Historical Thought for the Day
February 2, 2010
Thought for the day:
A living dog is better than a dead lion.
–Ecclesiastes 9: 4.
This day in financial history:
1985: The value of the U.S. dollar hits a modern record high relative to the German mark and other foreign currencies -- giving a huge tailwind to American investments in foreign stocks over the next decade.
1555: The company typically considered the world's earliest modern corporation is chartered in London, England. Its 201 shareholders, led by explorer Sebastian Cabot, put up 6,000 pounds in shares priced at 25 pounds each. They call the company the "Marchants adventurers of England, for the discovery of lands, territories, iles, dominions, and seigniories unknowen, and not before that late adventure or enterprise by sea or navigation, commonly frequented." Understandably, this "busynes" soon goes by a shorter handle, the Muscovy Company or the Russia Company.
1987: Templeton Emerging Markets Fund, the first portfolio of emerging markets stocks for retail investors, is launched.
1995: Barings Bank, one of the oldest and most distinguished investment banks in the world, declares bankruptcy after rogue trader Nick Leeson loses more than $1.4 billion on unauthorized (and apparently unsupervised) trades in Japanese stock futures. The ultimate irony: Barings had nearly gone bust more than a century earlier on its speculations in Latin American bonds. Some people never learn.
1891: David Sarnoff, future president of Radio Corporation of America and the greatest visionary of the radio and television industries, is born in Uzlian, Russia.
1933: Less than a week before Pres. Franklin D. Roosevelt is inaugurated, the stock market forecasts a gruesome future. The Dow Jones Industrial Average closes at 50.16, a new low for the year and barely above its all-time nadir of 41.22, set on July 8, 1932. Stocks are selling at 0.65 times book value and 10.3 times reported earnings, with an average dividend yield of 8.7% (among those that can afford to pay dividends). Five trading days later, after Roosevelt's banking moratorium and financial reforms kick in, the market is 23.8% higher; by the end of June, it has doubled.
1827: America's first great growth industry is born, as two dozen business leaders in Baltimore incorporate the Baltimore and Ohio Railway Co. to link Baltimore with Wheeling, W.Va. and connect the "western frontier" with the eastern seaboard.
1950: We're all indebted to these visionaries: New York City financial executive Frank McNamara and his attorney Ralph Schneider have dinner at the Major's Cabin Grill Restaurant on 33rd St. in Manhattan. When the check comes, McNamara hands the waiter a small paper Diners' Club card and asks to "charge" the bill. After a year of preparation by McNamara and Schneider, the first charge-card transaction has taken place.
1953: A young scientist named Francis Harry Compton Crick walks into the Eagle Pub in Cambridge, England, and announces that he and his research partner, James Dewey Watson, have "found the secret of life." Unlike most people who say that kind of thing in bars, Crick is right: He and Watson have discovered the double-helix molecular structure of DNA.
1964: Just under three years after breaking the 700 mark, the Dow Jones Industrial Average breaks through 800 for the first time, closing at 800.14.
Source: John A. Prestbo, ed., The Market's Measure: An Illustrated History of America Told through the Dow Jones Industrial Average (Dow Jones, New York, 1999), p. 78.
1975: A new U.S. government agency, the Pension Benefit Guaranty Corp., pays out its first check, for $140.75, to a participant in the International City Bank of New Orleans' Employees Retirement Plan. The PBGC was established after several companies, including Studebaker, failed to make good on their pension commitments after they went insolvent. Today, nearly 500,000 retirees receive a pension check from the PBGC to cover the obligations of employers whose pensions failed.
1988: As the junk-bond fueled takeover craze nears its peak, Wall Street has one of its biggest deal-days of all time. Kohlberg, Kravis, Roberts & Co. announces a leveraged buyout of Stop & Shop supermarkets for $1.2 billion, and R.H. Macy & Co. offers $5.3 billion for Federated Dept. Stores. And three corporate raiders launch hostile takeovers: T. Boone Pickens' Mesa L.P. makes a bid of $1.9 billion for Homestake Mining, Barris Industries offers $1.6 billion for Media General Inc., and Desert Partners bids $903 million for USG Corp.
2000: James J. Cramer, who writes the eponymous column "Wrong!" for TheStreet.com, gives a speech at a technology conference in New York City, naming his ten favorite stocks, which he christens "Winners of the New World." Among them: Ariba, InfoSpace, Inktomi, VeriSign, and Veritas. "They are the only ones going higher consistently in good days and bad," declares Cramer. "I love every one of them.... That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now." These "winners of the new world" lose an average of 82% in the year to come. However, Cramer is right about one thing: The NASDAQ does set a record in 2000, falling 39%, for its worst annual loss in history.
Source: Jason Zweig
