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- 💸 #0024 - The Calm Investor’s Guide to Market Mayhem
💸 #0024 - The Calm Investor’s Guide to Market Mayhem
A forgotten strategy from 1923 is quietly building fortunes today.
Shrewd Investor
April 08, 2025 • Read in 9 minutes
The Calm Investor’s Guide to Market Mayhem
What an interesting week in markets!
The S&P 500 sold off 10% Thursday and Friday of last week after Trump’s tariff announcements were more aggressive than the market originally thought.
As I’m writing this, the S&P 500 futures market is down 3% and financial “experts” the world over are forecasting a Black Monday type of scenario.
Only time will tell, but I’m always focused on knowing where we’re at relative to other financial crises.
Look at the chart above and notice that we have a red line for the 200-week moving average and see how rare it is for the market to dip below it.
In fact, the two most recent times we dipped below that level was the 2008 Global Financial Crash and the 2001 Tech Bubble.
So, where are we today?
We’re still 5% above the 200-week (as of the 3% drop in the futures market this morning).
Wow, even with all the recent news, we STILL haven’t reached the critical level that indicated the start of the crash in past crises!
That really gives you a sense of how overheated stocks were after the COVID stimulus.
So, the next prices I’m watching is 4,661 in the S&P 500 and 15,800 in the Nasdaq.
If the bleeding doesn’t stop there, we may be in the next great financial crisis — the third I’ve had to navigate in my lifetime.
The greatest difficulty during these times is to stay calm and make good decisions under stress.
Just remember all things in markets pass.
Stay off of social media.
Turn off CNBC.
Ignore the hysteria.
Focus on your strategy.
Execute.
It will all be fine, even if it is rough right now.
The greatest fortunes are made by people who keep their wits about them during stressful times.
👇 In this month’s newsletter, we have quite a few people who did just that and made fortunes!
Talk soon,
Josh
In today’s issue:
Weekly Wisdom - Baron von Rothschild reminds us not to panic…
Market Minute - The market is tanking, how bad is it?
Deep Dive - Three stories of people who prospered from chaos…
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WISDOM
“The time to buy is when there's blood in the streets, even if the blood is your own.”
DEEP DIVE
What the Great Wealth Builders of History Can Teach You About Today's Inflation Storm
Economic Chaos Creates Opportunity
In 1932, the stock market crashed, causing many investors to lose money.
However, while most people were struggling, a few clever investors were quietly building massive fortunes that would last for generations.
Today’s economy feels surprisingly similar.
Prices are rising, interest rates are unpredictable, and the financial world is shaky.
This creates both challenges and opportunities.
In my 30+ years managing wealth through multiple economic cycles, I've observed that fortunes are rarely made in calm waters.
The greatest transfers of wealth occur during periods of disruption, precisely like the one we're experiencing today.
The key question isn’t if money will change hands but who will be ready to take it.
The most excellent wealth builders in history didn’t just survive tough times, they used them to thrive.
By studying their smart strategies, we can learn to navigate today’s uncertain waters and emerge on top.
The Weimar Blueprint: Hugo Stinnes
Germany, 1923. Hyperinflation has destroyed the currency.
By November 1923, one US dollar was worth 4.2 trillion marks—up from 4.2 marks just five years earlier.
A loaf of bread costs billions of marks.
Savings have evaporated overnight.
While most Germans watched their wealth vanish, industrialist Hugo Stinnes employed a counterintuitive strategy.
This is what he did:
Borrowed aggressively in the rapidly devaluing mark
Converted this currency into hard assets—factories, mines, shipping fleets
Watched as inflation effectively erased his debt while his assets retained value
When the dust settled, Stinnes controlled over 4,500 companies and became known as the "Inflation King."
Modern Application: In inflationary environments, strategic debt acquisition paired with hard asset investment can transfer wealth from lenders to borrowers.
Consider what happened to those who purchased Miami real estate with fixed-rate debt in 2018.
By 2023, their mortgage payments remained constant while rental income increased 40-60%, creating substantial positive cash flow.
The lesson here points toward focusing on:
Income-producing properties in supply-constrained markets
Businesses with pricing power and essential services
Fixed-rate, long-term financing structures
The Depression Master: Joseph Kennedy Sr.
United States, 1929-1933. The Great Depression devastated the economy.
The Dow Jones has lost 89% of its value.
Joseph Kennedy Sr. exited the market before the crash.
His decision to sell in 1928 looked premature for months, even costing him millions in potential gains—until vindication came spectacularly in October 1929.
He converted positions to cash when, in his words, "even shoe-shine boys were giving stock tips."
When assets collapsed, Kennedy deployed capital methodically, acquiring distressed properties at pennies on the dollar.
Kennedy recognized that market extremes create asymmetric opportunities.
His core principles:
Maintain liquidity when others are fully invested
Move against prevailing sentiment
Capitalize on forced selling during crises
Modern Application: Holding strategic cash reserves during asset bubbles positions you to capitalize when distress creates buying opportunities. The hardest part? Exiting markets while others prosper.
The Volcker Victor: Sam Zell
United States, 1979-1982. Federal Reserve Chairman Paul Volcker has raised interest rates to nearly 20% to combat inflation.
The real estate market has collapsed as financing costs become prohibitive.
Industrial production plummeted 8.5% in two years while unemployment hit 10.8%, creating what many considered an unnavigable real estate environment.
While others retreated, Sam Zell methodically acquired distressed properties at steep discounts.
His thesis was simple: the fundamental value of well-located real estate wouldn't diminish long-term, but the capital structure supporting these assets had imploded.
Zell focused particularly on apartment buildings in supply-constrained markets.
When interest rates eventually normalized, the value of his portfolio soared, creating a multi-billion-dollar empire.
Properties Zell acquired for $3,000-5,000 per unit would be worth $150,000-300,000 per unit within 20 years—a 50-60x return on carefully timed contrarian investments.
Modern Application: Economic dislocation creates temporary mispricing of valuable assets.
Focus on:
Assets with persistent demand regardless of economic conditions
Markets where new supply faces significant barriers
Situations where financial distress, not fundamental issues, drives pricing
Today's Different (Yet Similar) Landscape
While history provides valuable templates, today's environment differs in critical ways:
Modern Central Banks employ sophisticated intervention tools beyond simple currency expansion, from quantitative easing to yield curve control.
Global Capital Flows move faster than ever, with money crossing borders instantaneously in response to policy shifts.
Digital Assets offer novel inflation hedges unavailable in previous crises, though with their unique risk profiles.
Bitcoin's programmatic scarcity has attracted institutional capital seeking inflation protection, with companies like MicroStrategy converting substantial treasury reserves to this new asset class.
AI and Automation enable businesses to adjust pricing dynamically, potentially changing how companies navigate inflation.
Environmental regulations increasingly constrain development in key markets, potentially amplifying the premium on existing well-located assets during inflationary periods.
Yet despite these differences, the fundamental principles remain unchanged:
Asset/Liability Mismatch Creates Opportunity: When monetary conditions shift, balance sheet structure determines who gains and who loses.
Information Advantages Matter: Those who correctly interpret policy signals before the broader market capture outsized returns.
Value Persists: Through all economic cycles, assets providing essential goods and services retain intrinsic worth.
While understanding these mechanics can help us identify opportunities, the greatest wealth builders of history recognized something even more profound about sustained success.
Beyond Profit: The Stewardship Mindset
The smartest money-makers in history weren't just people who took wild guesses about stocks but careful planners with a long-term vision.
The truly great wealth builders shared three core principles worth emulating:
First, they maintained intergenerational time horizons, making decisions their grandchildren would thank them for.
Second, they recognized that true wealth creation comes from solving meaningful problems, not financial engineering.
Third, they understood that reputation and relationship capital often outlast monetary assets during chaotic transitions.
They didn't just want to make quick money during tough times. They aimed to create lasting value that would stand the test of time.
In today's unpredictable world, it's not just about figuring out how to make money when things go wrong. It's about building strong wealth that can survive any ups and downs in the economy.
Remember: Markets don't reward those who understand history after the fact.
They reward those who recognize patterns early enough to act.
The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.
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