Episode summary
He Studied Every Bear Market Since 1929 | Ben Carlson on How the Worst Starting Point Still Made 8%
Excess Returns
· · 57 min · Guests: Ben Carlson
Summary
Ben Carlson argues that investors lose sight of the biggest lesson in markets: risk is never eliminated, only traded off against something else. He says vivid, sensational risks like sharks, headlines and geopolitical scares dominate attention, while the risks that actually hurt investors most are usually financial ones such as panic selling and bad market timing. That is why he emphasizes doing nothing, using filters, and building a process that limits impulsive decisions.
He also reframes inflation and market timing. Carlson says inflation is best understood as a personal finance issue, tied to housing, wages, human capital and the structure of one’s own life, not just the government’s average inflation rate. On stocks, he argues they can be a strong inflation hedge over long horizons, even if they struggle during inflation spikes. The key is not to nail the exact macro turn, because markets usually move far ahead of the data.
The episode repeatedly returns to history: the Great Depression, 2022, and long-run return data all show that even terrible starting points can still produce strong outcomes over decades. Carlson’s larger message is that volatility is not a bug in investing; it is the price of admission, and surviving it matters more than predicting it.
Key takeaways
- Ben Carlson says risk is always a trade-off, and investors should expect something to be left over no matter how conservative or aggressive they are.
- Carlson argues that sensational fears like shark attacks and geopolitical headlines distort judgment more than the financial risks that actually damage portfolios.
- He says inflation should be viewed through personal finances and human capital, not just broad CPI averages or traditional inflation hedges like gold.
- Carlson argues stocks can hedge inflation over long periods because the hedge often comes from the years before the inflation spike, not only during it.
- He says the worst timing mistakes usually happen when investors wait for the coast to clear, because the market often rebounds before headlines do.
- Carlson emphasizes that even the worst 30-year starting point since 1929 still produced roughly 8% annualized returns, showing the power of staying invested.
Notable quotes
“risk is what is left over after you've thought of everything”
“There's so many examples of that where just saying I'll just wait till the headlines tell me. By the time it's in the headlines, it's already too late”
“doing nothing is probably better for you”
“I almost look at inflation as more of like a personal finance problem than an investing problem”
“the big money is not is not in the buying or the selling but in the waiting”
How the episode opens
There's so many examples of that where just saying I'll just wait till the headlines tell me. By the time it's in the headlines, it's already too late. The market has moved on.
Markets bottom way before earnings do. Way before the unemployment rate peaks. All these things.
If you think about it, in 2022, the stock market bottomed on 8% inflation. The worst starting period ever was September 1929, of course, which was the start of the Great Depression. If you would have put your money in, then you would have had an 86% crash almost immediately, right?
Over the next three years, 86. And then, you know, many crashes in the late 30s and into the 40s because of World War II. And despite all that bad stuff, you would have still had a total return of around 850%.
So, good enough for almost 8% per year annually.
Ben, welcome back to Excess Returns. How are you?
Glad to be here, guys. We wanted to have you on. You have a new book coming out and it's great.
And I'm going to tell you why. because I feel like I could give this book to my wife who knows very little about finance and investing and I feel like she would learn a tremendous amount from it. But I also feel like the book is very appealing to more sophisticated investors and financial adviserss because there's so many powerful statistics and I think frameworks and insights about building long-term wealth and managing risk.
So great job on the book. I feel like the audience can be very wide here and books like this I think are are great because you know there's so much I think useful and important information. You have a way to kind of frame it up in a explainable way.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- risk and reward
- inflation
- market timing
- bear markets
- long-term compounding
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Excess Returns, this episode and its artwork belong to Excess Returns. Octagon is not affiliated with the show; this page is an independent summary.
