We* Read (And Liked)… Only Yesterday – An Informal History Of The 1920s

Frederick Lewis Allen’s Only Yesterday1 is by no means a well-kept secret. It was a best-seller when it was published in 1931, and continues to show up on reading lists of both university courses and famous investors. For anyone interested in learning about the prelude to the Big Crash, this is a must-read.

As the title implies, Only Yesterday chronicles American life in the 1920s. The book reinforces the popular image of that era (a decade of prosperity and riotous living), but most fascinating are Allen’s descriptions of the profound social changes that took place in the 1920s: the clash between young and old after the war and the rise of the consumer economy.

It is impossible to finish the book without reflecting on how history tends to rhyme (if not repeat).

Lewis colourfully describes consumers’ exuberance in the 1920s, which led to the ‘age of thrift’ that eventually became embedded in the generation that lived through the Great Depression. Similarly, today’s sub-par consumption patterns have their roots in the housing/mortgage bubble of the 2000s. Perhaps today’s Millenials are therefore an echo generation of the ‘Silent Generation’ that was born into the depression of the 1930s.

A second important similarity is the role of demographics and generational change. The Lost Generation – the cohort who came of age during the First World War and the 1920s – were often accused of being shallow amusement seekers who drank a lot. But this generation successfully upended social norms and thus forever changed the moral code of America. The coming generational conflict will not look anything like the 1920s, but Lewis’ description of the handover of power to the post-war youth suggest that the looming transition from Baby Boomers to Millenials (now turning 35) will not be without friction.

Hands down though, the most exciting theme in Only Yesterday is the equity mania that builds throughout the decade and how it gradually seduces the masses into believing the business cycle was on a permanent uptrend. For investors, the best part of the book comes at the very end. It is a forty page play-by-play of the rise and fall of stock prices during 1929. You’ll need to read that part in one sitting.

* This month’s book review is authored by our colleague Lenka Martinek, Managing Editor of the BCA Daily Insights service.

1 Allen, Frederick Lewis (2010). Only Yesterday – An Informal History Of The 1920s. New York: Harper Perennial Modern Classics.

U.S. Equity Sectors And The Soaring U.S. Dollar

The U.S. equity market is being forced to adjust to a surging U.S. dollar. There will be winners and losers.

The U.S. dollar has climbed to its highest level in more than four years, coincident with a sharp decline in global inflation expectations and sub-par foreign economic activity. This is a reversal of the post-Great Recession backdrop, when steady U.S. dollar depreciation, along with ultra-easy monetary policy and subdued but consistently positive global economic growth, turbo-charged corporate sector profit performance.

According to Standard & Poor’s, 46% of total sales are generated outside the U.S. Emerging markets matter more than the euro area , at 16% and 11% of revenue, respectively. Unsurprisingly, the impact of a rising dollar is not uniform across sectors within the U.S. equity market. The challenge for investors is to weigh the negative profit impact against the potential for a valuation/investor preference trade-off that might trump earnings performance. Our U.S. equity sectors team has analyzed the impact of the rising dollar on the ten U.S. S&P 500 sectors.