WARREN BUFFET STORY PART 3 | The Buffett Family during the Great Depression

Do you know which year in history had the worst economic depression in the United States?

Previously, we learned about the Buffett family history and in this article, we are going to see together what was described in the book, "A Tale of Two Cities."

"It seemed to be the best of times, but also the worst of times."

It’s similar to what happened with the COVID-19 pandemic. Indeed, history always repeats itself. What challenges will contemporary Americans and the Buffett family face?

The answer to the last question can be found in 1929, at the start of Warren Buffett's life, and many economists have studied the world economy's turbulence and flow cycles since then.

The story comes a little earlier, in 1920, when the U.S. stock market was already full of bubbles.

Almost all of the common people joined the stock market together to seek gold; even Warren Buffett's father, Howard, was no exception. He even quit his job at the newspaper to apply for a job as a stockbroker at Union State Bank. This decision cost him a lot of pain, but it also had far-reaching consequences.

Before the Great Depression, the United States was in a stock-buying frenzy. Whether it was a big city or a small town, there were securities salesmen everywhere encouraging people to come into the trading room to buy stocks. And many "professionals" went to public places to explain the benefits of investing in the stock market.

However, they failed to warn the public about the inherent risks of investing. As a result, the stock market has evolved into a national sport, driving American utilitarianism and money worship to a boiling point! 

The moment the stock market reached its peak, Leila was pregnant with Warren Buffett, and at that time people felt that the easiest way to make money in the world was to buy stocks, and stocks were an endless supply of money, so everyone wanted to use all the cash to buy all the stocks possible!

Because of the fierce upward trend of each stock, the majority of the public engaged in short-term trading and invested simply to earn profits from the price difference. No one paid attention to the enterprise behind the stocks they bought. However, in the financial market, when the bubble is blown bigger and bigger than the actual needs of economic development, the burst will happen.

The trend at that time had many stockholders even pledging to borrow money from their stocks, only to finance the purchase of more shares. When the stock price dropped one day, they had no choice but to sell more shares in order to cover the margin, which created a vicious cycle in which the stock price kept dropping. It became economic suicide, and most Americans at that time participated in this greedy investment game.

The writer wrote about the scene in his book "Inside the Great Depression of 1929"

Even in the smallest factories, there were large blackboards where people wrote the latest trading quotes and excitedly shared the latest prices, and even the farms outside had loud speakers to broadcast the stock market information on the radio so that all people could buy and sell in real time. 

People want to be informed of stock prices in real time, even when they are commuting, and hearing about stocks and investing in real time is what people consider to be the most valuable time of the day.

Even Howard Buffett, the father of Warren Buffett, believed that America had a bright future, that the stock market would always rise, and that everyone would get richer and richer. However, in September 1929, the opposite happened! 

The stock price began to fall, and even on October 24, there was a massive selling spree, and the stock market officially collapsed. 

The sky appeared to have collapsed in an instant, and stock prices plummeted from the sky to the ground at full speed. There was no room for redemption, and everyone was frozen because, at the time, there were no set "stop" and "stop" mechanism criteria and restrictions in the U.S. stock market.

October 24, 1929, later known as "Black Thursday," is also a day that Americans will never forget. On that day, 650,000 shares of U.S. Steel was sold for the lowest price ever, at $1.79. But no one bought it, and the price continued to fall without any volume. So far, all the companies' stock prices are falling one by one as if they had an infectious disease. 

Yesterday's valuable stock is now a waste of paper. Such a stock market crash made many investors decide to commit suicide because of their huge debts, including company owners, a large number of stock brokers, and heavy investors. The millionaires of yesterday became the bankrupts and debtors of today.

How did Americans and the Buffett family survive these dark times? We'll share more in the next article!

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