During a surge of speculative investors believing

Duringthe prior decade, the U.S. stock market underwent a rapid escalation, with asurge of speculative investors believing the bull market had no end. Thesentiment was excessive, with ‘unrealistic exuberance’ driving opportunists intothe market. The buyer overhang shifted the demand curve right, resulting inshare prices skyrocketing. The bull sentiment and crazy greed ran out of steamin August 1929, when it reached its peak.

Greed had blinded many to the factthat the fundamentals had already turned. Production had already started its declineand consequently unemployment was rising. This meant that the increasing shareprices had outstripped the companies’ real values. These initial fundamentalred flags helped to promote further declines in wages, increasing interestrates, a flood of debt, a struggling agricultural sector and an excess of largebank loans that could not be rectified.

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Share priceshad begun to decline in September 1929, with the real fall only manifesting inOctober 1929. On Black Thursday, the 24th October 1929, a record 12.89million shares were traded as panic set in.

On Friday, the 25thOctober 1929, investment companies and leading bankers sought to stabilise themarket by buying up huge chunks of shares, and generated a moderate rally.However, on Monday, 28th October 1929, referred to as Black Monday,the market started to go into free-fall. On Black Tuesday, the 29thOctober 1929, New York Stock Exchange share prices collapsed completely underthe deluge of selling, and a new record of 16.4 million shares traded on thatsingle day. The market capitalisation of the declined H1 by billions ofdollars, and thousands of investors (institutional and private) were wiped out.The share price tickers ran hours behind, adding to the panic, as the exchangeand stock broker’s machinery could not handle the record volumes. By 1932 shares wereworth only about 20% of their value prior to October 1929.

By 1933, nearly half of America’s banks had failed, and unemployment wasapproaching 15 million people, or 30% of their workforce.To add to the panic and risk, the markets andmarket infrastructure were unsophisticated. Information about markets andsecurities was slow in reaching investors, and the securities trading prices(on the ticker tape) were not reflective of the information and activity around thesecurity. Additionally, the lack of market controls, regulatory oversight,accounting standards and the like, intensified the perception that investingwas a form of gambling, best suited to the affluent and elite. H1Of the what???

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