Meb Faber is a co-founder and the Chief Investment Officer of Cambria Investment Management. He is the host of The Meb Faber Show podcast and has authored numerous white papers and leather-bound books. In this podcast, we talk about Meb’s latest book, “Investing in America: The Rise of the 250-year bull market.” This book is a US stock market fanatic’s dream. It’s a coffee-table-style book that breaks down US capitalism by decade, with beautiful charts and pictures and, most importantly, a narrative for each decade highlighting major business highlights, economic shortfalls, wars, and unexpected bumps in the road.
Rick Ferri, a long-time Boglehead and investment adviser, hosts this episode. The Bogleheads are a group of like-minded individual investors who follow the general investment and business beliefs of John C. Bogle, founder and former CEO of the Vanguard Group. It is a conflict-free community where individual investors reach out and provide education, assistance, and relevant information to other investors of all experience levels at no cost. The organization supports a free forum at Bogleheads.org, and the wiki site is Bogleheads® wiki.
Since 2000, the Bogleheads have held national conferences in major cities across the country. In addition, local Chapters and foreign Chapters meet regularly, and new Chapters form periodically. All Bogleheads activities are coordinated by volunteers who contribute their time and talent.
This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. Your tax-deductible donation to the Bogle Center is appreciated.
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Transcript
Introduction
00:00:09 Rick Ferri
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 today.
Hi everyone, my name is Rick Ferri, and I am the co-host of Bogleheads on Investing. Jon Luskin is the other host, and we’re now switching back and forth, bringing 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 nonprofit 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 13, through Sunday, November 15, 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.
00:02:31 Meb Faber
So good to be here, bud.
The Idea Farm
00:02:32 Rick Ferri
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.
00:02:47 Meb Faber
Yeah. As professional investors, we’re stuck with this problem, which is just 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 of 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.
00:03:40 Rick Ferri
Wow.
00:03:40 Meb Faber
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 podcasts. It 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, 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 want to go on there and search Macro or Vanguard or Podcast, we even have Spotify playlists.
So I say, if you actually want to get a modern-day MBA, don’t go to Harvard, y’all. You know, don’t waste all this money. You can just go subscribe to 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 podcast playlist too.
00:04:33 Rick Ferri
The website is theideafarm.com and if you want to get the email from Meb 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 or get out of bonds. It’s just really top-shelf research done by the top firms in the country, and it’s all done right there for 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 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. You’re an author. You’ve written several books, but this book was really unique. I mean, 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.
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 and read a little bit at a time. Tell me, how did you come up with this idea?
Investing in America
00:05:47 Meb Faber
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 the 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 say, look, this is a good thing people are getting into the markets, but they’re learning the 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 I got so frustrated, I said, 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.
00:07:34 Rick Ferri
What is the name of that?
00:07:36 Meb Faber
It’ll be called Time Billionaires and again, focused 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 soon because there’s, you know, 200 years before America even existed where there were, you know, real securities markets trading stocks.
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, all the crisis events, you know. And I said, let’s take that, but let’s take it back to 1800 because there’s another hundred 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, you’d barely even notice some of these things.
Market History
00:08:36 Rick Ferri
Getting data going back to the 1800s, what data set did you use?
00:08:41 Meb Faber
Yeah. We often joke 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 roses and honey and milk and just 15% per year, but we all live our own, 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 include a quote in the book from George Martin, “Game of Thrones” fans, listeners, no spoiler alerts, but, you know, 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 to be clear, it’s been much worse in history, like in the real world, right? Like 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 once, 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 study. There’s about four or five, you know, academics. You 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, Bryan Taylor of Finaeon, all these people, these academics that have compiled these, you know, series. And to me, 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 chose a series from Finaeon, 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.
00:11:28 Rick Ferri
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 one question about the very first stock in the United States. When were you actually able to start collecting stock data for the US?
00:11:46 Meb Faber
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 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 is 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 Bay Company, Virginia Company, on and on were expeditions funded for profit. But 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 rest of the century, you look at the numbers start to increase. And Philly, actually, I think was predated the New York Stock Exchange. So it was just banks, financials that eventually developed into railroads, canals, industrials, and of course, all the tech stocks we love today.
00:13:15 Rick Ferri
Today we talk about the concentration of technology stocks in the US stock market, but back in the 1900s, early 1900s, it was much more concentrated than that. It was mostly all rail and a few other industries. Now it’s actually much more diversified than it used to be.
There’s another table where you show the top stocks over various decades. And I always find that interesting because if we go back five decades, there’s top stocks are Exxon Mobil, Standard Oil, Shell. I mean, there was a lot of energy stocks, which were the top stocks, move forward 50 years and things have rotated around. So I mean, it’s an evolving market and that comes out in your book.
We’ve got 25 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.
00:14:29 Meb Faber
If you look back in history and you mentioned this per decades analysis, and that’s fun because you look it back at times 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.
And so there’s one fun chart we like where it’s like the key milestones every kind of 10x. So Bank of 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? It can be SpaceX, something we don’t know. What’s it going to be?
00:15:16 Rick Ferri
I’ll go with Google.
00:15:18 Meb Faber
I’m going to say Elon’s teleportation company that he hasn’t launched yet. That’s going to be mine. It’s a 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 a 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 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 anyway, you go back, but you understand 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 the US, it’s like 90% say yes. You go to Japan, you go to Europe, other places. And the answers are different. Like failure is very much an accepted and celebrated part of our culture, which I feel like it’s somewhat unique in the world.
Anyway, but you go back to the 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.
00:17:12 Rick Ferri
Absolutely.
1800-1810
00:17:13 Meb Faber
But it was 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 years. But the point being is that, you know, there was also, you know, a lot of additions to the way it works.
So one of my favorite parts of the book is the sidebar quotes and a lot of the old ones from, you know, they’re very kind of inspiring and patriotic in my mind. But 1800 to 1810, you know, that was Louisiana purchase decade, right? Early industrialization. And you start to look at, you know, kind of what was happening and it’s things were kicking off.
You also got to remember most investors in the 19th century were bond investors and they invested for the income. Now, that’s not too different than today. However, and we need another hour for this, Rick, because this is like my funny bone topic. The amount of people that invest in stocks back then, they partially did it for the income, right? But stocks yielded, you know, 6, 7, 8%.
00:18:22 Rick Ferri
More than bonds.
00:18:23 Meb Faber
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 gone up a bunch.
But people often really invested in stocks for the concept of income. And only really when the speculative mania has 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.
00:18:55 Rick Ferri
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. We 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.
00:19:17 Meb Faber
It makes 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.
00:19:26 Rick Ferri
Absolutely. Sure.
00:19:26 Meb Faber
Returns 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 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, 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 go spend it on piña coladas in Cabo.
00:20:03 Rick Ferri
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. 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 a 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 so 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. By 1810, the future 50-year return of the market, inflation-adjusted, compounded at 5%. Okay, that’s a starting point for this conversation, really. 5%.
00:21:41 Meb Faber
You know, 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 couple hundred years and the thousand or 2000 years before that where you know currencies rise and fall, inflations, 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 hosts of problems and challenges, et cetera. 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 two-thirds 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 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 very interesting takes on how to think about, but all that matters, 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, it 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 even at this point, grandkids, and they’re moaning about their 5% mortgage.
You say, my God, you know, people used to pay 15% mortgages not too long ago.
00:24:00 Rick Ferri
It wasn’t too long ago. I think my first mortgage was 14%. And I want to say that was ’83 or something.
00:24:06 Meb Faber
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, it’s a very similar vibe. You know, you find periods. I mean, look, we had a civil war, listeners, in the 1800s.
So trying to quote buy and hold and survive that with equities and bonds. I mean, you know, you may have had 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 in cheek look back at this period.
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 piña 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’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 the way to go.
1810-1829
00:25:27 Rick Ferri
So we’re going to move 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 one of these periods. In the second decade of the 1800s, the annual returns of stocks weren’t that high. We had a really big run-up and then there was a crash that occurred in around 1819. But 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 the previous 10 years. It now jumped up to 6.2.
So now we get into the 1820s to 1829. You put down the era of the Erie Canal and Wall Street actually comes on scene at that point. We actually have a stock market at this point. And we had a really great decade. That decade, the return of stocks was 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 and 7%. 50 years out, 50 years out, 50 years out. The equity risk premium over inflation, if you wish to call it that.
So we managed to get through the 1820s and we get to the 1830s. And here the rise of the railroads and the bank wars. Why don’t we talk a little bit about that?
00:27:28 Meb Faber
Yeah. There’s a lot of fun little tidbits. You know, one of which we included in the book was that, you know, the currencies didn’t used to say, “In God We Trust.” It actually used to say, “Mind your business.” And a little bit before that, “As time is short, mind your business,” which I would love to see back on the currency. I love that. I think it’s great.
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 chatting with telegraph, like telephones being invented, all these, you know, conventions we take for granted today.
I was just with my son recently. We saw a telephone booth and I was trying to explain to him how it worked. You know, he’s like, never seen one. He’s like, well, why would you need it anyway? 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 buildup, right? This is the industrialization of America.
00:28:40 Rick Ferri
Yeah. And 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, we’re looking at a rate of return after inflation of about 7.7% from stocks.
Now, that is just right in line with the risk premium that you would think for an emerging market, not maybe not for a developed market, but for an emerging market.
00:29:12 Meb Faber
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 a 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 the US has been one of the best performers. Ex-US, 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 sector you talked about, the chart of the US being an emerging market, you know, it’s now 25% of world GDP, but two-thirds 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 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 really important.
1860s
00:30:40 Rick Ferri
There’s one decade that I want to highlight and I got this wrong. If you would have asked me, what did stocks do when the Civil War broke out and that period when the Civil War was going on? What, you know, what did the stock market do? I would have said, well, obviously the whole country is in flames. I mean, 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 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 Vietnam and that war 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 the stock market reacts to that.
So during this period of time, 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 three years, basically from 1878 to 1880. And I couldn’t find anywhere where, you know, what was the cause of that?
1870s
00:32:42 Meb Faber
Well, there was a giant panic in the 1870s. We recently did 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, you know, 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, antisemitism, you know, really starting to take root in Europe, all these different threads. And it reads like 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 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 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 the rest of the world.
00:34:00 Rick Ferri
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.
00:34:13 Meb Faber
And part of this late 19th century period was also the advent of some of the first stock-based indices where the, 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 poke elbows about it being a price-based 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.
1880-1890s
00:34:47 Rick Ferri
In the last 20 years of the 1800s, we had the rise of the mass consumer market and big technology breakthroughs and electricity, the telephone. The market reacted to that very positively. And during the 1880s, again, 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 that quite, quite amazing. 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 it surged when the Spanish-American War started. So 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.
00:36:08 Meb Faber
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-year annualized return.
And the hardest part, as 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 know, for many people 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?”
00:36:41 Rick Ferri
Yeah, I know people who did that. Yep.
00:36:43 Meb Faber
2010, 2012, 2014 said I never got back in. I just, I was waiting for the right time. I never got back in. And it’s heartbreaking because 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 the reality is much, much tougher.
1900s
00:37:01 Rick Ferri
So let’s get into the 1900s.
00:37:03 Meb Faber
Oh, baby, here we are.
00:37:05 Rick Ferri
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 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, 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 when we were emerging.
00:37:56 Meb Faber
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 say this to listeners, put this in perspective. And this chapter may have my favorite sidebar called 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 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 and the sidebar we use from 1900 is my grandfather was named Mebane. And I said, just imagine what this person had to live through, right? Like in the world events that happened during 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, 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 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 were an owner, you know, if you owned the market, guess what? You did just fine.
1910-1920s
00:39:44 Rick Ferri
World War I starts in 1914 and the market goes up about 80% and it’s up about 80% by the time 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.
00:40:24 Meb Faber
I mean, how fun would it have been? You know, I think I would have loved to have been around the 1920s. It looks like a big old party.
00:40:31 Rick Ferri
It seems like it.
00:40:32 Meb Faber
Yeah, 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 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 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 of 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 Altria, which was formerly known as Philip Morris. But if you put a thousand bucks in this stock a hundred 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 outperformers. It’s 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 really steep.
And so during this period, of course, you know, you had the big haymaker, the just massive lead up to the party ending. And I want to read this quote because 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 the Scottish economist, but the pen name of a novelist in 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 end of period 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, wreaking 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 any hands.”
And so this is kind of really talking about this period of euphoria and, you know, the 1920s, this boom. And eventually, you know, the party ends. You can’t really talk about the 1920s without then talking about the 1930s.
1930s
00:43:14 Rick Ferri
1929, bad year, but not bad. I mean, actually, 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. The market lost all of its value then. It wasn’t 1929.
But still, you know, in the 1920s, for the whole entire decade, 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, 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 return during that decade.
00:44:48 Meb Faber
Piece of cake, Rick, we just close our eyes, you and I will be in our hundreds. 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, at a 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 $1,000 you’re about to spend is a hundred 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 main point of this whole story is you need a long hill, as Buffett says.
00:45:30 Rick Ferri
Long perspective. Now, I’m not in the 10% range. I mean, obviously that would be nominal return. I’m more in the range of, let’s call it 5% real return after whatever the inflation rate is. So if inflation is two and a half and you add five to it, you’re at seven and a half. And I’ll, you double your money every 10 years at seven and a half percent.
00:45:51 Meb Faber
You’re touching on the real key of all investing and really life, Rick, is just set low expectations. Just say, hey, I expect 5% nominal, fine. And anything above that, gravy, great.
00:46:02 Rick Ferri
That’s what my wife tells me all the time. She set low expectations. So, you know, we’ve been married for 43 years.
00:46:08 Meb Faber
There we go.
1940s
00:46:10 Rick Ferri
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 the real after-tax return there in that decade, 3.3% due to higher inflation from the war. While the future real return after that for the next 50 years was 9.5. So we had a couple of periods in the 1930s and 1940s where market returns were not that high, but we made up for it over the next 50 years.
00:46:56 Meb Faber
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 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’m going to invest. Like that takes quite a bit more, I think, fortitude than it is when you’re at all-time highs, which, you know, we are today, but at some point that your mettle will be tested with, I don’t know, it could be aliens. That could be bullish. I don’t know. Aliens might be bullish.
1950s
00:47:47 Rick Ferri
Well, let’s go into the 1950s because this was an unbelievable decade for equity investors. It was also the decade of, you know, mutual funds start to come around and be accepted. More people coming into the equity markets. But during the 10-year period of time between 1950 and 1959, that 10-year period, stocks compounded at almost 19% nominally.
00:48:13 Meb Faber
Lord have mercy.
00:48:15 Rick Ferri
16% after inflation. And then going forward after that, over the next 50 years, we got 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.
00:48:37 Meb Faber
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.
1960s
00:49:29 Rick Ferri
During the 1960s, we again continued with the bull run, the Vietnam War, Cuban Missile Crisis, and then the Vietnam War, and finally ending with the moon landing in 1969. But we had another good decade.
Stocks returned about 7.8% compounded. After inflation, 5%. Over the next 50 years, the returns were about 6.5% real inflation adjusted returns.
Now, we had some things occur in the early 1970s, which were negative for the stock market. We caused a lot of volatility. But still during the 70s, stocks still did okay, but not after inflation. So why don’t you talk about the interesting things that happened during the 1970s?
1970s
00:50:18 Meb Faber
You know, you have this period where you just had this romping party in the 50s. And, you know, it’s hard to always get the timing. But the good times following the bad and vice versa is a story as long as, you know, oldest 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 in 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 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 is not backed by anything anymore. Imagine like living through that and being like, wait, what are you talking about? Like, what am I going to do? Like, what’s, you know, like this modern, this hasn’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 then all of a sudden this optimism, moon landing, this 70s, you had this big energy crisis, right? And so 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 in perspective today.
Energy is 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, 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 really illustrates something that you talk about that 99% of the investing world doesn’t talk about because it’s harder, which is that nominal to real spread. 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 nominal return looked okay, but that was an illusion. And in reality, you ended up losing money over that decade.
00:52:54 Rick Ferri
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, but it was negative because of high inflation. Even though the nominal compounded return annualized was almost 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 from 1980 to 1989 of 17%.
1980s
00:53:45 Meb Faber
I mean, the beauty of this, Rick, is that you think back to the early 80s, the Death of Equities cover on Business Week, PE ratio in the stock market was like 5, 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 be an investor.
And what 80s 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 see 2000, 2009, 1920, 30s, but you can’t even find 1980s. Stocks actually are up on the year.
00:54:46 Rick Ferri
Well, you know, what’s funny was they were up 5% in 1987, 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 even feel it. You shouldn’t have felt it.
We got to get to the decade of the 1990s. I mean, this was the best decade in the US stock market of almost 20% compounded annual returns, 19.9%. And inflation had come way down. So we got a real return of almost 16.5% during this fabulous decade of the 1990s.
00:55:38 Meb Faber
I mean, what a fun period though. I mean, if you look back, 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 a hundred 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.
00:56:23 Rick Ferri
In the world, yeah, anywhere.
1990s
00:56:24 Meb Faber
In the world, globally. And you could argue, you know, various parts in time, but this just massive sentiment. Anyway, 1990s, absolutely monster period for US stocks. When you have these booms, I mentioned my professors trading stocks in class. Everyone, right? Like you go to the golf course, you go to the bar, you go to lunch, CNBCs.
00:56:48 Rick Ferri
Barber shop.
00:56:49 Meb Faber
Yeah, everywhere.
00:56:51 Rick Ferri
Irrational exuberance is what Greenspan called it.
00:56:54 Meb Faber
Yeah. But you remember that was in like ‘97 or ‘6. Like that wasn’t ‘99.
00:57:00 Rick Ferri
The market doubled from there.
00:57:01 Meb Faber
Yeah. But again, a fun period, you know, and I think a lot of lessons learned. But again, it sets the stage. It’s kind of weird, Rick, how some of these, just the timeline decade level, they get marked like Japan end of the 80s, you know, the roaring 20s, end of the 20s, like the decade. There’s something mental about humans that love to kind of mark the pen.
2000s
00:57:27 Rick Ferri
And we go into the 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 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 timeframe, okay. Well, if you got through that period, okay, then where we are now, you should get through this okay.
00:58:16 Meb Faber
Well, 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, if you owned value, if you owned REITs, if you owned gold, if you owned bonds.
00:58:31 Rick Ferri
International stocks.
00:58:32 Meb Faber
All that stuff did okay that decade, which, you know, could be a similar setup today. Like we wrote a paper a couple of 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.
2010s
00:58:53 Rick Ferri
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 2010 to 2020 where stocks continue to boom. 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.
00:59:27 Meb Faber
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 maybe just don’t expect 15% returns.
00:59:44 Rick Ferri
And of course, we haven’t talked about fees because even with 20/20 hindsight and doing asset allocation, fees can degrade your returns significantly.
00:59:56 Meb Faber
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.
But Rick, you have to implement it with the average mutual fund fee of 1.25%, not dollar weighted, but 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.
01:00:26 Rick Ferri
I completely agree. Yeah, I mean, you’re talking Bogleheads here.
01:00:30 Meb Faber
Your entire asset allocation decision 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 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.
01:00:54 Rick Ferri
Well, I’m going to end there because that’s a great way to end, man.
01:00:57 Meb Faber
One more comment, Rick. All the proceeds from the book go to the Invest America charity funding young people’s new investing accounts.
01:01:03 Rick Ferri
Oh, cool.
01:01:04 Meb Faber
So don’t get upset about the book being 76 bucks in honor of 1776. It’s all going to end up going to the young folks in the charity as well.
01:01:12 Rick Ferri
Wonderful job on the book. Great charitable cause. Thanks so much again for being on the show.
01:01:17 Meb Faber
It’s been a blast, bud.
01:01:19 Rick Ferri
This concludes this episode of Bogleheads on Investing. Join us each month as we interview a new guest on a new topic. In the meantime, visit boglecenter.net, bogleheads.org, the Bogleheads Wiki, Bogleheads Twitter, the Bogleheads YouTube channel, Bogleheads Facebook, Bogleheads Reddit. Join one of your local Bogleheads chapters and get others to join. Thanks for listening.
