Name: ______________________ Date: __________ Investor number: ______
Read this first. It is 1928. The Round 6 prices are on the board and your total is probably the highest it has ever been. Before you buy, sell or borrow a dollar, fill in this grid. That is the rule today and tomorrow: a written decision before any trade. Selling, holding, buying more and borrowing can all be right. What I am scoring is whether you decided or whether your stomach decided for you.
Step 0: my body and my ledger (Round 6, 1928)
Stress signs I notice right now (circle any): fast heartbeat / want to act right now / everyone else is buying and I am not / cannot think about anything else / hands shaky / none
Feeling word (English or Spanish): excited, greedy, nervous, calm, scared / emocionado, codicioso, nervioso, tranquilo, asustado
My feeling: __________
One step before I decide: stop, breathe once, name what I am choosing. Done? yes / no
My total right now, at Round 6 prices: $__________ It was $__________ in Round 5 (1911).
Which of my companies rose the most? ______________________ Which line did not move (the bank pays 3 percent and never falls)? ______________________
The margin rule, in three lines. The broker will lend me up to the cash I hold right now, at Round 6 prices. The loan goes on the margin line of my ledger. Next round the broker wants it back in cash. If I cannot pay, I sell shares at next round's prices until I can. If that is not enough, the loan takes everything and my total is $0.
Cash I hold: $______ The most I could borrow: $______
The five-step decision model
Picture cues: a question mark (name the choice), a list (list options), a scale (weigh each against what matters), a check mark (decide), a mirror (look back).
Step 1: Name the choice
The choice I am making is what to do with my ______________________ (the company or companies that rose most, or the cash I am holding).
Step 2: List the options
| Option | What it means today |
|---|---|
| SELL | Sell some or all of a company that rose and hold the cash, or move it to the bank. |
| HOLD | Keep everything I have. Do not trade. Wait. |
| BUY | Buy more of a company with the cash I already have. |
| BUY ON MARGIN | Borrow from the broker, up to my cash, and buy more with it. Pay it back next round in cash. |
Step 3: Weigh each option against what matters
Fill every box with a number or a short phrase. Use your own holdings.
| What matters | If I SELL | If I HOLD | If I BUY | If I BUY ON MARGIN |
|---|---|---|---|---|
| If prices keep rising next round, what happens to my total? | ||||
| If prices fall by half next round, what happens to my total? | ||||
| If I owe the broker and prices fall, can I pay? (a number) | no loan | no loan | no loan | |
| How will I feel about this next round, either way? | ||||
| Does this fit the pie I chose in Round 5? | yes / no | yes / no | yes / no | yes / no |
Step 4: Decide (Round 6)
My decision (circle one): SELL / HOLD / BUY / BUY ON MARGIN / a mix (say what): ______________________
Shares, if selling or buying: ______ shares of ______ at $______ Borrowing, if any: $______
One reason, with a number or a risk level (not a feeling alone): ______________________________________________________________________
More room: ______________________________________________________________________
My Round 6 trades (fill in as you make them; if you change your mind from Step 4, write why in the last column):
| Company | Buy or sell | Shares | Price | Same as Step 4? If not, why? |
|---|---|---|---|---|
Step 4 again: Round 7, October 1929 (fill this before any trade tomorrow)
Stress signs I notice right now (circle any): fast heartbeat / tight stomach / want to act right now / cannot think about anything else / hands shaky / none
Feeling word: scared, worried, calm, angry, sick / asustado, preocupado, tranquilo, enojado, mareado
My total right now, at Round 7 prices: $__________ It was $__________ yesterday, at Round 6 prices.
Which of my companies fell most? ______________________ Which line did not fall? ______________________
Margin call box (only if I borrowed): I owe $______ Cash I have: $______ Still owed: $______ Shares I must sell at Round 7 prices to cover it: ______ shares of ______ at $______ = $______ (the ledger's margin section has the full table). Done before trading? yes / no
Two facts before I touch anything: I have not lost anything until I sell, unless I borrowed. The bank did not move.
My Round 7 decision (circle one): SELL / HOLD / BUY / a mix (say what): ______________________
Shares, if selling or buying: ______ shares of ______ at $______
One reason, with a number or a risk level (not a feeling alone): ______________________________________________________________________
More room: ______________________________________________________________________
My Round 7 trades:
| Company | Buy or sell | Shares | Price | Same as the decision above? If not, why? |
|---|---|---|---|---|
Step 5: Look back (fill this in at the end of Round 7)
My Round 6 decision, in the boom, was (circle one): a plan / a rush
My Round 7 decision, in the crash, was (circle one): a plan / a panic
My evidence, a number from the ledger (what I bought, sold or held, at what price, and what it is worth now): ______________________________________________________________________
More room: ______________________________________________________________________
What I would tell a friend who is looking at the same ledger right now: ______________________________________________________________________
Two crashes on our own board (Round 7 notes; fill in from the dispatches and the price table)
| The Panic of 1893 (Round 3) | The crash of October 1929 (Round 7) | |
|---|---|---|
| What caused it (from the dispatch) | ||
| How far two companies on our board fell (from the price table, with the two prices) | ||
| What held, or fell least | ||
| What happened next to people who sold at the bottom (1893: look at Round 4. 1929: we find out in Round 8.) |
The teacher key for this handout is behind the teacher sign in. Teacher key