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Stocks and the Stock Market
In today’s world we are surrounded by the stock market, it is the very core of our private enterprise system and the economic stability of the US and the world. Stock market quotes now scroll at the bottom of news shows, providing information from major stock exchanges happening to the moment. From newspapers to the internet to blackberries, investors now have a wide range of options for getting their stock listings and quotes. Traders can follow quotes during the day and watch it change from minute to minute or second to second, depending on their level of interest.
But how did these people get started in the stock market? How did the stock market come about? And how can I make money in it? The majority of people don’t know where to start, so they never start at all. The stock market might seem mysterious and a risky investment, but with the right information and a little knowledge you’ll be on your way to investing in your future.
Stock Market History
The name Wall Street derives from the fact that in the 17th century, there actually was a wall there. In 1644, Dutch settlers constructed a crude wall of timber and earthwork, ostensibly to protect themselves from Indians, pirates, and other dangers, but in reality, it was used to keep the colony’s slaves from escaping. Little did they know that this wall would go on to become the center of financial activity in the world.
The path along the wall became a bustling commercial thoroughfare given that it joined the banks of the East River with those of the Hudson River on the west. Merchants set up shop along the path, along with a city hall and a church. The wall lasted until 1699, when the British dismantled it and built a street. The street was consequently named Wall Street. From 1785 to 1790, New York was the US national capital and Federal Hall was built on Wall Street. On the steps of that building, George Washington was inaugurated as our countries first president.
The New York Stock Exchange
The first organized stock exchange happened in 1792 when, under a buttonwood tree in Castle Garden (what is now known as Battery Park), a group of 24 men would gather to trade informally. In May of the same year they signed a document named the Buttonwood Agreement, named for their traditional meeting place. The agreement set rules, regulation and fees. The signers were to trade securities only among themselves, set trading fees, and to not participate in other auctions of securities. These gentlemen founded what was to become the New York Stock Exchange.
An Exclusive Organization
Housed on the historical Wall Street, securities were auctioned every day beginning at noon and sold to the highest bidder. The exchange was an exclusive organization, allowing only the elite of New York’s financial community to join. New members were required to be voted in, and an applicant could be black-balled by three negative votes. The price of a seat on the exchange cost $25 in 1817, in 1827 it was raised to $100, and in 1848 it was raised again to $400. Men’s attire consisted of top hats and swallowtail coats.
The Stock Market Crash of 1929 and Other Down Times
The New York Stock Exchange has since moved past its humble beginnings to the point where its system now facilitates billions of dollars worth of trades every day. But money hasn’t always been on the rise. The stock market crash of 1929 shocked the nation and triggered the Great Depression. Rich and poor alike lost considerable amounts of money.
The stock market crash of 1929 was just the beginning of many losses for Wall Street. In 1987 the Dow Jones suffered what was the largest single-day loss in the stock market’s history. Since then, the government and industry have tried to put measures into place to debilitate any future crash. The stock markets are now a vital part of the global economy, and so proper safeguards are necessary to reduce the risks of another disastrous crash. Even though the efforts are made to reduce the risk, the possibility of another stock market crash can never be completely ruled out.
The American Stock Exchange (AMEX)
The New York Stock Exchange (NYSE) had competition from smaller exchanges both in New York and other cities who weren’t considered good enough for them. Traders who couldn’t make it on the NYSE traded stocks on the street curb outside, no matter the weather. They became known as the Curbstone Brokers. Eventually, these traders moved indoors and became what they are now known as - the American Stock Exchange (AMEX).
In 1971 the National Association of Securities Dealers Automated Quotation System (NASDAQ) was the first electronic stock exchange, hooked together by a network of computers. (Yes, they did have computers back then.)
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