Saturday, July 19, 2014

Quotes from the Book: The Great Depression: A Diary, by Benjamin Roth (2009)

pg. 168  Roth reiterating the investment principles of banker George F. Baker:
     "1.  He always bought sound stocks and bonds when they were offered below intrinsic value.
     2.  He always had liquid cash for such a purpose.
     3.  After he bought such stocks and bonds he held on 'until the cows came home.'  He never tried to catch the market swings.  He simply bought when bargains were offered.  He never sold unless the stock market was going bad or the price offered was too good to refuse."  

pg. 204  Roth discusses another investment strategy from the author Morrell Walker's book, Art of Investment (1922), who believed that certain safeguards can be built up against risk:
     a.  Study the current business cycle you are in,
     b.  When speculation is highest, switch securities to liquid assets by moving out of common stock to short-term bonds,
     c.  When the downward sing has started, switch from short-term bonds or treasury bonds to long-term bonds,
     d.  When the bottom is reached and signs of upturn begin to appear, use the saved liquid and put back into securities, switch the long-term bonds to common stocks.

pg. 21  "I repeat it again and again - he must have liquid capital in time of depression to buy the bargains and then he must sell before the next crash... buying stocks when they are selling far below their intrinsic value and... selling his stocks... at prices far above their intrinsic value- such an investor will pretty nearly hit the bull's eye."

pg. 28  "In prosperous times a man must be cautious and preserve his capital and be careful not to over expand his business or to go too deeply in debt relying on a continuation of good business to pay the debt."

pg. 85  Comparisons the author made to economic conditions in 1873 to 1929-1934:
     "1.  The 1873 panic was preceded by Civil War- then 8 or 9 years of hectic prosperity, speculation, rising prices, corruption in government- and then sudden panic, bank closings, etc.
     2.  In both 1873 [and in the 1930's] the farmers revolted for higher prices.
     3.  Organized movements to stop foreclosures.
     4.  Wild schemes to inflate currency, greenbacks, etc.
     5.  Talk against tariffs.  (aka taxes)
     6.  Untold unemployment and suffering and considerable radical talk about capitalistic system, socialism, etc.- a change of political parties."
   "The panic of 1873 lasted 5-6 years," and the Great Depression started in Fall 1929 and lasted through the early to mid 1930's, in which 4 years were hard until they started seeing true signs of recovery.

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