Legendary investor Howard Marks has endorsed a book on the 1929 crash as he warns about excesses building in today’s markets.
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In his latest memo, the Oaktree Capital cofounder said Andrew Ross Sorkin’s “1929: Inside the Greatest Crash in Wall Street History — and How It Shattered a Nation” is “the best investing book I’ve read in years.”
Marks praised the book, published in October, for describing the Wall Street crash as “not by dryly recounting the events, but through profiles of the protagonists of the day.”
Fueled by a yearslong speculative boom and heavy margin buying, the stock market crashed in October 1929, ending the prosperity of the Roaring Twenties.
It also marked the start of the Great Depression, a prolonged economic downturn marked by bank failures, mass unemployment, and widespread hardship.
Drawing on Sorkin’s account, Marks said the bubble that led to the 1929 crash was driven by three main forces: stock sold without regard for suitability, heavy use of leverage, and a mismatch between illiquid assets and short-term financing.
In practice, that meant inexperienced investors piled into a market that had surged for years, while brokers, incentivized by commissions, extended margin loans covering up to 90% of purchases. Those loans could be called quickly if prices fell, forcing investors to sell into declines.
“A lack of financial sophistication on the part of individual investors leaves them susceptible to promotions and too-good-to-be-true promises,” wrote Marks.
That dynamic can quickly turn dangerous when markets reverse.
“It’s not easy to lose everything in the stock market, but the combination of these three elements can do the trick in a bad-enough boom/bust cycle,” Marks wrote.
Marks drew these lessons as part of a broader memo on private credit, a fast-growing corner of finance that has expanded rapidly in recent years.
It comes as concerns about private credit are mounting, as some high-profile funds face a wave of redemption requests.
