Book: 20260531 to 20260630, "1929" by Andrew Ross Sorkin
20260531 - Prologue
The almost singular through line behind every major financial crisis is one thing: debt. p14
At the moment, AI related companies are borrowing a lot of money to build AI centres. This year it's over $150B, which is more than the sum of the past 2 years.
Will this cause trouble in the near future?
https://x.com/_FORAB/status/2060960266322588048
20260531 - Part I
20260531 - Chapter One: February 1, 1929
20260601 - Chapter Two: February 14, 1929
20260531 - Chapter Three: February 16, 1929
20260601 - Chapter Four: March 4, 1929
So far, the only issue I found is leverage.
All other factors are fine.
20260606 - Chapter Five: March 5, 1929
20260607 - Chapter Six: March 26, 1929
20260607 - Chapter Seven: March 29, 1929
"The stock market will not have a very material decline unless and until there is an adverse turn in business," p101
Can interest rate changes affect companies' profit? Yes, of course.
Why most of the smartest people in 1929 cannot see that? Just because this is new stuff?
How smart are people really? What will AGI do?
20260607 - Chapter Eight: April 5, 1929
20260607 - Chapter Nine: April 8, 1929
20260607 - Chapter Ten: April 12, 1929
20260607 - Chapter Eleven: April 14, 1929
20260607 - Chapter Twelve: May 7, 1929
20260607 - Chapter Thirteen: June 4, 1929
No one can predict the future. Especially the near term future.
Is cash the only thing to keep us safe in investment?
Sarnoff immediately said. "Ever since we met on board ship I've admired your white meerschaum pipe. If possible, I'd like you to give me one like it." p144
This tells me what these people were thinking everyday. They don't think much about money, but more about collectibles. That showed their "taste".
But, is this taste real? Or just part of the culture?
20260612 - Chapter Fourteen: June 29, 1929
20260612 - Chapter Fifteen: September 2, 1929
"We are living in an age of increasing prosperity and consequent increasing earning power of corporations and individuals. This is due in large measure to mass production and inventions such as the world never before has witnessed. The rapidity with which worthwhile inventions are brought out is the result of the tremendous research laboratories of our great industrial concerns." p166
- The growth of share market is way higher than the growth of economy.
- Chain reaction. When share market crashed, people lost savings, then don't have money to purchase Goods, then companies go bankruptcy, then share market drop again.
Will this happen again with the burst of AI bubble?
20260613 - Chapter Sixteen: October 2, 1929
20260613 - Chapter Seventeen: October 6, 1929
The capitalist in the United States, Churchill wrote, "advances under the banner of 'High wages, enough leisure to spend them in, and better times for all': and the masses follow, confident that in one way or the other they will all win through." p187
When will share market crash? It seems be decided by two factors.
- Leverage in investing.
- Buffer.
Most of investors don't use leverage, and social welfare provides buffer.
How about the AI bubble? That will affect a lot of AI related companies, but not all companies.
20260613 - Chapter Eighteen: October 10, 1929
"The output of pig iron and steel ingots, usually regarded as an accurate reflector of industrial conditions, was more than 17 percent greater than in the corresponding period of the preceding year...Automobile production, often used as a measure of consumer purchasing power, was greater than any other similar period. Industrial employment was larger than in the same period of last year, while industrial payroll totals showed considerable expansion." p192
These data is solid. Then what caused the share market crash?
I guess,
- Monetary policy change.
- No social welfare to support the demand of Goods and Services.
Many bankers and brokers had already raised their margin requirements to 50 percent, up from the 10 percent that many of their regular clients were accustomed to. p196
Money comes from thin air. In the 1929 case, it mainly came from those easy credit of leverage.
Easy credit accelerated the economy growth, by pushing up debt of investors, which is dangerous, because investors need to pay back the credit with interest.
MMT is different. The federal governments don't need to pay back the debt.
The tricky thing is, there was no inflation during that time after the Great War.
https://www.macrotrends.net/datasets/2497/historical-inflation-rate-by-year
20260613 - Chapter Nineteen: October 24, 1929
A critical reason of the 1929 disaster is because that people don't have much experience with Stock Market.
Even the president Hoover thought it's not going to affect "real economy".
20260618 - Chapter Twenty: October 27, 1929
20260618 - Chapter Twenty-One: November 6, 1929
20260618 - Chapter Twenty-Two: November 8, 1929
20260618 - Chapter Twenty-Three: November 13, 1929
20260618 - Chapter Twenty-Four: December 19, 1929
20260618 - Chapter Twenty-Five: December 21, 1929
There was even a note of optimism in the observation that the crash had not induced "instantaneous shut-downs and unemployment, such as had followed other panics." None of the big banks had failed, and no major companies had declared bankruptcy. So maybe this time would be different. One could only hope. The stock market crash didn't even rate as The New York Times's most important news story of 1929. p262
This means the economy was actually very strong by that time. There was no real bubble. The bullish investors were not wrong.
The Dow Jones closed 1929 at 248, down just 17 percent for the year. p263
However, it dropped 35% from the peak of that year.
In 1921, the Dow Jones ended the year down almost 33 percent, and everyone remembered what happened next. Stocks went on a tear, up 12 percent the following year, then 21 percent the year after that. p264
20260619 - Part II
20260619 - Chapter Twenty-Six: September 30, 1930
20260619 - Chapter Twenty-Seven: October 28, 1930
20260619 - Chapter Twenty-Eight: November 5, 1930
The depression was caused by credit shrinking, as fiat currency is bound with gold.
Today, the 39T US government bonds($800B per year) and the huge government deficit($900B per year) bring a lot of extra money into the market every year, which prevents similar depression.
AI consumes a lot of capacity of production, which may lead to undersupply of other Goods and Services. This year, the AI related extra expenses is around 1 Trillion USD.
20260623 - Chapter Twenty-Nine: February 2, 1931
20260623 - Chapter Thirty: February 18, 1932
20260623 - Chapter Thirty-One: November 8, 1932
The issue that had in fact decided the race between Hoover and Roosevelt, according to the poll, was Prohibition. Eight-three percent of Americans supported its repeal. p319
Full of irony.
The impact of the 1929 Great Depression on ordinary people sounds more like the imagination of the media and scholars.
Or, perhaps the impact was significant, but people at the time did not consider it to be much of the government's business.
The side effects of alcohol are unquestionable; otherwise, "Prohibition" would not have existed. Perhaps whether to drink, or whether to smoke, are private matters that the government has no right to decide. What about drugs? Do parents have the right to decide whether to allow their children to access social networking sites?
A century ago, Westerners’ reliance on the government was far less than it is today.
20260624 - Chapter Thirty-Two: February 18, 1933
"During all this time the means of credit expansion has been available, but neither borrowers nor lenders are willing to act in the situation of business." p328
Government intervene is necessary in this case.
"Bank saving guarantee" helps the market to stop bleeding.
"Build large scale infrastructure" helps people to invest and spend.
20260624 - Chapter Thirty-Three: February 21, 1933
20260624 - Chapter Thirty-Four: February 22, 1933
20260624 - Chapter Thirty-Five: March 3, 1933
Roosevelt: "The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit." p356
So Roosevelt has no clue about the root cause of the problem. In the end, he solved the problem only by luck.
20260624 - Chapter Thirty-Six: March 7, 1933
20260624 - Chapter Thirty-Seven: March 21, 1933
20260630 - Chapter Thirty-Eight: May 16, 1933
20260630 - Chapter Thirty-Nine: May 22, 1933
If customers' funds were guaranteed regardless of where they put them, what was the incentive for choosing a reputable bank? p387
But customers don't have the power to ask the bank to invest rationally. Bank can take risky actions anytime they want.
20260630 - Chapter Forty: May 23, 1933
The House of Morgan should get heavy fine for obvious corruption.
20260630 - Chapter Forty-One: June 16, 1933
20260630 - Chapter Forty-Two: June 21, 1933
Agree with the jury that Charles Mitchell was not guilty.
He did something wrong, but not intentionally, based on the content in this book.
20260630 - Epilogue
Livermore had told his oldest son, Paul: "Every stock is like a human being: it has a personality, a distinctive personality." p428
That's completely wrong, and only the delusion from hindsight.
There is no pattern in short term fluctuation.
We never know what's going to happen next.
20260630 - Afterword
If there is one valuable insight we can learn from the twentieth century, and probably all of history for that matter, it's the societies are amazingly resilient. p443
This is achieved by sacrificing individuals.
Can human survive the AI evolution?
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