Pitfalls of greed: Nithin Kamath on why market manias repeat endlessly

From 1929 to 2008, market crashes follow the same pattern: greed drives bubbles, leverage builds silently, and busts wipe out fortunes.

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Zerodha co-founder Nithin Kamath has cautioned investors about the enduring risks of market euphoria, drawing parallels between current trends and historic financial crises. Through a series of social media posts, Kamath reflected on how cycles of greed and speculative manias have persisted across decades, irrespective of new financial products or tighter regulations.

Lessons from history

Referencing events like the 1929 Wall Street crash and the 2008 global financial crisis, Kamath noted that “Every crash, 1907, 1929, 1987, 2001 (Dotcom), 2008 (GFC), and so many more, follows the same script.”

 

He emphasised that, while markets evolve and instruments diversify, the emotional drivers of investors remain remarkably consistent.

 

Kamath recommended Andrew Ross Sorkin’s book 1929 as “a must-read for anyone in the markets, stocks, commodities, or crypto.”

 

He also quoted US President Herbert Hoover from 1929: “The only problem with capitalism is capitalists. They’re too damn greedy.”

The boom-bust cycle

Kamath explained that every speculative boom begins with rising asset prices fuelled by human greed. Enthusiasm attracts even those unfamiliar with the risks, while leverage quietly accumulates through loans, margin trading, or complex derivatives.

 

“It always finds a home,” he observed, highlighting the silent build-up of risk.

 

The inevitable bust follows, “One day, the bubble pops. The leverage unwinds with unstoppable force, amplifying losses as cascading sell-offs feed on themselves. Markets crash, fortunes evaporate, and the cycle reaches its end.” This sequence, he said, repeats across asset classes and geographies, from small-cap stocks to cryptocurrencies.

Regulation and the persistence of greed

Post-crisis, regulatory reforms often target the mechanisms that triggered the collapse. Yet, as Kamath pointed out, “Greed never disappears. It simply waits, then returns in a new form, finding fresh channels for leverage that no one is watching. And the cycle begins again. Different stories. Same ending.

 

Kamath’s reflections serve as a timely reminder for investors that despite technological innovation and policy reforms, the emotional core driving market behaviour remains unchanged. Awareness, prudence, and historical perspective, he suggests, remain essential tools for navigating financial markets.