On this day in economic and financial history ...
When the Fed chairman speaks, the markets listen. On Jan. 20, 1999, then-Chairman of the Federal Reserve Alan Greenspan spoke to the House Ways and Means Committee on his perceptions of the American economy. It was his second major attempt to tamp down the "irrational exuberance" of the late-'90s market boom, occurring about two years after the speech in which he coined that phrase, but this time resulting in a bit less market turmoil.
While much of Greenspan's speech focused on "America's sparkling economic performance," he also warned that "a decline in equity values ... could lead to a considerable weakening of consumer demand," and that "through the end of 1998, the economy continued to grow more rapidly than can be currently accommodated on an ongoing basis, even with higher technology-driven productivity growth." Greenspan also noted that the markets "remain[ed] fragile" after the Russian default scare of 1998, and that "the continued increase in our net external debt and its growing servicing costs clearly are not sustainable indefinitely."
Perhaps the most important takeaway from Greenspan's speech was the following statement:
"The recent behavior of profits also underlines the unusual nature of the rebound in equity prices and the possibility that the recent performance of the equity markets will have difficulty in being sustained. The level of equity prices would appear to envision substantially greater growth of profits than has been experienced of late."
Between Greenspan's "irrational exuberance" speech in late 1996 and this speech, the Dow Jones Industrial Average (DJINDICES:^DJI) had grown from 6,437 points to 9,355 points, a 45% gain. The Nasdaq Composite (NASDAQINDEX:^IXIC) had done far better, growing from just over 1,300 points to 2,400 points, an 85% gain. The markets barely reacted to Greenspan's warning on Jan. 20, with the Dow down a fraction of a percent and the Nasdaq gaining into the close on the back of Microsoft's (NASDAQ: MSFT) strong earnings report -- a beat that led the software giant to a market cap of just over $400 billion by the end of the day.
If you'd run for the hills on Greenspan's warning, you would have missed the most staggering gains of the dot-com bubble. A year after this speech, the Dow had climbed to 11,351 points, which was very near its all-time high at the time, and the Nasdaq had just breached 4,200 points. Microsoft joined the Dow at the end of 1999, and it seemed the sky might be the limit for these hyperinflated dot-com darlings. The two indexes clung to gains for two years after Greenspan's warning, with the Dow finishing late January of 2001 at 10,578 points and the Nasdaq closing at 2,760. It wasn't until nearly three years after this speech, in the aftermath of the 9/11 attacks, that the decline truly hit home and the indexes finished lower than they had in early 1999.
That's the problem with market warnings, no matter who offers them. Even if those sounding the alarms get everything right about the big picture, they can get the timing wrong on the details and cause you to lose out on significant gains.
The patented thrill ride
The first true roller coaster, designed by LaMarcus A. Thompson, earned its patent on Jan. 20, 1885, a year after Thompson built it at Coney Island. The Switchback Railway, as it was called, had two straight parallel tracks on undulating artificial wooden hills 450 feet long with a maximum 30-foot drop (not straight down, of course), conveying a single car to the end with nothing more than gravity. At the end of the ride, a lift mechanism returned the car to its starting place. Although far simpler and tamer than today's modern super-coasters, Thompson's Switchback Railway raked in $600 a day on a nickel per ride, earning back his original investment in just three weeks.
Thompson quickly became the king of coaster thrills, building nearly 50 of the tracks throughout the U.S. and Europe by 1888. As competitors developed new technologies to increase the excitement, Thompson incorporated them into his own rides. He also continued to develop his own coaster innovations, finishing his career with 30 coaster-related patents.
Today, roller coasters exist in a wide variety of styles and can be found in virtually every amusement park. According to the Roller Coaster Database, there are 3,087 roller coasters in action around the world. Asia has gone coaster-crazy, with 1,329 of the rides to choose from. However, the United States remains the world leader by country, with its 642 coasters narrowly edging China's 635. Two American theme-park operators dominate the coaster experience in the United States -- Six Flags operates 154 coasters in 18 parks, and Cedar Fair (NYSE:FUN) runs 124 in 13 parks.
If you're searching for the most extreme coaster thrill, Six Flags' Kingda Ka coaster in its Great Adventure park reaches a top speed of 128 miles per hour and reaches a dizzying height of 456 feet. Those numbers narrowly beat Cedar Fair's Top Thrill Dragster in Cedar Point, which races to 120 miles per hour and soars to a maximum height of 420 feet.
A gusher of gas
On Jan. 20, 1886, the Great Karg Well in Findlay, Ohio, burst into operation with an initial daily flow of 12 million cubic feet of natural gas. Drilled to a depth of 1,144 feet, the well produced a massive flow of natural gas that was initially uncontrollable, and it lit up the night sky in a 40-mile radius from the well, with a roar from the flame that could be heard 3 miles away. The success of this well led to a drilling boom in the area, which was soon capitalized on by the Ohio Oil Company, established in 1887 by five independent regional oil producers.
By 1889, Popular Science estimated that Findlay alone could produce 60 million cubic feet per day, or about a sixth of all known U.S. production in 1900, the first year for which national data is available. The Ohio Oil Company became one of the nation's leading producers. It was acquired by John D. Rockefeller's Standard Oil Trust in 1889, and in 1962, long after the trust was broken, it was renamed Marathon Oil. The company's Ohio-based refining and pipeline operations are now part of Marathon Petroleum (NYSE:MPC), which was spun off from its parent in 2011 and remains headquartered in Findlay, near the site of the Great Karg Well that first led to its creation.
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