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?

Category: Personal Finance

9 thoughts on “Lessons from the Great Depression

    • Dave Ozment on said:

      So true…. it’s like our parents suddenly get smart when we turn 20… no, that knowledge was always there it just took us so long to dial in our view on the world.

      The funny thing, when you step back, is that these guys have been killing all along… they’ve been quietly beating the market for 60 years and are about as rich as you’d ever want to be… the trick is that they did it over time and that’s not sexy until one day it is.

      Thanks Baker!

  1. Like Warren Buffet, these guys seem to have their foundations firmly planted in basic economic principles. When followed, sound economic principles should lead to good financial decisions…micro and macro decisions. So Buffet had a rough year last year, big deal…I bet his strategies come out on top 5 to 10 years down the road.
    Nice post Dave!

    The Almost Millionaire’s last blog post..#1 Worst Small City for Jobs…Jackson, Mi.

    • Dave Ozment on said:

      Exactly… it’s like the idea of systems we’ve talked about… having a good one in place will allow you benefit over the long haul and not worry about the hiccups every once in a while.

      Thanks for commenting!

  2. Dave Ozment on said:

    Good point… I’m sure they all thought or said something like that off the record or later than evening at home.

    Thanks for commeting!

  3. threadbndr on said:

    I liked the one comment about divended investing being the only reason that ‘little’ people were in the market ‘back in the day’. That’s STILL the main reason that I’m in the market. None of my major stocks have cut their dividends to date. The money’s still coming in. Price of the shares only matter if I were to sell, and why would I if the cash cows are still mooing?

    • Dave Ozment on said:

      Some really good points here… I’m glad you checked out the article to find a point that spoke to you when I missed or overlooked that point. The other or main point you make about dividend investing such that you don’t really worry so much about the price of the stock so long as the divy keeps paying is huge… pick large stable companies that can weather a storm and enjoy the dividends and leave the media drama for someone else.

      Great points! Thanks for visiting, reading, and commenting! I hope to have you back!

  4. Dave Ozment on said:

    Spot on Amy, accountality for one’s self is critical for our lasting success.

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