Remembering 1975 - The Majority was Wrong

Does anyone remember the stock market crash of October 1973? Over the next 15 months world stock markets collapsed. In the UK the FT 30 index fell by 70%. The holidays of 1974 into the new year of 1975 was not merry. President Nixon decided not to light the National Christmas tree!

All the talking heads agreed: the end was near. Oil was about to be rationed, thermostats were turned down in all federal buildings to 68 degrees, and 55 mph speed limits were imposed to save gas. An energy crisis was upon us. And the Department of Energy got a Cabinet level position in the White House.

But what happened next? In January 1975, the FT index jumped 25% and in the next 12 months was up over 100%.

And what are "they" telling us now? "Things are bad right now, but they're going to get a lot worse. Apparently it'll be as bad as the Great Depression."

So why does this post offer a "good news" perspective? Because history continues to tell us that when it comes to economics, "the majority is always wrong."

Remember it has been less than 6 months since all the financial experts were predicting rampant inflation, oil over $200 a barrel, and gold over $2,000 an ounce. Yet now the same experts tell us deflation is the problem, oil and gold have plummeted. And every news outlet has a new story on economic bad news.

The majority was wrong in Jan 1975 -- one of the best buying opportunities ever in the stock market. Now the majority is wrong again.

Sounds like good news for 2009!