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Stock market crash warning as “surprising similarities” between today and the disaster of 1929 | Personal Finances | Finance

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Inflation is currently accelerating at an unprecedented rate, failures in the Chinese real estate market are intensifying. This has led to growing tensions among world stock markets, with some experts predicting that the “Lehman crisis in China” could be on the horizon. Real estate giant Evergrande is struggling financially and has warned the global public of “unprecedented problems”.

The China-based company is on the verge of defaulting on debts totaling a staggering $ 300 billion (£ 220 billion), which could lead to a financial chain reaction.

Since the coronavirus pandemic ensued and lockdowns saw markets stagnate around the world, the global financial picture has been grim.

Governments around the world have billions of dollars in debt.

Last year, many made weird predictions that the stock market was approaching something like the Great Wall Street Crash of 1929.

Stock market: parallels between the events leading up to the crash of 1929 and today have been drawn (Image: GETTY)

Real estate: the collapse of Evergrande could be a disaster for the financial world

Real estate: the collapse of Evergrande could be a disaster for the financial world (Image: GETTY)

While these fears were quickly dismissed, expert analysis this year has revealed alarming parallels to the events leading up to 1929 and today.

Maury Klein’s 2001 book, “Rainbow’s End: The Crash of 1929,” dissected the crash, with many of its analyzes applied to today.

In one of the parallels, he shows that a year before the crash: “New listings on the New York Stock Exchange went from 58 million shares in 1925 to 102 million in 1928.

In 1929, new listings reached record levels as the excitement around Wall Street peaked.

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The Wall Street crash: it was one of the worst financial crashes in history

The Wall Street crash: it was one of the worst financial crashes in history (Image: GETTY)

Will Daniel, investment reporter at Business Insider, noted that the book reveals “surprising similarities to today’s euphoric markets.”

He wrote: “While there are many differences between the time of the 1929 crash and today, the increase in new registrations is a similarity that cannot be denied. “

In the first quarter of this year, IPO volumes rose 85% and revenues jumped some 271% year-on-year, according to Ernst & Young Global IPO Trends: Q1 2021.

The rise of special purpose acquisition companies, or SAVS, has contributed to the boom in new listings.

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History: Millions were left behind when stocks fell

History: Millions were left behind when stocks fell (Image: GETTY)

Today: traders working on the floor of a stock exchange

Today: traders working on the floor of a stock exchange (Image: GETTY)

PSPC’s IPO issuance broke records in the first quarter of 2021, with 298 PSPCs raising nearly $ 88 billion (£ 64 billion) according to data from ICR Capital.

There was also an increase in the number of inexperienced speculators and traders, which happened until 1929.

As Klein noted in his book: “To the discerning eye, they represented a new breed of gamblers drawn to the market more by hope than experience, like casino vacationers trying their luck. in a game owned by professionals … Suction cups are born. every minute.

“One goes, two comes in. Winner or loser, we get our commissions.”

Between 1928 and 1929 alone, brokerage firms opened 599 new offices.

This brought the total number of brokerage firms in New York to over 1,600 in the days leading up to “Black Tuesday,” more than double the number that were operating in 1925.

Rich list: Many of the UK's richest people have great investments

Rich list: Many of the UK’s richest people have great investments (Image: Newspapers Express)

A trader who had recently signed up channeled the essence of the period into a ‘how-to’ article at the time: “We went for the same reason most of the other little pigs went, that is- that is to say because to earn money quickly without working for it. “

In 2021, new trading platforms flooded the app stores.

Robinhood, E * trade and Fidelity, which are the brokerage houses of our time, are booming like never before.

Charles Schwab added a record 3.2 million new brokerage accounts in the first quarter, more than in 2020.

Black Friday: the last major financial crisis dates back to 2008

Black Friday: the last major financial crisis dates back to 2008 (Image: GETTY)

These are just a few examples.

There are also record levels of borrowing for investing and trading, and in 2021 brokers are granting record levels of debt to traders.

Federal reserves around the world have also forced the market to avoid the collapse of many organizations due to the pandemic.

Yet many argue that market manipulation was one of the deciding factors in the crash of 1929.


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