Chapter 1: What is Andrew Ross Sorkin's new book about?
Bloomberg Audio Studios, podcasts, radio, news. Carol Master along with Tim Stenevik live in our Bloomberg Interactive Broker Studio. We all just listened to Jamie Dimon on Bloomberg. JP Morgan, by the way, featured very prominently in a new book out on the 1929 market crash.
And this feels like kind of the right conversation to be having at this moment in time when certain investing narratives dominate investing. U.S. financial markets, AI, private credit, transparency concerns, crypto prediction markets, and more. Questions about whether these narratives are the right ones that lead to longer-term gains and prosperity for investors and for the country.
There's a lot of questions out there.
Yeah, stuff about exuberance as well. Could it lead to a crisis or to a crash? It does lead us to 1929, a book that takes us inside the greatest crash in Wall Street history and how it shattered a nation. The book by New York Times bestselling author of Too Big to Fail, who
Chapter 2: How does the 1929 stock market crash relate to today's financial landscape?
Also happens to be an award-winning journalist for the New York Times. He's the founder and editor-at-large of Dealbook. He's co-anchor of Squawk Box on CNBC. Andrew Ross Sorkin joins us now. Welcome. Thanks for having me, guys. Yeah, thanks for joining us. It's great to be here. Thank you. You know, it's funny.
Jamie Dimon was asked about, just now by David Rubenstein, about the financial crisis and about whether or not we could have another big financial crisis. Our question for you is, in this day and age, could we have another 1929-like stock market crash or... Is the structure just completely different? Are the protections now in place? Could it happen again?
So yes and no. I can explain why no. And then if you'd like, I can get you there if you want to go there. Look, the good news is the world is very different.
Today, from a technology perspective, one of the reasons that 1929 ever even happened was literally the stock exchange was oftentimes off, meaning the numbers that you saw on the big board were three, four, five hours behind the actual numbers. And as a result, people were just selling indiscriminately because they just thought the whole thing didn't even work.
I mean, one of the reasons you always see those famous pictures of people down the New York Stock Exchange in 1929. Right. The reason they're there, the reason they're all in the street is these are people who've come from all over New York and the rest of the country to try to find out what's happened to their money.
So that piece of it you take off the table because you can get the numbers right here and off of your terminal and everything else. Right. There's an SEC. Insider trading is not legal. It was legal then. So all the manipulation that was taking place. There was no FDIC. So you had bank runs that took place in the aftermath of this crisis.
You know, we could talk about Glass-Steagall and what that either represented or didn't or whether you think it's come back or not. But here's a bigger one. Capital requirements for banks. There were none. Zero back then. So there's a lot of reasons why You'd like to believe that we can't have another crisis of the magnitude we did.
And by the way, it's also worth noting the crash in 1929 wasn't preordained that when that happened that we had to have the Great Depression. That was really the first domino of a series of dominoes and then a series of, frankly, terrible policy choices. The Federal Reserve basically doing nothing. The implementation of tariffs. We can discuss what that means today. Right.
There was a gold standard, so there was a question about how much money you could throw into the system, austerity, all of that that worked against things that led to 25% unemployment. It didn't have to happen, if you will.
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Chapter 3: Could a financial crisis similar to 1929 happen again?
So far, we're all talking about corporate debt, really. Back then there was, in 1929, there was a budget surplus in America. Now we have $38 trillion. The question is, let's say we have a crash and the government says, you know what, we're going to write a check for $5 trillion. That's the put.
And whether you believe that there is some kind of invisible line that turns into a red line for the bond market, where they say, you know what, we like you guys in America. We're happy to lend you money at three or four times the rate that we do today, and that's the interest rate you're going to pay.
And then all of a sudden, you actually do get into some kind of austerity spiral, and then you're living at a 25% unemployment rate in the country. When you really start to try to get through the permutations, how do you get there? In this day and age, that's one way. The one other thing that's interesting today is the technology, as bad as it was then, in some cases could even be too good today.
And I think we learned that with the Silicon Valley bank failure, where someone goes on Twitter and says, I'm pulling my account. Now, that information is accurate. Everybody does it over the weekend on their phone. Everybody does it. I used to think, oh, this device is so great because if there was a bad piece of information, it could be corrected very quickly.
But if there's a accurate piece of information, that's not good.
Right. People act on it quickly.
Well, so let's talk more about the technology today and sort of parallels and the idea of maybe irrational exuberance and signs of irrational exuberance right now. In reading the book in the 1920s, there was certainly a lot of that, but it seemed like it was more on credit and people buying on margin. Nowadays, there's the idea of crypto.
Some of that has been kind of pulled back in just a couple of months, actually, since you published the book.
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Chapter 4: What lessons can we learn from the 1929 crash?
We've seen some stocks fall.
But by the way, there is a lot of debt in the crypto market.
I mean, shocking amounts of leverage. So there's that side of things. There's prediction markets and sort of the money that's going into those, the excitement around those. Totally. private credit and concerns about private credit that we've seen in the last couple of months. Any signs of anything there?
Well, look, the private credit business has always concerned me because of the transparency of it, or frankly, lack of transparency. I think if you were to talk to Jay Powell, he would tell you that even the Federal Reserve doesn't have a full grasp of how interlinked all of the debt and credit is in the private credit market. Having said that,
depending on what numbers you're looking at, you could argue it's only $2 trillion. $2 trillion is a lot of money, but it's not the entire market.
It's not systemic.
So I don't know if it's systemic. By the way, I might worry more today about short-term treasuries. I mean, by the way, we, the United States, have been trying to sell short-term treasuries like crazy because we think that we can get a cheaper rate that way. That's also a much more complicated place to be if, in fact, you actually have to pay it back more quickly.
One of the questions we were kicking around when we were thinking about having our discussion with you is, is Wall Street greedier today?
I don't know if it's greedier today. And it's greed bad, necessarily.
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Chapter 5: What role does leverage play in financial crises?
I think the lesson for me of writing this book in some ways was that, they didn't use the phrase back then, but this idea of FOMO.
Yeah.
Which, by the way, is driven in part by this phone and TikTok and people seeing all sorts of things. And by the way, I think makes inequality actually. I don't know if it makes it worse, but the perception of it and just the visibility of it. Right. But I do think the sort of FOMO, greed, envy, I think that is what's driven people. for, you know, the test of time. And that's what it is.
Is it worse today than it was before? I don't know, except maybe this gets to the inequality piece. I think there are more people who think that they are effectively unable to actually make it and therefore more willing to take risk and more willing to sort of try to grab this lottery ticket as opposed to sort of make it over time slowly.
So on that, the... Ultra wealthy today versus the ultra wealthy back then. And reading the book, there's a lot of, you know, people have their yachts and in some cases actually sailing to work in lower Manhattan on the yacht. Absolutely. Today, the wealthiest people today, how much different are their lives versus the ultra wealthy back then?
And not with the technology, but I mean, what they were able to do versus what the normal person is able to do. I mean, you have, you know, billionaires go into space now.
I think there is a distinction. But look, I think you go back and I think of J.P. Morgan's son. He was building the biggest yacht at the time. People would have thought that's like the Gates or Bezos, whatever yacht you're thinking of. I think that there was a distinction.
But I remember having an interesting conversation, oddly enough to drop a name, with President Obama, interesting, maybe 2015, about the idea that And I think this is true in the 20s, but really true even just 25 years ago. I think CEOs, people of means, were oftentimes living in the same neighborhoods with the people who worked on the factory floor of their companies.
And as a result, their kids went to the same schools. And they went to the same temples and churches and ran into each other at the same restaurants and markets. And I think that there's a cohesion there that's important for our culture. And I think that increasingly that has come apart.
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Chapter 6: How has technology changed the stock market since 1929?
They are very aware, very aware of what the president's saying, what their reputations are going to be like as a result, what people are saying about them, whether they have to do certain things to demonstrate their independence. I mean, that's the thing.
The idea of demonstrating your independence effectively means you might even make a decision that might not be the decision you'd otherwise make, but you're doing it for your own reputation. So, yes, I think that all of that is not healthy.
Does the Fed keep that in a few months when Jay Powell is no longer Fed chair? And look, we can't see the future. We don't know who will be nominated.
I have a view that is maybe contrarian in this space, which is there's a board and there's a number of people on that board. I've never believed that the entire Fed is controlled by one human being. It just isn't. And so I think it's very important who is running it. I'm not... telling you it isn't. But I do think there will be people on that board
those who care also about their own independence, who will... By the way, another reason I think Jay Powell may ultimately stay on that board for that reason.
I love that you went there because I keep wondering... We're hearing that a lot now.
Right?
Because we keep waiting. We expect to hear an announcement. It just keeps getting pushed off. And I just think there's... Oh, no, no.
By the way, it's not that I think that Jay Powell is going to be in this role forever. They're going to let him stay. No, but just that he can stay for another two years after this.
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Chapter 7: How do modern financial practices compare to those in 1929?
Maybe we all want more. And that's, for better or worse, what seems to drive people. And then the question is, When people get a little too confident, you know, can you have the humility effectively to step back and realize that maybe that confidence could be misplaced?
You write that the antidote to irrational exuberance is not regulation by itself, nor skepticism, but humility. The humility to know that no system is foolproof, no market fully rational, and no generation exempt. Do you see that humility out there today? I said it better in the book than I just said it now. And we have the full screen for it.
Do I see there's humility today? I see that humility among some. Look, I think, you know, we also talked about Warren Buffett, Jamie Dimon and David Rubenstein were talking about Warren Buffett. I think Warren Buffett has a remarkable humility. And when it comes to sort of even his own confidence, he has humility about that.
I think there are a number of business leaders and investors who absolutely do. And then there's a number of business leaders and operators and investors who clearly don't. And I think anybody who walks in the door and sits down at this table and can tell you exactly what or thinks they can tell you exactly what's going to happen probably can't. Thank you.