There are certain phrases in financial history that are so famously, so catastrophically wrong that they serve as permanent warnings for the peril of prediction. On October 15, 1929 (exactly 96 years from this past Wednesday), just weeks before the most devastating stock market crash in American history, Irving Fisher, one of the most brilliant economists of the 20th century, uttered one of those phrases.
Speaking to a dinner audience, he confidently declared:
“Stock prices have reached what looks like a permanently high plateau.”
It’s a quote that has echoed through the decades, a perfect symbol of the danger of conviction in a world governed by uncertainty. Fisher’s story isn’t just a historical anecdote; it’s a potent reminder of the limits of genius, the folly of forecasting, and why we should be deeply skeptical of those who claim to know what the market will do next.
The Unquestionable Genius
To understand the gravity of Fisher’s mistake, you first have to understand who he was. This wasn’t some wild-eyed speculator; Irving Fisher was an intellectual giant. A Yale professor, mathematician, and inventor, he was hailed by many as the greatest economist the United States has ever produced.
Fisher was a pioneer in using mathematical models to understand the economy. He developed complex theories on the velocity of money and was so confident in his ability to forecast swings in inflation and the economy that he wrote a weekly column read by millions. In an era before the 24/7 noise of financial television, tweets, posts, etc., he was a true authority. When Irving Fisher spoke, people listened, hanging on his every word.
Conviction and Catastrophe
Fisher’s “permanently high plateau” comment wasn’t a reckless, out-of-the-blue prediction. It was the product of deep conviction, delivered at a time of widespread optimism. The Roaring Twenties had produced a massive bull market and unprecedented wealth. In the four years leading up to his speech, the Dow had tripled in value and was still up about 40% over the prior 12 months. His forecast was, at the time, the consensus view. Interestingly, a much-forgotten part of the story is that during a Q&A session after his speech, he stated that he expected “to see the stock market a good deal higher than it is today, within a few months.”
But Fisher didn’t just espouse this bullish outlook; he practiced what he preached, and then some. He was, by his own admission, “massively under-diversified,” with the bulk of his and his family’s fortune concentrated in just a few stocks. He was also “margined to the hilt,” having borrowed heavily to maximize his exposure to the market’s seemingly endless rise. When the market began to show cracks, his conviction led him to double down, even borrowing a substantial sum from his sister-in-law to cover his margin calls. He was supremely confident that his models were right and that any downturn would be temporary.
The Great Humbling
The market, however, had other ideas. The reality of Fisher’s prediction was devastatingly immediate. The day after his comments, the Dow fell by over 3%. Within two weeks, the market experienced the historic crashes of October 28th and 29th, 1929. The “permanently high plateau” had crumbled into a canyon.
The ensuing years were brutal. From its peak in 1929 to its low three years later, the Dow Jones Industrial Average lost nearly 90% of its value. Fisher’s personal fortune, once estimated at over $10 million (in 1930s dollars), was completely wiped out. He lost everything, his investments, his home, and his once-impeccable reputation.
The most humbling fact of all is this: the level the Dow was at when Fisher made his infamous call would not be seen again for another 25 years. An entire generation of investors who bought into the hype of 1929 would have to wait until 1954 just to get back to even. And while this type of drought should certainly NOT be a base case for investors, it’s the ultimate reminder to stay humble and that no one can predict the future.
The Lesson for Today
So what is the lesson here? It’s that trying to predict the market is a fool’s errand. If Irving Fisher, a certified genius with immense data and a deep understanding of economic mechanics, could be so catastrophically wrong, what does that say about the predictions we see on social media or in screaming headlines today?
Fisher’s story is particularly relevant now, in an era where the business model of so much financial media is driven by clicks, not by sound advice. Fear sells. Bold predictions of an imminent crash are a reliable way to get attention, drive engagement, and sell newsletters. These modern-day prognosticators often operate in a consequence-free environment; if they are wrong (and they are more often than not), they simply push out their forecast and issue another dire warning.
Fisher, for all his flaws, had a genuine intellectual conviction. Many of today’s permabears, in contrast, seem to be in the business of being perpetually wrong because it’s a profitable niche.
The story of Irving Fisher should serve as an anchor, a reminder to focus on the things we can actually control. We cannot predict where the market will be next month or next year. But we can control our savings rate, our asset allocation, and our behavior. We can build a diversified, resilient portfolio designed to withstand inevitable storms, rather than betting the farm on a single, confident prediction. The market is a powerful engine for wealth creation over the long term, but its path is never a straight line, and no one, no matter how brilliant, has a reliable map.
Markets / Economy
- Markets recovered a portion of last Friday’s meltdown as tensions eased between the U.S. and China. The S&P finished the week up 1.7%, the Nasdaq was up 2.1%, and the small-cap Russell 2000 was up 2.4%.
- The NY Empire State Manufacturing Index rose 19.4 points to 10.7 in October, marking its third positive reading in the last four months and beating market expectations of -1.0, signaling modest growth in business activity across New York State.
Stocks
- U.S. equities were in positive territory. Real Estate and Consumer Discretionary were the top performers, while Financials and Healthcare lagged. Value stocks led growth stocks, and small caps beat large caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield decreased four basis points to 4.01% during the week.
- Global bond markets were in positive territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
