Stocks for the Long Run (Jeremy Siegel)

A-Squared (0:00)

So, imagine for a second that it is the sweltering late summer of 1929

SPEAKER_2 (0:06)

Okay, wow, right at the absolute peak.

A-Squared (0:08)

Exactly, right at the absolute zenith of the roaring 20s. I mean, the jazz is loud, the speakeasies are totally packed, and the American stock market has basically become this seemingly invincible engine of just, you know, infinite prosperity.

SPEAKER_2 (0:23)

Right, everybody thought it was just gonna go up forever.

A-Squared (0:24)

Yeah, that was the vibe. And into this atmosphere steps a man named John J. Raskob.

So he is a highly respected senior executive at General Motors, which, you know, is one of the most powerful corporations on the planet at the time.

SPEAKER_2 (0:38)

Oh, yeah, absolute titan of industry back then.

A-Squared (0:40)

Right. And he gives this interview to a journalist named Samuel Kryther, which ends up getting published in August 1929 in the Ladies Home Journal.

And the article is boldly titled, Everybody Ought to be Rich.

SPEAKER_2 (0:53)

Which is just an incredibly provocative title.

A-Squared (0:55)

It really is. And in it, Rascald makes a very specific, like very mathematical claim to the American public. He basically says that if a common worker just puts $15 a month into good common stocks and reinvest the dividends, that ordinary worker will eventually become incredibly wealthy.

SPEAKER_2 (1:14)

That's $15.

A-Squared (1:15)

Just $15 a month. He basically promises that America is on the verge of this massive, unprecedented industrial expansion.

SPEAKER_2 (1:23)

And I mean, the timing of that publication is just one of the most staggering, tragically poetic moments in all of financial history.

A-Squared (1:31)

It really is.

SPEAKER_2 (1:32)

Because the magazine hits new stands in August, right? Millions of everyday Americans read it. And many of these people have never invested a single dime before in their lives.

A-Squared (1:41)

Yeah, they're just getting swept up in the mania.

SPEAKER_2 (1:43)

Exactly. And then on September 3rd, just a few days later, the market hits this historic dizzying high. Yeah. And then, well, the music just completely stops.

A-Squared (1:51)

It completely stops. Just seven weeks later, the market completely and violently crashes. And over the next 34 months, we plunge into the Great Depression.

SPEAKER_2 (2:00)

Right. The darkest economic period of the century.

A-Squared (2:02)

Exactly. The market value of the world's greatest, most unassailable corporations just declines by an astonishing 89 percent.

SPEAKER_2 (2:11)

89 percent. I mean, it's hard to even wrap your head around that number.

A-Squared (2:14)

It is. To put that emotional reality into perspective for you today, imagine opening your brokerage app on your phone tomorrow morning, right? And the $100,000 that you painstakingly saved over the last decade is suddenly worth $11,000.

SPEAKER_2 (2:28)

Oh, man. It makes you sick just thinking about it.

A-Squared (2:30)

Right. The devastation is total. Millions of people are financially obliterated. And John Jay Raskov, he just becomes this massive national laughing stock.

SPEAKER_2 (2:40)

Yeah. He was the scapegoat.

A-Squared (2:41)

Totally. He is hauled in front of the public, blamed by a US senator for ruining the common people. I mean, fast forward decades later, like to 1992, and Forbes magazine is still ridiculing him as the worst offender of historical market mania.

SPEAKER_2 (2:57)

But if we actually connect this to the bigger picture, history delivers a completely different, deeply counterintuitive verdict. And this is really the core of what we are unpacking today.

A-Squared (3:09)

Yeah. This is the part that blows my mind.

SPEAKER_2 (3:11)

Right. Because the cold hard data shows that if an investor had actually possessed the superhuman emotional discipline to follow Raskob's exact advice, just patiently putting in $15 a month, right through the absolute terrifying apocalyptic bottom of the Great Depression.

A-Squared (3:30)

Which would have been terrifying.

SPEAKER_2 (3:31)

Oh, completely. But if they did it, their wealth accumulation would have actually exceeded someone who put the exact same amount of money into supposedly safe United States Treasury bills in less than four years.

A-Squared (3:43)

Okay, wait. That is the part that completely short-circuits my brain. I mean, in less than four years, the person buying into the greatest economic collapse in human history beats the person hiding in government cash.

SPEAKER_2 (3:54)

Yes, exactly. Because they were buying those shares at a historic discount. They were buying the structural foundation of the American economy for pennies. Yeah. And by 1949, their stock portfolio would have returned nearly 8% annually, completely doubling the return of those safe bonds.

And after 30 years, that $15 a month grew to over $60,000, which just totally dwarfed the returns of anyone who had fled to cash.

A-Squared (4:21)