The 7 biggest events of the last century investors didn't see coming

The 7 biggest events of the last century investors didn’t see coming

Everyone would like advance warning of the next crisis.


How do you know when the sky is going to fall? Everyone would like advance warning of the next crisis. When you look back at great turning points in history, whether wars or economic calamities, the world sometimes knows what it is going to happen and other times it doesn’t. Here are seven great turning points of the last 100 years and my take on whether people knew about them in advance. You might disagree, but how boring life would be if we all nodded in agreement. Let’s look back at seven great turning points of the last 100 years.

1.    The First World War

This was sleepwalking at its best. The world woke up in the last few days before the war. Markets closed in panic just four days before the start of the war. They would stay closed until Christmas of 1914, just about the time the troops were supposed to be back home.

Even Wall Street shut down even though the Americans wouldn’t join the war until 1917.

Where was Canada in the summer of 1914? Asleep in a Muskoka chair.  All but two members of the cabinet were on vacation. The Prime Minister, Robert Borden, was in Muskoka and didn’t think it necessary to return until two weeks after the war started. Sixty-seven thousand Canadians died the First World War, at a time when there were just 11 million people in this country.

2.    The Crash of 1929

This was a surprise to just about everybody. Joseph Kennedy was an exception. He not only sold early, but held on to his money and made even more. But the euphoria of the 1920s meant people thought the good times could last forever. Even after the crash people couldn’t see what lay ahead.

The problem was compounded by dumb policy, things such as the Smoot-Hawley Tariff Act—a buy America keep foreign stuff out by a couple of dummies in Washington—which turned the crash into a depression. By the way, that’s what Ben Bernanke has a doctorate in so he tried to insure it didn’t happen this time. Looks as if it worked.

3.    The Second World War

Lots of warning for this one. Remember Peace in our Time? Munich 1938. Well the British were building Spitfires and Hurricanes at a great clip from about 1937 on. Even Chamberlain probably knew he was only buying time. When the victor, Churchill, writes the history, it is always an “I told you so.”

There was a surprise though. The Americans were gob smacked by the Japanese. In the long run that was good news for the British, bad news for Germany and Japan and the one thing that ended the Great Depression. Remember in 1941 the Dow Jones was still not back to where it was in 1929.

4.    The oil crisis of 1973

This came as a complete surprise. For one thing the Yom Kippur War of 1973 started it. In October came the Arab Oil Embargo. Oil prices shot through the roof. They quadrupled from $3 a barrel to $12 a barrel. And they kept on rising until 1986. By the way, three dollars a barrel is equal to $15 a barrel in today’s money.

Britain went to a three-day week. A major crisis that brought down the government. Taxman Mr. Wilson beating taxman Mr. Heath. In the U.S. there was gas rationing with odd-even license plates dictating who could buy on which days.

No one saw this coming.

5.    The Fall of Communism

Another surprise. There were people who predicted it, but no one thought it was come as quickly as it did. Glasnost, Perestroika and then poof,  bye-be the Soviet Union. Hello drunken Boris Yeltsin—Moscow’s Rob Ford—oil oligarchs and Russians in yachts in Monaco and owning British Soccer clubs.

6.    The tech bubble

Most people remember this as sleep walking, but it wasn’t. The Economist kept warning it would happen. When flim-flam tech startups were worth more than General Motors something had to give. The Bre-x helicopter moment came when Steve Case of AOL hugged the Time Warner Guy. See you laughed. So did enough people back then.

But it was a surprise to the believers. The new way of doing business. A dot com Ponzi scheme.

7.    The crash of 2008

This is a yes and no. A lot of clever people saw the mortgage crisis coming. People like Eric Sprott even used the words sub-prime. But what they didn’t see was the cascading effect, the failures of mortgage lenders in Britain, Lehman Brothers and Bear Stearns, the whole too big to fail thing. This was an out of control mess. It was a good thing Ben Bernanke studied the causes of the Great Depression and our own Mark Carney was so clever. Sure they may have put the brakes on too much. But it could have been a lot worse. And not many people predicted it. It was as big a surprise as the Japanese attack on Pearl Harbor.

The thing about all seven crises is that we are all still feeling the effects. The First World War is the root cause of the civil war in Syria. The Crash of 29 and the Great Depression are why we are terrified of mass unemployment.

The Second World War only really ended in 1989 and since then—the end of history—we have lurched from one crisis to another as the world tries to stabilize itself. Think of the mess in Europe and how the Greeks blame the Germans. Don’t mention the war? Well they do.

The tech bubble created a culture of greed, and as an unintentional consequence, it created a kind of class warfare. A lot of the 1%, or the 0.1%, are tech and financial gazillionaires who learned how to get rich in the late 1990s. The survivors of the tech boom.

Occupy Silicon Valley says a recent headline from The Economist. The idealists that build Apple and Google are just as greedy as the Wall Street types. And who needs to be told about the 2008 mess. We’re still living through that. It is why people who read this are worrying about ways to make money on their money. Interest rates dropped to save us from a replay of the 1930s. Bond yields are zilch. The only route to reward is risk. And who knows where that will take us a few years from now.

Fred Langan is former business journalist with CBC and author of two novels, The Stringer and The Obit Man.