Well, I said I was going to begin updating some of the market
statistics I have previously listed on this link, but with the Dow
Jones having crossed into bear market territory as of this writing,
(thus joining the S&P 500, Nasdaq, and Russell 2000), I thought
it would be a good time to briefly summarize the awful Bear
Market of 1973-74. Following are some key dates, events
making news during this period, as well as the level of the Dow
at that time. There may be a lesson or two here.
6/17/72: Watergate break in. Dow Jones closed the Friday
before at 945.
10/10/72: Woodward and Bernstein break the Watergate story in
the Washington Post and hint that the scope is far broader than
initially thought.
Dow closes at 951.
11/7/72: President Nixon wins reelection overwhelmingly.
Gallup poll reveals that 48% of Americans have never heard of
Watergate.
Dow closes at 983 on 11/8. [Markets closed on Election Day.]
Dow finishes 1972 at the 1020 level.
1/11/73: Dow Jones closes at 1051, its all-time high. President
Nixon lifts wage and price controls, except on food. *Inflation is
the big issue. Consumer prices will rise 8.5% over the course of
1973.
1/22/73: Ceasefire announced in Paris between U.S., South
Vietnam, North Vietnam and Vietcong.
Dow, 1018.
2/7/73: Senate select committee, chaired by Sam Ervin, is
established to investigate 1972 campaign.
Dow, 968.
2/12/73: U.S. dollar devalued by 10%, 2nd move in 14 months.
Dow, 991.
4/30/73: Nixon aides Haldeman, Ehrlichman, and Dean resign.
Dow, 921.
5/17/73: Senate Watergate Committee begins hearings. Senator
Howard Baker utters for the first time, “What did the president
know, and when did he know it?”
Dow, 911.
6/13/73: Nixon orders 60-day retail price freeze.
Dow, 915.
6/25/73: John Dean testifies that Nixon knew much more than he
let on.
Dow, 869.
7/16/73: White House taping system revealed.
Dow, 897.
10/6/73: Egypt and Syria launch invasion of Israel on Yom
Kippur.
Dow, 977. [10/8, first day market can respond.]
10/10/73: Vice President Agnew resigns as a result of scandal
unrelated to Watergate.
Dow, 960.
10/12/73: Court of Appeals rules that Nixon must turn over
tapes.
Dow, 978.
10/17/73: OPEC strikes back against the West for aid to Israel
and launches oil embargo. The price of a barrel of crude is hiked
from $3 to $5.11 (70%).
Dow, 962.
10/20/73: “Saturday Night Massacre”; Attorney General Elliot
Richardson and others resign over refusal to fire special
prosecutor Archibald Cox.
Dow, 960. [10/22]
*What”s important to note here is that while everyone talks of the
awful Bear Market of 1973-74, you can see that between 1/11
and 10/17, the Dow hardly moved. What was so bad about that?
But, as is often the case, the market can be slow to discern what”s
really happening. The Dow would close at 987 on October 26,
over a week since the embargo was announced. Idiots. It
wouldn”t see that level again until February 1976.
Dow finishes 1973 at 850. Inflation is to rise at a 10.3% rate
over the course of 1974.
1/4/74: Vietnam War officially “restarted.”
Dow, 880.
3/1/74: Grand jury indicts Haldeman, Ehrlichman, and Mitchell.
Dow, 851.
3/18/74: Arab oil embargo lifted.
Dow, 874.
4/29/74: In televised speech, Nixon announces he will release
transcripts. But they are loaded with discrepancies and
omissions.
Dow, 835.
7/24/74: Supreme Court rules unanimously that 64 subpoenaed
tapes must be turned over to District Judge Sirica. That night,
the president announces he will comply.
Dow, 805.
7/29/74: House Judiciary Committee votes 27-11 to approve
three articles of impeachment. [Process was from 7/27-7/29.]
Dow, 770.
8/5/74: “Smoking gun” tape revealed.
Dow, 760.
8/8/74: Nixon announces resignation.
Dow, 784. [On August 6 and 7, the Dow staged a strong 5%
rally, from 760 to 797, as the tape clearly foretold Nixon”s
resignation. Everyone thought, for a moment, that things were
going to start looking up.]
10/8/74: With President Gerald Ford now in control, the
Administration announces their Whip Inflation Now program
(WIN). It proves to be a miserable failure. The same day,
Franklin National Bank is declared to be insolvent, the biggest
bank failure in U.S. history.
Dow, 602. [23% decline from 8/8, after that 5% rally on the
impending resignation.]
12/6/74: Dow Jones bottoms at 577. The bear market has lopped
45% off the average.
12/18/74: Massive layoffs in the auto industry, to the tune of
142,000.
Dow, 603.
Dow finishes 1974 at 616. Bad economic news continues for
awhile, but by 7/15/75, the Dow has rallied to 881, a spectacular
53% move from the 12/6/74 low.
Sources:
“The Dow Jones Averages,” edited by Phyllis S. Pierce
“The Encyclopedia of American Facts and Dates,” Gorton and
Carruth
“Webster”s Chronology of World History.”
Brian Trumbore
