Bogleheads® on Investing 096: Meb Faber, Investing in America: The Rise of the 250-year Bull Market

Welcome everyone to the 96th edition of Bogleheads on investing. Today our special guest is Meb Faber. Meb is the co-founder and chief investment officer of Cambria Investment Management and the host of the Meb Faber Show podcast. He has authored numerous white papers and books including Investing in America, The Rise of the 250-year bull market, which is the topic of our discussion tonight. >> [music] >> Hi everyone. My name is Rick Ferri and I am the co-host of Bogleheads on investing. John Luskin is the other host and we're now switching back and forth to bring you a greater variety of topics and guests. This episode, as with all episodes, is brought to you by the John C. Bogle Center for Financial Literacy, a non-profit organization that is building a world of well-informed, capable, and empowered investors. Visit the Bogle Center at boglecenter.net where you will find a treasure trove of information including transcripts of these podcasts. One announcement before we get started. The 2026 Bogleheads conference will be held Friday, November 13th through Sunday, November 15th at the Green Valley Ranch Resort and Spa in Henderson, Nevada. Just a 15-minute ride from the Harry Reid International Airport in Las Vegas. Claim your seat at boglecenter.net but do it soon because we are almost sold out. Every year we get more people, more speakers talking about more topics. You don't want to miss it. See you there. Today our special guest is Meb Faber, the co-founder and chief investment officer of Cambria Investment Management and the host of the Meb Faber Show podcast. Meb has authored numerous white papers and books, including the book that we're going to be discussing today, Investing in America, The Rise of the 250-Year Bull Market. Another service that Meb offers for free is called The Idea Farm, which is an institutional research curation service that he offers free to anyone who signs up for the weekly newsletter, and I highly recommend it. So, with no further ado, let's welcome Meb Faber. Meb, it's great to have you on Bogleheads on Investing. >> So good to be here, bud. >> You know, I've been following you for years. We've known each other for many years, and then you came up with this fabulous idea called The Idea Farm. Anyone can sign up for the distribution list, it's free. Tell us the concept behind The Idea Farm. >> Yeah, as a professional investors, we're stuck with this problem, which is this massive information thrown at us every day. You know, CNBC, newspapers, and now it's social media and Twitter and everything else, and it's just noise, noise, noise. And I know that you and the Bogleheads can all relate to this, especially, is that, you know, investing doesn't have to be super complicated. So, I think it's like over a decade now, I said, "I wish someone out there would curate this, and I just want to see the top one or two academic papers." And there were a couple people that were writing about them, our buddy Wes Gray and other people were summarizing, but I said, "You know, but sometimes it's a magazine article, sometimes it's a book, sometimes it's a podcast. Like, I just want the two or three things that I need to read this week." Like you, my mission, you know, democratizing investing, making it available to everyone. So, now it goes out to, I don't know, 150,000 people. >> Wow. >> But once a week, but I said, "Look, I do all this work curating. I just want to read the two best things from Goldman or Bridgewater or academic podcast, could be from anywhere. Two or three best things this week that are must reads, and then, you know, it's evolved over the years. And so, Sunday with my coffee, with my Barron's, uh we sit down, we send out this email. And like you mentioned, it's free. It's a labor of love. We've been doing it for over a decade. The cool part is the website now has archives. So, if you go on to go on there and search macro or Vanguard or podcast, we even have Spotify playlist. So, I say, if you actually want to get a modern-day MBA, don't don't go to Harvard, y'all. You know, don't waste all this money. You can just go subscribe the Idea Farm. You can even throw all of them into an AI and just talk to it. Say, "Hey, here's my Mount Rushmore of, you know, research and and podcast playlist, too." >> Uh the website is the ideafarm.com. And if you want to get the email from Meb, uh you just sign up, and it shows up in your inbox. And it's not as though we're trying to outperform the markets or pick the next sector or get into bonds to get out of bonds. It's just really top-shelf uh research done by the top firms in the country. And it's all done right there for you. You We don't have to go out and find this stuff. I mean, Meb just gives it to us in our inbox once a week. So, I I really enjoy getting that and looking at it and see what you've come up with that week. But today, we're talking about your new book. Do you have You're an author. You've written several books. But this book was really unique. I mean, I as I heard about this book, I think I got it in one of your emails. And I said, "That is a great idea. Investing in America, the rise of the 250-year bull market." Uh coffee table type book for people like me who are market geeks, who love to look at charts, and take a little bit at a time, uh and read a little bit at a time. Uh tell me, how did you come up with this idea? >> Go back to COVID period. The beaches are closed. You know, nobody can do anything and we looked around and if we know anything about Americans, they're risk-takers and in some good ways and some bad ways. Great in entrepreneurship, not so great doing things like sports betting. When sports closed, no one could risk and bet on sports, these young folks and so what did they do? They started paying attention to stock market. So in my mind, amazing, right? Like I cut my teeth in the bull market of the '90s, that great bubble. I was trading stocks in college. You know, I look back and I and I say, "Look, this is a good thing people are getting into the markets, but they're learning the wrong wrong lesson. They're getting led to these markets through the casino doors, right? You got this app that's shooting confetti cannons every time you make a trade and investors are getting excited about meme stocks and they're getting excited about now it's prediction markets and and I get so frustrated and say, "No, no, no. The story is much better than that. It's much simpler than that, you know? And so my son's nine and I was joking with him, you know, not too long ago when I wrote this book. I said, "You know how many books I wrote before you were born?" He's like, "How many?" I was like, "Seven." I said, "Do you know how many I've written since you're born?" He said, "How many?" I said, "Zero." But it's time to put pen back to paper. I wanted these young investors to understand that the story is much better than any of this. Like they don't have to day trade. They don't have to gamble with their money. You can make a little money, you put it to work. There's this magical compounding that happens over time despite all the terrible, horrible events that have happened in history. And a little secret, Rick, I've actually written two coffee table books and the first one to come out is the American one. The second one to come out, which I actually wrote first, is a global history of stock markets back to 1600. >> What what is the name of that? >> It'll be called Time Billionaires. And again, focused on on young people, but I said, "Oh man, we got a big birthday coming up. You know, everyone's going to be patriotic celebrating this 250. Let's do the US version." And so that one was a little more time sensitive, but the global one will come out come out soon cuz there's, you know, 200 years before America even existed where there were, you know, real securities markets trading trading stocks. >> Yes. >> And the one chart you've been into many a financial advisor's office, but there's that chart in most offices that's got the beautiful line of the stock market going up over time. >> Right. >> The crisis events, you know. >> Sure. >> And I said, "Let's take that, but let's take it back to 1800." Cuz there's another 100 years of stock returns. And I said, "There's a lot of crazy stuff that happened in the 1800s." So the way we did the book is we zoom in on every decade and say, "Oh my gosh, look at Civil War, World War I, pandemics." And then zoom out and say, "If you just left your money in for 20, 50 years, >> Mhm. >> you'd barely even notice some of these things." >> Getting data going back to the 1800s, what data set did you use? >> Yeah. We often joke when when you're being a good investor, you got to be part historian just to know what's happened in the past, right? But so for the young people, you know, you've only or professionals, you start your career in your mid-20s, you're middle-aged now, you know, you're 40 or something and you've only lived in one environment, which is stocks up. And so looking at the kind of the long history, we know that's not always the case. It's not always uh roses and honey and milk and just 15% per year, but we all live our own um you know, personal existence. So if you extrapolate from living in Japan or, you know, Russia or China or Brazil, you've had a totally different experience. This is true throughout history. Anyway, so data. So part historian just to know what has happened. We we include a quote in the book from George Martin, Game of Thrones fans listeners, no spoiler alerts, but you know, a a journalist asked him they're like, how do you come up with all these kind of really violent and crazy events in your novels? Like you got a sick mind. He's like, oh no, no, just just to be clear, it's been much worse in history, like in the real world, right? Like like this this is nothing compared to what has happened. And so kind of when we talk about being a historian, having the base case of understanding, hey look, I'm a stock investor. I think every American should be investing in stocks, but every once in a while you lose 30, every every once in a once in a while you lose 50, and one time, you know, in our history, you lost over 80 drawdown. And yet during that period, and you look at this long-term chart, it's sustainable and survivable. So, the further you go back, the data gets worse, harder to to study. There's about four or five, you know, academics who have the Siegels of the world, you have the McQuarries of the world, you have Arnotts of the world, on and on, all these people, Brian Taylor of um Fama-French, and all these people, these academics that have compiled these, you know, series, and to me, it's it's less important what's to the right of the decimal point. Like, hey, did stocks do 8.653%? It's just like, hey, did stocks do 8 to 10, or did they do two? And so, we we chose the series from Fama-French, the biggest, the largest caps, the market cap. Despite all that, you know, there's very big differences in the 19th century versus the 20th century. Almost no one was an investor, you couldn't index, right? There was no Bogle of the 19th century. Low cost wasn't really a thing. The point was to try to get this concept of being an owner, this ownership mentality, and what that would have done with compounding over time if you could express it. But even then, of course, like today, it would have been hard. >> Well, you also did it in two series. You did it nominally, and you did it inflation adjusted, which I really appreciate. But I have But I have one question about the very first stock in the United States. When were you actually able to start collecting stock data for the US? >> I want to even take it back further, and then I'll answer your question. Almost everyone assumes that America was founded a lot of immigrants came over from Europe and other places, and hey, we're we're escaping religious persecution, we want some freedom, and all these things may be true, but a lot of the expeditions were for-profit companies funded called joint stock companies, just called stocks today. And why is this important? It's because a couple hundred years ago, if you got on a ship and you were going to do a voyage, like first of all, that's expensive. Second of all, there might be pirates, there might be a hurricane, that ship sinks, like too bad, you lost all your money. Or you could diversify. So, this is hundreds of years before modern portfolio theory, but you said, "Hey, if I can invest a little bit in 10 ships, well, actually, that makes a lot more sense than investing all my money on one ship." And so, they started these companies, and so, a lot of America, Hudson's Bay Company, Virginia Company, on and on, were expeditions funded for-profit. But And I'll answer your question. Starting in 1800, late 1700s, it was banks, right? So, the first bank, second bank, you know, they eventually fail. And then by the the rest of the century, you look at the numbers start to increase. In Philly, actually, I think was uh predated the New York Stock Exchange. So, it was just banks, financials, then eventually developed into railroads, canals, industrials, and of course, all the tech stocks we love today. >> Today, we talk about the concentration of technology stocks in the US stock market, but back in the 1900 early 1900s, it was much more concentrated than that. It was mostly all rail. And uh a few other industries. Uh now it's actually much more diversified than it used to be. There's another table where you show the top stocks over uh various uh decades. And I I always find that interesting because if we go back five decades, there's top stocks were Exxon Mobil, Standard Oil, Shell. I mean, there was a lot of energy stocks which were the top stocks. Move forward 50 years and or things have rotated around. So, I mean, it's it's an evolving market. And that comes out in your book. We've got 25 or segments, if you will, of the book from 1800 through today. And so each decade, you list out a couple of key events that happened. And then, you know, what happened to the stock market during that 10-year period. So, let's go ahead and start out with some of the things that struck you over this 250-year period. >> If you look back in history, and you mentioned this per decades analysis, and that's fun because you you look at back at times and and try to extrapolate from hey, we're all in on these Mag 7, we're all in on tech stocks in the US, and it was not too long ago that the names were different. So, there's one fun chart we like was like the key milestones every kind of 10x. So, Bank in North America was the first stock to be a $1 million market cap, then the Bank of the US, the New York Central Railroad, names that no one like even remembers anymore. And then AT&T, that was the first billion-dollar company, GM, GE, Apple was the first trillion. And then, of course, the first 10 trillion. Rick, where are you going to put your bets? Is it going to be SpaceX? Something that we don't know? What what what what's it going to be? >> I I'll go with Google. >> I'm going to say Elon's teleportation company that he hasn't uh he hasn't launched yet. That's going to be mine so so quick transit to Mars. But the point being is that the creative destruction of markets has always been the story. The hot tech stocks of our parents generation were computers or maybe electronics or maybe plastics, you know, to quote a movie. But even to go back, you know, the generation before that, there was canal stocks and railroads. Professor Shiller has great paper on the 1920s where he talks about how these massive run-up in boring old railroads and utilities, right? Those were the indices back then that, you know, people got all hot and bothered about. Anyway, let's take it back to 1800. You got to make a few clarifying statements, of course. The first being is that, hey, like 1% of people were investors. It wasn't the majority of the population today, you know, we joke in you know, the intro where we're talking about, you know, taking a a Waymo locally here in LA. And I'm like, just imagine trying to tell someone that a couple hundred years ago. They're like, not what's a self-driving car, they're like, what's a car? You know, so yeah. Anyway, you go back, but you understand this this something in the DNA of Americans, first of all. If you go to other countries in the world and you ask them, is it a good idea to invest or how much do you put in stocks? Is it a good idea to be an entrepreneur? You know, in US it's like 90% say yes. You go to Japan, you go to Europe, other places, and the answer is different. Like failure is is very much an accepted and celebrated part of our culture, which I feel like is somewhat unique in the world. Anyway, but you go back to 1800s, man. You got to remember, you know, we didn't look like what it looks like today. And so we talk about how part of the US was founded by for-profit motives. Like a lot of people don't know that. It was founded by capitalism and exploration. >> Absolutely. >> But it's also acquired, right? If you look at Thomas Jefferson and others, Louisiana Purchase, Alaska, a lot of these other territories combined, you know, maybe it's Greenland next time we talk in I don't know in a few [laughter] years. But but but the point being is that, you know, there was also, you know, a a lot of additions to to to the way it works. So, one of my favorite parts of the book is the sidebar quotes. A lot of the old ones from, you know, they're very kind of inspiring and patriotic in my mind, but 1800 1810, you know, that was the Louisiana Purchase decade, right? Um early industrialization and you start to look at, you know, kind of what was happening and it's it's things were kicking off. You also got to remember most investors in the 19th century were were bond investors. And they they invested for the income. Now, that's not too different than today. However, and we need another hour for this, Rick, cuz I I this is like my funny bone topic. The amount of people that invest in stocks back then, they they partially did it for the income, right? But stocks yielded you know, 6 7 8%. >> More than bonds. >> And today, stocks hit an all-time low dividend yield of 1.05%. I keep watching to see if it crosses below 1% on the S&P. Now, there's some reasons for that. Part of it is buybacks, part of it is just the market is, you know, broadly expensive. It's going up a bunch. But people often really invested in stocks for the concept of income. And only really when the speculative manias kicked up did they get all hot and bothered about price appreciation. And usually to their detriment, like we all know that story, right? Like over and over and over again. >> No, I think also taxes have something to do with that. You get a break tax break for delaying paying taxes on long-term gains. And we have you have to look at the after-tax return of interest income. We have to look at the after-tax return of a dividend. We have to look at the after-tax Oh, when you would actually pay the tax on a capital gain and it does make a difference I think in where people put their money. >> a monumental difference Rick and one of the things that you and I probably agree about more than anything is that like you mentioned real returns after inflation but it's also after taxes and after fees. >> Absolutely, sure. >> you can eat and so we talk about this in the very beginning of the book because so many investors want to go spend that income. They want to spend their their dividends and I say look, you know, to get that in the very first chapter of the book I'm like to get that historical return to really compound you have to reinvest those dividends. Like you can't just go magically spend them. You can but you're not going to get the same appreciation you would as if you uh you know, reinvested them and so that being kind of a key lesson from the very get-go you end up with a very different ending balance if you if you go spend it on pina coladas in in Cabo. >> Uh well, we've got to really quickly kind of fly through all 250 years but there's one thing I wanted to really bring out and you're going to hit on as we move along on this timeline all of the good things that happened in the country and the bad things that happened and but it's the inflation-adjusted return that I really want to focus on. Some decades we didn't have any inflation and some decades we had high inflation. So what you did is you stripped out the inflation rate and gave us in the book two sets. You gave us nominal and you gave us inflation-adjusted but what's really interesting to me is the inflation-adjusted return decade by decade because some of the decades I would have expected the return to be quite low. Actually, it was not bad. And and so uh 1800s for example I guess there wasn't much inflation. The nominal return and the real return was 8% compounded in the stocks that were available and we know very few. And then you have this future. You look forward 50 years, and you said from that point, what was the inflation-adjusted return over the next 50 years? And I really want to focus on the 50-year number. So, I'm going to round here. Uh by 18 10, the future 50-year return of the market, inflation-adjusted, compounded at 5%. Okay, that's a starting point for this conversation, really. 5%. >> You know, if if you're listening and you're getting a little lost on what Rick and I are talking about, you know, since I've been born, my entire lifetime has been in the modern fiat era, but things look very different with currencies for the past um couple hundred years and the thousand or 2,000 years before that, where, you know, currencies rise and fall, inflation's, hyperinflations, deflations, tied to precious metals. And so, for the vast majority of this period, the US was tied, you know, in some form or another to the gold standard. And creates all sorts of host of problems and challenges, etc. And in many ways, for a good part of the 19th century, the US was an emerging market. You know, if you and I were sitting around, you know, sipping on tea in the Boston Harbor in, you know, 1799, I don't think any of us would have predicted the US is going to be 2/3 of the world's market cap by the time we sit down today, but here we are. And so, I think the challenges of looking at inflation and deflation has always been the hardest part for an investor. For a lot of that period, it was pretty volatile, right? You had these booms and busts in the economy. You had periods where you had uh outright deflation. And you're now getting into a philosophical argument, which is, you know, what is the right level of inflation? What should we be targeting if anything? Should it be zero? Should it be 2%? We were joking with Jim Grant on the podcast recently and he's like what you call deflation I call progress. And so there's a very interesting takes on how to think about but all that matters it's it's like any tax rule that gets passed or any politician that's passing regulatory like there's always going to be someone who benefits, you know, almost always and someone who doesn't. And so looking back at this like deflation inflation really inflation really hurts the bond investor. Just crushes fixed income returns. Can really be problematic. But at the same time can also really impact the equity investor. And so you've had periods I'm sure as you talk to your kids, you know, or or even this point grandkids and they're moaning about their 5% mortgage. You say, my god, you know, people used to people used to pay 15 15% mortgages not too long ago. So >> Right. >> It wasn't too long ago. I think my first mortgage was 14% and I want to say that was 83 or something. >> And so if you don't study history, you don't really understand that that like, you know, that can happen. That has been part of the track record. And again, looking back over the 1800s is a very similar vibe, you know, you you find periods. I mean, look, we had a civil war listeners in the 1800s. So trying to quote buy and hold and and survive that with equities and bonds. I mean, you know, you may have had a the old phrase not worth a continental. You know, there were currencies that came and went in the US on and on during this period. So I think that again, we have to tongue and cheek look back at this period. But but but going back to this concept of being an owner and why I think this matters so much. The behavioral science of all of us is that if we have money in our bank account, we're probably going to spend it. You know, that car, that RV, that vacation, that pina colada, whatever. And this is one of the reasons home ownership does so well. It's not because homes are spectacular investments, they can be. It's really, in my mind, is that money that's being forced to go into your mortgage that otherwise would be spent. And the same is true with stocks. You you're translating your human capital, and we have a chart of this in the book, from your time, your income into these investments, and you know, it was hard to do in the early 19th century, but if you could, being a business owner was was the way to go. >> So, we're going to move through this through the decades here a little bit, and just I want to just read off what the returns were, you know, per decade, and just stop me when you want to talk about uh one of these periods. Uh in the uh second decade of the 1800s, uh the after the the annual returns of stocks went that high. We had a really big run up, and then there was a crash that occurred in around 1819. Uh but the still the compounded return after inflation was about 1.2%. In the future going forward after that, it then actually jumped up a little bit from previous 10 years. It now jumped up to 6.2. So, now we get into uh the 1820s to 1829. Uh you put down the the era of the Erie Canal, and Wall Street actually comes on on scene at that point. We actually have a a stock market at this point. And uh we had a really great decade that decade. Uh the return of stocks uh were was uh the annual return was 5. 8, but the after inflation return was 7.9. So, why? Well, because we had deflation, like you were talking about, which I found interesting. But over the next 50 years after that, what happened in the stock market was we had about a 7% real compounded rate of return. And I just think this number keeps coming up over and over and over between 5% 7%. 50 years out, 50 years out, 50 years out. The uh the equity risk premium over inflation, if you wish to call it that. So, uh we managed to get through the 1820s and we got to the 1830s. And here the rise of the railroads and the bank wars. Let me talk a little bit about that. >> Yeah, there's a lot of fun little tidbits. You know, one of which we included in the book was that, you know, the the currencies didn't used to say in God we trust. It actually used to say mind your business. And a little bit before [laughter] that is time is short, mind your business, which I I would love to see back on the currency. I love that. I think it's great. Um you know, if you look at the 19th century, it was certainly a time of kind of panics, booms, and busts. You got to remember people like there's no cars, there's no airplanes. Like you're you're chatting with telegraph, like the telephones being invented. All these, you know, conventions we take for granted today. I was just with my son recently. We saw a a telephone booth. And I was trying to explain to him how it worked. >> [laughter] >> Never seen one. He's like, well, why would you need anyway? Um so, it's easy to take for granted where we are today and looking back at kind of these turbulent decades of the past. And I was like, think about disruption. I was like, early in the period of our republic, firewood was a quarter of GDP. So, looking back at this period, I mean, you have this giant industrial engine coming online. So, very much a build up, right? This is the industrialization of America. >> Yeah, and so the rate of return during the 1880 period, first half of the 1880s, a good return, you know, relative to the inflation rate and then over the next 50 years from 1850 through 1900 uh we're looking at a a rate of return after inflation of about 7.7% from stocks. Now, that is just just right in line with the risk premium that you would think for in emerging market. Not maybe not for in a developed market, but for in emerging market. >> One of the comments I did want to make real quick was Elroy Dimson who wrote Triumph of the Optimists, really my favorite investing book, picture book over the years. I always go back to the default rule of thumb on equities where I'm like globally historically they've been somewhat around 5% real and the US has been one of the best, right? If you look at the distribution like US has been one of the best performers. XUS not quite as good for the last 100 200 years, but there's also 200 years of history before the US. And trying to put it in perspective of you know, hey that that sector you talked about the chart of the US being an emerging market you know, it's now a 25% of world GDP, but 2/3 of world market cap and you've had this just massive run which is in the subtitle of the book, 250 year bull market. But also putting that a little bit in context and saying, okay, well were we the outlier, you know, can we expect us to outperform everything in the future forever? Maybe not always. Maybe at some points, but going back in these periods I think gives us some humility as we know like you look through these periods and try to walk through what was it like to invest in these periods? Like try to just picture and I think that's a a useful exercise. It's not quite the same as losing half your money in the real world, but at least stepping through you know, this concept I think is is really important. >> I think there's one decade that I want to highlight and and I I I got this wrong. If you would have asked me, "What did stocks do when the Civil War broke out?" And that period uh when the Civil War was going on, what uh you know, what did the stock market do? I would have said, "Well, obviously the whole country is in flames. I mean, it's it went It must have gone down." Well, boy, would I have been wrong. In fact, during that period of time, the stock market doubled in value, which uh kind of opened my eyes to, "Oh, yeah, well, war is actually good for companies." And I found that over and over again as I looked at World War II and uh Vietnam and that war uh causes more bull markets than bear markets. Maybe not initially. Maybe when the first shots are fired, but shortly thereafter, the government starts spending money and and and and the stock market reacts to that. So, uh during that period of time, uh the stock market the year of the decade of the Civil War, the market gave us an annualized return of 12% annualized, nominally, which was inflation-adjusted a little over seven. We had high inflation during that period of time, during the war years. Going forward over the next 50 years, the return of the market after that was a 7% compounded return. Again, getting right back to that and kind of emerging market real return number. And then we move on to the rest of the 1800s. We had a period of time in the late 1870s where the market literally doubled in value again over a period of 3 years, basically from 1878 to 1880. And I couldn't find anywhere where you know, what was the cause of that? >> well, there was a giant panic in the 1870s and um we we recently did a a chat with Liaquat Ahamed who wrote Lords of Finance and recently just published a book. I think it's out, maybe not out yet, 1873, which he calls the first truly global crisis. And it didn't quite affect the US as much. You mentioned some of the returns here, but in Europe was uh you know, a a big speculative boom and then kind of bust that went on during this period. Really fun read, you know, you get all sorts of intertwining themes of that time, the Rothschilds, anti-Semitism, you know, really starting to take root in Europe, uh all these different threads and it reads like uh a thriller where it's really just, you know, a finance history book. But this period, if you actually, you know, 1873 was actually a a big panic. But again, like this lesson we just keep hammering into, you know, our brains is despite the geopolitical news, despite something terrible happening, stocks withstood and and actually went up in the period. Kind of a surprise to a lot of people, a lot of famous names from this period, Jay Gould and others, but it affected the US less, I think, than than the rest of the world. >> This was the time of John D. Rockefeller, Andrew Carnegie, >> and the birth of America's great corporate giants all happened coming out of this crisis. >> And and and part of this late-19th-century period was also the advent of some of the first stock-based indices where they, you know, the Charles Dow, who started the Wall Street Journal, started the industrial average and as a way to track kind of what was going on with the market and we all know it's a little curious today. We try to you know, laugh and and poke elbows about it being a price base index, but even at the time, you know, at least like that was one way to be able to track what's going on in this ticker tape world. >> In the last 20 years of 1800s uh we had the rise of the mass consumer market and big technology breakthroughs and electricity the telephone uh the market reacted to that very positively. And during the 1880s again I went up during that period of time compounded at about 6% return, but inflation adjusted also 6% so there was no inflation during that period of time. And again looking forward over the next 50 years, 7.25% return over the next 50 years. So uh that quite quite amazing the last the last decade of the 1800s we had a compounded return of 9% nominally and basically 9% inflation adjusted. Looking forward 50 years after that it was 6% inflation adjusted and lots of things going on. You know, the Spanish-American War begins and again you would think oh the market's going to go down and and it surged when the Spanish-American War started and so you just so many misconceptions we have about what must have happened in the market when things occurred and then you actually look at the data and you find out that you were wrong and that the opposite happened. >> All you got to do Rick is just ignore all the bad news, you know, if we just had a special magical, you know, teleportation that Elon's coming up with 50 years from now. We just get that 50% 50 year annualized return and the hardest part is we all know even I mean it's worse today is being able to zoom out and say how do I withstand these downturns?" The path matters. You You know, for many people it is that you got a mortgage, you got kids, you got college, and all of a sudden the market goes down 30. How many people do you know in 2009 said, "I sold everything. I couldn't take it anymore." >> Yeah, I know I know people who did that. Yep. >> 20 2010 2012 2014 said, "I never got back in. I just I I was waiting for the right time. I never got back in." And it's heartbreaking cuz it's easy to look at these charts and say, "Oh, yeah." You know, you're 20 or 30 or 40 or 50 or 60 years old, you know, and it's it's it's the reality is much much tougher. >> So, let's get into the 1900s. >> Oh, baby, here we are. >> Beginning of the 1900s, we have some sort of monetary policies going on with the Gold Standard Act trying to get our fiscal house in order. And that started out well perhaps, but then led to a a crisis, the panic of 1907. Real bad bear market. But, despite this, the first 10 years of the 1900s, we had a 10.7% annualized return from stocks. Inflation-adjusted, that was 8%. So, again, uh a lot of volatility, but still good returns. And then going forward from there, over the next 50 years, again, 7.6. Keep going back to that number. 7% real return long-term from equity, at least during this period of when we were emerging. >> You But, you know what number you know that number is not you don't see in the book is 15% returns, which is what we've experienced since 2009, which is great. You know, we we say this to listeners, put this in perspective. And this this chapter may have my favorite sidebar called the mark This market is the worst. And I said, "Look, there's been four times in the past 100 years where US stocks on a 10-year rolling basis have done 15% for an extended period." It was the 1920s, which we'll get to in a minute, the the Nifty 50 period, the internet bubble, and then today. And the point is not that the market has to crash, it has to go down. The point is, hey, just pat yourself on the back and just put this in terms of history. Maybe you shouldn't expect 15% returns. And even looking back, you know, every investor always loves to talk about how hard they've had it, right? Like, oh, I had to live through GFC, I had to live through the dot com bust, whatever it may be. And I say, the beauty of history in the the sidebar we used from 1900 is as my my grandfather was named Mebane. And I said, just imagine what this person had to live through, right? Like, and the world events that happened during this this period, right? By the time you're 14, hey, it's World War I, the first truly global conflict. Spanish flu then just knocked off 50 million people around the world. Guess what? Then you got World War II, right? The Holocaust, on and on. And then I was like, you know, and but also imagine if you were trying to invest in Russia or China. Guess what? Communists closed the stock markets, gone, right? Zeros. And so, all these periods of of kind of trying to walk through what it went like. And yet, you know, you can look at the zoom out on the chart, and you're like, wow, this period was actually pretty good if you're [laughter] if you're an owner, you know? If you own the market, guess what? You did you did just fine. >> World War I starts in 1914, and the market goes up about 80%, and and it's up about 80% by the time by the war ends. That period. And then let's get to one of the most talked about periods in stock market history, which is the roaring 20s. And people like Ed Yardeni are talking about the roaring 20s again, only this time it's 2020s, but here we are from 1920 to 1929. Technology and consumer revolution, post-World War I boom, the roaring 20s bull market, and then something terrible happened at the end, but I want to get to that in a minute. Let's get the lead-up first. >> I mean, how fun would it have been? You know, I I I think I would have loved to been around the 1920s. It looks like a a big old party. >> It seems like it. >> Yeah, I I want to mention a fun stat. Academic Hank Bessembinder wrote a fun book called "Do Stocks Outperform T-Bills?" which really speaks to the whole Bogle said Boglehead concept of investing in the broad market cap index is very few percentage of the broad market generates all the returns. So, one way to to capture that, of course, is to own everything. But, also he wrote a fun paper later where he looked at all the best-performing stocks, and there's a couple takeaways. One, if you look at the top 10, a lot of investors may never even heard of some of these names. And the number one was uh Altria, which was formerly known as as Philip Morris, but if you put a thousand bucks in this stock uh 100 years ago, it'd be worth two and a half billion today. Now, you couldn't spend those dividends. You couldn't go pay taxes. All those pesky things. But, the point being, there's been like a hundred stocks that have had a 500,000% return. But, the crazy part about this is you would I think most listeners would assume that you would have had to have compounded at 20, 25, 30, 40% per year. But, the reality was most of these were stock market index-like. It was like low teens, right? It wasn't like that they just were massive out-performers. It's really that they compounded and existed, right? They didn't go away. And so, that's part of the index sort of idea is that if you just put it to work, that right tail by the time it gets to the later years is is really steep. And so, during this period, of course, you know, you had the the big haymaker, the just massive lead-up to the party ending. And I want to read this quote cuz uh this is probably this might be my favorite quote in the book. And you got to stick with me, listeners, for a second. It's from Adam Smith, not not the Scottish economist, but uh the pen name of a of a novelist who penned some really great books. If you haven't read any of his books, look him up on Amazon. And here's the quote. He says, and this is to really put this into period and in in line, and maybe some rhymes today. He says, "We're all at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know by the rules that at some moment the black horsemen will come shattering through the great terrace doors, wrecking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there's still time, so that everyone keeps asking, 'What time is it? What time is it?' But none of the clocks have hands." And so this is kind of really talking about this period of euphoria and, you know, the the 1920s, this boom. And eventually, you know, the party party ends. You can't really talk about the 1920s without then talking about the 1930s. >> 1929 bad year, but not bad. I mean, actually, uh if you would have invested your money at the end of 1928, by the end of 1929, you would have had the same amount of money. What happened was it ran way up and then it came right down, at least in 1929. The real damage actually occurred 1930, 1931, and into 1932. That's when the damage occurred. Uh the market lost all of its value then, not it wasn't 19 29. But still, uh you know, in the 1920s, for the whole entire decade, uh the after inflation returns compounded at 15%. It was a very good decade, similar to 2010 to 2020, that we'll get to in a minute here. And the future returns from there, even though it went sky-high, okay, sky-high and it hadn't come down much. Uh compounded over the next 50 years was 5.4% over the inflation rate. So, even if you invested at the peak or close to the peak, over the next 50 years, you still would have gotten over 5% inflation-adjusted, which is amazing. From 1929, 1930s were not so good, but still, strangely, if you held onto stocks for the entire decade, after inflation, you still compounded at a 3.7% compounded returns during that decade. >> Piece of cake, Rick. We just We just close our eyes, you and I will be in our hundreds. >> [laughter] >> But again, that's the hard part. If we could all just put it in a lockbox, lock the key, say, "You can't mess with this, you'll be spectacularly rich." You know, the 10% return after 25 years, you 10x your money, and after 50, you 100x. And trying to put that into young people's heads and say, "Look, you know, that that $1,000 you're about to spend is a 100 grand in 50 years. And, you know, if you can save 10 grand, hey, you know, you're probably going to be a millionaire. You just got to put it away." And that to me is kind of the the main point of this whole story is you need a long a long hill, as Buffett says. >> Long long perspective. Now, I'm not in the 10% range. I mean, obviously, that would be nominal return. >> Mhm. >> I'm more in the range of, let's call it 5% real return after whatever the inflation rate is. So, if inflation is 2 and 1/2, and you add 5 to it, you're at 7 and 1/2, and I'll you double your money every 10 years at 7 and 1/2%. >> You're You're touching on the real key of all of all investing and really life, Rick, is just set low expectations. Just say, "Hey, I I expect 5% nominal. Fine. And anything above that, gravy. Great." >> That's what my wife tells me all the time. She set low expectations. So, you know, we've been married for 43 years. Yeah. >> There we go. >> [laughter] >> World War II. Oh, bad time, right? War begins. Japanese attack Pearl Harbor. Terrible time. Between the time World War II began and the time it ended in September 1945, the stock market literally doubled in value during that period of time. Again, another period where you wouldn't think it, but it did. And uh the real after-tax return during that decade, 3. 3% due to higher inflation from the war. Uh well, the the future real return after that for the next 50 years was 9.5. So, we had a couple of periods in the 1930s, 1940s where market returns were not that high, but we made up for it uh over the next 50 years. >> Just try to imagine, listeners, like living through that period of atomic bombs, right? You know, these just terrible stories coming out of Europe at the depths of like the Holocaust. And and this is coming off the Great Depression where there's a great book called The Great Depression: A Diary, where you can read about what it was like to live through this period. And it's almost unfathomable how foreign it feels to I think a lot of people today. But studying that period and then still having the mental optimism to say, "Okay, yeah, but I I'm going to invest." Like that takes uh quite a bit more, I think, fortitude than it is when you're at all-time highs, which, you know, we we are today. But at some point that your your metal will be tested with I don't know, could be aliens. That could be bullish, I don't know. Aliens might be bullish. >> Well, let's go into the 1950s cuz this was a unbelievable decade for equity investors. It was also the decade of, you know, mutual funds starting to come around and be accepted. More people coming into the equity markets, but during the 10-year period of time between 1950 and 19 59 that 10-year period, stocks compounded at almost 19% nominally. >> Lord a mercy. >> 16% after inflation. And then going forward after that over the next 50 years, we got a a little over 5% inflation-adjusted return. But it was just an incredible period of time. And that was again, we started out with the Korean War. Didn't seem to make any difference. The market almost went up about 50% during the Korean War. >> Let me make a quick comment there too that I think is it ties it back to today. You know, Korean War happens. Imagine being in that country, country gets chopped in half, you know, you got North Korea, South Korea now. And imagine talking to the South Koreans at that point and saying, "You know what? In about 70 years, so your grandchildren your stock market, so not even the whole country, just half of it is going to be bigger than the UK." And they would say, "What are you talking about? The UK like the great world power? Like what do you mean? You know, why would this tiny little half of this island be bigger?" And here we are today in 2026, the South Korean stock market driven by some very large tech companies is currently bigger than the entire UK stock market, which is astonishing in many ways. My goodness, it sounds unbelievable. >> During the 1960s, we again continued with the bull run, uh Vietnam War, Cuban Missile Crisis, and then the Vietnam War. Uh and finally ending with the moon landing uh in 1969, but we had a another good decade. Uh stocks returned about 7.8% compounded after inflation, 5%. Then over the next 50 years, uh the returns were about 6 and 1/2% real inflation-adjusted returns. Now, we had some things occur in the early 1970s, which were negative for uh the stock market. It caused a lot of volatility. But still during the '70s, stocks still did okay, but not after inflation. So, when you talk about the interesting things that happened during the 1970s? >> You know, you have this period where you just had this romping party in the '50s. And and and you know, it's it's hard to always get the timing. But but the good times following the bad and vice versa is a story as long as, you know, old as time in markets anywhere around the world, any asset class, doesn't matter if it's gold, bonds, stocks. It doesn't always just go straight up to the moon. And and the '50s, I mean, 20% a year almost, my goodness. But you started to have something happen in the '60s and then the 1970s. And you mentioned that the coming off the gold standard and the modern fiat era. You know, to those people experiencing that for the first time and watching bond yields tick up, watch inflation tick up. And all of a sudden, you know, all of a sudden people are saying, "Oh, actually your currency's not backed by anything anymore." Imagine like living through that and being like, "Wait, what are you talking about? Like what what am I going to do? Like what's what's you know, like this modern this this isn't been something we've experienced before. What do we You know, how do we behave? And yet, you had this '70s were like one of the hardest decades ever to be an investor. You know, the '60s you had good returns and all of a sudden this optimism, moon landing. This '70s you had this big energy crisis, right? And so, some some assets did okay, commodities like to the extent you can't really invest in them, but energy stocks. Energy stocks, this is a fun factoid as you look back through history and just putting it into perspective today. Energy as a percentage of the S&P today is less than 5% which to me is an astonishing amount to have that sector be so low, but at one point it was almost a third of the S&P. And so even if you just bought US stocks, you got a partial hedge during some of these periods to energy sort of um you know, commodity based inflation problems, whereas today you don't, right? And it sort of oscillates with tech stocks. So the 1970s, you know, was a brutally tough period and and really illustrates something you talk about that 99% of the investing world doesn't talk about cuz it's harder, which is that nominal to real spread. And and real is all that matters. And Rick, we almost wrote this book only in real terms, but I said, "I don't want to confuse the hell out of a bunch of people, you know?" But the after inflation return in the '70s was a 7% spread, right? The the nominal return looked okay, but that was an illusion. And in reality, you ended up losing money over that decade. >> Yeah, so interesting the 1970s were really the first decade that I came across where the inflation adjusted return was negative. Wasn't that much negative. It was like 0.5% annualized negative. Uh but it was negative because of high inflation. Even though the nominal compounded return annualized was almost a 7%. Inflation was higher than that. However, coming out of that, we have Paul Volcker putting the kibosh on inflation. And the 1980s reacted with a bull run that some people like me might say is still going on. We have annualized returns in from 1980 to 1989 of 17% >> I mean the beauty of the beauty of this Rick is that you think back to the early 80s the death of equities cover on Business Week PE ratio on the stock market was like five right you had all these setups to where you know the sentiment's horrible all these things going on and yet you know it sets the stage for this just massive secular boom for 20 years 50 years right like it just was astonishing time to to be an investor and and what 80s is is one of my favorite decades because the way we do the book listeners if you buy it is that it zooms in on every decade and shows how crazy it was in 1987 you see this 20% drop you know but then you zoom out you can't even find the 1980s crash on the chart right you can you can you can see 2000 2009 1920s 30s but you can't even find 1980s it at stocks actually are up on the year >> Well you know what was funny was they were up 5% in 1987 the the year of the crash but what happened was the beginning of the year they went up a lot and then they came crashing down but by the end of the year they were still up 5% even with the quote unquote crash if you were a long-term investor and had been putting money in the market that whole decade you didn't didn't even feel it or you shouldn't have felt it Uh we got to get to uh the decade of the 1990s I mean this was the best decade in the US stock market uh of almost 20% compounded annual returns 19.9% and inflation had come way down so we got a real return of almost 16 and a half percent during this fabulous decade of the 1990s >> I mean, what a fun period though. I mean, if if you look back, but but but even putting in you're in the 1980s, great decade for stock returns. And yet at the end of the 1980s, everyone in America was having a full-on panic about Japan. Japan was the largest stock market in the world at the end of the 1980s, right? So, this is during our lifetime. This wasn't 100 years ago. And that set the stage for I mean, what? Three decades of terrible Japanese stock returns. I think they look absolutely amazing now, but you had this situation where arguably the biggest equity bubble at size we've seen. And >> yeah, anywhere. >> In the world, globally. Um and you could argue, you know, various parts in time, but but this just massive sentiment. Anyway, 1990s, absolutely monster period for US stocks. When you have these booms, I mentioned my professor's trading stocks in class. Everyone, right? Like it you go to the golf course, you go to the bar, you go to lunch, CNBC's >> barber shop. >> Yeah, everywhere. >> Irrational exuberance is what Greenspan called it. >> Yeah, but but you remember that was in like '97 or '6. Like that wasn't '99. >> Market doubled from there. >> Yeah, but again, a fun period, you know, and I think a lot of lessons learned. But again, it sets the stage. It's it's kind of weird, Rick, how some of these just the the timeline mark decade level, they get marked like Japan end of the '80s, you know, the roaring '20s end of the '20s. Like the the decade, there's something mental about humans that love to kind of mark the mark the pin. >> And then we go into the uh early 2000s, the first decade. Now, a lot of people listening to this podcast were investing during that period of time, 25 years ago. But, what you do not know is that was between 2000 and 2009, the end of 2009, was the worst period ever in the history of the stock market. We lost annualized uh after inflation of almost 5%. It was the worst decade that ever happened. Now, most people don't look at it that way, and they say, "Well, I got through the 2000 to 2010 time frame okay." Well, if you got through that period okay, then where we are now, you should get through this okay. >> Well, I I I think that a big key takeaway for that period is that diversification really helped. You know, if you owned many other things other than just US market cap index, you did fine. If you owned small cap, you owned value, if you owned REITs, if you owned gold, if you owned bonds, >> international stocks, >> all that stuff did okay that decade, which, you know, could be a similar setup today. Like, we wrote a paper a couple years ago, one of my favorites, called the bear market and diversification, talking about this period where the S&P's just creamed everything, but who knows? The decade going forward, a lot of these assets might also help to diversify a traditional portfolio. >> Well, let's get into the last decade where you really cover, because we're not done with this decade yet. And that's the decade of uh 2010 to 2020, where stocks continue to boom. Uh annualized returns of 13.4% after inflation, 11.4. So, two decades back-to-back >> And so far this decade, US stocks have done well, but now international stocks recently have started to outperform, say, over the last year and a half. You know, who knows what the future holds. >> We definitely talk about a global approach. We talk about diversification. We talk about being mindful of valuations. And I really wanted to include a postscript endnotes chapter and be like, "Look, it's been an amazing 250-year run, but but maybe just don't expect 15% returns." >> [laughter] >> And of course we haven't talked about fees cuz even with 2020 hindsight uh in doing asset allocation, if fees can degrade a year returns significantly. >> If you said, "I'm going to let Rick go back to 1970s. You get to pick the single best allocation, which is endowment style, which is mostly equities, which makes sense." Um but Rick, you have to implement it with the average mutual fund fee of 1.25% not dollar weighted, but at that's the average today. And you got to do it with a financial advisor that charges you 1%. That takes the best performing strategy and makes it worse than the worst performing strategy. >> I completely agree. Yep. I mean you're talking Bogleheads here. >> Your entire asset allocation decision is is moot. Like it doesn't matter. All the time you spend on the Fed, what's gold doing, are stocks expensive, how much I have in bonds. All totally irrelevant because you implemented it with high fee funds and and and and and forget the financial advisor. If you just implemented it with the average mutual fund fee, I mean way more expensive 50 years ago. It makes it almost as bad as the worst allocation. >> Well, I'll end it there because that's a great way to end Meb. >> One more comment Rick, all the proceeds from the book go to the Investopedia charity funding young people's new investing accounts. >> Oh, cool. >> So don't get upset about the book being 76 bucks in honor of 1776. It's all going to end up going to uh the the young folks in the charity as well. >> Wonderful job on the book. Great charitable cause. Thanks so much again for being on the show. >> It's been a blast, bud. >> This concludes this episode of Bogleheads on investing. Join us each month as we interview a new guest [music] on a new topic. In the meantime, visit boglecenter.net, bogleheads.org, [music] the Bogleheads Wiki, Bogleheads Twitter, the Bogleheads YouTube channel, Bogleheads Facebook, [music] Bogleheads Reddit. Join one of your local Bogleheads chapters and get others to join. Thanks for listening. >> [music]