The "Witch of Wall Street's" Timeless Investment Wisdom

There is a story I love telling about one of history’s greatest value investors. She was a woman who made her fortune by following two simple principles that are just as relevant today as they were in the 19th century.

I'm talking about Hetty Green, the infamous “Witch of Wall Street.”

Born in 1834 in New Bedford, Massachusetts, Hetty learned the art of finance at her father’s knee while most girls her age studied needlepoint. By age thirteen, she was keeping the books for her family’s whaling business. Her real education, however, came from her grandfather, who taught her to read stock tables and understand the intricacies of commerce and trade.

Hetty left us with two golden rules that every investor should tattoo on their forehead.

The first one you'll easily recognize: “I buy when things are low and no one wants them. I keep them until they go up and people are crazy to get them.”

And this crucial addition:

“There is no great secret in fortune making. All you do is buy cheap and sell dear, act with thrift and shrewdness, and be persistent.”

Is it simple? Yes. Is it easy to execute? Absolutely not.

The Green Method: A Template for Success

Hetty’s approach was beautifully straightforward. In good times, she was a lender, primarily focusing on well collateralized real estate deals. When markets turned chaotic, she became an aggressive buyer, scooping up distressed assets that others would not touch with a ten-foot pole.

In the 1890s, Texas was experiencing one of its worst droughts, sending land prices plummeting. While most investors were paralyzed with fear, Green recognized an extraordinary opportunity. She systematically acquired vast tracts of Texas real estate at deeply discounted prices. Her philosophy about investing “when blood was running in the streets” would later be echoed by Warren Buffett; this serves as a testament to the timeless nature of her investment wisdom.

Despite being unfairly labeled as a loan shark by her critics, Green’s lending practices demonstrated sophisticated risk management. She insisted on securing every loan with tangible collateral, typically real estate or other hard assets. There is an illuminating story about her approach involving a church seeking emergency funding. When she demanded the church’s deed as collateral, someone questioned whether she would actually foreclose on a religious institution. Her response was characteristically direct: “I would foreclose on a church, dearie. Business is business.”

This episode beautifully illustrates several enduring investment principles that remain valuable today. First, Green understood the paramount importance of maintaining substantial liquid reserves. This allowed her to act decisively when genuine bargains appeared; this strategy remains just as crucial now as it was then.

She also grasped something that many modern investors overlook: the fundamental value of hard assets. In an era of increasingly complex financial instruments, her insistence on tangible collateral seems remarkably prescient. She knew that real assets retain intrinsic value regardless of market conditions.

Perhaps most importantly, Green mastered the psychological aspect of investing. She developed the emotional discipline to invest counter cyclically, buying assets when fear drove others to sell. This requires a kind of temperamental advantage that is rare in any era: the ability to remain rational when others are gripped by panic.

Despite her considerable wealth, Green maintained strict financial discipline, controlling expenses with remarkable vigor. This combination of frugality and intelligent capital allocation enabled her to compound her wealth consistently over time.

She also demonstrated remarkable patience, understanding that the best investment opportunities often require waiting through long periods of market irrationality. This quality, the ability to wait for the right opportunity rather than forcing action, separates truly great investors from the merely good ones.

These principles were not just effective in the 1890s; they are the same foundational concepts that create lasting wealth in any era.

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Fast Forward to Today’s Market

Now, let us apply Hetty’s wisdom to our current situation. The market is trading at roughly 30 times trailing earnings and 21 to 22 times projected earnings; these are historically high levels that would make Hetty Green raise an eyebrow. The CAPE ratio sits at 38, and we are looking at a market cap to GDP ratio of 200%; this represents one of the highest levels ever seen in U.S. history.

Here is the crucial point: The United States represents 4% of global population, 25% of market GDP, and an astounding 70% of global market cap. If that does not scream “expensive,” I do not know what does.

What Would Hetty Do?

Following Hetty’s playbook in today’s market means being a selective lender. At Benzinga Yield Report, we are focusing on:

• Carefully selected Business Development Companies
• Commercial real estate mortgage REITs
• Residential mortgage REITs

Consider the Simplify Mortgage Backed Securities ETF (MTBA) for those looking for an even lower-risk option. With a current yield of about 6% and backed by agency mortgages, it offers an attractive risk-reward profile in a market where 60% of mortgages are below 4%.

The Bottom Line

The next decade might not deliver the returns we have seen in the past fifteen years. We could see a melt up followed by a crash, a sudden collapse offering tremendous opportunities, or the nightmare scenario: a long, grinding sideways market that tests investors’ patience.

But remember Hetty’s approach: Be a lender when assets are expensive, and be ready to buy aggressively when everything goes on sale. It is not just about making money; it is about being positioned to take advantage when others are running scared.

Hetty Green may have been known as the Witch of Wall Street, living on oatmeal heated on radiators and wearing the same dress until it fell apart, but she died one of the richest women in the world. Her strategy of lending in good times and buying in bad times built generational wealth that even today’s investors can learn from.

The market might be expensive now, but somewhere down the road, our Hetty Green moment will come.

The question remains: Will we be ready to seize it?

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