Black Tuesday was Tuesday, October 29, 1929. This was the day the New York Stock Exchange crashed. This was the single largest crash in the country. Black Tuesday hit Wall Street as investors traded 16 million shares in one day on the New York Stock Exchange. Black Tuesday wiped out thousands of investors and billions of dollars were lost. Black Tuesday was an event leading up to the stock market crash. As a result numerous Americans lost all to a lot of their savings. Black Tuesday was also known as the beginning of the great depression which was economic recession that made Americans struggle to make money and provide food, shelter and clothing for their families.
The great depression was also cause by the poor distribution of wealth. The top 5% of the wealthy earned 70% of the income. People spent less because of the lack of money they had and industries struggled. There was high speculation in stocks.
During the 1920s there were countless Americans who were interested in Wall Street and in buying stock. The United States had of prosperity and success which then average Americans could buy luxury items. For example they had radios, vacuum cleaners, and automobiles. They could pay monthly installments and buy on credit.
Buying on credit allowed them to buy very expensive and nice items that they wanted but they didn’t have the money at the time to buy these things. There was also a down side to buying on credit which was that people would buy things that are very expensive and they couldn’t pay back the money they owed. This made many Americans deep into debt.
Buying on the margin is when you borrow from a broker to purchase stock. Not all stocks are able to be bought on margin. The Federal Reserve Board tells you which stock are able to be bought on margin. Brokers will not let you buy penny stocks. These stocks are common stocks that are usually highly speculative. Penny’s stocks are relatively cheap in price, which sell for less than a dollar a share. Buying on the margin is like when you take a loan from your brokerage. This allows you to buy a lot of stock, more than you could regularly buy.
You have to have a margin account to buy on margin. This account is different from a regular cash account. You trade using the money in your margin account. To open an account your broker has to obtain your signature by law. You can purchase up to 50% of the stock once your account is set up and able to function. For it to be operational you have to have an initial deposit of $2,000 for your account and some brokerages require more than $2,000. This deposit is known as minimum margin.
Buying on the margin is more used for short-term investments rather than long-term investments. It is easier to get into a lot of debt if you are using it for long-term investments. The longer you hold on to an investment the more you have to pay back because of interest. If you make payments your interest charges are not applied to your account, but if you do not...