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This famous photo shows 26-year-old model and agent Walter Tornton attempting to sell his luxury car for just $100 cash — a 94% discount off the $1555 list price — on a New York City street. It street serves as a chilling reminder of just how quickly the boom of the 1920’s turned to despair.
Fast forward to today and while the flappers and sheiks might be missing, Jeffry notices some eerie similarities which are making him raise a cautionary flag.
For a while now — at least a year — he’s been talking about a pattern developing on the charts which has him concerned that we could be headed for what he calls The Greater Depression. (as in “bigger than the original”)
At the same time, he’s pointed out economic conditions which have eerie similarities to those that brought the Roaring Twenties to an abrupt end.
Echoes of the Past
One key similarity Jeffry highlights is the concentration of wealth in a small number of stocks.
Just like in the 1920s, where companies like Radio Corporation of America (RCA) and Montgomery Ward saw their stock prices soar according to data from the Federal Reserve Bank of St. Louis (FRED), we've witnessed a similar phenomenon in recent times.
Think of high-flying stocks like Nvidia (NVDA) and Super Micro Computer (SMCI) that soared hundreds of percent earlier this year, while many other stocks remained stagnant or even dragged down the average.
The overall market indexes may have been climbing, but a significant portion of the market was left behind. This is especially true for small caps, which are measured by the Russell 2000 (IWM) we mentioned in yesterday’s article.
Jeffry further emphasizes the easy credit policies of the Federal Reserve in the 1920s. While it allowed companies to move more consumer goods — especially the automobile which was rapidly gaining popularity, it was also a big factor that contributed to the speculative bubble of the 1920s.
Cut to today: In a similar way, central banks around the world have injected trillions of dollars into the financial system in recent years to stimulate economic growth following the 2008 crash and the COVID-19 pandemic.
This easy money environment has undoubtedly helped everyday Americans — but it has also fueled market gains, raising concerns about potential asset bubbles.
Finally, Jeffry worries about a growing sense of complacency among investors. Just like in the 1920s, where investors blindly chased stocks fueled by FOMO (fear of missing out), Jeffry observes a similar lack of caution in today's market.
Too many investors seem to believe the good times will last forever, neglecting potential risks and historical precedents.
So, Where Are All the Flappers (and Sheiks) This Time Around?
One could argue that the excesses of the 1920s were more flamboyant. The Charleston may have been replaced by social media posts, and the lavish Gatsby-esque parties by exclusive online forums.
But the underlying trends — the concentration of wealth, easy money, and a sense of invincibility — seemingly have a timeless quality.
Jeffry tells us that humans have a short memory. Almost no one alive today lived through the Great Depression. And the few who, like him, study the historical data and raise concerns are often ignored as “party poopers.”
A Call to Action: Navigating a Market Fraught with Potential Risks
While no one has a crystal ball, Jeffry’s insights remind us that all parties come to an end — some are just more abrupt and disastrous than others.
Jeffry’s big fear is that humanity as a whole has lost a lot of generational knowledge — one of the biggest ones being how to grow your own food. If the economy suddenly crashes and the government is powerless to help citizens, what might happen when people can no longer turn to the land to feed themselves?
Stay tuned, we’re planning to continue this series and keep you up-to-date on continuing developments.
— The Jeffry Turnmire Trading Team
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