Lessons from the Great Depression

 “The Biggest Recession since the Great Depression” seems to be a favored storyline and the media has certainly had its fun with the premise.  Yet so much of it is tired and breathless drivel.

But featured in the May issue of Smart Money is a smartly correlated discussion of the then and now.

The idea is simple and elegant and seemingly impossible:  Find former brokers that actually worked on Wall Street during the Great Depression and report their opinions on the realities of today.

But this is no simple task.  Shameless pun notwithstanding, this is a dying breed.

Nonetheless, three such experts were identified and in age they ranged from 92 to 103.

Now my intent is not to rob your enjoyment in reading the full article so I’ll simply share some of my favorite points.

  • All 3 are still actively managing funds today – albeit with lighter schedules
  • 2 of the 3 worked with Benjamin Graham, known as the father of value investing and author of Security Analysis. (if you require further endorsement of Graham and his work then consider that Warren Buffet is also a Graham disciple)
  • All 3 favor running numbers and churning through annual reports rather than summarized analysis and computer models which fuel many of today’s market experts
  • A bargain does not equal a sure thing
  • Stock Market news in the Great Depression was not widely reported because only 10% of the population was invested in the market – or only the wealthy… hmm – my commentary…what does this say about the long term viability of current trends of taxing or punishing the rich?
  • Today’s economy doesn’t compare to the 20’s and 30’s due to its diversity… back then the economy relied on only a handful of industries – banks, railroads, utilities, and oil companies, whereas today our economy is additionally fueled by giants in the technology, healthcare, and services arena… hmm – more of my commentary… how might we expect solutions of yesteryear to save us today?
  • “If investors today were a little less emotional they would see that this could be a good opportunity” claimed one of the experts heralded by Warren Buffet as a “Super Investor”
  • One contributor railed against consumer debt and “the deteriorating caliber of our political leaders” in the early 2000’s – when he was in his late 80’s

So what do you think?  Are these old guys on to something or are they past their time?