Historical Thought for the Day
February 15, 2010
Thought for the day:
The investor can scarcely take seriously the innumerable predictions which appear almost daily and are his for the asking. Yet in many cases he pays attention to them and even acts upon them. Why? Because he has been persuaded that it is important for him to form some opinion of the future course of the stock market.... If you, the reader, expect to get rich over the years by following some system or leadership in market forecasting, you must be expecting to try to do what countless others are aiming at, and to be able to do it better than your numerous competitors in the market. There is no basis either in logic or in experience for assuming that any typical or average investor can anticipate market movements more successfully than the general public, of which he himself is a part. –Benjamin Graham, The Intelligent Investor
This day in financial history:
1809: Cyrus Hall McCormick is born on a farm in Rockbridge County, VA. He goes on to perfect the mechanical reaper -- the technological breakthrough that turns the Midwestern plains of the U.S. into the breadbasket of the world.
1966: "Gunslinging" fund manager Gerald Tsai opens his Manhattan Fund, hoping to raise $25 million. Frenzied investors, whipped up by his 49.5% return the year before at Fidelity Capital Fund, pour $247 million into the Manhattan Fund before it even opens. In 1967, Manhattan gains 39.4% -- then goes on to lose a disastrous 76.3% by the end of 1974. As always, the people who chase the hottest returns are the ones who get burned the worst.
1985: The U.S. government begins allowing Treasury securities to be carved up, creating "STRIPS," or Separate Trading of Registered Interest and Principal of Securities. Investors can now hedge much more easily against changes in interest rates by trading either the interest or the principal portion of a given bond, vastly increasing the liquidity of the government bond market.
Source: Jason Zweig
