On Tuesday October 29th, , a stock market crash cost the market about 12 percent of its value. Although the loss was staggering, it was only a portion of the loss that was to occur in the following 3 years. It reached a high of Although we can recognize some of the conditions that helped to fuel the stock market crash of , what set it off is harder to determine.

The 's post WWI era was one of tremendous growth, optimism, and prosperity. Americans had returned victorious and optimistic from the first World War. Industries had been greatly expanded to help support the war effort, and these helped establish capital to fuel the growth in the 's.

Electricity was also becoming mainstream and beginning to make its way into the daily life of regular citizens. Radio became popular and people began to tune into radio programs on a regular basis. Charles Lindbergh made his famous flight over the Atlantic in Even the first automatic bread slicer was invented in the late 's. Economic growth during the 's was very real--even through Several companies were increasing their dividend payouts.

Leading economists of the day, including John Maynard Keynes, had money invested in the stock market and some even suggested buying after the October sell-off. During the 's more middle-class and lay citizens began investing in the stock market. Buying on margin became very popular.

If the stocks increased in value then the investor got to keep all of the profit. When he sold he would pay off his debt to the broker. When someone buys on margin, the stock itself is acting as collateral. If the value of the stock decreases below the margin, then even after selling the stock the investor would still owe the broker money.

Buying on margin probably helped to fuel some of the stock market prosperity during the 's. At the time buying on margin wasn't regulated so the brokers could choose the margins they were willing to give. Buying on margin allows investors to buy more than they otherwise could have. This has a tendency to push the market up.

Imagine one million "Henry's" being able to double the amount of money they were willing to invest in the stock market. However, there is some evidence than public utility stocks were overpriced. Public utilities are regulated--that is, the government sets a limit on how much they are allowed to earn.

Hughes Optioneering

The prices of public utility stocks were high given their government-set return limits. Public utilities can earn excess returns because of weather or regulation lag, but nothing extraordinary. Public utility stock prices seemed to indicate otherwise. The media seems to have been part of the cause of the October sell-off. In the weeks preceding Black Thursday many articles surfaced asserting that there was too much speculation in the American stock market and that stocks were overpriced.

In October front page headlines discussed recent market losses and questioned whether share-holders were beginning to pull out.

Evidently this feeling trickled down to make investors nervous. On Thursday, October 24, , the largest volume ever traded on the New York Stock Exchange was recorded,, shares--crushing the previous record of 8,, shares set in March. The volume was so high that the market tickers got over an hour behind.

The market lost value early in the day but then regained it later on. Over the weekend the New York Times reported that Massachusetts regulators weren't going to be as friendly towards public utilities.

On Monday 9,, shares were traded. The nervousness that existed amoung investors caused many people to sell once they saw the high volume and the ticker-lag.

Stock Market Crash

It's as if you were in a movie theater and someone screams "Bomb! When stock prices fell, investors were forced to sell their shares so that they could pay back their brokers.

This forced prices further down and the cycle continued. When investors couldn't pay back banks the money they had borrowed, banks began to fail. Banks had also invested money in the stock market, but even a well diversified portfolio couldn't protect anyone from the crash that occurred.

For a while banks borrowed money from the Federal Reserve System, but eventually no more funds were available and banks began to break by the hundreds. If people thought that their bank was going to fail they would run to withdraw their money, making matters even worse. Eventually in the market bottomed out. By this time the Great Depression was very real and it would take another 23 years before the market would ever fully recovered from stock market crash of The Stock Market Crash - Harold Bierman, Jr.

An excellent in-depth article about the stock market crash of , used as a reference for this article. Other sites in the eonor. The Stock Market Crash of On Tuesday October 29th, , a stock market crash cost the market about 12 percent of its value. Stock Market Crash of EMH - Beat the Market. List of the DJIA. GTH - US Geothermal.