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Stingy News: History

The lost decade
08/28/16 Funds Indexing Bonds Stingy Investing History
"Bond yields remain near historic lows with long-term Canadian government bond yields hovering near 1.7% this week. That doesn't leave much room for error. If interest rates rise, bond prices will fall. Rising inflation could also wipe out the small gains. More ominously, interest rates and inflation could climb at the same time like they did in the 1970s. It's a period that older investors remember all to well and one that younger investors should learn from."

Mastery or ignorance
03/19/16 Markets History
"Who among stock brokers and investment analysts in 1900 could have foreseen the eclipse of railroads? However, just like de Tocqueville said about the Roman aqueducts and roads, the miles of unused railroad tracks today are monuments (albeit not as conspicuous) not just to a young nation's will to master a continent, but also to the 19th century's ignorance of internal combustion and air travel."

Activists through the decades
12/26/15 Graham Markets History
"The famed activist investors of today are fine-tuning 400-year-old tactics. Shareholder fights with management stretch back all the way to the very first publicly-traded company, The Dutch East India Co., when shareholders tried to fight against a restructuring in the 1622."

The art of investing
09/05/15 Zweig Books History
"The market values of our leading securities [are] determined by...a howling mob of incurable lunatics" [via Jason Zweig]

How Singer won
08/23/15 History
"The Singer Sewing Machine changed the way America manufactured textiles, but the invention itself was less important than the company's innovative business"

Watch prices and the industrial revolution
03/14/15 Academia History
"Although largely absent from modern accounts of the Industrial Revolution, watches were the first mass produced consumer durable, and were Adam Smith's pre-eminent example of technological progress. In fact, Smith makes the notable claim that watch prices may have fallen by up to 95 per cent over the preceding century; a claim that this paper attempts to evaluate. We look at changes in the reported value of over 3,200 stolen watches from records of criminal trials in the Old Bailey court in London from 1685 to 1810. Before allowing for quality improvements we find that the real price of watches in nearly all categories falls steadily by 1.3 per cent per year, equivalent to a fall of 75 per cent over a century, a rate considerably above the growth rate of average labour productivity in British industry in the early nineteenth century."

Was tulipmania irrational?
10/05/13 Markets World History
"there has been little attempt to understand how speculation actually works. The example of tulipmania shows the importance of doing that - rather than relying on lazy quips about 'animal spirits' or irrationality."

How to kill a currency
06/12/12 History
"As the world considers the possible death of the euro, it's worth considering a famous historical example. Ok, it's not that famous. But it's still worth looking at: The break-up of the Austro-Hungarian currency union in 1918."

Euro breakup precedent
06/07/12 World History
"It was a currency union of 15 states in 1992. Two years later, as budget deficits spiraled out of control, hyperinflation reigned and economies shriveled, just two members of the Soviet Union's ruble zone were left. As Greek politicians threaten to break terms of the country's bailout with international lenders, Spain calls for financial help, and northern European nations balk at funding the south, historians are asking whether the euro region is about to face a similar exodus. They take a longer view of the European Union's crisis than economists, and it's much bleaker."

Origins of the indebted homeowner
04/22/12 History
"Not long after the economic crisis began, the president's landmark Conference on Homeownership reported that 'down payments of 10 percent, 5 percent, and even nothing down' had become common practice in the home-mortgage market. Reliance on second mortgages and novel financing terms, the report noted, were also widespread. Although these developments sound all too familiar, this Conference on Homeownership was held in 1931 and the president sponsoring it was Herbert Hoover, not George W. Bush or Barack Obama. We often think of the expansion of easy mortgage financing as a relatively recent development, but the growth of indebted homeownership has older and more complicated origins."

'Fortune 500' of 1812
04/11/12 History
"Fortune magazine began publishing annual rankings of U.S. corporations by revenue in 1955. Ever since, scholars and forecasters have analyzed changes in the Fortune 500 to help inform their judgments about industry concentration and the relative importance of different sectors of the economy. Historians would love to have snapshots of the nation's largest corporations at earlier dates. Unfortunately data are scarce, especially before the Civil War. Based on our research, however, it is now possible to create a sort of historical 'Fortune 500' ranked by corporate capitalization -- the total sum stockholders were supposed to pay for their shares."

No normal recovery
04/03/12 History
"With the U.S. economy yielding firmer data, some researchers are beginning to argue that recoveries from financial crises might not be as different from the aftermath of conventional recessions as our analysis suggests. Their case is unconvincing."

United States then, Europe now
02/03/12 History
"Under the Articles of Confederation, the central government of the United States had limited power to tax. Therefore, large debts accumulated during the U.S. War of Independence traded at deep discounts. That situation framed a U.S. fiscal crisis in the 1780s. A political revolution - for that was what scuttling the Articles of Confederation in favor of the Constitution of the United States of America was - solved the fiscal crisis by transferring authority to levy tariffs from the states to the federal government. The Constitution and Acts of the First Congress of the United States in August 1790 gave Congress authority to raise enough revenues to service a big government debt. In 1790, the Congress carried out a comprehensive bailout of state governments' debts, part of a grand bargain that made creditors of the states become advocates of ample federal taxes. That bailout created expectations about future federal bailouts that a costly episode in the early 1840s proved to be unwarranted."

The Long Shadow of German Hyperinflation
12/07/11 History
"The Germans' strict opposition to the monetary financing of governments isn't just petty legalism -- it's a bedrock principle, based in history, which was purposefully built into EU treaties and Bundesbank policies. It's worth revisiting why the memory of hyperinflation has seared itself into the minds of many Germans, and how it's shaping their thinking and the future of the euro itself."

Control rights and wrongs
10/26/11 History
"Banks are special. That has long been recognised in the design of their ownership, governance and regulation. This special status can have strange consequences. The historical distribution of risks and returns in banking is one. For a century, both risks and returns have been high. But while the risks have typically been borne by wider society, the returns have been harvested by bank shareholders and managers. The experience of the past two decades illustrates well this imbalance. In 1989, the CEOs of the seven largest banks in the United States earned on average $2.8 million. That was almost 100 times the median US household income. By 2007, at the height of the boom, CEO compensation among the largest US banks had risen almost tenfold to $26 million. That was over 500 times the median US household income. Those are high returns by any measure. But so, subsequently, have been the risks. The fall in the share prices of global banks means they are scarcely different in real terms today than in the early 1990s. And it is not just investors licking their wounds. So too is the global economy."

Trust issues
09/20/11 History
"Hartwick College didn't really mean to annihilate the U.S. economy. A small liberal-arts school in the Catskills, Hartwick is the kind of sleepy institution that local worthies were in the habit of founding back in the 1790s it counts a former ambassador to Belize among its more prominent alumni, and placidly reclines in its berth as the number-174-ranked liberal-arts college in the country. But along with charming buildings and a spring-fed lake, the college once possessed a rather more unusual feature: a slumbering giant of compound interest."

A second great depression, or worse?
08/18/11 History
"According to the National Bureau of Economic Research, falling from peak to trough in each cycle took 11 months between 1945 and 2009 but twice that length of time between 1854 and 1919. The longest decline on record, according to this methodology, was not during the 1930s but rather from October 1873 to March 1879, more than five years of economic decline."

The Nixon shock
08/13/11 History
"Burns was replaced by Jimmy Carter in 1978. The following year, with inflation rocketing toward 15 percent, Burns delivered a keynote speech, "The Anguish of Central Banking," in which he argued that central bankers around the world were failing because elected leaders were unwilling to risk displeasing constituents. The new Fed chief, Volcker, did tame inflation unlike Burns, he had the fortitude to subject the country to a brutal recession. But the dilemma faced by Burns - how to withstand the demands of the public for limitless monetary expansion - did not go away. We see it now in the troubles of nations from Greece to Ireland to the U.S. And the anguish that Burns felt is Ben Bernanke's unfortunate inheritance."

How debt has defined human history
08/08/11 History
"Since 1971, when the U.S. abandoned the gold standard, and the world has been moving to a system of virtual credit money, we have been entering a new period of history. But it's not entirely unprecedented. In fact, contrary to popular belief, credit has been the predominant form of money in world history."

Partying like it's 1929
03/24/08 Government Markets History
"Normally, banks satisfy both desires: depositors have access to their funds whenever they want, yet most of the money placed in a bank's care is used to make long-term loans. The reason this works is that withdrawals are usually more or less matched by new deposits, so that a bank only needs a modest cash reserve to make good on its promises. But sometimes - often based on nothing more than a rumor - banks face runs, in which many people try to withdraw their money at the same time. And a bank that faces a run by depositors, lacking the cash to meet their demands, may go bust even if the rumor was false. Worse yet, bank runs can be contagious. If depositors at one bank lose their money, depositors at other banks are likely to get nervous, too, setting off a chain reaction. And there can be wider economic effects: as the surviving banks try to raise cash by calling in loans, there can be a vicious circle in which bank runs cause a credit crunch, which leads to more business failures, which leads to more financial troubles at banks, and so on. That, in brief, is what happened in 1930-1931, making the Great Depression the disaster it was."

Too dumb to fail
03/24/08 Government Markets History
"In 1984, Continental Illinois, then one of the country's largest banks, found itself on the verge of collapse, after billions of dollars. worth of its loans went bad. To avert a crisis, the government stepped in, purchasing $3.5 billion of the soured loans and effectively taking over the bank. Later that year, at a congressional subcommittee hearing, Representative Stewart McKinney summed up the lesson of the rescue effort: 'Let us not bandy words. We have a new kind of bank. It is called too big to fail. T.B.T.F., and it is a wonderful bank.'"

Panic of 1907 or not, trading stops on good friday
03/21/08 Markets History
"The New York Stock Exchange is closed today, as it has been every Good Friday for almost 150 years, except 1898, 1906 and 1907. That last one was the same year as the infamous Panic of 1907, when the aggregate value of all U.S. stocks plunged by more than a third. Hence, a legend that persists 101 years later: Traders get to stay home the Friday before Easter not just because it's a Christian holy day but because of its association with one of history's great bear markets."

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