In a stark warning reflective of historical precedents, Andrew Ross Sorkin, founder and editor of the New York Times’ DealBook and CNBC host, has raised alarms about the current stock market’s speculative behaviors. He likens today’s conditions to those in 1929, shortly before the infamous market crash that precipitated the Great Depression. Sorkin expresses concern that the prevailing mindset driving stock prices is not a matter of “if” a crash will occur, but rather “when” and how deep the consequences will be.
Having spent nearly a decade analyzing the 1929 crash, Sorkin sees troubling signs that echo that era. He highlights a pervasive atmosphere of reckless speculation and an overreliance on borrowed money, which initially buoyed the market prior to the Great Depression. This time, however, the speculative tide seems fueled by excessive enthusiasm surrounding artificial intelligence instead of margin trading. He notes that critical safeguards designed to protect investors have been undermined, warning that the consequences could be dire. “A crash is coming…I just can’t tell you when, and I can’t tell you how deep,” he articulates.
Sorkin’s insights resonate particularly for individual investors, who have historically borne the brunt of financial downturns. Current trends, such as pushing ordinary investors to include riskier private investments and cryptocurrencies in their 401(k) plans under the guise of “democratizing finance,” echo similar pitches made in 1929, which ultimately led to substantial losses for middle-class savers. He stresses the importance of recognizing these warning signs now, urging investors to safeguard their retirement savings before potential fallout.
In his latest book, titled “1929: Inside the Greatest Crash in Wall Street History,” Sorkin draws lessons from the Roaring Twenties. He argues that the peril isn’t merely the record-high stock market but its ascent amid deteriorating economic conditions and geopolitical unpredictability. This unsettling concoction of rampant speculation, high levels of debt, and diminishing protective measures for investors contributes to Sorkin’s anxiety over market sustainability.
Reflecting on the past, Sorkin explains that easy credit was a powerful catalyst for the 1920s stock market bubble. At that time, borrowing for everyday purchases began to gain acceptance, allowing consumers to buy cars on credit. This notion soon permeated Wall Street, leading ordinary investors to buy stocks on margin with as little as 10% of their own money down. “In good times, it felt like free money,” he says, drawing parallels to current trends encouraging average investors to leverage retirement funds for high-risk investments, often devoid of adequate disclosures or protections.
Today’s market showcases several attributes of speculative mania, particularly in the swiftly rising AI sector, where massive sums are being invested despite looming economic concerns. Sorkin notes that ordinary investors are increasingly encouraged to engage in risk-laden private investments within their retirement accounts—another point of concern, given the parallels to the financial vulnerabilities of the past.
While Sorkin’s outlook is dire, he is not without dissenters. Larry Fink, CEO of BlackRock, suggests that allowing access to private equity and other higher-risk investments could yield better returns for everyday investors. He argues that, despite historical correlations, modern regulations, Federal Reserve interventions, and sophisticated risk management tools create a buffer against such catastrophic events. Yet, this perspective often overlooks the pressing concerns Sorkin raises: the gradual dismantling of essential safeguards just when they are most needed.
A quirky highlight arose during a discussion on CNBC, where a lighthearted mention of a “Sorkin coin” by Fink resulted in the rapid creation of a cryptocurrency that went on to achieve remarkable trading volumes before collapsing.
Ultimately, Sorkin paints a sobering picture, drawing uncomfortable parallels between today’s market and that of the late 1920s—a landscape characterized by soaring valuations driven by technological enthusiasm, escalating debt levels, speculative assets, and a systemic erosion of investor protections, all framed within the appealing narrative of democratizing finance. While the timeline and the depth of any impending crash remain uncertain, the message is unequivocal: the echoes of the past could soon resonate once more, and investors must heed the lessons of history as they navigate the current volatile landscape.
