It was a seasonally cool Monday evening on October 14, 1929, when Irv-
ing Fisher arrived at the Builders’ Exchange Club at 2 Park Avenue in
New York City. Fisher, a professor of economics at Yale University and
the most renowned economist of his time, was scheduled to address the
monthly meeting of the Purchasing Agents Association.
The Yale economist, often called the founder of modern capital the-
ory, was no mere academic. He actively analyzed and forecast financial
market conditions, wrote dozens of newsletters on topics ranging from
health to investments, and created a highly successful card-indexing
firm based on one of his own patented inventions. Despite hailing from
a modest background, his personal wealth in the summer of 1929 ex-
ceeded $10 million.^3
Association members and the press crowded the meeting room.
Fisher had intended to defend investment trusts, the forerunner of
today’s mutual funds. But the audience was most eager to hear his views
on the stock market, as they had been nervous since early September
when Roger Babson, businessman and market seer, predicted a “terrific”
crash in stock prices.^4 Fisher had dismissed Babson’s pessimism, noting
that he had been bearish for some time. But the public sought to be reas-
sured by the great man who had championed stocks for so long.
The audience was not disappointed. After a few introductory re-
marks, Fisher uttered a sentence that, much to his regret, became one of
the most-quoted phrases in stock market history: “Stock prices,” he pro-
claimed, “have reached what looks like a permanently high plateau.”^5
On October 29, two weeks to the day after Fisher’s speech, stocks
crashed. His “high plateau” turned instead into a bottomless abyss. The
next three years witnessed the most devastating market collapse in his-
tory. Like Neville Chamberlain’s proud claim that the “agreement”
Adolph Hitler signed in Munich in September 1938 guaranteed “peace
in our time,” Fisher’s stock market prediction stands as a memorial to
the folly of great men who failed to envision impending disaster.
After the crash, it made little difference to the public that Fisher had
earlier correctly forecast the bull market in the 1920s, or recognized the
importance of the Federal Reserve in creating a favorable economic cli-
mate, or properly defended investment trusts, the forerunners of today’s
mutual funds, as the best way that the public could participate in the
stock market. After 1929, his reputation was shattered.
78 PART 1 The Verdict of History
(^3) Robert Loring Allen, Irving Fisher: A Biography, Cambridge: Blackwell, 1993, p. 206.
(^4) Commercial and Financial Chronicle, September 7, 1929.
(^5) “Fisher Sees Stocks Permanently High,” New York Times, October 16, 1929, p. 2.