Investment Lessons From The Great Depression

Many successful money managers and businessman are in a great debate as to what the best investment stance is for the future. How does an investor protect themselves if we enter a serious deflation similar to the great depression. At times like this its necessary to go back to the eminent dead ( see previous post) for some guidance.
I am adding a new addition to our eminent dead board of directors, Benjamin Roth. Mr Roth was an attorney in Youngstown, Ohio during the 1930s who chronicled in a diary his thoughts on personal finance as the great depression was raging. His diary appears in a new book written by his son, Daniel Roth titled “The Great depression a Dairy”. This is a must book for all businessman as it provides superb lessons for investors of today. He provides entry after entry of the accounts of people who prospered and failed during the great depression. The overriding theme from the book is that buying well capitalized companies when their share prices were extremely depressed was the best way to protect wealth. As Buffet would say, “be greedy when people are fearful and fearful when people are greedy”. It’s so simple but one of the most difficult investment stances to take when a panic is raging. It was remarkable to see how fortunes were made by those who bought equities of well capitalized companies during the depths of crises. It was also instructive to see fortunes wiped out by people reaching for yield in financial instruments they did not understand or those who bought shares on margin. Using margin was a fools game as one could never predict when a bottom was at hand. Amazing how little things have changed in the investment world since the 1930s. The book also provides numerous examples of how the investment gurus at the time were wrong a majority of the time in their predictions throughout the great depression. His entry on July 31, 1939, is classic” as I reread some of the predictions made by the outstanding economists in the past few years. I must laugh. They were all wrong. None of them foresaw the 1937 1939 collapses and many predicted inflation before this”.
I highly suggest this book be purchased. Its guidance is priceless.