Perhaps the first “fact” that everyone should know is why on earth one of the largest and most influential financial centers in the world called “Wall Street”. The prosaic answer is that this is just where the Dutch – when New York was New Amsterdam – built a wooden fence to keep out the British, the Native Americans and the pirates – although it could be said that modern day pirates, without eye patches or skull and cross bone flags, are still not unknown in the vicinity!
It served for many years as a slave market and became a venue where people would get together under a buttonwood tree to trade securities – in 1792 the signing of the Buttonwood agreement was the forerunner of the establishment of the New York Stock Exchange. However, before this agreement was signed Wall Street was the venue for the inauguration of President George Washington. It was also the venue for the passing of the Bill of Rights.
Now everyone has heard about the Dow Jones index but where does it spring from and how did it get its name? Charles Dow began tracking industrial stock in 1884, most of these being railway stock which were the big movers in 19th century America and he formulated an average of the eleven companies to give an idea of how the American economy was performing. This was the beginning of the Dow Jones index. Of all the companies that were featured in the original index, only one is still included today – General Electric.
The newspaper that has been the epitome of the New York financial sector has of course been the Wall Street Journal which originated as the Customer’s Afternoon Letter. Established in 1889 it took another hundred years before the average rose to cover thirty companies which is the number that it still tracks today.
When things go well, any underlying problems tend to be swept under the carpet. The first generation of investors on the NYSE left themselves open to risk by buying stocks on very small margins – meaning that people were paying a very small proportion of the actual value of the stock that they were trading. This colossal overheating of the market culminated in the Wall Street Crash of 1929 the result of which was to put the USA into the depths of the Great Depression. The aftermath of this in terms of stock market trading was a crackdown on leveraging as a means of buying stock, a suppression which only began to ease in the middle pf the century.
It was the Presidency of Ronald Reagan which saw the NYSE starting to roar again and the figure of Gordon Gecko, principal character in the film entitled “Wall Street” symbolizing another age of get-rich quick capitalism. But there was two more periods of crash and recovery – the 1987 crash which hit stock exchanges around the world and the financial meltdown of 2008, not to forget the devastation caused by the terrorist attacks of 9/11.
More sensible trading now appears to be the order of the day in Wall Street. Nonetheless the more perceptive of traders keep a weather eye for pirates!