Well, here we are. I'm writing this article, and you're reading it, on the 21st day of December 2012. The world didn't end! It might seem like Congress and the Dow Jones Industrial Average are acting like it did, but unless Bolon Yokte, -- the Mayan god of creation or the end times (no one's quite sure) -- is waiting for the apocalypse parties to blow us all to kingdom come, tomorrow will arrive just the same. The world, or at least the nuttier elements of it, will move on to the next prophecy of doom. There are always a few of those floating around.
Why is it that the Mayan 2012 phenomenon has gained so much public attention when other predictions have been all but ignored? Novelty plays a part in it, but I think one story we've overlooked is the role of economic misfortune in popularizing prophecies.
Seeking a trend for the end of the world
Remember Harold Camping? Camping, a California radio preacher, managed to convince thousands that the world was heading for an apocalypse on May 21, 2011. Nothing happened, of course, so Camping decided that his math was off and the real Ragnarok was scheduled for Oct. 21. Those darn numbers, so slippery. Camping initially made his prediction in the tail end of 2010, during a weak economic recovery that had yet to lift millions of Americans. Thousands joined Camping's camp in 2010, but they all looked silly a year later.
Fool me once, shame on you. Fool me a hundred times...
Talk-show preacher Pat Robertson made a highly public prediction in 1976 that the world would end in 1982, repeating his belief in 1980. Stagflation and oil crises combined to keep the Dow in the dumps between 1976 and 1982, and this period began shortly after one of the more unpleasant post-war recessions and stretched through two more. By 1982, the Dow finally broke through its bear-market ceiling and began the longest bull run in history.
This has happened again and again. In 1833, William Miller, founder of the Millerite sect, predicted that the Second Coming would cleanse the world by 1844. It wasn't until 1840 that this end-times prophecy transformed the obscure sect into a national one. This time frame coincides perfectly with one of the worst depressions America has ever encountered, which occurred only a year after another steep recession during which the Southern cotton market imploded. The Millerite doomsday wound up falling on a date during an economic rebound, and the false prophecy left cultists so woebegone that the period immediately afterward is known as "The Great Disappointment."
If not now, when?
Before 2012, there was Y2K. Predicted since the mid-'80s, Y2K was an eminently man-made calamity that nonetheless drew coverage and panic at least as widespread as 2012's. You might think this is a bit of an outlier, since the years leading up to Y2K were among the best the Dow's ever seen. But it's important to note the "man-made" part of the equation. The Cuban missile crisis also panicked the public in the middle of an economic boom, after all.
The world had ample time to address Y2K, and hundreds of billions of dollars were spent in preparation and upgrades. The only people who really panicked over Y2K were probably already profoundly mistrustful of technology to begin with -- the same sort of people who believed in 2009 that the Large Hadron Collider would create a black hole and suck the planet into a void of nothingness. Scientists working on the collider seem to have found the elusive Higgs boson, but nothing like a black hole has popped into existence yet.
Then there's 1910, when analysis of Halley's Comet revealed toxic gas in its tail. Since Earth was set to pass through the tail of the comet that May, some predictions claimed that the toxic gas might annihilate life on Earth. The resulting panic was a boon to scam artists, who sold "anti-comet pills" and comet-safe umbrellas (how would that even work?) to the gullible public. Incidentally, this comet panic also occurred in the middle of a moderate recession, from which the Dow did not manage to fully recover until 1916.
To freak out is human; to stay invested is Foolish
As investors, we're constantly bombarded by doomsday scenarios. But if you (or your grandparents) had taken these freak-outs as opportunities to invest, you'd be doing far better than the doomsayers every time.
Simply investing in an index fund in 2011 when Camping predicted doom, or in 1976 after Robertson's prophecy, or in 1910 during the comet panic would have earned you some tidy gains -- not counting reinvested dividends, which would make things look even better:
- Since 2011: 7% return.
- Since 1976: 1,232% return.
- Since 1910: 14,666% return.
There were plenty of opportunities as far back as 1833, as well. Bank of New York Mellon (BNY +0.00%) has been trading on the New York Stock Exchange since 1792, and has been one of the nation's largest banks by deposits for much of its existence. Citigroup (C 0.45%) wasn't far behind, as it was founded as the City Bank of New York in 1812. By 1910, sober-minded individuals could have bypassed comet pills and magic umbrellas to invest in DuPont (DD +0.00%), which has been paying dividends since 1904. Had you invested in Coca-Cola (KO 1.72%) instead of worrying about the world's end in 1976, you'd have earned a cumulative 12,552% on that initial purchase with dividends reinvested.
If the world ends, it won't matter what you invested in. But if it doesn't end, you'll want to own the best investments you can find to take advantage of your continued survival.
