I can't seem to find information about economists, or others, warning about the overheated stock market of the 1920s in the US that would culminate in the stock market crashing on Black Thursday, October 24th, 1929, and Black Tuesday, October 29th, 1929. I keep seeing general statements that "prudent experts" warned about the overheated stock market, but that is it.

If you could provide paper names, or books, published prior to those dates that would be great. If it has to be a post-event book, or paper, it needs to be one that provides the names who warned against the possibility of a crash.

  • 1
    Decades ago I remember reading that the big investors spent weeks trying to prop the market up before the collapse, only to give up and quitely pull their money out to save themselves when they realised it was hopeless. If I could have found some backup for that, I woulda made an answer of it.
    – T.E.D.
    Apr 10, 2012 at 13:22
  • cbc.ca/news/business/story/2009/10/26/f-langan-great-crash.html mentions the anecdote of Joseph Kennedy bailing the stock market because a bellhop gave him a stock market tip. Don't know whether it's true or not.
    – Golden Cuy
    Apr 10, 2012 at 23:09
  • It is commonly said that Hungarian/Soviet economist Eugen Varga did indeed predict a depression before the crash, but I don't know how much time before, or whether he wasn't predicting crises all the time, and got it right like a still clock gets right twice a day (to his credit, by 1921 he was theorising a period of "capitlist stabilisation"). I also do not know if he got the form of the crisis (beggining in the stock market, etc), or its causes, correctly. But I think some research on him would have some merit. Jul 11, 2016 at 10:32
  • The Fed predicted it so accurately that through 1928 and 1929 they steadily contracted the money supply - in order to deflate the bubble - and thus fulfilled their own prophesy. Jul 11, 2016 at 23:25

4 Answers 4


Roger Babson is often credited with predicting the 1929 crash. See, for example, http://www.newswise.com/articles/the-man-who-predicted-the-crash-of-29

Having worked in the markets through several more recent crashes, I suspect that there may have been a number of people lamenting high asset prices in 1929, but Babson happened to say so in the press just before Black Thursday, and/or had the most vocal campaign for credit afterwards, and has become associated with the prediction. A similar phenomenon certainly seemed to apply with Elaine Garzarelli in 1987 and again with Nassim Nicholas Taleb and Noriel Roubini in the most recent crash.

  • 2
    To be fair, Roubini not only predicted a major crash but also got a fair amount of details right. So, imo, some of credit coming his way is very much deserved.
    – Opt
    Apr 12, 2012 at 17:25
  • 1
    There were actually quite a few people who predicted a crash in the housing market in the USA. Michael Lewis' book 'The Big Short' goes into good detail on some of them, especially the ones who studied the market in detail (Michael Burry and Steve Eisman). In this case, their warnings were ignored because 1) nobody understood the complicated mortgage-backed products the banks were churning (including the banks themselves), 2) nobody understood how bad the house loans were and 3) everybody expects house prices to continually go up. Sep 3, 2014 at 14:01

One should take with a grain of salt any "predictions" by "experts" about the stock market. An inherent characteristic of the stock market is that it is highly unpredictable in the short run. This follows by common sense: If one could predict the fluctuations in the stock market consistently, one could become the richest person in the world simply by shorting stocks at opportune moments, rather than spending all his time warning the public. For a more detailed argument, see A Random Walk Down Wall Street, which reflects current academic consensus.

So, retrospective analyses about how "warnings were not heeded" are usually moral tales designed to lay blame on greedy investors, foolhardy families, or even human nature itself. In reality, well-documented histories about stock market crashes generally show that there are always as many "believers" in the stock market as skeptics before the crash. In particular, both John Maynard Keynes and Irving Fisher - leading economists of their generation - believed wrongly that the prices before the crashes of 1929 were reasonably priced. (The Great Myths of 1929, Harold Bierman, 1991)

  • 1
    I think you took the word "prediction" too literally. I am interested in hearing what experts, if any, were warning about an overheated market. Although the random walk hypothesis, and efficient market hypothesis, are always interesting topics, this is not economics.stackexchange.com . I am interested in who said what, why, and when. I appreciate your answer all the same.
    – ihtkwot
    Apr 10, 2012 at 2:59
  • I realize my comments may come off too harsh. Your concerns are well deserved, founded, and noted, but I am just curious if there were rumblings among academics, and others, prior to the crash.
    – ihtkwot
    Apr 10, 2012 at 3:18
  • I think the notion of "overheated" market is flawed. It all boils down to this: at one moment shareholders are confident (not OVER-confident, just plainly confident) and then suddenly they are not. That's it. That's how we, people, work. If we lose confidence, we lose it suddenly. It isn't productive to say "Oh, they were over-confident, at that time they should have been slowly begin to doubt, but not too much, silly! They should have been introducing more and more doubts in a very steady manner so the stock prices would drop gradually".
    – kubanczyk
    Apr 12, 2012 at 10:31

Lawrence Sloan, in his 1931 book, "Every Man and His Common Stocks," posed three rhetorical questions about the economic conditions in the United States and the rest of the world: Was the country in a severy and possibly prolonged economic downturn? Almost certainly yes. Were there clear signs ahead of time? A qualified yes. The last questoin was "Could if it have been foreseen? Here, Sloan made a mixed case. In his opinion, the indications of trouble were present, but only to someone who was predisposed to look for them. But there were enough other confusing and positive signs that someone with an optimistic, or even neutral view of the world would have been led astray."

The above passage comes from my own, 2004 book, "A Modern Approach to Graham and Dodd Investing," which predicted a "1929" crash (more than 50% drop in the Dow, like the one that occurred in 2008-09). No one believed me at the time, that "it" could happen again. Some people don't want to believe it even after the fact.


  • Quoting one's own work in an answer, not sure if that is credited or not. Haha.
    – ihtkwot
    Apr 13, 2012 at 0:03

Babson did call for a crash right before the 1929 crash, but he also called for a crash a year earlier. The Federal Reserve was very concerned about stock speculation and called for a restriction in call money lending by banks which was fueling the stock market bubble. However, Smiling Charlie, the President of First National Bank (Citi Bank) said he would make all the money needed for security loans available, overriding the Fed's concerns. He was also a Director of the New York Fed at the time

Also, I believe the financial writer for the NEw York Times wrote several articles throughout the summer about an overheated stockmarket, which every choose to ignore.

  • Needs some references and some clarification for those of us not familiar with the US financial world of the 1920s.
    – Steve Bird
    Jul 11, 2016 at 5:14

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.