Dickens’ A Christmas Carol was published on December 19, 1843, and has never been out of print from that day to this. It is the ultimate Christmas classic, and Ebenezer Scrooge, the miser saved from himself on that early Victorian Christmas Eve, is among the most recognized characters in all of English literature.
Consider reading A Christmas Carol, aloud if you’ve got children or grandchildren, but at least to yourself during the festive season to come. And as a financial advisor and a student of American economic history, don’t fail to pause for a moment when the narrator describes Scrooge having a particularly terrifying nightmare in which he sees his solid British assets transmogrified into “a mere United States’ security.”
For those were the days when America was a capital-starved emerging market, and when the wealth of Britain had increasingly sought high-yielding investments over here in the wilderness. Instead, in the severe depression of the early 1840s, U. S. state debt plunged to fifty cents on the dollar. Pennsylvania, Mississippi, Indiana, Arkansas, Michigan and the Florida territory had already defaulted by the time Dickens wrote, and even U.S. government bonds were shunned everywhere.
The American banker in London who had vouched for so many of these loans, George Peabody, said in those days that whenever he met a British investor, he felt shame. Yet within ten years, Peabody had taken into partnership Junius Spencer Morgan, whose son, John Pierpont Morgan, would finance the emergence of the United States as the most powerful economy in the world. Pierpont, born the year Andrew Jackson finished killing America’s central bank, would die the year the Federal Reserve was created. At his birth America was in financial chaos; he left it on the cusp of financial hegemony.
I was born almost exactly a hundred years after A Christmas Carol was published, and have seen America appear to fall on many occasions, only to rise again to new and undreamed-of heights. In my time, we went from providing six billion of the seven billion barrels of oil the Allies consumed in WWII to abject dependence on a foreign oil cartel. I vividly remember a day in 1968 when U.S. sovereign debt was unsalable in Paris, as Europe expected us to abandon the gold standard literally at any moment. Between that tumultuous year and 1980, U.S. common stocks (adjusting for inflation) lost over 70% of their value. Most recently, I watched the entire global financial system go to the brink, driven by (of all things) an implosion in the value of the American single-family home.
Yet here we are again this Christmas: the predominant economy of the world, with the values and dividends of our great companies soaring, and household net worth hitting new all-time highs. Inflation-adjusted GDP was $2 trillion the year I was born (1943), and will end this year north of $17 trillion, an increase of eight and a half times. Yet population has grown barely two and a half times. Surely this is the greatest leap in real per capita GDP in the history of the planet.
Meanwhile, in my lifetime the S&P stock index has gone from 12 to 2,600, ignoring dividends. That is, equity values have increased well over 200 times, while the Consumer Price Index rose a mere fourteen times. U.S. common stocks have thus, despite all the crises, been the greatest generator of real wealth for the largest number of people that the world has ever seen. And equities continue to be the only asset class that fully captures human ingenuity, which – second only to love – is the most powerful force on earth.
And so with Tiny Tim I say to all the ethical, knowledgeable, caring, empathetic, tough-loving financial advisors throughout our great republic, “God bless us, every one!”
© 2017 Nick Murray. All rights reserved. Reprinted by permission. Nick reviews current books, articles and research findings for advisors in his monthly newsletter, Nick Murray Interactive. His most recent book is Around the Year with Nick Murray.