Financial journalist Andrew Ross Sorkin has flagged similarities between Wall Street today and the 1929 pre-crash market, which preceded the Great Depression, CBS reported on October 12. He noted that while the market boom has been “propped up” by the artificial intelligence (AI) rush, it is too early to tell if the boost can be sustained or if there is a crash coming.
“I just can’t tell you when, and I can’t tell you how deep. But I can assure you, unfortunately, I wish I wasn’t saying this, we will have a crash,” Sorkin told the channel. He has been studying the 1929s markets and authored the book, “1929: Inside the Greatest Crash in Wall Street History – and How It Shattered a Nation”.
Prices, speculations, bubble: What are the concerns?
Sorkin said he is “anxious” that current prices “may not feel sustainable”. He pointed to similarities with the 1929 markets, where rampant speculation by ordinary investors without appropriate markets knowledge led to the concept of credit.
“It was called buying on a margin. You only had to put down 10 per cent of the stock price, borrowing the rest from your banker,” he explained, adding that this changed when General Motors began lending money so that people could afford their cars, “It changed how Americans shopped”.
“In good times, when the stock is going up, it’s like free money. In bad times, you’re on the hook, and you’re on the hook in a very bad way,” he added.
Noting the billions being invested in AI, and the recent market crash after United States President Donald Trump threatened additional 100 per cent tariffs on China, he cautioned, “I think it’s hard to say we’re not in a bubble of some sort. The question is always when is the bubble going to pop?”
‘Guardrails coming off’: Ordinary customers face risk?
Sorkin also noted that the impact of the Great Depression was such that in the years after, laws and regulations were introduced, and agencies put into place to regulate markets and protect investors. But, these protections and guardrails seem to be coming off.
“Some of those barriers to prevent exploitation are now coming down. US Securities and Exchange Commission rules have become less stringent and the Consumer Protection Bureau practically doesn’t exist anymore. That’s what concerns me,” Sorkin said.
“It’s not that we’re going off a cliff tomorrow. It’s that there’s speculation in the market today, there’s an increasing amount of debt in the market today, and all of that’s happening against the backdrop of the guardrails coming off,” he warned.
He added that one of these protections included keeping ordinary investors away from riskier, but potentially more rewarding options. “Public companies, after the SEC was created, were required to have all sorts of disclosure rules so that the public could understand what’s going on inside them. Private companies don’t have that. But historically, the average ordinary American wasn’t really allowed to invest in the private companies. But in this flag of democratizing finance, there’s a lot of people who want access to that,” he noted.
He acknowledged that some of the rules were loosened to “democratise” the investment access, but pointed to crypto products such as meme coins, that can be abused and leave common investors in similar unprotected situation as 1929.
