Before the late 1920s, stock prices generally reflected their true values. In the late 1920s, however, many investors failed to consider a company’s earnings and profits. Buyers engaged in speculation, or betting the market would continue to climb, thus enabling them to sell stock and make money quickly.
Many investors bought stocks on margin, making only a small cash down payment (as low as 10 percent of the price). With $1,000, an investor could buy a sum of $10,000 worth of stock. The remaining $9,000 came as an interest-bearing loan from the stockbroker. Quick profits were possible if stock prices kept rising, but problems came when prices began to fall. To protect a loan, a broker could issue a margin call, demanding the investor repay the loan at once.
Some Great Plains farmers managed to hold on to their land, but others were not as lucky. If their land was mortgaged, they had to turn the property over to the banks. Then, nearly penniless, many families headed west, hoping for a better life in California. Because many migrants were from Oklahoma, they became known as “Okies.” In California, their struggles continued