Andrew Ross Sorkin Compares Today’s Stock Market to the 1929 Bubble

Andrew Ross Sorkin draws striking parallels between the stock market dynamics of today and the infamous 1929 bubble. Sorkin, who recently released his book “1929,” highlights how investor behavior might mirror the excesses that led to the Great Depression.

Historical Context: The Plaza Hotel

Sorkin recounts the vibrant atmosphere at The Plaza Hotel during the late 1920s. This prestigious hotel was a social hub for businessmen and influential figures. In June 1929, Sorkin’s character, Charlie Mitchell, had a notable lunch there with General Motors founder William Durant, emphasizing the celebrity status of financiers.

Brokerage at The Plaza

During that era, The Plaza was not just a luxurious gathering spot. It featured what was then an EF Hutton brokerage in its Oak Room, where patrons actively engaged in stock trading.

Comparing Past and Present Market Behaviors

Fast forward to today, and Sorkin expresses concern over similarities in market behavior. The current stock market is witnessing an increase in valuations reminiscent of historical bubbles, especially with the rising interest in artificial intelligence (AI).

Investor Euphoria and Market Valuations

Today’s investors are eager, driving stock valuations to record highs. Key indicators, such as the Shiller CAPE ratio and the Warren Buffett indicator, are at peak levels, suggesting a potential bubble.

Regulatory Landscape Changes

Sorkin notes that while regulations have mitigated some excesses since 1929, there are signs of regulatory rollbacks today. For instance, proposals to decrease the frequency of earnings reports could reduce transparency, echoing concerns from the past.

Emerging Investment Trends

• Access to risky investments, like crypto and private equity, is expanding to average investors.
• Significant corporate investments, like Nvidia’s $100 billion in OpenAI, raise questions about sustainability.

Reflections on Speculation and Innovation

Sorkin acknowledges the dual nature of bubbles. While they can lead to innovation, greed and speculation often result in market excesses. His book’s epigraph from Albert Einstein poignantly suggests that each generation must learn from its own experiences, indicating that history may repeat itself.

Given Sorkin’s extensive background in financial storytelling, the lessons from “1929” resonate strongly in today’s economic climate. The potential for history to repeat itself invites critical scrutiny of current investor behavior and market dynamics.