Macro

Peak 12%+ inflation devastates real incomes

New York's Consolidated Edison, crushed between quadrupled fuel oil costs and regulators' refusal of rate relief, skipped its quarterly dividend for the first time in 89 years. Utility stocks collapsed across the board as income investors fled, and the sector's cost of capital soared just as it faced huge nuclear construction programs.

Our worst year in living memory: Con Edison omitted its dividend in April for the first time since 1885 as quadrupled oil crushed generation margins under regulatory lag, fed funds near 13% gutted valuations, and the whole sector stayed bearish all year.

Inflation 12%, worst peacetime; margins crushed

Mortgage REITs, which had ballooned to some $20 billion of assets financing condominiums and commercial projects, faced surging defaults and frozen commercial-paper funding as rates hit records. The sector's collapse hammered bank sponsors like Chase and became the decade's defining real-estate bust.

Fed funds near 13%; mortgage-REIT crisis deepens

Regulators closed Franklin National Bank after five months on Federal Reserve life support, with fraud by financier Michele Sindona compounding FX and loan losses; European-American Bank assumed the deposits. The biggest American banking failure to that date tested the FDIC-Fed resolution machinery and rattled confidence in money-center banks worldwide.

Stagflation and Volcker-precursor tightening (fed funds near 13%) crushed the Dow 45% to 577, while Herstatt's June collapse exposed FX settlement risk and Franklin National's October insolvency was the largest US bank failure to date.

The DOJ filed a sweeping antitrust case against the Bell System, the world's largest corporation, seeking divestiture of Western Electric and the operating companies. The suit, ending in the 1982 breakup decree, initiated the deregulation and restructuring of the entire telecommunications sector.

The deepest recession since the 1930s and 12% inflation slashed ad budgets, though TV took share from print, cushioning the fall slightly. A brutal, deeply negative year.

Intel's 8080 offered roughly ten times the performance of prior chips and became the standard component of early microcomputers, including the Altair 8800. The chip cemented the microprocessor as a general-purpose product and anchored the semiconductor industry's next growth wave.

Dow bottoming toward 577; Intel ships 8080 microprocessor

Bear-market bottom; even defensive pharma valuations near lows

Nixon resignation; policy uncertainty but neutral for backlog

The quadrupled oil price came into force the same day British industry went on emergency short-time working. The twin events opened a year in which the industrialized world absorbed a massive stagflationary shock, with inflation and unemployment rising together.

The quadrupled price locked in through 1974 delivered record oil-company profits, but a deepening recession destroyed demand and windfall-tax threats and price controls loomed, so euphoria cooled steadily through the year.

The ban on private gold ownership dating to 1933 ended, and COMEX launched gold futures as the metal traded near an all-time high around $195 an ounce. Legal gold gave US investors an inflation hedge and built the market infrastructure for the metal's spectacular late-1970s run.

Inflation over 12% and gold's legalization near a record $195 kept precious-metals revenue booming, but the deep recession and 45% equity collapse crushed base-metals and chemicals demand, leaving the owner euphoric on gold yet squeezed on industrial volumes.