Reasonings for Stock Market Crashes

Source- "Stock Market Crash." 2006. http://www.stock-market-crash.net/what.htm

Stock Market crashes always start with " Smart Money" ( corporation, big businesses, and smart investors) and end with " dump money"( average investor). What happens is when the stock market is low, big corporations and smart investors will buy a good bit of stock. Once these corporations buy these stocks, they'll start rising gaining interest from mutual funds, brokerage firms, and some smart investors. Once all these mutual funds and brokerage firms start buying the stocks they rise a little more a start making the everyday investor look more and more at these specific stocks. Once this happens a bull market is created. All investors start putting all their money into these stocks because they think they're great and will keep rising and everything is great. At this time all the "Smart Money" people are selling all those cheap stocks they bought when the market was low to the small investors who are buying at a ridiculous prices because they think the market will keep rising, what makes it worse is they'll buy on margin trying to greater increase capital.

So what happens now is the crash. Once the stock market reaches it's high it has gotten all the investors it's going to get and they have spent all the money they can in the market. So now there is no more money going into the market, it is at it's absoloute high, so the only way to go is down. Once the media catches on there's no more money everyone starts selling there stocks immediately. Once this starts to happen everyone gets nervous about buying stocks for awhile and all the people who bought on margin can't sell there stocks putting them more and more in debt. So eventually all the stock prices drop back down to dirt cheap and everyone's broke except the people who invested at the begginining when it was cheap. Well guess what, after the crash the markets cheap again and the companies buy the stock once again and renew the whole process again and again. taking all the small investors money.