One man's investment diary through the Great Depression

 

Reading about the Great Depression can be a dry affair. Most investors only focus on a few highlights without spending much time on the details. That is unfortunate. The thumbnail sketch is simple. There was a stock market crash, bank failures, severe unemployment, and then the New Deal solved the problem. Bad Fed decisions and tight money failed the banking sector and economy. For many, activist government policies worked, and the doors were opened to the Keynesian revolution.

Most investors spend even less time thinking through the social impact on consumers and the fear faced by those trying to make investment decisions during this uncertain period. Banks closed and businesses shuttered without warning.  There are some good books describing the social impact from the Depression, and there have been recent revisionist books on the “forgotten man” impacted by the downturn and policy choices, but little has been written about what investors were thinking during this period. 

I jumped at the chance to read about investor perceptions when I recently heard about the book The Great Depression: A Diary, published in 2009. What makes this a good read is the sense of uncertainty that was felt by the author as he walks through the financial ups and downs during this traumatic time. 

The author, Ben Roth, was not a wealthy man but a middle-class lawyer during depression who has trouble collecting from clients and paying his bills. He had a strong interest in investments during this period and made regular diary entries describing his thoughts on the markets and the economic environment. He sprinkles sage investment advice in his entries that is useful even today. Roth describes the ups and downs of stocks, the economic climate in Youngstown, Ohio, and how crowds moved from optimism to pessimism and back again from 1929 until the beginning of WWII. 

Reading his views in real time is fascinating. He has hopes for Hoover after 1929 and concerns with the Roosevelt policies. He writes about bank failures, the inability to collect on bills from those with nothing to give, fortunes made and lost in a wild stock market, the bottom falling out on what was perceived as safe real estate, and the fear of just not knowing when the depression will end or whether the latest policies will actually work. Unemployment led to protests and unrest and it was not clear whether life savings could be withdrawn from banks. Without the support of hindsight, it becomes an interesting tale of how one man deal with financial unknowns.

This book is important because it creates a fearful tone that is often missing from history books. Economic fear is real, and it should not be missed that many are currently living in similar economic fear from the pandemic. Excessive fear will lead to actions that in another time would be viewed as irrational. Hence, we cannot always predict the actions of consumers or investors.