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by jacquesm 79 days ago
"The Roaring Twenties roared loudest and longest on the New York Stock Exchange. Share prices rose to unprecedented heights. The Dow Jones Industrial Average increased six-fold from sixty-three in August 1921 to 381 in September 1929. After prices peaked, economist Irving Fisher proclaimed, "stock prices have reached 'what looks like a permanently high plateau.'"

https://www.federalreservehistory.org/essays/stock-market-cr...
2 comments
timr 79 days ago
You can argue that current market multiples are higher than 1929 [1] - and they're certainly high - but this also ignores the mechanism that drove that crash, focusing only on the symptoms. We simply aren't doing the kind of consumer margin buying that drove the '29 crash. It isn't even close. Average schlubs were leveraged to the stratosphere to buy shares of boring industrial stocks.

[1] https://www.multpl.com/shiller-pe

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jacquesm 79 days ago
> The US stock market has nearly tripled since then. Literally the best period of stock growth in history.

The only thing I meant to point out was that a very high stock price by itself is no guarantee that there isn't a crisis around the corner. We plugged a lot of holes after 2008 and then reversed a lot of those fixes, I hear retail investors talking about their stocks at birthday parties again. Deja vu... of course this time it will be different. Or not. Let's just say that with the proverbial bull in the earthenware goods store on the loose if we only end up with another financial crisis that might actually not be so bad.

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triceratops 79 days ago
I actually calculated wrong. It went up 7.5x, not 3x.

In the roaring twenties stockbrokers allowed clients 10:1 margin. Investors were not as well-informed as they are today. There was no deposit insurance.

The SEC wasn't nearly as powerful as it was in 2024 and there was way more shady shit going on. In that respect, and the repeal of Glass-Steagall we're reverting to the pre-depression era.

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triceratops 79 days ago
Ok second best :-) I wasn't alive in the 1920s though
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jacquesm 79 days ago
True, but it is close enough in time that we should heed the lessons learned lest we repeat the experience.
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hunterpayne 79 days ago
Do you know the actual lessons of that crash? Because we don't allow retail investors to go 10:1 on leverage anymore. There are a lot more lessons and none of them apply to this situation (even Glass-Steagall). This is much closer to the dot com crash in 2001 in how it looks, just a lot more concentrated and probably a bit bigger. If all you got is "number go up too much" then you probably shouldn't be investing your own money.

The good news is that its almost all rich folks money on the line here and a small amount of dumb money. That's very different than, 2008 where it was mostly the indexes that got hit and that's more middle class/upper middle class concentrated.

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