Watch Now
Listen Now
In this deeply insightful episode of The Long Term Investor, I sit down with Mark Higgins, author of Investing in U.S. Financial History, to explore how an understanding of our nation’s financial past can shape smarter, more resilient investment strategies. Mark outlines why historical knowledge isn’t just interesting—it’s a competitive edge. By revisiting recurring behavioral patterns, regime shifts, and the long-term consequences of fiscal decisions, investors can build portfolios that are informed, durable, and responsive to real risks.
Sign up for my newsletter so you can easily reply to my emails with your thoughts or questions for the podcast:
Why Human Behavior and Financial History Are Inseparable Guides for Investors (2:00)
According to Mark, the essence of financial history lies in the consistency of human behavior. While technology evolves at breakneck speed, the instincts and emotional reactions that drive market manias and panics remain largely unchanged. Studying the past provides a mirror into these behavioral patterns, allowing us to recognize familiar warning signs and act more rationally when markets are volatile.
Mark discusses how financial panics—such as those following World War I or during the Spanish Flu—set the stage for comparable reactions during the COVID-19 pandemic. Each crisis may have different origins, but the emotions and missteps that follow often rhyme. By recognizing these patterns, investors can be better prepared to distinguish between short-term noise and genuine regime shifts.
He emphasizes that true regime changes—those rare shifts that reset the market environment—are not weekly headline events. They unfold over decades and are often rooted in deeper structural transformations such as wars, demographic shifts, or long-standing economic imbalances. Mark believes we’re at such a juncture today, citing chronic deficits and ballooning debt as signs of a broader inflection point.
The Interplay of Politics, Inflation, and Investor Behavior (09:24)
Economic history is deeply entangled with political history. Mark highlights how political interference in central banking, from Nixon’s pressuring of the Fed to Trump’s tariff policies, reflects a long-standing tension between short-term political incentives and long-term economic stewardship.
He warns that today’s political environment is not unique in its intensity, but the implications of returning to inflationary policies are significant. The pressure to lower interest rates, despite persistent inflation, mirrors policy errors of the 1970s when the Fed eased too soon. Mark worries about history repeating itself, where political expediency undermines the hard-earned progress made in inflation control.
Tariffs, often justified by poor historical analogies, can be especially misleading. Mark critiques the popular comparison to the McKinley tariffs of the late 19th century, noting that such comparisons fail to consider the entirely different economic structure of that time. More importantly, he highlights how tariffs can exacerbate international tensions, referencing how they contributed to Japan’s militarization leading up to World War II.
Stocks, Alternatives, and the Power of Simplicity (13:17)
The transformation of the stock market from a speculative circus in the 1800s to a regulated, mainstream investment vehicle is one of the great achievements of financial modernization. Mark credits reforms in the 1930s for improving investor protections and creating the conditions for wider public participation in equity markets.
He also delves into the evolution of alternative investments. The growth of private equity, hedge funds, and venture capital has reshaped institutional portfolios, but not always for the better. Mark critiques the widespread emulation of Yale’s David Swensen without the necessary due diligence or access to top-tier managers. He warns that this mimicry often results in higher fees, illiquidity, and added complexity—all of which can erode returns.
For most investors, the pursuit of simplicity is undervalued. Mark and I agree that if alternatives were free, they might be worth the added noise. But in reality, their costs and opacity often outweigh their benefits. Simplicity, especially through index-based exposure to broad markets, remains one of the most efficient paths to long-term success.
Herd Behavior and Misunderstood Market Crises (16:51)
Herd behavior has fueled financial bubbles for centuries, from the Mississippi Bubble and the South Sea Bubble to the dot-com crash and crypto mania. Mark shares one of his favorite quotes by J.P. Morgan: “Nothing so undermines your financial judgment as the sight of your neighbor getting rich.” This timeless truth reflects the emotional gravity of envy and FOMO (fear of missing out).
He elaborates on how investors often rationalize speculative behavior using technological or economic narratives that seem sound, but ultimately ignore price and context. The belief that “this time is different” frequently precedes bubbles, as investors forget or dismiss the lessons of history.
Among historical crises, Mark singles out the Great Depression as widely misunderstood. Contrary to common belief, it wasn’t the stock market crash alone that caused it—but the Federal Reserve’s failure to backstop the banking system. He connects this failure to global consequences, including Hitler’s rise in Germany and Japan’s aggression in Asia, ultimately leading to World War II.
Building a Resilient Long-Term Portfolio (21:01)
At the heart of successful investing is emotional discipline. Mark argues that knowing your risk tolerance isn’t about filling out a questionnaire—it’s about understanding how you will react during extreme market downturns. Can you endure a 50% drop without panicking? Your answer may determine your long-term success.
Mark strongly advocates for passive investing through index funds. He argues that financial markets are ruthlessly efficient, and that most active managers will eventually underperform. The analogy he uses—taken from the film Heat—compares the market to a relentless detective. It doesn’t matter how many times an active manager gets it right; one big miss can ruin decades of gains. And eventually, the market always catches up.
He also warns investors not to cherry-pick historical analogies to justify short-term moves. Many such comparisons are irrelevant or taken out of context. He urges investors to use history as a guide, not a forecast, and to stick to principles grounded in evidence and long-term thinking.
Truly Unprecedented: Today’s Fiscal Picture (28:12)
Mark closes with a sobering assessment of today’s fiscal reality. He notes that the U.S. is currently experiencing record levels of debt and deficits during peacetime—levels that have historically only occurred during world wars. This fiscal path is unsustainable, and the political will to address it appears limited.
He previews an upcoming article titled Short Term Gains and Long Term Pain, which will detail how entitlement spending has steadily increased over decades and now threatens to overwhelm federal budgets. Mark believes that, left unchecked, this trend could profoundly reshape markets, interest rates, and future investment returns.
Connect with Mark Higgins (29:23)
For deeper insights into financial history and how it can shape modern investment decisions, follow Mark on LinkedIn or subscribe to his free newsletter Investing in Financial History on Substack.
Resources:
- Investing in U.S. Financial History, by Mark Higgins
- Follow Mark on LinkedIn
- Subscribe to Mark’s newsletter Investing in Financial History
The Long Term Investor audio is edited by the team at The Podcast Consultant
Submit Your Question For the Podcast
Do you have a financial or investing question you want answered? Submit your question through the “Ask Me Anything” form at the bottom of my podcast page.
Support the Show
Thank you for being a listener to The Long Term Investor Podcast. If you’d like to help spread the word and help other listeners find the show, please click here to leave a review.
I read every single one and appreciate you taking the time to let me know what you think.
Free Financial Assessment
Do you want to make smart decisions with your money? Discover your biggest opportunities in just a few questions with my Financial Wellness Assessment.
Disclosure: This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Plancorp LLC employees providing such comments, and should not be regarded the views of Plancorp LLC. or its respective affiliates or as a description of advisory services provided by Plancorp LLC or performance returns of any Plancorp LLC client.
References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
Please see disclosures here.
