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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.
Nathan
Lewis
Nathan Lewis was formerly the chief international
economist of a leading economic forecasting firm. He now works in asset management.
Lewis has written for the Financial Times, the Wall Street Journal Asia, the
Japan Times, Pravda, and other publications. He has appeared on financial
television in the United States,
Japan, and the Middle East. About the Book: Gold: The Once and Future
Money (Wiley, 2007, ISBN: 978-0-470-04766-8, $27.95) is available at
bookstores nationwide, from all major online booksellers, and direct from the
publisher at www.wileyfinance.com or 800-225-5945. In Canada,
call 800-567-4797.
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