Not a Bear Among Them
January 20, 2007
Thirty four years ago, in January 1973, Barrons did its annual roundtable survey of investment professionals for their views on the upcoming year. The title that year was “Not A Bear Among Them,” indicating universal bullishness. Well, not bullishness exactly, of the pound-the-table-at-the-bottom variety, but confidence that the expansion and rising stock prices of the last twenty-four years (since the 1949 bottom) would continue.
Actually, they were on the very brink of total annihilation. The inflation of the 1970s had already gotten well underway, with an easy Fed starting in 1970, the end of the gold standard in 1971, and the dollar losing fully 50% of its value in 1972 when it hit a low of $70/ounce of gold from its Bretton Woods value of $35/oz. In 1973 it burst out in a big way, with the dollar losing another 50% of its remaining value in a move to $120/oz., and the fixed currency system of the Smithsonian Agreement (replacing the Bretton Woods agreement in December 1971), fizzling away as the era of floating currencies began. Today, every mainstream economist insists that floating currencies are a necessary part of the “free market,” but actually they came into existence in March of 1973.
The bear market of 1973-1974 lost about 50% in nominal terms, but the real damage was due to the decline of the dollar as compared to gold. From the $35/oz. level of the Bretton Woods years to the $200/oz. nadir of 1974, the dollar lost about 85% of its value. If you combine a 50% stock market loss with an 85% currency loss, you get about a 92% decline. Ouch!
Here is a link to some scans I made of the original 1973 Barrons article. It’s hard to read. Also, you may have to go forward and back on the pages to follow the article, as it moves from the bottom of the column to the top. Also, it’s pretty boring. The fascinating part, of course, is its boringness. I suppose this exercise is primarily for connoisseurs of market sentiment. The next step is to compare with the Barrons roundtable from this year.