In the Great Depression, some people remained rich. How did they do it? I don’t just mean people who got through ok, but those who kept their wealth and possibly even got wealthier. What are the factual reasons why such tactics would/wouldn’t work today?
Huh? I’m not really following the latter part of your question. But the answer to the first part is simple: they didn’t have money in the stock market, they weren’t dependent on savings held in banks that failed, and their assets were such that they could live off the principle until things settled down. It’s not like anything tangible disappeared in the Depression. The only thing that vanished was consumer confidence. The very wealthy will always ride out something like a depression with little care. Land and property owned outright rarely disappear.
First, those people had a lot of tangible assets (vs stocks and bonds). The stock market was fueled by massive speculation before the Depression, and those who were neither interested in stocks, or saw what was coming, put their money in things like precious metals, cash or real estate.
Second, during the Depression, demand was low and supply was high. So prices were generally depressed, at least in real terms. The people that still had tangible assets (something worth trading) could get a pretty good value from desparate sellers.
Also, remember, it’s not as if ~everyone~ was suddenly unemployed and ~everything~ was suddenly worthless. Sure, consumer confidence was totally shot, but most people still had jobs, even if it was working on the family farm. There were some solid companies that sold everyday items that did well enough. Those were good companies to invest in at the time. The ones that were overextended on credit went under, but the good companies eventually expanded to fill the gaps.
If you had liquidity the depression was a great time to pick up things that people had to sell regardless of price. Just like a year or so from now would be a good time to pick up some real estate for around 40% off the bubble.
My late grandfather bought a house in 1933 for $6000. It had been built in 1924, at a cost of $24000!
So yes, if you had cash, things were incredibly cheap in the depression. Those who had cash emerged as very wealthy, once WWII got started!
Including stock. If you were savvy enough to buy stock in 1932, you could become rich indeed in subsequent years, off of a quite small base.
Of course, if you bought stock in 1928 . . .
My grandfather played pro baseball and was employed through the depression. My aunt tells me that they considered themselves lucky in his having a job. I believe he was wealthy before the depression hit, but I’m sure having a steady income helped.
The rich were hit hard too, especially those whose wealth was mainly in stocks or in banks and other financial institutions that were pulled down by the crash. But a handful of people were prescient enough to either get out of the stock market or sell short. Joseph Kennedy actually made money off the crash.
BTW: 1933 might have been a good time to buy stock in sound companies cheap, but I’d heard there was another stock slip in 1938. What was that all about?
Charlie Chaplin was OK during the depression because he liquidated his stock in favor of gold a few months before the crash. Just one example.
Not surprising–there was a nasty slide back into recession in 1937-38 after four years of recovery. Even at its 1938 trough, however, the DJIA was at about two and a half times its 1932 trough.
Quite true. My mother’s family owned a large baking concern and during times of poverty, bread was a staple good for most people. So their family was quite well-to-do during the depression.