by Gary Alexander
October 13, 2020
News articles, even in the market-friendly Barron’s or Wall Street Journal, keep asking how and why this market keeps rising in face of the (you name it) impeachment, the Covid-19 pandemic, riots in the street, anger and paralysis in Congress, a contentious election, and a 74-year-old President catching a killer virus.
Barron’s columnist Randall W. Forsyth offered a partial answer (in “Nothing Seems to Worry the Stock Market These Days”): “Maybe the bar-stool bettors were right all along: Stocks just go up.”
I would add that the underlying economic and corporate fundamentals are strong – and those are far more important to the market than news headlines. But more importantly, the market discounts today’s wild headlines with more historical perspective than the media talking heads or knee-jerk day traders have. As I have often said here, conditions were far worse 100 or 50 years ago (1920 or 1970) in several categories:
Pandemics: The 1918-19 global flu pandemic killed 675,000 Americans (about 0.65% of us, or one in 155) and at least 50 million worldwide. The Covid-19 pandemic is about one-tenth as deadly (a 0.062% death rate, or one in 1,600) so far, and that’s by an accounting that may have to be re-calculated in future years, once co-morbidity statistics are examined. In between, the 1968-69 “Hong Kong flu” killed over 100,000 Americans (about 0.02%, or one in 2,000), while few wore masks or shut down their businesses.
Sick Presidents: While Speaker Nancy Pelosi seems to be concocting a 25th Amendment “coup” of some sort, a century ago, Edith (Mrs. Woodrow) Wilson had been running the country for a full year, ever since her husband’s massive stroke on October 2, 1919. History.com says: “While Wilson lay in bed, unable to speak or move, Edith purportedly insisted she screen all of Wilson’s paperwork, in some cases signing Wilson’s name to documents without consulting the convalescing President.” Eat your heart out, Nancy!
Dissident Anarchists: On the first business day of 1920, the U.S. Justice Department raided homes and businesses, jailing over 4,000 “anarchists” (mostly immigrants) under the Sedition Act of 1918. During World War I, the Justice Department had charged over 2,000 Americans with sedition, convicting half of them. According to historian Jill Lepore in These Truths, “Pacifists and feminists went to prison, and so, especially, did socialists,” and 50 years later, anarchists exploded thousands of bombs, 1969 to 1972.
Systemic Racism: Eugenics (promoting “the value of superior blood”) enjoyed widespread popularity, with two-thirds of America’s 48 states passing forced sterilization laws, starting with Indiana in 1907. Part of this racism was against immigrants, but it was mostly against blacks. In 1917, 30 black men were lynched, doubling to 60 in 1918 and 76 in 1919, including 10 WWI veterans, some still in uniform. Klan popularity peaked when thousands marched at the Democratic Party convention in New York in 1924.
Political Unrest. Speaking of the 1924 convention, the Democratic Party convention ran a record 15 days and was not decided until the 103rd ballot, in favor of the man who came in 7th in the first ballot, John W. Davis. In November, as usual, the Democrats only won the “solid south” (12 former Confederate and border states), with Wisconsin Progressive Socialist candidate Bob La Follette taking his home state and incumbent Calvin Coolidge winning the other 35. The 1968 political year was even more unruly, with the retirement of LBJ, assassination of RFK, the angry Chicago convention, and the narrow Nixon victory.
I could go on and on with such comparisons, but the stock market ignored it all and soared in the 1920s, because, as Jill Lepore (who is also a New Yorker columnist and no fan of the current President) wrote:
“Between 1922 and 1928, industrial production rose by 70%, gross national product by almost 40%, per capita income by 30% and real wages by 22%. The nation was electrified in the 1920s, too, as a new power grid reached business and residences alike: In 1916, only 16% of Americans lived in homes with electricity, but by 1927, that percentage had risen to 63…. By 1929, the U.S. produced 42% of the world’s output (Great Britain, France and Germany together produced 28%.)”
— Jill Lepore, “These Truths: History of the United States,” p. 405-406
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Despite all these troubles, real GDP grew by over 40% in the 1920s and the stock market grew 10 times faster. Today’s market is basically saying “You think 2020 is tough? Go read a history book, my friend.”
Of Toppling Statues and Miracles on Ice
“They all laughed at Christopher Columbus. Now they tear his statue down.
“The Founding Father’s statues are all coming down.” – Gershwin’s “They All Laughed” (re-imagined)
Today is Columbus Day – and you can bet there will be more statues desecrated than celebrated.
Ever since June, when George Washington’s statue was toppled in Portland, Oregon, with an American flag wrapped around his head and set afire – and no local press or politicians seemingly noticing or caring – I have been reading two great Washington biographies, asking: Was G.W. really that bad a role model?
Ron Chernow’s 2010 biography of Washington (“Washington: A Life”) won a Pulitzer Prize and became a New York Times Bestseller (he also wrote “Hamilton” and “Grant”). His “Life” contains this surprising response to what his troops did to a statue of King George III on July 8, 1776 shortly after the Declaration of Independence was read aloud to the troops in New York City – when they were surrounded by Brits.
“Reading of the document led to such uproarious enthusiasm that soldiers sprinted down Broadway afterward and committed an act of vandalism: They toppled the equestrian statue of George III at Bowling Green, decapitating it, then parading the head around town to the lilting beat of fifes and drums. The patriots made excellent use of the four thousand points of gilded lead in the statue, which were melted down to make 42,088 musket bullets. Washington was appalled by the disorder. Ever the strict parent, he told the men that while he understood their high spirits, their behavior had ‘so much the appearance of riot and want of order in the army’ that he disapproved their actions and urged that in the future they should be left to the ‘proper authority.’ Washington wanted this revolution to be an orderly one, with due respect for property, and he refused to abide even the desecration of the king’s statue” (page 237).
Bear in mind that this event happened 15 months into a full shooting war between the colonies and Great Britain, and Washington was surrounded at the time by British troops and ships. Despite that, he still had more respect for the enemy king’s statue than today’s anarchists have for a statue of George Washington.
Also, this week marks the anniversary of the sudden surrender of the British at Yorktown five years later:
“At ten A.M. on October 17, 1781 – the fourth anniversary of Burgoyne’s surrender at Saratoga – a British officer appeared before the ramparts, flapping a white flag….” (page 417)
This surrender is all the more amazing because Washington’s army had dwindled down to a skeleton crew, a rag-tag collection of “survivors” of six years of retreats and killing winters. The army had recently revolted, many joining traitor Benedict Arnold in his sweep through Virginia. Farmers sold provisions to the British for hard money instead of accepting Washington’s worthless paper currency.
Much is made of Washington’s winter in Valley Forge, PA (1777-78), a story of great courage, but the dwindling Washington army’s next three winters in northern winter camps were much more trying.
Here’s a short snapshot of his army’s final winter encampment of 1780-81, in West Point, New York:
“In late November 1780, Washington sent his army into winter quarters, assigning the bulk of them to West Point, while he lodged in a cramped Dutch farmhouse overlooking the Hudson River at New Windsor, New York. Depressed by this ‘dreary station,’ he had to requisition supplies from nearby residents to set his meager table and pleaded with Congress for emergency funds. ‘We had neither money nor credit,’ he wrote ‘adequate to the purchase of a few boards for doors to our log huts…It would be well for the troops if, like chameleons, they could live upon air, or, like the bear, suck their paws for sustenance during the rigor of the approaching season.’ Things grew so grim that Washington’s own horses were starving for want of forage…. The soldiers would receive certificates to compensate them for depreciated currency” (pp. 388-389).
Given this weak and broken army, it’s a “miracle on ice” that they survived to accept Britain’s surrender.
This is not a man whose statue should fall. Anyone contemplating such an act should read this book first.