Paper
? Once there was a time when ?shares in business corporations were rarely bought and sold because few companies were considered promising financial profits? (Blume 21). That is hard to believe considering almost everybody has invested in some stock today. The stock market went through some distinct changes since its inception, and has evolved into a shaping force in the world today. There is one idea that sparked the fire which produced the stock market: capitalism. Everything the stock market is, and was, rooted in the basic idea of capitalism. Without that idea, stocks and bonds would never have come to be.
??? Capitalism is an ?economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market? (Peterson). When a person buys a stock, that means they own a part of the company in which they invested. The average person can thereby invest in a public company and receive a piece of that company’s success, or failure. This process helps not only the smart investors, but the companies as well. The investors’ money must go somewhere, and that place is the treasury of the company they endorsed (Simonson). The company then uses that money for its financial needs, providing the company an income in addition to simple sales profits. Then, the investors make or lose money based on how much that company makes. Basically, people invest in an idea, and make money based on how that idea performs in the real world (Blume 35-39). While the stock market is based upon capitalism, this type of enterprise was shunned by the community in 1792 because of financial panic (Blume 23).
??? However, these practices were not shunned by all America in 1792. People wanted a way to trade stocks without the public stock auctions (which were banned because of lack of profits), so they tried something different than stock auctions. ?The institution we know today as the New York Sock Exchange began in 1792 as an effort to circumvent government regulation? (Blume 21).
??? ?Twenty-four…stock brokers, with no building or even a formal title, met under a buttonwood tree on the north side of Wall Street…? (Blume 23) there they made a deal that went on to be known as the Buttonwood Agreement. In it were these words: ?We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever any kind of Public Stock, at a less rate than one quarter percent Commission on the Specie value of, and that we will give a preference to each other in our Negotiations? (Blume 23). To these brokers’ great delight, their idea became very popular amongst investors and brokers alike. They bought office space on Wall Street, where the Buttonwood Agreement was made. That office space later went on to be called the New York Stock Exchange. They grew and expanded the Exchange so that it became the only place to buy stocks if a profit was to be made.
??? This system was a good one, but there were ways to beat it. Some of the outstanding financial powers of the United States often used their wealth to corner the stock market. All of these powers had monopolies in large business areas such as oil, steel, railroads and banking. The government tried to stop monopolies from forming by passing the Sherman Anti-Trust Act of 1890 (Blume 270). This did not stop these giants, however. They often engaged in financial battles for control of the market.
??? In one of these instances, J.P. Morgan and Harrimen both wanted control of the Northern Pacific Railroad Company in 1901 (Sharp 165). Harrimen decided to buy his way to majority share holder of the company, thereby allowing him to run the business. Morgan then bought all the outstanding stock available. This activity raised the stock price from $112 to $149 (Sharp 166). This increase caused people to sell the stock short (to sell it hoping it will go down before you buy it), but J.P. Morgan had unexpectedly created a corner in the market and within hours the stock price had soared from $149 a share to $1,000. Since Harriman had sold short, he was now in debt $800 for every share he owned (Sharp 166).
??? There were big rivalries between other giants as well, showing how the market could be swayed so severely simply to fit ones needs. There were many similar struggles between men like Morgan and Carnegie for control of the steel business (Sharp 168). There have been too many battles over small railroads to count. All this led to one thing. In the late 1800’s and early 1900’s, the stock market was easily swayed, and cut-throat business was a way of life. Today we have laws against monopolies, market cornering, and other violations which greatly influenced the market. However, it was not truly recognized that stricter laws were needed until the crash of 1929 (Blume 29). The free public market had become too free and out of control. Investing geniuses saw the evident crash coming, but they were powerless to stop it.
??? The brokerage business ended up being more of a free market where the good brokers could charge a higher commission and the less successful brokers would be paid a lower one (Blume 24). A few brokerage firms had an idea that would change the market, but not for the better. They decided to allow their investors to pay for only ten percent of the actual amount of stock they bought. Since many people could not afford to buy stock at its face value, the firm would put up ninety percent of the money, leaving the investors to pay a mere ten percent (Simonson). This set investors up for huge gains, because if the stock went up ten percent, the money the investor had put into the company doubled. There is a flip side to this money making wonder though. What happens if the stock goes down even ten percent? A complete failure resulting in the investor being in debt to the firm with whom they conducted business (Simonson).
??? That problem is exactly what caused the major market failure of 1929. ?The initial panic in 1929 carried the market some fifty percent lower and back to preboom levels. The slow grinding misery of the longest depression in the nation’s history worked the market ninety percent below its 1929 highs by 1932? (Sharp 210). The market only fully recovered after the start of Word War II. This was not a good time in America, but there were a few good things that came out of it. One is that we have learned from our mistakes, and will hopefully not make the same mistake twice. The other prosperous idea was invented just before the crash.
??? The smart investors knew that one must spread his holdings amongst a pool of stocks, just like the old phrase about never keeping all your eggs in one basket. They also knew that the riskier stocks gave far greater returns than the safer ones (Blume 95). These ideas paved the way for the invention of the first mutual fund, created in 1924. This allowed people to invest in one fund, but still spread their money over a wide variety of stocks, thereby creating a net to fall back on. This was one idea that has survived until today and shows no sign of stopping. This notion helped lead the way for the prosperity that was to come.
??? The next twenty years was a time of great prosperity due to low inflation rates and inheritance taxes (Simonson). However, the 70’s brought about a whole new era. The economy had grown too fast, causing ten percent inflation. This caused stocks to tumble. Real estate and fixed income became the prominent assets. From the 80’s on, the market has enjoyed many years of prosperity, with the 90’s being the decade of largest market growth. However, none of it would have been possible if it weren’t for the lessons learned in the 1920’s (Brown 90-107).
??? Learning from the past is very important, and a great example to learn from is the crash of 1929. We caught the monopolies before they became too out of control, but failed to stop the small investor from driving the market down (Sharp 210). We must learn from history to make sure we never make the same mistakes that Wall Street made at the turn of the century. However, nobody can predict the future; with the rise of new types of stocks, online trading, and faster riskier trading, are we setting ourselves up for yet another fall?
Другие работы по теме:
Yahoo Essay Research Paper Yahoo rode the
Yahoo! Essay, Research Paper Yahoo! rode the bull market Thursday, primarily on the strength of a report by Lehman Brothers, which raised its recommendation on the stock to a “Buy.”
The Right Stuff Day Traders Essay Research
Paper In today’s economy, it is no longer feasible to just put money in a savings account and expect to gain financial stability. If a person desires financial security, financial experts recommend stocks and mutual funds to secure one’s financial future. With the wide spread release of the Internet, stock trading is no longer a professional’s game.
A Comparison Between The Great Depression And
Of Mice And Men Essay, Research Paper The Great Depression is comparable to Lennie and George’s life. I would like to give a comparison of George Milton and Lennie Small to the Great
Essay 2
Essay: #1 Overproduction And Its Weakness Essay, Research Paper There were many problems that occurred as soon as WWI ended. Such as overproduction. Overproduction was going on all through the war, and it did not stop as soon as
The Wheel Of Fortune Essay Research Paper
Robert Balgac Journal Entry #5 Mysticism Dr. Collinge The Wheel of Fortune According to Zen Buddhisim, the wheel of fortune rotates and the ones who are now poor will be rich in the future and vice versa. The stock of America Online, symbol AOL, is a perfect example of this belief.
Great Depression In America Essay Research Paper
The Great Depression of America The Great Depression is probably one of the most concerning events in American history. It is also proof that capitalism was not a perfect type of government, as everyone believed. The American depression started in a different way than it did in Germany. The Treaty of Versailles was the main event that forced them into depression while a stock market crash was the main event which forced America.
Financial Article Essay Research Paper Goldman Sachs
Financial Article Essay, Research Paper Goldman Sachs is the last big Wall Street investment bank to go public. In this story they are explaining how is the timing of its IPO (Initial Public Offering) going to be affected by the market at this moment. The market at this moment is very volatile. Some people think that the market is too high and that a correction is in our way very soon.
VOICE OF DEMOCRACY Essay Research Paper VOICE
VOICE OF DEMOCRACY Essay, Research Paper VOICE OF DEMOCRACY AMERICAS ROLE FOR THE NEXT CENTURY Americas role for the next century will be to stay economically stable. That will be no problem unless
Fifth Business Essay Research Paper Canadian Heritage
Fifth Business Essay, Research Paper Canadian Heritage Commercial A railroad line is shown in the background as workers slave away at finishing the Canadian Pacific Rail line, which will run through all of Canada. Finally, the last stake is driven into the rail line thus completing it, rendering it useful for many years to come and effecting the lives of many in the present and future.
Efficient Market Theory A Contradiction Of Terms
Essay, Research Paper AbstractAccording to the Efficient Market Theory, it should be extremely difficult for an investor to develop a “system” that consistently selects stocks that exhibit higher than normal returns over a period of time. It should also not be possible for a company to “cook the books” to misrepresent the value of stocks and bonds.
The Stock Market Essay Research Paper The
The Stock Market Essay, Research Paper The Stock Market Have you ever noticed how everyone thinks they know what is best for you? Everyone telling you what to do when you are the only one who knows what is the best
Investing Online Essay Research Paper Personal Investing
Investing Online Essay, Research Paper Personal Investing with Computer Technology Introduction Computer technology has revolutionized the way people can invest their money. Online trading has become the newest fad for people trying to get more bang for their buck. Virtually anyone with access to the Internet can set up an online brokerage account.
Y2k 6 Essay Research Paper Y2K is
Y2k 6 Essay, Research Paper Y2K is also called a bug. Y2K is one of the big problems for everyone. Y2K means many computer systems use software that tracks dates with only the last two numbers of years such as 97 instead of 1997. When 00 comes up for the year 2000, many computers will view it as 1900 instead, potentially leading to failures in business, transportation, utilities and other services.
Paul Essay Research Paper Paul was always
Paul Essay, Research Paper Paul was always an insecure individual. His insecurity was a direct result from the lack of attention he received from his father, and love from his deceased mother. He grew up with minimal support from his father. Paul was never encouraged to do what he was interested in. For instance, when Paul s was at school and was interested in stocks, his father did not encourage his abilities to play the stock market; rather he pulled Paul out of school.
Shoe Industry Essay Research Paper Shoe
Shoe Industry Essay, Research Paper Shoe Industry The shoe industry is one of the biggest moneymakers in the market, but it?s facing many changes, rushes, and difficulties. The big power in the industry is Nike inc. which all the other companies are trying to be like. Some changes are the industry as a whole is moving there factories to the far east such as China.
Index Funds Essay Research Paper With the
Index Funds Essay, Research Paper With the growing popularity of index funds, one might be confused as whether to choose index funds or to use traditional money managers. If you are looking for an investment with low risk and a long term return that follows the market, then index funds is the choice for you. In fact, most private investors are better off investing in index funds.
Stock Market Rally Essay Research Paper Wow
Stock Market Rally Essay, Research Paper Wow, what a day on the market today. Technology stocks soared on the news of the new gigahertz processor release. Computer makers like Gateway and Dell saw their shares increase by 68 and 42 percent respectively. Both companies expect the release of this new computer chip to boost sales tremendously.
Taxable Bond Market Outperformed The U.S. Stock
Market Essay, Research Paper For the first time since 1990, the taxable bond market, as measured by the Lehman Brothers Aggregate Bond Index, appeared nearly certain to outperform the U.S. stock market, as measured by the S&P 500?. The former was up nearly 10% year to date through November, while the S&P 500 was down by approximately the same amount.
Y2k Vs Stock Market Crash Essay Research
Paper The stock market crash of 1929 and the year 2000 bug are very similar. Black Thursday was not one of the brightest days in American History. This day was the cause of a nation downward spiral that closed 4000 banks, starting the great depression, and leading to stock that at one time would decrease 89% to the value some had bought.
Causes Of The Stock Market Crash Essay
, Research Paper Causes of the Stock Market Crash It has been said that all good things must come to an end. In the case of the Roaring Twenties that end came abruptly and unexpectedly. It is easy for one to look back upon the economic situation that lead to the crash and ridicule the experts for not seeing the signs of a potential disaster.
Admission Essay Research Paper Experience is what
Admission Essay, Research Paper ?Experience is what you receive when you don?t get what you want.” I remembered my father?s words as I tried to postpone the coming massacre. Like during the fall of the Roman Empire, my allies became enemies and my foes turned into partners. In fast and furious action with property changing hands again and again, I rested my fate on the words of one man, hoping he would rescue me from this dangerous tailspin.
Investing In The Millenium Essay Research Paper
Investing in the Millenium The stock market has been the major backbone in American and international earning since its origin. There have been major inclines and also, many major declines in the history of the stock market. Commonly, the best-known stock exchange is the New York Stock Exchange. Nasdaq, ASCAP, the Dow Jones Industrial, to name a few.
Depression Essay Research Paper The Great Depression
De[pression Essay, Research Paper The Great Depression, the worst economic downfall ever in United States history, began late in 1929. Supposedly triggered by the stock market crash. It lasted for nearly a decade. The main cause for the depression was the combination of the greatly unequal distribution of wealth throughout the 1920s and the extensive stock market speculation that took place during the latter part of that same decade.
Great Depression Essay Research Paper Great Depression
Great Depression Essay, Research Paper Great Depression began in the early 1930’s, and lasted about a decade. The main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920’s and extensive stock market speculation that took place during the later part that same decade.
The Great Depression Essay Research Paper THE
The Great Depression Essay, Research Paper THE GREAT DEPRESSION The year of 1929 began a time period of horror in America. It was the beginning of the great depression. A time in which many lost their
Stock Market Crashs Of 1929 And 1987
Essay, Research Paper The Stock Market Crashes of 1929 and 1987 The stock market crash of 1929 occurred over a period of time that was the beginning of what is called the Great Depression. Everyone wanted to invest their money in the stock market. People thought that the stock market was the perfect place to make money.
Recent Drops In The Stock Market Essay
, Research Paper Recently, the stock market has been very unstable. After a period of extremely good business and market highs, it seems we are experiencing just the opposite. The market has
A Short Essay For A Intro To
( Bussiness Class) Essay, Research Paper In the October 14th issue of Businessweek there is an article entitled “Cavwat Entrepreneur” by Michelael Schroeder. This artical details how modern
Executive Compensation Essay Research Paper Executive CompensationExecutive
Executive Compensation Essay, Research Paper Executive Compensation Executive compensation should be pay for performance. The direct link between pay and the company s profitability is an important factor. It can either motivate an executive to work harder for the company or to work against the company.