When Bad Things Happen to Good Markets: Part 1 of Our Series on U.S. Downturns

October may not be the cruelest month for investors -- based on the averages, that's September. But when Wall Street stumbles at this point of the year, it stumbles extra hard. And that's why, in the Oct. 3 episode of Motley Fool Answers, Alison Southwick and Robert Brokamp are joined by former Fool Morgan Housel to kick off a four-part series on the history of market crashes in the United States, with a discussion of the big one, the Great Depression. They'll look at its causes, why it was so much worse than prior downturns, how America climbed out, and what today's investors should learn from it.

A full transcript follows the video.

This video was recorded on Oct. 3, 2017.

Alison Southwick: October is an auspicious month here. Not only did a couple -- a few -- market crashes happen in this month, but it's also October, so we thought, let's dedicate the whole month to looking back at the history of market crashes in the United States. And joining us to talk about that is Morgan Housel. Hi!

Morgan Housel: Hey, guys! How are you?

Southwick: So the first one we're going to talk about is the Great Depression.

Robert Brokamp: The big one. The granddaddy of them all.

Southwick: The big one. And then we'll just move forward in history.

Housel: They didn't mince any words naming it.

Southwick: No, they did not.

Housel: They just wanted to make it accurate and so they called it the Great Depression.

Brokamp: It's not just a depression. It is a "great" depression.

Southwick: It's great! So let me set the stage for you. It's the Roaring Twenties. In the wake of World War I, the nation's wealth more than doubled. This means that a lot of people had enough money to become full-blown consumers. They could buy newfangled things like electric refrigerators, and radios, and, lest we forget, the Model T. In this prosperous America you could have anything -- except alcohol, of course.

But the party did stop, and suddenly. So today Morgan joins us for this month-long series looking at market crashes in the U.S. And why not start with the big one? The Great Crash. Black Tuesday. But before we get into the actual crash, Morgan, thanks for joining us!

Housel: Thanks for having me back.

Southwick: You're going to be doing a lot of talking today ...

Housel: Yeah.

Southwick: ... and hopefully our listeners like you, so ...

Housel: Well, if not, there's a lot of podcasts out there. You can turn this down.

Southwick: That's true. We'll give you your money back. All right. So what was life like leading up to the Great Depression?

Housel: I think whenever people talk about what caused the Great Depression and what caused the Crash of 1929, it's always easy to point to one thing. But then what caused that one thing? Like, you can always keep going back in time and say what really caused all this to happen. And if we're talking about the Great Depression, I like to start in World War I.

Something really important happened in World War I. Frederick Lewis Allen, who was a great historian who wrote of history in the 1920s and the 1930s, he made this point that during World War I, to finance a war, they sold Liberty bonds to average, everyday Americans. Not just wealthy people, but everyday Americans were buying Liberty bonds to finance the war.

And it was the first time that most Americans had any experience with a stockbroker, because stockbrokers up until that point only dealt with wealthy people and aristocrats, and now it was everyday train conductors and farmers going and talking to a stockbroker to buy these Liberty bonds, because there was just a push of patriotism to buy these bonds.

And because of that, not only did people get their first taste of what it was like to work with a stockbroker, but stockbrokers had to learn all kinds of new skills to sell to these average, everyday people. And high-pressure sales tactics had to needle their insecurities and get them to buy something that they really didn't need. But the salesman's job was to kind of convince them that you needed this.

So it's set up in the late nineteen-teens, this early dynamic of Main Street's affiliation with Wall Street that had no relationship before that. So that's where I think the seeds of the Great Depression were ultimately planted, of getting everyday people who didn't have a lot of money, had no sophistication, no training or education, involved with Wall Street.

Southwick: But then they had no place to get educated, either. You were just going to have to trust this stockbroker guy.

Housel: So that's kind of like the first seeds that were planted. And then after World War I, all the troops came home. Devastating period for the war, and the economy instantly falls into a really deep recession. Really bad. High deflation, really high unemployment in the early 1920s.

And Frederick Lewis Allen makes this really interesting point that between the war and then the recession, when people came home, the people just got tired of being tired. After, like, seven years of everything going wrong, there was a period in the early and mid-1920s where people said, "I'm ready to have fun again. We've been dealing with a decade of everything going wrong between war and recession. I'm ready to let loose and have fun again." And it was almost like this spark that he wrote about, that in the early 1920s people were just ready to have fun, and they just let loose.

And a few other things happened at the same time that were really important to the lead-up of the Great Depression. To continue with stories of really awful things happening, in 1921 there was a really awful famine in Russia, and the United States wanted to do something about it. So the U.S. government set an artificially high price for wheat and told farmers, "As much wheat as you can grow, we will buy it from you at this inflated price." The price of wheat at the time was, I think, $0,40 a bushel, and the government said, "We will buy as much as you can grow at a dollar a bushel." They could then send it to Russia to help break the famine.

So you had all these farmers that overnight were minting money and planting as much wheat and corn as they could, and making a fortune doing it, selling it to the government. And it was so lucrative to be a farmer during this time because of these inflated prices that they had what were called suitcase farmers, which were people from, like, Chicago and Minneapolis who were lawyers or insurance salesmen. They would take the train into Iowa, buy a small farm, and grow wheat. They'd come in with their suitcases, and they'd be farmers on the weekend and go home, because you could make so much money doing this.

And farming was such a big part of the economy back then that in the early 1920s, when it started, it was just a huge stimulus to the overall economy -- this big farming surplus that was going on -- at the same time that you had people that were just ready to get back into having fun and helping grow the economy again. It was almost overnight in the early 1920s that the U.S. economy just took off like a rocket ship. Part of that was coming out of this recession in the early 1920s, and then you combine that with this big farming stimulus, and it was just boom, off to the races.

Because of the psychology at the time -- Frederick Lewis Allen writes a lot about this -- people were so ready to have fun again that you mix that excitement with that much extra money that was flowing around, and it was just a boom time in the 1920s. And you mix optimism with a lot of money, and people start making really bad decisions.

Brokamp: And then you also add in debt, because a lot of people didn't have, necessarily, all the money to buy these new consumer goods or these investments, but there were people who were willing to lend them money to do that. Back then, the margin requirement to borrow money to buy investments was only 10%, so if you wanted to buy $1,000 worth of stock you only needed to put down 100 bucks. All that thing had to do was drop 10%, and you lost all the equity in that investment.

Housel: And not only that, but buying stocks on margin in the 1920s, when there was a huge bull market, was the normal thing to do. It was like the equivalent of when people buy homes today. Do they take out a mortgage? Of course. Everybody takes out a mortgage. And back then it was, if you were buying stocks, of course you used margin.

Today if you're using margin, it's like, "Well, you're either reckless or you're brilliant and you have some crazy idea." But back then everybody used margin, and they used a ton of margin. So everyone's stock position was really leveraged up, which did two things. It made the run-up that much more potent, because you had people who didn't have a lot of money to their name that could go out and buy a ton of stock. And also it was just a bunch of dry kindling sitting around for when the crash eventually came.

And also during this period in the 1920s, two of, I think, the most important inventions of the 20th century, the car and the radio, were coming online for average, everyday people. And that just added to the sense of optimism of what we could do as a country, what our potential was. It completely changed American life in the span of a few years, the car and the radio.

So then you add all that together. You have people who for the first time ever have connections to stockbrokers. You have this big economic boom from farming. And you have all this optimism coming from the car and the airplane. And the 1920s, I think a lot of people know, the booming '20s, the Roaring '20s, it was was a great time for a lot of people that just led to a lot of excitement and overoptimism.

And so it led to in the late 1920s, probably the biggest stock bubble that we've ever seen, and that really took place in just, like, a year or two. It was really, like, 1928 and early 1929 that the market just went straight up, just went parabolic. And day after day after day, stock prices for all companies were just going straight up, and increased by several multiples just in the late 1920s. It created a bubble that's hard to measure, because earnings and whatnot weren't measured back then, but probably much bigger than the 1999 stock bubble. Just completely detached from reality by 1929.

Southwick: So what actually made the bubble burst? So do we go to Black Tuesday? Because that's what I picture, right? You picture the stockbrokers jumping -- we don't literally picture them, because that's macabre.

Housel: You can if you want ...

Southwick: Is that when the bubble actually burst? On Black Tuesday?

Housel: For most of 1929, there were a lot of smart people and newspapers saying that this was getting a little out of hand, but no one said this is going to completely burst, come down, and cause a huge depression. Robert Shiller, who's a Yale economist -- we've interviewed him several times at The Motley Fool -- he has spent a bunch of time with economic historians, saying, "Find me one person in the 1920s who predicted how this was going to play out. Predicted the crash in its magnitude and the ensuing Great Depression." And he said, "No one. No one back then predicted what would happen."

Brokamp: In fact, it was almost the opposite. You had people like Irving Fisher, who was the preeminent economist back then, saying in 1929 that stocks have reached what looks like a permanent plateau.

Housel: And even the pessimists would say "due for a correction." I think they called them "breaks" back then. "We're due for a break." But no one was really predicting the mayhem that came from it.

One of the things that I think is interesting back then is that a lot of the metrics that we use for sizing up the stock market today -- the P/E ratio and really basic things that you learn in Investing 101 -- didn't exist back then in people's minds. The first book that really put together how people should value stock in a rational way based on discounted earnings, which today we approximate with the P/E ratio, was a book written by Ben Graham called Security Analysis. That was written in 1934. This was years before that.

The first book that a smart finance professor put together on the theory of intrinsic value and what a company is worth based on rational accounting measures was a book written by a guy named John Burr Williams. The book was called The Theory of Investment Value, and that was 1938. This is a decade after the crash.

So if you try to put yourself back in 1929, looking at what's going on in the stock market, we didn't really have the knowledge or the metrics or the data to really understand how inflated stock prices were. We do today with the advantage of not only hindsight but a greater understanding of what stock prices should be, based on earnings and whatnot. But even back then, the smartest finance professors were really just starting to scratch the surface of how a market should be valued. People really didn't know.

Southwick: Was it a lot of gossip and whispers? Like guys chomping on cigars saying, "Hey, I've got a buddy. His boat's coming in, and it's going to take off?" No, I think the metaphor is the boat taking off.

Housel: There were two types of investors. The first was your old-school aristocratic investors who just owned stocks for a hundred years and they just cashed the dividends. That's what they were. And stocks at that point were almost indistinguishable from bonds. You didn't really care or even know what the price changes were. You just got your dividend checks every month or every quarter, and that was it. That was one side.

And then the other side was just pure casino. Had nothing to do with what the companies were doing, or what they were paying in dividends. It was just a casino going back and forth, maybe like bitcoin today, where prices go up and down, but it's not based on anything intrinsic.

Southwick: That's terrifying. All right, so, then, this doesn't last.

Housel: No!

Southwick: Let's get to the actual bursting of the bubble.

Housel: So what's interesting, too, is that it didn't happen in one day. We talk about the Crash of 1929, but it played out over a week. And it was basically three days in October of 1929 where the market fell about 12% each day, consecutively. And so I think putting that together, rather than all happening at once, having it spread out a little bit, kind of gave investors at time time -- I don't think it was as traumatic as we would expect it to be today, because it happened slower than, say, the crash of 1987. It just kind of played out slowly.

And people were so accustomed to prosperity and rising stock prices that the 30% decline that happened in October -- was it a big deal? Of course. Did stockbrokers jump out the window? Literally, yes. There are accounts of that happening. But I think people were so shocked -- a 30% decline, in the grand scheme of things, isn't that huge. In three days it's big, but it's not that big a deal. I mean, stock prices fell 20% in the U.S. in 2011.

So there was still a pretty big sense of optimism at the time. Herbert Hoover, who was president, and Andrew Mellon, who was Secretary of Treasury, at the time made a big push in the media and newspapers to say business is sound. The fundamentals are strong. This is a temporary break, as they called it back then. We're going to pull through this. Everything is OK. And I think people bought it at the time.

And so as the months kept playing out into November and December of 1929, things stabilized and recovered a little bit. The big idea was, that was it. That was tough, but things are going to move on and keep going. There was a little bit of a rally after that, but people had absolutely no idea what was still to come.

Southwick: So what was still to come? How long are we going to suffer?

Housel: So even by mid-1930, most economists thought by looking around at what was happening that we were in a pretty bad recession, but nothing more than that. A pretty severe recession, but nothing of historic terms. It was the summer of 1930, and as we moved into 1931 the banking system started cracking, which was caused a lot by two things. One, all these investors with margin debt who were buying from banks were now defaulting on their debt that they were borrowing against. But also wheat prices and corn prices started plunging, so then farmers who had been a big driver of the economic boom in the 1920s, and had leveraged up with all kinds of debt to buy farm equipment and whatnot, were defaulting at record rates, too.

Back then, the Federal Reserve worked in a different way. They didn't bail out banks like they do today, and more importantly, the big thing was there was no FDIC insurance. If your local bank was going down, your life savings was going with it. That began the bank runs of the early 1930s, which is where things really started getting out of hand.

It peaked in 1932. There was a wave of bank failures in 1932, and the big one, actually, was a bank in Austria called Creditanstalt in Vienna. It was a huge bank in Austria. It failed overnight, and no one really saw it coming. And there have been some economists who have mapped just how it happened. After Creditanstalt failed in Vienna, then it spread to Paris, and then it spread to London, and then eventually spread to New York. It was a bank called the Knickerbocker Trust in the United States that failed in New York, and after that the curtain came down.

Southwick: Knickerbocker. That's like the most perfect name for a failing bank ...

Housel: The perfect name for a 1920s bank, right?

Southwick: You couldn't write that.

Housel: And so after the banks started failing, that's where things started getting really ugly in the United States. So now we're into, like, 1932. So we're three years after the Crash of 1929, which, I think, to me that's probably the biggest misconception of the Great Depression, is that there's the Crash of 1929 and then boom, welcome to the Great Depression!

And it wasn't. It played out, the first couple of years, played out kind of slowly, over a period of many many, years. And if you think about the 2008 financial crisis, the worst of that was really contained in literally, like, a 90-day period. It was late 2008 -- September, October, November -- and then it was pretty much over.

The Great Depression played out over three years, and that, I think, did the opposite of what the 1920s did, is that people just got accustomed to pessimism. Their hopes vanished. After you've been beaten up consistently for three years, people lose all their optimism and all their faith, and that feeds on itself. If businesses and employees and investors don't have any optimism and don't have any confidence, then it's really hard to get the economy going.

Southwick: Nothing goes up.

Housel: So the stock market bottomed in mid-1932. Unemployment and the economy bottomed in 1933, four years after the crash.

Southwick: How did we recover? How did we get out of this?

Housel: This is where things could get political, and a lot of people still disagree with this 90 years later. Franklin Roosevelt is elected in 1932. He starts the New Deal. There's that element of it, of economic stimulus from the New Deal, and just changing tactics. There's also a thing with all recessions that prices get low enough -- stock prices, housing prices, labor prices -- then it's attractive to get back in business.

Every investment, every business opportunity is attractive at some price, and prices got ridiculously low in the 1930s everywhere. The price of labor. The price of food. By 1932, stock prices were down 89% from their 1929 peak. They were just completely obliterated, but there were still a lot of good companies out there that were still profitable. Still paying dividends.

There's a re-creation of what the S&P 500 would have been back then. Robert Shiller put it together. The dividend yield in 1932 was almost 20%, which is crazy, but that's how low prices had fallen. So whenever prices get that low, there's just enough opportunity that even if there's an inkling of optimism or opportunity somewhere, somebody's going to take it, and eventually it just feeds on itself. Suddenly there's a pretty big boom, both in the economy and in the stock market from, 1932 to 1937. And it was pretty big. I think stock prices tripled during that five-year period from 1932 to 1937. It was actually one of the best five-year periods in history to own stocks.

Southwick: You talked about the FDIC. Did that come out of this? What other legislation or regulation came out following the Depression to keep this from happening again? Because it's obviously never going to happen again.

Housel: Knock on wood.

Southwick: No, it's only going to happen for the next three episodes of this podcast. Not this bad, of course.

Housel: So the few big ones besides FDIC insurance -- one is the SEC. A lot of the reason that the market grew so high in the 1920s is because fraud and bad behavior in the stock market was rampant. One of the big actors during the 1920s, who made a fortune from ripping people off in the stock market, was Joseph Kennedy, JFK's father. He made a fortune in the 1920s bringing together groups of investors. They would corner a stock and put out false information. Since they had it cornered, they could drive up the price. Rising prices got other people excited, and then they would dump their shares back on them. There was all this misbehavior in the stock market that was perfectly legal back then, even though they were really taking advantage of vulnerable people.

So with that came the SEC, and the punch line of the story is, "You know who the first chairman of the SEC was?"

Southwick: The same guy?

Housel: Joseph Kennedy.

Brokamp: What was FDR's quote about that?

Housel: I forget.

Brokamp: Something along the lines that if you want to catch a bank robber, you've got to put a put a criminal in charge. Something along those lines.

Housel: That was the other big thing, besides the FDIC, was the SEC. And then there's two other big securities laws that came out of it, one in 1933 and one in 1940, that just set the standards for how mutual funds can be bought and sold. How mutual funds can be operated. For how financial advisors have to act and what they have to disclose. Those rules are still in effect today and really regulate and govern the lives of financial advisors and investors today.

And if you're ever talking to a mutual fund manager behind the scenes when they're talking shop, you'll hear people say "40 Act funds." That's the Securities Act of 1940, and it's still in the lexicon today for investors, and that came from the Crash of 1929.

Brokamp: And obviously out of the New Deal also came Social Security ...

Housel: Right ...

Brokamp: ... which was passed in 1935, and one of the ways that FDR and the New Deal helped people get back to work -- that was necessary back then, because unemployment was 25%, which is almost inconceivable these days -- was the Works Progress [Administration], the WPA, which was responsible for tens of thousands of projects all over the country. You can't go anywhere in this country, pretty much, without coming across a road, a school, a bridge, a dam, something that was built by these unemployed people who were able to work for the government, and they put them to work doing these things.

Southwick: So as we're winding down here, what is your takeaway for investors? What's one good lesson from the Great Depression that our listeners should take away?

Housel: There was a lawyer during the Great Depression named Benjamin Roth, who kept a really incredible diary. He was a lawyer, but he was also an amateur investor and an amateur economist. A really smart guy. And his son published a biography five years ago. It's called The Great Depression: A Diary, and it's really fascinating to see a layman's perception of what happened during the Depression. And he constantly writes about that in 1932, 1933 -- he uses the same phrasing over and over again -- "everyone knows stocks are cheap, but nobody has any cash to buy them."

He just talks about it all over the place. And not just stocks. He's talking about buildings and real estate in his neighborhood. There's a warehouse down the street. It's selling for nothing, but nobody has any cash to buy it. And he writes about it in the sense of all this opportunity that's lost, and if anyone had any cash during that period they could mint a fortune. There was opportunity laying right in front of them but no one had any cash saved up.

I used to write about this quite a bit when I was here at The Motley Fool. People really discount cash as an asset when things are going well. Cash doesn't earn a return. Why would you want to earn cash? Put your money to work. It's not doing anything for you. The value of cash is what it can do for you when things turn down, and things eventually will. That's when you earn your return on cash.

So I've always held more cash than I think any financial advisor would say is necessary, but that's why I do it, and I think I'm earning a good return on my cash. I'm just not going to realize that return until things get hairy again.

Southwick: So you're maybe hoping for a little downturn so you can put that cash to work.

Housel: No, not a great depression. Just a minor depression.

Southwick: That's OK. A so-so depression.

Housel: Just an OK depression.

Brokamp: A so-so depression.

Southwick: Well, you're going to stick around, because I'm not going to let you leave.

Housel: That's part of the deal.

Southwick: All right.

Housel: Handcuffs.

Southwick: So as we revisit different market crashes this month, we're also going to test your knowledge of the era, and since this series is going to last for four parts, we're going to play four rounds of trivia. Today we're starting with the '20s and '30s. You get to take turns picking categories, and the other person can steal the points, by the way. The categories are geography, entertainment, arts and literature, science and tech, sports and leisure, and history. These are Trivial Pursuit categories, by the way. Morgan, you're the guest, so you get to go first.

Housel: I want history.

Southwick: All right, history is tough, because these are always going to be history. I'm not super proud of this, but basically all of the history questions are going to have to do with Time's People of the Year ...

Housel: OK.

Southwick: ... from around this era. And this is all '20s and '30s. In the 1930s, two women were named Person of the Year by Time. Can you name at least one of them?

Housel: What year?

Southwick: It's in the 1930s. The decade of the '30s.

Housel: In the 1930s.

Southwick: Yup.

Housel: Was Eleanor Roosevelt one of them?

Southwick: No, but you would think that!

Housel: You'd think!

Southwick: Bro, do you want to steal?

Brokamp: I can only remember -- does one have the first name Frances?

Southwick: Nope.

Brokamp: Dang.

Housel: Ha!

Brokamp: I can't remember her last name. She was the woman who was responsible for Social Security.

Southwick: Frances Perkins?

Brokamp: That's it.

Southwick: No. Wallis Simpson, which you might recall is the woman who King Edward married after he abdicated the throne. And then the wife of Chiang Kai-shek. So Chiang Kai-shek ...

Housel: I never would have gotten that.

Southwick: ... and his wife both received it.

Brokamp: Oh, interesting.

Southwick: That's a tough one.

Housel: That was obviously next.

Southwick: By the way, some of these will be easy. Some of these I will be very surprised if you get right, so don't worry about it.

Brokamp: Easy ones over here. Thanks.

Southwick: Bro, it's your turn. Well, it's up to you. You've got to pick it.

Brokamp: Oh, man. Let's go with entertainment.

Southwick: Entertainment. The Depression effectively ended the Jazz Age, but the music goes on, and while music, in general, took a sad turn with songs such as "Brother, Can You Spare a Dime," one song was jaunty and optimistic enough to help get FDR elected in 1932. Do you remember the name of the song?

Brokamp: I'll say "In the Mood."

Housel: "Blue Skies"?

Southwick: That's a good guess, too. No. It's "Happy Days Are Here Again."

Brokamp: Oh!

Housel: OK.

Southwick: It was originally published in 1929. It became FDR's campaign song and later the unofficial theme of the DNC. The song has been associated also with the repeal of prohibition, and it has appeared in over 80 films since 1930.

Housel: Wow!

Southwick: Boy, you guys are not doing so hot, but that's OK. That's OK.

Brokamp: This is a tough one.

Southwick: I still think you're smart.

Brokamp: Thanks!

Southwick: Your turn, Morgan.

Housel: OK, science and tech.

Southwick: Science and tech. So this is a quote from the book Once in Golconda, which is about the crash. In it they write, "Automobile stocks were to the stock market of the 1920s what electronics would be to that of the 1950s." At this time, what four companies were known as the Four Horsemen of the Boom? And I will give it to you if you can name more than one.

Housel: For automobile stocks?

Southwick: These companies were known as the Four Horsemen of the Boom.

Housel: Well, it wasn't Ford, because Ford wasn't public back then, so I'm crossing that off. General Motors (GM -0.05%)?

Southwick: Yes. And I'll give this to you if you can guess one of the others.

Brokamp: Do I get to take a guess if he doesn't know?

Southwick: Yes ...

Housel: No. No.

Southwick: Yes. If he gets it wrong, you can steal it.

Housel: OK, I've got to think about this. ... Packard!

Southwick: Nope.

Housel: Ugh!

Southwick: Bro?

Brokamp: Chrysler and Mack Truck.

Southwick: Nope.

Brokamp: What?

Southwick: General Motors.

Brokamp: They were in the Dow in 1929.

Southwick: Well, here's the answer.

Housel: Not Packard?

Southwick: General Motors, Fisher Body, DuPont, and Yellow Cab.

Housel: I had DuPont in my head because I thought William DuPont was the guy who ran General Motors.

Southwick: I don't know.

Housel: Is that not true?

Southwick: You're going to have to take it up with Once in Golconda.

Brokamp: I don't know.

Southwick: In the book they also ...

Housel: No, I'm going to say William Durant. That's who it is. Him and the General Motors guy.

Southwick: So the book goes on to say that a standard Wall Street joke was to speak of the market collectively as a product of General Motors.

Housel: That's not a very good joke.

Brokamp: Ha!

Southwick: I've heard better. All right, Bro, your turn.

Housel: These people weren't very funny back then.

Brokamp: Uh, let's see. Just to choose something different, I'll go with art and literature even though I doubt I will get it right.

Southwick: All right. John Steinbeck said the following when talking about what book he was about to commence writing. "I want to put a tag of shame on the greedy bastards who are responsible for this, the Great Depression." He famously said, "I've done my damnedest to rip a reader's nerves to rags."

Brokamp: 1939 is Grapes of Wrath.

Southwick: Yes!

Brokamp: There you go.

Southwick: Good job. Of course, it went on to win National Book Award and the Pulitzer Prize for fiction. Hey, you got one!

Brokamp: I did get one. Woo-hoo!

Southwick: All right, Morgan, are you ready?

Housel: Yes. Geography.

Southwick: All right, geography. This is a short one. In 1926, Route 66 was created, and it ran between which two cities?

Housel: One is probably Albuquerque, right? No? Am I close?

Southwick: Well, it does go from the West to the Midwest.

Brokamp: Just mention the Nat King Cole song, so that's a good guess.

Southwick: Yeah, but there's a million cities in that Nat King Cole song.

Housel: I don't know. That's my guess. I tried.

Southwick: Do you think you can steal it, Bro?

Brokamp: Washington, D.C. to L.A.

Southwick: L.A. to Chicago.

Brokamp: Well, I got one of them right.

Housel: Is that right?

Southwick: Yes.

Housel: OK, well ...

Southwick: Well, I guess so. I'm the one who looked this up.

Housel: I mean, you've got the answers.

Southwick: If I got this wrong, I'm sorry. Then the last one goes to Bro. Sports and leisure.

Brokamp: Sure, why not. If it has nothing to do with football, I'm out of luck, but go ahead. Well, football didn't really begin until the '20s, so ...

Southwick: Let's see if you know your onions. Which of the following is not a term for being drunk in the 1920s and 1930s: boiled as an owl, burning with a blue flame, on the gooseberry lay, half-seas over, or on a toot?

Brokamp: Which one isn't?

Southwick: Yes.

Housel: They all seem acceptable to me.

Brokamp: They all sound -- and I think we should bring them all back. What was the one about a goose?

Southwick: On the gooseberry lay.

Brokamp: Well, it sounds controversial, so I'll choose it.

Southwick: You're right!

Brokamp: Hey, hey!

Housel: Alison just made that up.

Brokamp: And I don't even drink!

Southwick: No. "On the gooseberry lay" actually means that you're making money by stealing clothes off clotheslines.

Housel: While drunk.

Southwick: And if you drink too much giggle water, you might just pull a Daniel Boone, which means to throw up.

Housel: Wow!

Southwick: That was a fun one.

Housel: Poor Daniel Boone!

Southwick: Oh, Bro. You won that two to zippy. But that's OK, Morgan. You showed your smarts.

Housel: I tried.

Southwick: You showed your smarts in the rest of the show, so we'll give you a break on this. Morgan, thank you for joining us today!

Housel: Thanks for having me.

Southwick: We'll see you again next week, huh?

Housel: Maybe.

Southwick: Oh! Please?

Housel: OK.

Brokamp: I'll bring the gooseberry.