Stock market crash warning as ‘startling similarities’ between today and 1929 disaster | Personal Finance | Finance

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Inflation is currently accelerating at unprecedented rates, with Chinese property market failures intensifying. It has led to growing nerves among the world’s stock exchanges, with some experts predicting “China’s Lehman crisis” may be on the horizon. The real estate giant Evergrande is in financial difficulties and has warned the global public of “unprecedented problems”.

The Chinese-based company is set to default on its debts totalling an astonishing $300billion (£220billion), which could lead to a financial chain reaction.

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

Governments around the world are trillions of dollars in debt.

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

Stock market: Parallels between the events leading to the 1929 crash and today have been made

Stock market: Parallels between the events leading to the 1929 crash and today have been made (Image: GETTY)

Real estate: Evergrande's collapse could spell disasetr for the financial world

Real estate: Evergrande’s collapse could spell disasetr for the financial world (Image: GETTY)

While these fears were soon dismissed, analysis by experts this year has revealed alarming parallels with the events that led up to 1929 and today.

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

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

In 1929, new listings hit record levels, with excitement around Wall Street having reached fever pitch.

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

He wrote: “While there are many differences between the era of the 1929 crash and present day, the rise of new listings is a similarity that can’t be denied.”

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

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

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History: Millions were left out of pocket when the stocks fell

History: Millions were left out of pocket when the stocks fell (Image: GETTY)

Present-day: Traders working on the floor of a stock exchange

Present-day: Traders working on the floor of a stock exchange (Image: GETTY)

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

There has also been a rise in inexperienced speculators and traders — something that happened leading up to 1929.

As Mr Klein noted in his book: “To practised eyes, they represented a new breed of gambler lured to the market more by hope than experience, like vacationers at a casino trying their luck in a game owned by professionals…Suckers are born every minute.

“One goes, two come in. Win or lose we get our commissions.”

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

It brought the total number of New York brokerage offices to over 1600 in the days before “Black Tuesday” — more than double the number that was operating in 1925.

Rich List: Many of the UK's wealthiest people have handsome investments

Rich List: Many of the UK’s wealthiest people have handsome investments (Image: Express Newspapers)

One female trader who had recently signed up channelled the essence of the period in a ‘how-to’ article at the time: “We went for the same reason that most of the other little pigs were going-that is, because we wanted to make some money quickly without working for it.”

In 2021, new trading platforms flooded app stores.

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

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

Black Friday: The last great financial crisis came in 2008

Black Friday: The last great financial crisis came in 2008 (Image: GETTY)

These are just a few examples.

There are also record levels of borrowing to invest and trade, and in 2021, brokers are dishing out record levels of debt to traders.

Federal reserves around the world have also forced their hand into the market in order to prevent the collapse of many organisations because of the pandemic.

Yet, many argue that market manipulation was one of the decisive factors of the 1929 crash.





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