I’m fortunate to have strong relationships with clients from many facets of life. Among them is a 94-year old gentleman, who I’ll refer to as Bob (not his real name for confidentiality reasons), a survivor of the Great Depression. I enjoy learning from people who’ve lived many years because they’ve seen more than I have and they’re able to distill decades of good and bad experiences into the most salient points. Knowing that, I interviewed Bob last November, when we were in the eye of the financial storm and the world looked bleak. I asked him about his investing experiences to glean some valuable insights we can all learn from.
What was it like for you during the Great Depression? If I could make $10.00 per week I saved $5.00. I had a tent, stove and cot and that’s all I needed. I always saved because there were times when I was between jobs and I had to save money to survive. Eventually I became a bricklayer and was a member of the Mason’s union for sixty years. [Note: $10.00 per week in 1929 equates to $124.60 in 2008 dollars when adjusted for inflation, just to put that into perspective]
How long have you been investing? I bought my first mutual fund in 1947, which was recommended by my father-in-law, and started investing in stocks within a couple of years after that. In 1979 I inherited some more stocks which I’ve held since then and never sold.
You’ve invested during some difficult economic times? What did you do with your stocks during the oil crisis of 1973? That’s when I started to buy oil stocks. Oil company stocks were dropping and everyone was saying the prices were going to go to zero. I saw that they were well-managed concerns and I could buy them cheap, so I did.
Did you sell stock in order to buy those companies? No, I always had money saved up and I bought them. The only time I sold stock is to offset a gains and losses to avoid taxes. If I made a lot of money on one stock I would sell something that was down to avoid paying the tax on the gain.
Do you ever get nervous and sell when the market is down? I never have, never. The market goes crazy because of speculators. I don’t speculate. I know what I want and I have a reason for buying it. I strongly believe it’s going to go back up. It might take a few years, but it will go up again.
What’s the difference between an investor and a speculator? A speculator constantly tries to buy low and sell high, but the commissions [and taxes] will eat a lot of the profits. If you a steady investor you always know where you stand. As a speculator you’re always trying to guess the market. This is why the government put a restriction on short selling and I think this is a good thing to do. I’m an investor – some of the stocks I own are over 4o years old.
How were you investing during the high interest rates of the early 1980’s? I had some money available and put it in the bank because I was earning 14 percent. I didn’t sell any stock because I had some other cash available.
Do you remember Black Monday in 1987? Yes the papers said it was going to crash the whole world. I don’t remember what I bought then, but I know I bought something in 1987.
What about the internet boom? I was never interested in investing in it because I didn’t know anything about it. I just couldn’t fathom investing in something I don’t understand.
When do you buy stocks? I’m constantly investing. Just because the stock market is going up or down doesn’t mean you should quit buying. I buy whether it’s going up or down.
A lot of headlines say we’re going into another Great Depression. What do you think? I don’t feel so. I think the government is going in the right direction. With the amount of money Uncle Sam is pushing into banks and buying mortgages, if we get rid of the foolish overextending, trying to keep up with the Jones’, the stock market will go through the roof.
What do you think is going on right now in the stock market? Fear. That’s all it is, is fear. My granddaughter asks “how can you be so calm?” I’ve been watching the market for years and this is nothing new to me. It always goes back up. Now is the time to buy because it will always go up. Look at Warren Buffett. He’s doing a lot of buying. You watch him. It will go up again.
If someone is retiring in ten years, what would you tell them to do today? Buy stock. It’s going to go up. I don’t think we’re at the market bottom yet, but I would still buy some. In fact, I’m tempted to take some money out of my bank to buy some more. I’m not trying to time the market – that’s not for me. I’m not gambling on whether the market will go up or down. I’m counting on the fact with the amount of money Uncle Sam is putting into the economy, if employment starts going back up people will have more money to spend.
What three pieces of financial advice you would give to people today?
1. Get out of debt. That’s a big problem in America today.
2. Get a home of your own.
3. Maintain a buffer of six months of wages.
There you have it. You may never have another opportunity to gain a perspective on today’s economic challenges from a living survivor of the Great Depression.
Bob’s advice is no different from what I teach my clients because true principles withstand the test of time. You've heard many of these principles from your parents or grandparents and you may have written them off as old advice for a period long ago, but the fact is that these financial principles are timeless and are one sure way to live without financial stress.
If there is a silver lining in today’s economy, I hope it’s that we can re-learn how to find joy and happiness with a simpler lifestyle.