The Lookout Investor

Technology and policy are often at the heart of financial bubbles. In the 19th century, hot technologies were not Cloud computing and electric cars, it was bicycles , candy bars, and beer. From the years 1885 to 1913, English breweries were suspended in a unique bubble. The features that separate this bubble from others can be for the most part attributed to two major oddities. First, the bubble resulted from unintended consequences of legislation. Second, many of the companies involved were not new businesses; they were long-standing, often family-controlled breweries that incorporated to take on outside shareholders and cash. Widespread incorporation of the brewery companies was initialized by the temperance movement’s “crackdown” on the distribution of alcohol. Instead of merely limiting supply of alcohol as the politicians intended, this development caused breweries to rapidly start buying pubs in an effort to secure their ability to supply their product to thirsty consumers. Natur...

  Today marks the 300th anniversary of the penultimate moment of the South Sea Bubble. On August 22, 1720, following the wild bull run from 128 pounds to over 1,000 pounds per share, the fourth and final share subscription of the South Sea Company took place. It proved to be the tipping point of the South Sea Bubble. Many attempted to become wealthy through the stock. Most failed.  On August 22, South Sea shares were offered at 1,000 pounds, and by October they were 290 pounds. Families were reduced to beggary. This article outlines what today’s investors look out for, in order, to not suffer the same fate as the average citizen in England in 1720. Understand what you are investing in There are many things to look out for in investments, however, the most basic and important one is understanding the business. In the case of the South Sea Bubble, although the investors knew it was a trading company, but if they had dug just a little bit deeper then they would have found that on...

  The comically disproportioned Penny Farthing bicycles were the go-to bike in England during the early 1870s through the early 1880s. However, they were not widely used. Like the bicycles we know today; they were less for daily transportation and more of a novelty item. Penny Farthings were expensive(10 pounds), and they were extremely uncomfortable. They were so uncomfortable that the flagship model was called the “boneshaker”. On top of that the seat was so high they were hard to mount and pedal.  In 1886, John Kemp Starley made the first commercially produced bicycle of a new age of bicycles that transformed the Penny Farthing into something which closely resembles the bikes we ride today. They had a chain in order to reduce the size of the wheel and made them equal sizes. Also, they had pneumatic tires which contributed to a much smoother ride. No to mention the frame was far smaller which made them significantly easier to mount and ride. Because of these features, they r...

“To  move from the old to what is about to come  is the only tradition worth keeping”.  Marcus   Wallenberg  wrote to his brother  Jacob  in 1946 to convince him to sell the family's interests in the railroad industry and focus instead on founding the airline SAS. The economy runs in cycles. As challenges arise, old business models are replaced by new ones that are more attuned to current consumer demands. Although most are pessimistic about the current economic situation there are some who are going out creating businesses that we may come to know in future years. These new businesses arise when people see an opportunity to fill a need or a new market develops. For example, when the pandemic started quarantine raised the need to meet virtually for people, schools, and businesses needed a way to virtually meet with online this problem was solved by ZoomInfo. Even out of crises, successful companies emerge. There are several patterns to watch for:...

The pandemic has driven many people to fill their newfound free time with day trading and speculation in the stock market. They can yield unprecedented gains and losses. This is the side of the market which more aptly resembles gambling than the classic value investing. Like gambling, for every winner crowing about gains, there are many losers who have lost their nest egg. As a whole, this gambling activity makes share prices detach from the company's actual value. History can help guide us through this time because what may seem unprecedented events, is a phenomenon that repeats itself across centuries. The baseless speculative activities of today are similar to those in 1720 Britain where at the time the South Sea Company reigned as the stock to be traded up and down. The resemblance is uncanny to anyone who is familiar with the South Sea Bubble and our reenactment is happening almost exactly 300 years later. Bubbles are a phenomenon where people buy into an idea of something whi...