Elon Musk has warned that there are similarities between the collapse of Silicon Valley Bank last week and the crisis that sparked the 1929 Wall Street crash.
“Lot of current year similarities to 1929,” the Tesla CEO said on Twitter Tuesday, in response to a thread by Ark Invest CIO Cathie Wood.
Musk’s comments come after last week’s implosion of California-based lender SVB, as well as Signature Bank and Silvergate Capital, rattled financial markets.
Big bank stocks including JPMorgan and Bank of America shed billions of dollars in market value after SVB collapsed Friday – although they edged higher Tuesday as policymakers’ promise of a backstop helped to soothe investors.
Musk didn’t specify where he sees similarities between 1929 and US stocks’ current position – but he could have been alluding to Wood’s assertion in a previous tweet that the popularity of cryptocurrencies like bitcoin and ethereum had led to bank deposit levels falling for the first time since the 1920s.
In late October 1929, the Dow Jones Industrial Average plunged 23% in two days, signaling the start of the Great Depression.
Musk’s warning clashes with most of Wall Street’s top names, who’ve said that SVB’s collapse won’t trigger a similar stock market rout to the financial crisis of 2008 – let alone the great crash of 1929.
“Any issues are finite and idiosyncratic,” Jefferies CEO Rich Handler said in a letter to the firm’s clients published Sunday.
“In other words, they don’t threaten the whole system and should not lead to endless contagion, as long as we remain calm, acknowledge the problems are very serious and capable of spiraling out of control, and deal proactively and aggressively in a smart, immediate and targeted manner,” he added.Source: Business Insider