.

How does it work?

Many investors bought stocks "on margin." This means they borrowed money to buy the stock.

​

​Some text here about the topic of discussion.

Buying on Margin

Say a stock cost $10 a share. An investor might pay $2 in cash and borrow the rest. When stock prices went up, buying on margin worked well. If the investor could sell the share for $15, he or she could pay off the $8 loan—with $7 left over.

Some text here about the topic of discussion

If the stock price dropped to $5, however, the investor would still owe $8. If the investor sold at $5 a share, he or she would have to come up with another $3 to pay off the loan. The investor would lose the $2 paid for the stock, plus $3 more.

Some text here about the topic of discussion

Some investors began to worry that stock prices were set to fall. They began to sell their stocks.

September 1929

Many experts thought there was no need to worry. Investors did not listen. Stock prices plunged as investors sold millions of shares each day.

October 1929

Panicked traders sold almost 13 million shares. That day became known as "Black Thursday."

October 24th 1929

Stock prices plummeted. The New York Stock Exchange closed for a few days to prevent more panic selling.

October 29th, 1929