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1920 stock market and shares

Jazz Age

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#1 Felscor

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Posted 15 October 2013 - 07:59 AM

I am wondering what are (if any) the rules of stock market investments and share buying in 1920 scenarios and characters. Is it buy shares, roll luck a month later to see if it goes up or down?

 

It seems like a great way to make a quick buck and from memory of a documentary I once watched ages ago (forget the name sorry) on the Great Depression that said that many US citizens invested in the stock market during the 20's as a popular pass time, but I haven't heard of that anywhere else since.


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#2 The_Tatterdemalion_King

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Posted 15 October 2013 - 08:43 AM

You could probably find actual stock listings somewhere...



#3 rylehNC

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Posted 15 October 2013 - 10:58 AM

I think a Keeper has more important things to worry about in a horror game.


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#4 MadCultist

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Posted 15 October 2013 - 06:32 PM

This would be only important if it was a campaign where the characters actually has to deal with money more than usual (travelling and buying loads of equipment are more important than in a single scenario). Otherwise I recommend not to do the whole share investment thing.


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#5 ElijahWhateley

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Posted 16 October 2013 - 12:18 AM

There's the inevitable problem of the players knowing that a reasonably diversified portfolio will make huge gains as long as they withdraw everything before a certain date in '29.

 

Although just once I'd like to have a player do that, and then explain to him how all the stocks he sold off start to lose value rapidly, and then the whole industries they're in, and soon everyone's trying to cash out...


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#6 Nick Storm

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Posted 16 October 2013 - 12:51 AM

You want to talk about Horror! REAL horror, as in the realization of one's entire fortune going interminably, inevitably,irrevocably down the drain.



#7 wombat1

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Posted 16 October 2013 - 01:10 AM

Leaving aside the problem of history and whether the market will go up or down on a certain October day in 1929, this actually may be an interesting new way to provide a path into the scenarios--investors are, of course, always advised to consult the prospectus before investing, and the footnotes in the prospectus for New World Industries must be absolutely fascinating.  Those with knowledge of the gold mining industry (make a Geology roll folks) have no way of explaining just how the Marsh Refining Company of Innsmouth, Mass., manage to stay in business; their purchase of ore and scrap gold simply isn't high enough to justify the revenue booked. Meanwhile that very glamorous, very nice, very eligible young Mr. Howard Hughes, who just inherited most of Hughes Tool and Die from his father, has taken time off from making movies and studying aviation to sign a contract to make some very unusual aluminum parts for a Mr. Penhurst (or was it Penhew?) in China.  Of course, since he is very aviation minded, he would be very curious to know what they are to be used for and needs some likely investigators to go find out.

 

Other things can bedevil an investigator:

1. The market is much less regulated in the 1920s than it is now, and investors may only need to put down as little as 10% of their purchase, receiving the rest on credit (or 'margin').  If the market goes down suddenly, they must maintain that value or be sold out in a 'margin call.'   This is what wiped everyone out in 1929--everyone was borrowing to the hilt on that stock that was only going up.

 

2. If an investigator is reasonably prosperous, it may be assumed that they have invested in the market as a matter of course, probably leveraging that with margin.  On the other hand if they are some sort of 'dilitante' or indepedently wealthy, or are stated to have an interest in some significant business, the stock of which they own outright.

 

Now what are the implications for a horror game?  Well, I can also borrow those shares on margin, and sell them, or sell them without having them in the first place--this is called a 'short sale.'  If a cult is being plagued by someone known to have investments heavily weighted in one company, they can easily find the resources to move the market quickly by a series of heavy short sales.  Word of this will get out quickly and the thing will take on a life of its own.  Investigators with stock in that company will be faced with the ugly choice of being wiped out (and there goes all of the Credit Rating), or stopping what they are doing and finding the money to cover their margin, if that is the problem, or shoring up the company, if they own it.

 

"Ahh," says the clever investigator, "two can play at this game.  Mr. Broker, sell 10, 000, 000 shares of New World Industries.  I don't own any but I will buy them up in 30 days when they fall to 1% of their value.  In the mean time, credit my account."  Well, that is just ducky until it is realized a month later that there are almost no shares of New World Industries available to cover the delivery of that massive order.  Mr. Chandler owns 99% of it, and isn't cooperating (indeed, he probably took the other side of the order when he heard about it, and Mrs. Igweena Mae Wombat in Frostbite, Minnesota owns the rest.  She and her broker are going to make a huge amount of money lending those shares over and over again to deliver on the contract.   Or, the investigator will default, and either there goes the Credit Rating, or there goes the investigator to prison for fraud.



#8 ElijahWhateley

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Posted 16 October 2013 - 02:29 AM

I just remembered that the corebook rules say the following about income:

 

"The investigator also has property and other assets of value equal to five times yearly income...One tenth of that is banked as cash. Another one tenth is in stocks and bonds, convertible in 30 days. The remainder is in old books, a house, or whatever seems appropriate to the character."

 

So anyone with a reasonable sum can be assumed to have some amount of money in the stock market. I suspect many people would have considerably more, especially in the present, although some might be in retirement funds that can't be accessed. Of course, if you're worrying about retirement funds in CoC, it better be either because their sudden disappearance is forcing you to do dangerous and mind-destroying things for money, or you really want to know why your funds are starting to invest so heavily in "Yith Inc." when they have no assets and nobody knows how they make money in the first place.

 

You know, I've always thought that running a Ponzi scheme actually made sense if you just needed all of the money to buy the supplies to summon Yog-Sothoth. One way or another, after that it doesn't really matter if you can't pay people back.


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#9 Gaffer

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Posted 16 October 2013 - 02:19 PM

It seems like a great way to make a quick buck ...

Unfortunately, it's not. Gains from stock holdings in publicly traded companies tend to be incremental. Rapid gains are unusual, even in boom times. What attracted so many 'ordinary' folks to the market in the 1920s was its apparent stability. After four 'panics' in 14 years, ending with the Panic of 1907, the stock market had been fairly predictable (overall) for an extended time. Many stocks paid regular annual dividends, usually a few dollars per share.

 

However, large rapid gains that provide 'quick bucks' mostly went to those with inside information. Usually, this is done by selling short, that is, making an agreement to sell someone securities (stocks) that you don't own, with the intention of subsequently 'covering' (purchasing) them at a lower price. In the event of an interim price decline, the short seller will profit, since the cost of repurchase will be less than the proceeds received upon the initial (short) sale. Someone who knows in advance that a company is going to announce very bad news can make a lot of money in a hurry. They can also get out of an exposed position by selling at a price that will be gone tomorrow.

 

Such 'insider trading' wasn't illegal in the US until after the 1929 crash when the newly-formed Securities Exchange Commission adopted regulations making such activities illegal. Joseph P. Kennedy, a well-known short-seller was the first chairman of the SEC. Such activities were the real foundation of the Kennedy fortune, not bootlegging.

 

The other thing that made the stock market attractive to middle-class people wa the fact that brokers were willing to extend the privilege of buying 'on the margin': buying securities with cash borrowed from the broker, sometimes using the securities themselves as collateral. (Not unlike a home mortgage or a car loan).

 

In the 1920s, margin requirements were very loose. Brokers required investors to put in very little of their own money, allowing leverage rates of up to 90 percent debt. When the stock market started to contract, many individuals received margin calls, requiring that they give more money to their brokers or their shares would be sold. Since many couldn’t cover their margin positions, their shares were sold, causing further market declines and further margin calls. This was one of the major contributing factors which led to the Stock Market Crash of 1929. Note that the investor still owed the broker the balance of the debt.

 

There was also a lot of fraud during the 1920s. Once people got the idea that stocks were guaranteed to increase in value, crooks and con men sold a lot of fake or 'watered' stock. That's why people pay brokers' fees, though sometimes even brokers get fooled.

 

So, as many real people found out in 1929 (and any number of times before and since), while stocks can be a good investment over the long run, they can be very volatile in the short term. And all that money your portfolio was worth, that made you feel (and act) rich, that you used as security for other purchases, just evaporates.

 

If you do choose to let your PCs play the market, I recommend that you advance the date of the Great Crash to  March 25, 1929, when an historical 'mini-crash' occurred.

 

Oh, the Horror.

 

[Most information in this post was obtained from Wikipedia.]


Edited by Gaffer, 16 October 2013 - 02:29 PM.

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#10 justadame

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Posted 16 October 2013 - 06:38 PM

Has anyone said  the ancient comment ' to make a small fortune on the Stock Market, first start with a large one'.

If your Players somehow stay alive, stay sane, and then have Cash to play with, then have some scandalous rogue wipe them out with a dodgy Ponzie scheme, think Enron style, or a Oil Company that gets sued (litigated into the Dust) after they invest in it.

Or their Accountant could do a bunk with all their Cash, (see numerous American Starlets etc).

 

Of course, a Mythos Cult could be behind a fraud.......


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#11 rylehNC

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Posted 17 October 2013 - 11:22 AM

Many stocks paid regular annual dividends, usually a few dollars per share.

 

It should be stressed that this - as opposed to day trading or the corporate control/liquidation struggles born in the 1980s - was the impetus to own stock back then.


Edited by rylehNC, 17 October 2013 - 11:22 AM.

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#12 WinstonP

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Posted 17 October 2013 - 11:32 AM

I hear New World Industries is a stock to watch.

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#13 Felscor

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Posted 29 October 2013 - 07:21 AM

Thanks for all the help, this should be useful. Sorry for the delay in response, my internet went down for a little bit.


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