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When is a good idea really a bad idea? The night before the stock market crash of 1929, two of the biggest stars of the day had dinner together. Charlie Chaplin, the movie star, and Irving Berlin, the composer/songwriter. Irving Berlin on that night had $5 million invested in the stockmarket. He had seen the market grow by 37 percent in 1927, 44 percent in 1928 and was already up 28 percent by the last quarter of 1929. Berlin was enthusiastic about the future of the stock market. Charlie Chaplin was not. He tried to persuade Berlin to sell all of his stocks, like he did the year before. Chaplin told his friend that "owning stocks was unwise" especially since unemployment was at 14 million. Berlin did not listen and the next day, you know what happened. You may think that Charlie Chaplin was very smart and Berlin was extremely foolish. Charlie Chaplin received many a free meal through the years telling this story. But, was Charlie Chaplin's advice, which everyone thought was as a good idea, really a bad one? First, Chaplin was wrong about unemployment. The night before the crash it was 2 million, not 14 million, or 3.2% which is better than what is considered full employment (there is always a percentage between jobs). US unemployment has never been more than the 13 million at the depths of the Great Depression. No one knows when or if Irving Berlin gave up and sold off his stocks, but if he held on and assuming his stock portfolio followed closely to the Standard and Poor's 500 Stock Index, by 1932 his $5 million would have fallen to $1.2 million.
If he held on he would have been even by 1937. By 1945 his portfolio would have grown to $7.9 million. By 1955, he would have been worth $37 million. Irving Berlin died in 1989, at the age of 101, and his investment would have grown to The stock market can be rough in the short term, but over the long term it has historically returned 10 percent annually. This means that every 7 years you should double your money, quadruple it in 14 years, octuple it in 21 years, etc., etc. |


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ONE OF A KIND! He made and lost three fortunes and loved every minute.
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Edison's Dirty Trick
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