carey_jim

Where's the Smartest Money Investing?

If history teaches anything, it is that we are often surprised by the future.

It might be a utopia of inventions and a DOW of 40,000 or an economic paralysis and a DOW of 200.

Consider the event that historians consider the formal cause of World War I: the assassination of the Archduke Franz Ferdinand, on June 28, 1914.

Hardly anyone took notice of the assassination and the DOW traded without a ripple. It wasn't until the last week of JULY that American financial reporters began mentioning the possibility of a war in Europe.

The early days of August saw the formal declaration of this war that virtually no one had predicted and that produced 40 million deaths, many of them civilians. European civilization was delivered a death blow from which it never recovered.

When World War I finally arrived in the first week of August, the American financial world was caught completely off guard and almost everyone in the world predicted the war would last no more than a few weeks.

Every exchange in the world announced suspension and only the New York Stock Exchange tried to stay open but this proved impossible.

It closed on July 31, 1914 and stayed closed for five months.

"When it managed to begin limited, formal trading on December 12, American was on its way to becoming the most important economic power in the world, and Wall Street had begun to replace Lombard Street."

Robert Sobel
The Big Board

If it hadn't been for that one fatal shot, the world we live in would be completely different.

Who predicted it? No one, not even the greatest American financier ever, J.P. Morgan, who had died the previous year in Rome on March 31, 1913.