This Reminds Us Of The 1920’s | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss This Reminds Us Of The 1920’s. Here’s an excerpt from the episode:

Bill: Yeah. Well, Jamie Catherwood says that this reminds him of the 1920s and that we’re in the lull before the Roaring 20s. He said that’s the parallel on his most recent Investor’s Podcast. So, there you go. I’ll roll with– [crosstalk]

Jake: He looks pretty young to [crosstalk] remember-

Bill: Get ready for the good times.

Jake: -the 1920s. [laughs]

Bill: What?

Jake: He looks pretty young to remember the 1920s.

Bill: Yes, he found the fountain of youth.

Tobias: What are the parallels that he sees?

Bill: I don’t know, dude. You always ask me this. I hear stuff, I parrot stuff.

Jake: [laughs]

Bill: I dispose of things immediately. I think what it was is we had inflation, then maybe we had some deflation. Listen to him on The Investor’s Podcast. And then, we had the Roaring 20s. So, there you go. I don’t know, we had a decade of subpar growth. It wouldn’t be totally shocking if somehow, we’re on the verge of some industrial revolution. Also, maybe we’re just about to crash and it’s going to be famine. Who knows?

Jake: Interesting because that doesn’t fit with my understanding of what the 1920s looked like before and then leading into them.

Bill: Yeah.

Tobias: What’s your impression?

Jake: Well, you had a forgotten depression in 1920 and 1921, where Fed basically just got the hell out of the way, let prices reset, and it was a complete deflationary event, like a real deflationary event that wages, everything reset to a much lower level and then grew from there. I don’t think we’ve tried since basically in 100 years. Not the full– [crosstalk]

Bill: Nor should we. That sounds awful.

Jake: Well, I don’t know. Take your– [crosstalk]

Bill: I do know. Kick that can down as far as you can. Make sure it’s three generations away before it comes.

Jake: Well, yeah, that’s good in theory until it’s your generation that finally has to deal with all the problems that all the ones before you have been kicking down the road.

Bill: Yeah, well, it’s working so far.

Jake: [laughs] That’s what the turkey thought early in November also.

[laughter]

Bill: That’s true. That is not untrue.

Tobias: Yeah.

Jake: Well, in any event, great book on that, by the way by Jim Grant, if you want to read to really get into the historic nitty-gritty of it.

Tobias: The Forgotten Depression?

Jake: Yeah.

Tobias: That’s the title?

Jake: Yes.

Tobias: Yeah, I think that we’re more likely to be in a little bear market rally here. But then, I think that’s consensus, I would say. I think everybody feels very bearish.

Jake: I thought you just told me the greed was up at the-

Tobias: Well, that’s a good point.

Jake: -80th percentile.

Tobias: That’s a good point.

Jake: Boing.

Tobias: It’s very hard to tell, because it’s hard to know to what extent the Twitter stream or whatever the people who I talk to are representative of the main field. I did get the feeling through most of the bubble run through 2020, 2021, or whatever that period was, 2019 and 2020, I got the feeling through most of that bubble run that Twitter became very much the crowd through there.

Jake: They became as smart– [crosstalk]

Tobias: Yeah, I think so. Maybe Twitter’s not the crowd at the moment, but– [crosstalk]

Bill: All right.

Jake: You see retail– [crosstalk]

Bill: Thankfully, I save things, because I know my mind is not a trap door, thanks to partying.

Tobias: [unintelligible 00:21:18] trap.

Jake: Yeah.

Bill: Yeah, that’s right. It is a trap door.

Jake: It is a trap door.

Bill: I’m a mess today. Anyway, [Jake laughs] I think he said I would say that the period I’m finding most interesting in terms of parallel today would be the 20s, which I’m sure most people know by now, but I found really interesting since honestly COVID started, the similarities and progression in timeline between the late 2019s and 2020s with today, because while we obviously, at least, knock on wood, didn’t have or don’t have a world war today. It looks like that got avoided with Russia-Ukraine, yada yada, yada.

But a hundred years ago, you had a pandemic with the Spanish flu. After that, you had a wave of summer protests around race called the Red Summer of 1919, which was similar to George Floyd’s and Black Lives Matter summer protests and demonstrations. Then, you had a reopening, where things really got speculative and surging to make up for pent demand that had existed while were all locked down, which also occurred coming out of World War I and the Spanish flu a hundred years ago.

Then in 1920 and 1921, you had this really sharp and severe recession, which was very short. But again, it was a problem of, in that case, rampant inflation very quickly turning into rampant deflation and it’s an interesting period. But then after that is when you got the Roaring 20s, but people like to skip over the part when they talk about the Roaring 20s, yada, yada, yada.

Tobias: Which part of the– [crosstalk]

Bill: The story sees the parallels today.

Tobias: What are they skipping–?

Jake: We’re going to skip over that.

Bill: No, you need to listen to, because you know it came out of the pandemic, then we had a recession, then we had the Roaring 20s. And so, today, obviously, the parallels are pretty obvious. We had the pandemic, we had the George Floyd summer, then we had the recession. And now, the question is, are we going to keep following roughly in line with the 20s, or that we would be experiencing, or on the precipice of experiencing a true Roaring 20s, or is it something different where the economy takes longer and rebuilds to truly get back to pre-COVID levels? Anyway, that was all AI generated.

Tobias: Was it really?

Bill: So, if some of it didn’t make sense– Yeah, you can go to The Investors Podcast and listen to Jamie.

Tobias: AI listening to the audio and then transcribing it?

Bill: Yeah, man.

Tobias: It’s pretty good.

Bill: Jason Buck put me– Corey actually, I think, told him about it. It’s this podcast listening app, Snipd-

Tobias: Oh, yeah.

Bill: -and you can listen and then you just create Snips. So, this is like a three-minute Snip that I had and then– here, I’ll do my tech. You got tech, I got tech. Look at all that.

[laughter]

Jake: Oh, my God.

Bill: So, you just request an AI transcript, and then you got all the words.

Tobias: It’s very cool.

Bill: Yeah, it’s pretty cool app.

Tobias: We’re not sponsored by Snipd, by the way.

Jake: Yeah.

Bill: Not yet.

Tobias: Snipd, if you want to- [crosstalk]

Bill: They should.

Tobias: -give us– we reach dozens of people every week.

Bill: Yes.

Jake: Snipd. [laughs]

Bill: That’s a different thing, sir.

Jake: Oh, okay. [laughs]

Bill: Yeah.

Tobias: I think the big difference though between– [crosstalk]

Jake: Now brought to you by the urology group.

Tobias: The 20s are now. The 20s started on a very low valuation base. After the recession, that was coming out of single digit Shiller PE, and now we’re about as expensive as we’ve ever been before. They’re only famous [crosstalk].

Bill: Pretty shitty businesses back then.

Jake: [laughs]

Tobias: Were they?

Bill: There was definitely more market fragmentation. I think, in general, you had more asset-heavy businesses. It was a lot more industrial-type stuff. I don’t think you had hyperfinancialization of everything. You didn’t have Burger King spin off the franchise or restaurants from the franchisor economics from the franchise, restaurants, and cram the shitty economics down and float the public entity that has pretty solid returns on capital and lever it three and a half times. No, you didn’t have that stuff.

Jake: Well, you kind of did though. Utilities at that point were very hot and you had this– I think it was Sam [unintelligible [00:25:37], if I remember right, was leading these– They would pump the stock up for utility and then issue a bunch of shares. It was like the early playbook of a lot of the same things– [crosstalk]

Bill: Yeah, but that’s securities fraud type stuff.

Jake: Well, it-

Tobias: Didn’t rise to the level of fraud [crosstalk]

Jake: -came because everyone was so– They believed so much in the captured demand of a utility at that point. This was before we had a lot of regulation around it. So, same story about– [crosstalk] for Amazon–

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