The Australian Stock Exchange Essay Research Paper — страница 8

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primary economies of the world. 4) An increase in interest rates. 5) Large price earnings ratios (the average was above twenty) 6) Large market to book values (above two) 7) The Dow Jones Industrial had already started to slide form the August high of 2,722 to 2,507 on October 13. 8) Continuous changes in the tax laws (especially in 1984 and 1986) that were not favorable to corporations and investors. 9) The continuing federal deficit. We do not know why such a dramatic fall took place from October 14 to October 19, 1987. We can conjecture that the market was too high at 2,722 (or 2,747) in August. But there were many reasons to think the rise would continue. We must take into account the introduction of computerized stock selling, the speed of the transaction well and truly

could have lead to the quick dramatic fall, but I personally have my doubts. One of the more important factors was the purchase of equity investment by foreign (especially Japanese) investors. During the 9 months of 1987 Japanese investors purchased $15 billion of United States equities. However, expectations of the future value of the dollar were becoming increasingly important. The announcement of the trade deficit accentuated fears of further drops in the value of the dollar. ASX Boom of the 1960’s The ASX experience a significant boom in the 1960’s. This boom was felt tremendously in Western Australia and sent the markets soaring to amazing levels. It more important for us to understand the reasons why the market performed so well, it was not just the case of the

companies doing good. The 1950’s were an era for tremendous growth for Western Australia. The Korean war raised the price of wool, there were significant uranium, iron ore and aluminum discoveries. One very significant discovery was that of a spectacular oil find at Ruff Range, this sent investors queuing in the streets for shares. A credit squeeze in the 1960’s caused the market into a down turn. WA’s economic recovery was again due to performances of resources, but this was not only by gold. The Vietnam was created a huge demand for nickel. The nickel boom was the biggest event for the ASX, it lifted the whole market. One particular company, Poseidon, climbed to holding a value of more than $200 per share. This boost in the Perth Stock Exchange meant that the exchange

must expand to keep up with the performance of the companies. The Perth Stock Exchange took the following steps in improving their market, they: :Hired their first employee :Established a secretariat :introduced post trading :installed direct telephone lines and :published their first annual report. The crash of 1930 There is a great deal wrong with our understanding of the 1930 sock market crash. Even the name in inexact. The largest losses to the market did not only come in October 1929, but rather in the following two years. In the calendar year 1929 the market lost only 11.9 percent of its value after having gained 37.9 percent in the previous year. In December 1929 many expert economists, felt that the financial crisis had ended and by April 1930 the Dow Jones Industrial

Average had recovered a large percentage of the October losses. The 1929 Crash, like the 1987 Crash was preceded by a market top. In 1927 the top came on September 4th. As in 1987, the new highs in late summer did not cause much fuss. The market had been in a strong bull for years and new highs were almost taken for granted. In fact, the 9/4/29 Wall Street Journal did not even mention the new highs. Before we give reasons to why the market crashed, it is important to understand some of the most significant events that led to the 1929 stock market decline. In 1920 Warren G. Harding was elected president of the United States Of America and in 1924 Calvin Coolidge was elected. These two presidents do not rank high in performance and their appointees left something to be desired. At

the beginning of 1929 the Federal Reserve Board consisted of Harding-Coolidge appointees or reappointees (three members of the board-Edmund Platt, Charles S. Hamlin, and Adolph C. Miller-had originally been by Wilson). Unfortunately, these appointees were not the most talented or best prepared for controlling the United States banking system. The Federal Reserve Board in January 1929 consisted of the following six members (omitting the two ex-officio members: Secretary of the Treasurer A. W. Mellon and Comptroller of the Currency J. W. Pole): Roy a. Young, Governor. Young had been governor of the Minneapolis reserve bank before joining the Board. Edmund Platt, Vice-Governor. Platt was an ex-newspaper editor and ex-congressman from Poughkeepsie, New York Adolph C. Miller. Miller