by Gary Alexander
January 3, 2024
We now begin 2024, the key year of the decade – like 1924 was to the Roaring 20s – the year when Cal Coolidge was re-elected and the stock market began to roar – or 1974, the year President Nixon resigned, the stock market cratered, and we had simultaneous inflation and recession, dubbed “stagflation.”
Which model will we emulate? By the end of 2024, maybe by March 19, we’ll need to decide:According to the 2024 Presidential Primary Schedule, more than half of state primaries will be decided by March 19.
1924 Began to Roar When “Silent Cal” Won Big
It’s fitting that the 1920s began to roar in 1924, since the film giant Metro-Goldwyn-Mayer (MGM) was first formed on April 17, 1924, and they used a roaring lion as their symbol, even in the silent film era:
Business was already booming in 1924 under the “benign neglect” of Silent Calvin Coolidge, who gave business leeway to grow, through low tax rates and low regulation. You name it – movies, music, cars, radio, manufacturing, services, construction. All were booming. Here are three mid-1924 benchmarks:
- Radio: On June 10, 1924, the first radio broadcast of a political convention was aired, the Republican National convention in Cleveland. Radio exposure was growing exponentially in the 1920s: The number of radio stations rose from 30 in 1922, to 556 in 1923, to over 1,000 in 1924, while the number of home radio sets grew from only 5,000 in 1920 to five million by 1926.
- Cars: On June 14, 1924, the 10 millionth Ford Model T came off the assembly line, and Ford was adding three million new Tin Lizzies each year. The first Ford Model T came out in 1908, costing $850 and seating only two. By 1924, the price had dropped to $290, seating five in most models.
- Stocks: On July 26, 1924, the first “mutual fund” was invented. Mutual funds were one of the many popular by-products of the big bull market of the 1920s, when the Dow index rose by nearly 500%.
Shortly before the 1924 election, on October 23, the first radio network speech to the West Coast was broadcast on 23 large stations, a 45-minute talk by the supposedly “silent” Cal. Then, on November 4, Coolidge was re-elected with 54% of the vote in a six-man race. Democrat John Davis was next in votes (29%), Progressive Robert LaFollette got 16% and three others divided 1%. On the same day, Nellie Tayloe Ross and Miriam Ferguson became the first two female state governors (in Wyoming and Texas).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The stock market was already growing well between 1921 and 1924, but it took after Cal’s re-election:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Now, here’s a mirror image from 50 years ago, when the Dow fell by 45% in a time of high inflation:
1974 – the Worst Market Year since the 1930s?
The worst bear market between the Great Depression of 1929-32 and the Great Financial Crisis of 2007-09 took place in 1973-74, when the Dow declined over 45%, from 1051.7 on January 11, 1973, to its lowest reading of the last 60 years, 577.6 on December 6, 1974. Since those were two years of double-digit inflation, the “real” loss was closer to 60%. 1974 wasn’t a Presidential election year, but it was perhaps the most dramatic political year of the decade – with the resignation of President Nixon and a Democratic landslide in November, gaining 43 House seats to reach a 291 to 144 majority (over 2-to-1). The Senate ratio was nearly as high, 61-37. Democrats also added four governorships, owning 36 of 50.
It took a series of huge blunders to cause Nixon’s abject political surrender and a year-end stock free-fall.
Maybe Nixon’s first mistake came on Day 1, when he signed a bill requiring all states (even Montana!) to “temporarily” lower their maximum speed limit to 55 miles per hour to increase fuel efficiency. Like our “transitory” inflation, that “temporary” ban lasted longer than expected, about 20 years. Two weeks later, Nixon’s team printed 4.8 billion gas-rationing coupons, costing $11 million, but they were never used.
That was all a silly side show, like Ford’s “WIN” buttons (below). The real problem was inflation amid stagnation, while most politicians and our Fed Chair (Arthur Burns) seemed clueless to solve either one.
The sickness was global. On January 7, the Japanese yen was devalued by 6.7%. The IMF called an emergency meeting in Rome to fight inflation, but the conference quickly broke up amid widespread dissension. The next day, the Department of Labor reported that wholesale prices (now called producer prices) had risen by 18.2% in 1973. In the next three days, the Dow fell 6.5% from 880 to 823.
Amid this global crisis, on January 18-20, 1974, the first gold-oriented investment conference opened in New Orleans under the sponsorship of the late Jim Blanchard. (Bunker Hunt attended that seminar, where he hatched his idea of cornering the silver market, though his plan took six years to reach fruition.)
The world entered crisis mode by mid-year, when Bankhaus Herstatt, one of Germany’s largest private banks, collapsed on June 26, the first major bank failure since Western currencies began to float in 1973.
Then came the market’s worst quarter of the postwar era. The Dow fell from 806 on July 1 to 584 on October 4th (down 27.5% in a quarter, plus a few days). In the midst of that quarter, President Nixon resigned, 10 days after three articles of impeachment were voted against him by the House Judiciary Committee. The Dow dropped 48.4 points (-6%) that week. (Also in that week, on August 14, the U.S. Congress authorized U.S. citizens to own gold for the first time in 41 years, as of year-end 1974).
On September 8 (a Sunday), President Gerald Ford pardoned former president Nixon for any crimes he may have committed while in office. On the next Monday morning, the stock market continued its free-fall. In the next week (September 9-13), the Dow fell by over 50 points (7.5%), while the S&P fell 8.7%.
The economy was cratering: Auto sales were off 20%, housing starts were down 40%, and unemployment hit 7.2% by year’s end. Inflation reached double digits for the second year. On September 28, President Ford concluded an emergency two-day summit on how to fix inflation and recession. His answer was unveiled on October 6, when Ford urged everyone to wear “WIN” buttons (Whip Inflation Now), but inflation continued into the 1980s. From September 20 to October 4, 1974, the Dow fell 13%+, from 674 to 584. and on October 8, America suffered its worst bank failure to date, the Franklin National Bank.
The week of December 2-6 brought the stock market’s absolute bottom in the 1970s. On Monday, December 2, 1974, President Ford addressed the nation in a televised speech, in which he sounded the alarm for three major economic crises at once – inflation, recession and the oil shortage. The Dow fell 41 points (-6.6%), to 577.60 that week. But there was a sort of new birth just two weeks later.
On December 19, the PC revolution was begotten, if not born, when the Altair 8800, a do-it-yourself computer kit, went on sale for $397. It made cover of the January 1975 issue of Popular Electronics, where it caught the attention of a Harvard student, Bill Gates. He and his high school buddy Paul Allen realized that the Altair would need a programming language, so Gates and Allen dropped out of Harvard and went to Albuquerque to sell their operating system to Ed Roberts, founder of Altair’s maker, Micro Instrumentation and Telemetry Systems (MITS). To give it a name, Gates and Allen established Micro-Soft (later Microsoft), in Albuquerque. They later moved to Seattle, where the two went to high school.
Their little start-up is now the second largest corporation on the Big Board, valued at $2.8 trillion. In fact, today’s two largest (#1 near $3 trillion) stocks did not even exist in 1974, but they were born in 1975-76.
We need more business ideas and less government. Where is Calvin Coolidge when we need him most?
Navellier & Associates owns Ford Motor Co. (F), in managed accounts. Gary Alexander does not own Ford Motor Co. (F) personally.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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