Sharing my reflections on 1929 book
November 2025
Dear Investors and Friends
I have just finished the brilliant audio book of 1929 by Andrew Ross Sorkin. The book looks at the 1928-34 period through the eyes of the major players (bankers, presidents & regulators).
I have read other books studying this period but found this one amazingly insightful about markets and the investor psychology that drives them. For studiers of market and economic cycles it is a MUST read. For those not wanting to spend 20h listening to it, I share my learnings.
My learnings/observations post reading 1929:
- Greed was all persuasive leading up to 1929, affecting almost everyone in the US. By 1933 it was fear that ruled, and this was then a hard mindset to alter.
- Debt and investing on margins were commonplace, even amongst those already rich.
- The wider population loved and embraced get-rich-quick schemes and were easily convinced to leverage these. Wall Street sold this deadly combination in limitless scale.
- This exponential growth in the sale of ultimately toxic products we saw repeated in 2008.
- In 1929-33 almost every single participant was self-serving to a point of extreme, including politicians in the face of a clear oncoming economic crisis.
- A great many clever, perhaps brilliant, people ended up doing very dumb things due to arrogance, self-interest or delusion.
- The better political communicators were seen far more kindly than those with quiet competence (Roosevelt vs Hoover).
- The knock-on consequences took time to evolve, as the psyche of politicians, regulators and the wider population worked through the first 4 Stages of Grief: Denial, Anger, Bargaining and Depression. This was also the case post-2008, I observe.
- Lack of deposit guarantees and a non-belief (non-discovery) of Keynesianism were the two crucial reasons why the wider economic effect snowballed out of control.
- This was a lesson well learnt and better adjusted to in 2008 when Wall Street bank failures did not then lead to main street bank runs.
- In 2008 TARP/bail out were selectively used and Keynesian was widely adopted. (Bernanke was famously a studier of the 1929-33 period ahead of 2008. Thank goodness!).
How might this help us today
- True market bubbles are rare as they take time to build and be re-enforced, pulling in more and more participants. Before a crash, the voices of dissent are small and unreported.
- I have often written about my 3 different cycles: ‘Political’, ‘Economic’ and ‘Market’. Extreme market cycles (up or down) can create economic ones, but this is also quite rare.
- It is the scale of debt spread widely, amongst those who cannot afford it, that causes lasting economic problems. This was margin investing debt in 1929, and housing debt in 2008.
- These two periods were true bubbles, whose bursting did cause severe economic downturns. Other market corrections, or economic contractions are different from these.
- Momentum investing using debt is always a recipe for disaster. It can create large scale permanent losses that can never be recouped. Often there is no intrinsic value backstop where say industrial buyers emerge.
- Retail investors always love such get rich quick schemes and sadly there is never a shortage of people highly motivated to promote them to investors they are highly unsuitable for.
- Meme stock/Crypto gambling could well fall into this camp today – both also seem to have leverage easily associated with them
- I also wonder if China today is where the US was in say 1935-40 or in 2010-2012, i.e. where the population has become very cautious and are over-saving due to recent economic pain and the knowledge that there is little safety net provided for them by government.
- This could give us long term reasons to be positive on the Chinese economy. But it also makes us realise how hard that ingrained cautious mentality is to shift.
As I’m assessing bubbles, many readers might be assuming this gives insight into today’s AI spending. I don’t think it does. Today’s AI spending is a sectoral capital cycle in the face of a large technological shift (ala TMT in 1996-2000). Also, depending on the productivity improvements enabled by AI, it might also be comparable with the US economic productivity surge that occurred in 1994-1998. Time will tell.
For all the talk of bubbles and excess I thought the following quote from the book insightful. Winston Churchill was in New York at the time of the crash in 1929. He lost a fortune and arguably his finances were ruined by it for the next ten years. Despite that fact, soon after the crash he made the following comment:
“Before disparaging American methods, the English critic would do well to acquaint himself with the inherent probity and strength of the American speculative machine. It is not built to prevent crises, but to survive them.”
His optimism about American capitalism was unbowed. “No one can doubt that this financial disaster, huge as it is, cruel as it is to thousands, is only a passing episode in a march of valiant and serviceable people who, by fierce experiment, are hueing new paths for man and showing to all other nations much that they should attempt and much that they should avoid.” Source: Winston Churchill, November 1929. Book by Andrew Ross Sorkin
Churchill was early and right we can now all see. For decades Buffett has said something similar, urging investors not to “bet against America.” Too many I feel forget these tailwinds amongst the speculative noise. Remembering the old adage of “time in the market” vs “timing the market” can serve us all well.
1929 is a brilliant book which I cannot recommend enough.
Kind regards
Andrew Hollingworth
