StartupTalky

Tag: the great depression

  • Biggest Stock Market Crashes in History

    A stock market, share market, or equity market – whatever moniker one uses – is an aggregation of buyers and sellers of shares (also called stocks) which represent ownership claims on various businesses. These can include securities listed on a public stock exchange and stock that is only traded privately. Private stocks are shares of private companies which are sold to investors through equity crowdfunding platforms. Investment strategies drive investment in stocks.

    Stock market trading is one of the most important ways for companies to raise additional financial capital for various business activities including expansion. While the price of the stock is associated with the company’s business investments and other economic activities. However, changes in stock prices are caused by external factors such as socioeconomic conditions, inflation, exchange rates, fiscal policy, and the political situation of a country.

    What is a Stock Market Crash
    The Biggest Stock Market Crashes
    How to prepare for a Downturn
    Conclusion

    What is a Stock Market Crash

    A sudden dramatic decline of stock prices across a major cross-section of a stock market resulting in a significant loss of paper wealth is defined as a stock market crash. While there is no numerical specification, the term is applied to a decline of 10% or more in a stock market index. It is a social phenomenon of external economic events combined with crowd psychology that drives participants to panic selling. Stock market crashes often follow speculation and economic bubbles. Some reasons that can drive stock market crashes are –

    • Excessive economic optimism
    • A prolonged period of rising stock prices
    • Large corporate scams
    • Wars
    • Changes in federal laws and regulations
    • Natural disasters
    • Political disturbances

    Naturally, stock market crashes are, generally, unexpected.

    Niall Ferguson aptly stated – “Before the crash, our world seems almost stationary, deceptively so, balanced, at a set point. So that when the crash finally hits — as inevitably it will — everyone seems surprised. And our brains keep telling us it’s not time for a crash.”

    The Biggest Stock Market Crashes

    As quickly and unexpectedly as a stock market crash can occur, its effects can be deep and long-lasting.  And history has noted some biggest crashes over the years.

    2020 – The Covid-19 Crash

    2020 – The Covid-19 Crash
    2020 – The Covid-19 Crash

    As the pandemic hit globally, governments across the world shut down entire economies to restrain the spread of the deadly virus. It caused an economic shock rattling investors. The financial markets recorded a loss of 34% between February and March 2020. The largest one-day drop since Black Monday of 1987 was on March 16, 2020, with a loss of 12.9%.

    However, unlike other crashes in history, this one recovered quickly and the market regained its peak within 33 days – a historically fast turnaround. The quick recovery is also, partially, a result of the Federal treasury injecting USD 1.5 trillion into the financial markets and Congress passing a USD 2.2 trillion aid package. Despite the human cost due to the pandemic and the financial suffering of millions of people, the stock markets took an upward run. Valuations soared and companies recorded profits.

    What New Innovations will Come after COVID-19 Pandemic? Pandemic Innovations
    Due to Covid-19, people are using various platforms for their conveniences like online learning platforms, wfh, virtual doctors and online grocery shopping. This has led startups to look for innovations in technology.
    StartupTalkyVarad Kitey

    2008 – The Mortgage Crisis

    2008 - The Mortgage Crisis
    2008 – The Mortgage Crisis

    The foundation of this financial crisis was laid in 1999 by the Federal National Mortgage Association (FNMA). In a bid to make home loans more accessible, banks relaxed regulations and due diligence parameters and began lending money to people with low credit ratings and less money to spend on down payments. Their elevated risk profiles were evident in the mortgage repayment terms – such as high-interest rates and variable payment schedules. It fuelled an explosive growth in mortgage debt and home sales as previously ineligible borrowers and investors could now avail of loans. New homeowners were taking on additional debts to purchase other goods. Adding to this chaos were Financial Institutions using cheap debt to boost ROI and companies indebting themselves to capitalize on the opportunity of a surging economy.  

    This debt-fuelled market began showing signs of an impending collapse in 2007. The foreclosure rate on residential homes was high as was the unemployment rate, which was increasing. It was a very specific trigger that caused the index to fall by 57% and took the global markets with it in September 2008.  

    Recovery came in the form of government bailouts, fresh cash injections into the economy, and a historical lowering of interest rates. The global markets took close to 2 years to recover from this disaster.

    2000 – The Dot Com Bubble

    A bubble is caused by valuations that don’t match the company’s financial stability. It is spurred by eager investors trying to chase the next big thing. During the late 1990s, the valuation of internet-based companies rose sharply. Many investors speculated on the dot-com companies, even the ones without revenue or scalable business plans. Huge money was invested driving up the value of any internet-based company. Inevitably, the Federal Reserve tightened its monetary policy restricting capital flow and causing this dot-com bubble to burst. Nasdaq lost 77% of its market value after rising to 500% within a space of 5 years. By the turn of the century, the stock market was reeling from this crash which would take 15 years to recover.  

    What happened during the 1991 Financial crisis in India?(Case Study)
    1991 was one of the worst financial crisis of India. Lets revisit it and understand what led to the crisis and how was Indian economy revived.
    StartupTalkyAnagha S

    1973 – The Oil Crisis and Economic Recession

    This crash was a result of a series of events and, the worst, since the Great Depression of that time. There were financial reforms that included the unlinking of the dollar to gold. This caused instability of the dollar causing a runaway inflation. Parallelly, the economic recession was adding stress, and then, in 1973, the price of oil quadrupled due to the oil crisis. This sped up inflation. All these events, combined, created a market crash of 48%. It took 21 months for the markets to recover from this crash.

    1929 – The Great Depression

    Clocking a market crash of 89% which took 25 years to recover is, possibly, the worst stock market crash in history. It caused the Great Depression which would only recover in 1954. This crash ended the Roaring Twenties during which the economy expanded significantly. The Dow Jones market saw a sixfold increase between 1921 and 1929 up from 63 points to 381 points. Beginning a descent in early September of 1929 it accelerated during a two-day crash on October 28, 1929, and October 29, 1929, by 13% and 12% respectively. Within a month the Dow had lost half its value. It continued its loss for the next 3 years and bottomed out after losing 89% by the summer of 1932. This great loss is attributable to excessive leverage as investors began buying stock under margin loans. Consumers were adding to this by purchasing items on credit. When this debt bubble burst it caused the greatest economic crash in modern history.

    The Great Depression – 5 Minute History Lesson

    How to prepare for a Downturn

    Market downturns and unexpected crashes are a part of investing. Panic selling only adds to the loss, however, with a little patience, investments make up their losses with time. There are a few things that can be done to shore up finances during a period of volatility and uncertainty.

    • Paying off high-interest debt
    • Having a fully funded exclusive emergency fund to support for at least 6 months
    • Curbing unnecessary and excessive spending habits
    • Create a diversified investment portfolio

    Conclusion

    A market study of the biggest crashes in history provides valuable insights into how the financial markets behave to various catalysts and how perception can drive consumer mood. It is essential to, first, study the market, understand the risks, and then invest.

    FAQs

    What is a stock market crash?

    A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market resulting in a significant loss of paper wealth.

    What are the biggest stock market crashes in history?

    The biggest stock market crashes in history are:

    • 2020 – The Covid-19 Crash
    • 2008 – The Mortgage Crisis
    • 2000 – The Dot Com Bubble
    • 1973 – The Oil Crisis and Economic Recession
    • 1929 – The Great Depression

    How can one be prepared for the downturns occurring in the stock market?

    There are a few things that can be done to shore up finances while downturns occur in the stock market:

    • Paying off high-interest debt
    • Having a fully funded exclusive emergency fund to support for at least 6 months
    • Curbing unnecessary and excessive spending habits
    • Create a diversified investment portfolio

  • Harley Davidson: Riding High, Falling Hard

    This is a name that needs no introduction. Harley-Davidson Inc. was founded in 1903 and is headquartered in Milwaukee, Wisconsin in USA. It is one of the world’s largest motorcycle manufacturers and a brand with a loyal following. The iconic brand is famous for the chopper motorcycle style with manufacturing factories spread over York-Pennsylvania, Milwaukee-Wisconsin, Manaus-Brazil, Bawal-India, and Pluak Daeng-Thailand. Not only does the company market its products globally, but it also licenses and markets merchandise like apparel, home décor, ornaments, accessories, toys, scale models of its motorcycles, and video games based on its motorcycle line under the Harley-Davidson brand.

    The Begining
    The Recent History
    The Fall
    Conclusion

    The Begining

    The first motor-bicycle was built by 20-year-old William S. Harley along with his friend Arthur Davidson by using the northside Milwaukee machine shop which was located at the home of their friend Henry Melk. The finished bike in 1903 did not have the power to climb hills without pedal assistance and the makers wrote off their first attempt as a learning curve.

    Their second attempt was successful with a bike that featured a bigger engine and loop-frame design as it marked their path to future designs of motorcycles. This prototype of the new loop-frame Harley-Davidson was functional by September 8, 1904. It, then, competed in a Milwaukee motorcycle race and was placed fourth.

    By January 1905, Harley-Davidson placed small advertisements in the Automobile and Cycle Trade Journal. These advertisements offered bare engines for do-it-yourself projects. The business did well and by April of the same year, the company was producing a limited stock of completed motorcycles.

    Within a year, by 1906, Harley and the Davidson brothers built their first single-storey, wooden structure factory on Chestnut Street and produced 50 motorcycles. Chestnut Street was later renamed Juneau Avenue, which also serves as the current location for the Harley-Davidson Corporate Headquarters.

    History of Harley Davidson Motorcycle

    By 1907, the company expanded its factory and increased its annual motorcycle production to 150 motorcycles. It was also the year that the company was officially incorporated. The company began selling its bikes to police departments as well.

    Over the next few years, Harley-Davidson continued making improvements to the engine and the bike design and by the year 1914, Harley-Davidson was pulling ahead of Indian-dominated motorcycle racing and also increased their bike production numbers to 16,284 machines.

    World War I proved to be a major sales push for the company as the military demanded motorcycles as the US entered WWI in 1917. It purchased more than 20,000 motorcycles from the company. To recruit more domestic customers for its motorcycles, the company launched a line of bicycles in the same year but discontinued it in 1923 due to disappointing sales. However, by the year 1920, Harley-Davidson had grown to be the largest motorcycle manufacturer in the world with dealers in 67 countries. They were producing a whopping 28,189 machines annually.

    A few years later, The Great Depression began which negatively impacted the company and its sales dropped from 21,000 machines in 1929 to 3703 machines in 1933. It emerged from the Great Depression scathed but alive and was only one of the two American motorcycle manufacturers that survived. It again rose to its former prominence as it reproduced a large number of machines for the US army during World War II. Harley-Davidson received two Army-Navy ‘E’ Awards, in 1943 and 1945 respectively, for ‘Excellence in Production’. It also resumed civilian production of large V-twin motorcycles that were successful on racetracks and with private buyers.

    The company evolved and by 1970, it become a lifestyle brand that sold jackets, vests, T-shirts, and various memorabilia to commemorate the Harley-Davidson lifestyle. By the 1980s, people were economically progressing after a long financial hiatus that led to soaring sales for the company.

    A Screenshot from the Harley Davidson Website
    A Screenshot from the Harley Davidson Website

    The Recent History

    The decade of the 1980s proved to be immensely profitable for the company. The group that consisted of Harley-Davidson motorcycle owners grew to 90,000 members and the company registered a profit of approximately USD 3 million in 1984. This number rose by another USD 1.5 million within a few short years. Harley Davidson continued on its growth trajectory right into the 21st century. By the year 2006, it reported a profit of approximately USD 1 billion as its core owners’ group reached middle age and the stock price of the company peaked. However, it was also the last successful year of the company.

    The Fall

    The iconic company that had survived and grown through two world wars and The Great Depression fell victim to the economic recession of 2007 and it struggled with sales and stock prices plummeting between 2007 and 2009. This abruptly stopped the company’s new efforts to market its product to a younger and new audience that included women and children.

    To survive this newest threat of the economic downturn, it reverted to producing bikes that its existing customer base wanted, resulting in loud, chopper styles and bulky motorbikes.

    Harley Davidson - Total Worldwide Retail Sales
    Harley Davidson – Total Worldwide Retail Sales

    What they failed to take into account was that their current core customer base was aging and the brand had missed its chance of evolving with the times. By 2008, the average age of a Harley-Davidson owner was 50 years and the younger generation did not identify with the company’s bike styles or ethos. This was in addition to the high price point of the motorbike which made it unaffordable for the younger generation that did not have such high disposable incomes. The third strike against the brand was that its image was associated with middle-aged men and father figures.

    Conclusion

    The iconic company that, at one time, was at its peak and the leading manufacturer of motorbikes across the world, has failed to recover post the 2007 recession. Although its sales are better, it has not been able to capture its pre-recession numbers. The main issue is that their bikes do not attract the millennials at all. Today, a company that has survived multiple ownership arrangements, subsidiary arrangements, intense global competition, and periods of economic health and product quality is struggling for survival. Only time will tell if the company will succeed in reversing its fortunes.

    Droom Company Profile – India’s 1st Online Market Place for Automobiles
    Droom is an online marketplace to buy and sell new and used automobiles. Read about Droom, business model, founders, revenue, competitors, funding.
    StartupTalkyRishabh Rathi

    FAQs

    Harley-Davidson motorcycles are built to with sturdy construction and innovative engines. Many parts are also easily replaceable, allowing riders to keep their bikes in top shape without needing to replace the entire machine.

    What was the first Harley Davidson model ever produced?

    The first Harley-Davidson motorcycle was built in 1903 and was named the Harley-Davidson Model 1.

    Does Harley-Davidson sell lifestyle products?

    Yes, Harley-Davidson sells lifestyle products like jackets, vests, T-shirts, and various memorabilia like home décor, ornaments, accessories, toys, and video games based on its motorcycle line.

    Some of the most popular Harley-Davidson models include the Sportster, Dyna, and Softail.