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Quote of the Day
“At this time the high protectionists were blaming [a] tariff act as responsible for this fall in [stock market] values; other critics of the Administration attributed it to the Federal Reserve Act – which had not yet been passed. How little the Wall Street Brokers and the financial experts realized that an Imperial Conference held in Postdam, presided over by the Kaiser, was the real force that was then depressing that markets!”
-Henry Morgenthau, then U.S. ambassador to Turkey and future Secretary of the Treasury on the German preparation for war. See below for the impact this had on the markets.
July 5th – This Day in Stock Market History
July 5th, 1914 – German industry heavyweights are all called to an “Imperial Meeting” with the German Kaiser. The Kaiser went around the room and asked each man one question: “Are you ready for war?”. Heads of railroads, manufacturing and other industries all say yes. The German banks say no, and that they require 2 weeks to prepare.
The financiers heavily sell stock and raise cash over the next 2 weeks. It is no coincidence that between July 5th and July 22nd (The day the Serbian Ultimatum was sent) Union Pacific shares fall 18%, Baltimore and Ohio falls 11% and United States Steel falls 18% as German banks sell shares to raise cash.
Germany would declare war on Russia on August 1st.
Source: Eyewitness to Wall Street
Best July 5th in Dow Jones Industrial Average History
2002 – Up 3.58%, 324.53 points.
Worst July 5th in Dow Jones Industrial Average History
1912 – Down 2.19%, 1.47 points.
Read of the Day
The quote from Morgenthau above is just one more bit of evidence that we can not rely on stock market forecasts. As Benjamin Graham says in his book, The Intelligent Investor
“The investor can scarcely take seriously the innumerable predictions which appear almost daily and are his for the asking. Yet in many cases he pays attention to them and even acts upon them. Why? Because he has been persuaded that it is important for him to form some opinion of the future course of the stock market…. If you, the reader, expect to get rich over the years by following some system or leadership in market forecasting, you must be expecting to try to do what countless others are aiming at, and to be able to do it better than your numerous competitors in the market. There is no basis either in logic or in experience for assuming that any typical or average investor can anticipate market movements more successfully than the general public, of which he himself is a part.”
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