Dreams of Avarice: Popular Investment Advice before and after the Great Crash of 1929

This paper examines US popular investment advice guides of the 1920s to the 1940s in relation to the defining financial event of the era: the Wall Street Crash of 1929. Authors of such guides largely kept themselves aloof from the “New Era” euphoria of the “roaring Twenties,” preferring, instead, to advocate independence of mind and the cool application of scientifically grounded methods and principles. The “science” that these writers uniformly propounded, though, was “technical analysis,” which, in its narrow focus on the eddies of the stock market, helped to foster an indifference to underlying economic conditions that many analysts have identified as a key factor in the crash. Writers of technical analysis-based guides recognised that the Great Crash was a major problem for them and their methods, and a series of books published in the aftermath of 1929 went out of their way to explain how technical analysis in fact perfectly explained the recent boom and bust. At the same time, though, technical analysis was in danger of being outflanked by the emergence of what would become its arch-rival during the middle decades of the twentieth century: fundamental analysis, which urged investors to make use of a New Deal regulatory regime mandating unprecedented corporate transparency in order to determine the “fundamental” value of the firms in which they were investing. The latter part of the paper will show how fundamental analysis gradually gained the ascendancy in this tussle between competing schools of investment advice, but without ever fully silencing the appeal of privileged insight into the mind of the market offered by its more glamorous, if less reputable, cousin.