Historical Thought for the Day
February 1, 2010
Thought for the day:
There is a fine passage near the beginning of Aristotle's Ethics that goes: "It is the mark of an educated mind to expect that amount of exactness which the nature of the particular subject admits. It is equally unreasonable to accept merely probable conclusions from a mathematician and to demand strict demonstration from an orator." The work of a financial analyst falls somewhere in the middle between that of a mathematician and an orator.
–Benjamin Graham, The Intelligent Investor
This day in financial history:
1812: The Deed of Settlement is signed by a group of British brokers, establishing the formal basis for the London Stock Exchange -- even though stocks have been trading in London for roughly two centuries already. 1869: The New York Stock Exchange requires listed companies to register their securities to prevent "watered stock," or the manipulated over-issuance of shares by insiders. 1946: The U.S. venture-capital industry is born as John Hay Whitney, scion of a great family fortune, founds J.H. Whitney & Co. to finance promising new businesses. Some of Wall Street's leading figures, including Goldman, Sachs & Co. chairman Sidney Weinberg, warn him that his idea of venture-capital financing will never work. So "Jock" Whitney gets started simply by writing a $5 million personal check. The firm goes on to finance Freeport Sulphur, the Minute Maid Co., Memorex Corp. and Compaq Computer.1975: Bill Gates and Paul Allen finish writing the first BASIC language program for a personal computer and license it to Micro Instrumentation and Telemetry Systems of Albuquerque, NM, the maker of the Altair 8800 PC. Unlike some of Gates' future products, "it works perfectly the very first time." 2002: The Nikkei 225 Average of blue-chip Japanese stocks closes the day at 9791.43, while the Dow Jones Industrial Average finishes at 9907.26. For the first time since August, 1957, Japan's leading stock index has closed below the level of America's best-known stock index. Since it peaked on 38,915.87 on December 29, 1989, the Nikkei has lost 74.8% of its value -- a sobering reminder that bear markets start when people least expect them and can last longer than most investors could ever imagine. 1938: "Fannie Mae" is born, as the National Mortgage Association of Washington (later the Federal National Mortgage Association) is created as a subsidiary of the Reconstruction Finance Corp. Its mission: to buy and sell home mortgages insured by the Federal Housing Administration, in order to create a liquid market for mortgage debt that will encourage lenders to continue making home loans. 2000: Dr. Martin Baily, chairman of Pres. Bill Clinton's Council of Economic Advisers, declares: "The fundamentals look very good. As long as we stick to sound policy, there's no reason why it [the nation's economic expansion, now 107 months long] cannot continue indefinitely." By yearend, the economy is heading into recession. 1847: Thomas Alva Edison -- future inventor of the stock ticker, the phonograph, the improved incandescent light bulb, and the motion picture -- is born in Milan, Ohio. 1956: The Korean Stock Exchange is established in Seoul, South Korea. 2000: Pets.com goes public on NASDAQ at an initial price of $11 per share. In an early warning sign that the Internet bubble may be about a burst, the stock barely budges in the first day of trading. The stock peaks a few weeks later at $14 per share. Less than nine months after its IPO, Pets.com announces that it will shut down its operations, and by yearend 2000 the stock has fallen 99.1%. 1970: After 178 years, the New York Stock Exchange finally elects its first African-American member, Joseph L. Searles III. Lest any of its members be embarrassed by having to decide whether to let him sit next to them in the NYSE's private luncheon club, the Exchange gives Searles his own table. Hit by the bear market of 1970, Searles is forced to give up his membership that November, but the color barrier has at last been crossed. 1997: The Standard & Poor's 500-stock index closes above the 800 mark for the first time, finishing the day at 802.77, having doubled in less than six years. 1910: William Bradford Shockley, co-inventor of the transistor, is born in London, England, to William Shockley, an MIT-trained mining engineer, and May Shockley, a mathematics graduate of Stanford. Along with John Bardeen and Walter Brattain, Shockley invents the transistor at Bell Labs in 1947, making small, economical computers possible for the first time. 1990: Junk-bond giant Drexel Burnham Lambert seeks bankruptcy protection, only days after chief executive Fred Joseph had told The Wall Street Journal, "I see daylight. The worst is behind us." Source: Jason Zweig
Source: The Wall Street Journal, February 4, 2002, p. C1; Financial Times, February 2-3, 2002, p. 1.
