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On Speculation and other financial events! December 4, 2008

Posted by shaferfinancial in Uncategorized.
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*Note.  I have offered an e-book, “The Best of Uncommon Financial Wisdom,” a compilation of my most popular posts to readers as a Christmas gift.  Just click on the contact tab and mention you would like the e-book sent to you. I will be sending it out before Christmas.*

The mass media is constantly using the bear stock market as a lead to sell their products.  This constant drumbeat of old news has turned off even many of my friends who always read the paper, watch the TV pundits, etc.  They make this credit driven, bubble bursting, event seem unprecedented. But it is not.  A great book on this subject is “Devil Take The Hindmost” by Edward Chancellor. Here is a partial list of speculative bubbles, many credit driven as today, as summarized from Mr. Chancellor’s book.

In Venice speculative events on Government back bonds occurred in 1390,1404 and 1410;

Antwrep and Lyons speculation in Royal loans in 1550 and in 1557 in France;

In 1609 a bear raid was led by Isaac Le Maire on East India stock;

Future trading was established in Amsterdam in 1610, which naturally led to speculation;

In 1634 the beginning of the Tulip bubble, which lasted 3 years;

In 1720 the South Sea  Company stock bubble emerged;

Foreign Loans emerged as speculative items; 1750s, 1780s, 1817, 1821 & 1824 (Latin America);

Railroad Mania 1840s;

American Civil War era (stocks) 1860s;

Stocks 1904-07;

The Great Depression; 1929-1940;

Bretton Woods system was established in  1944 regulated monetary system world wide and dampened speculative activity until its demise in 1971.

1980s brought derivatives and great speculators like George Soros.  The derivatives almost immediately started causing damage with Barings, Orange County, and Sumitomo being brought to their knees by single employees in the 1990s;

Tech stocks bubble 2001;

Real Estate Bubble 2003-2006; and   

Mortgage Backed Securities Derivatives 2006-?.

So when someone tells you the current financial situation is unprecedented, you can assure them its not!



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