For those who had realized big losses or gains, the mania redistributed wealth. The largest honest fortune was made by Thomas Guy, a stationer turned philanthropist, who owned £54,000 of South Sea stock in April 1720 and sold it over the following six weeks for £234,000. Sir Isaac Newton, scientist, master of the mint, and a certifiably rational man, fared less well. He sold his £7,000 of stock in April for a profit of 100 percent. But something induced him to reenter the market at the top, and he lost £20,000. “I can calculate the motions of the heavenly bodies,” he said, “but not the madness of people.”
—Christopher Reed: “The Damn’d South Sea,” Harvard Magazine, May-June 1999
To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.
—Sir John Templeton, as quoted by Tim Price: “How Isaac Newton Went Flat Broke Chasing A Stock Bubble,” ZeroHedge.com, Dec. 10, 2013
It is a perfect December in New York. Within our ever-wider income and wealth inequality, it is clear that the local haves and their brethren jetting in for shopping, rest, and relaxation are celebrating a pre-2008 December.
2013 joy is kindled by a 56-month bull market, a surge that benefits owners of shares.
John Templeton had the humility to know all raging bulls end—and end ugly. The trick was in riding gains, staying in “the trade” and withstanding natural and normal fear while always searching for value. Sir John taught me grace under fire and investment humility. The gentleness of his Tennessee accent hid a determination of steel.
Sir Isaac should have met Sir John.
Tim Price generates a terrific piece for ZeroHedge on certifiably rational men capitulating to our nascent 2014 economic optimism. He touches upon a previous folly of 1720. (The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of fishing.)
Christopher Reed wrote a brilliant article on Newton’s folly, this near the 2001 peak of a more recent sleigh ride.
Thomas Levenson has a required light read that humanizes Sir Isaac in Newton and the Counterfeiter: The Unknown Detective Career of the World’s Greatest Scientist.
Read Tim Price. Know at some point we will correct, dive, plunge, or crater. Assess and attempt to find value in growth of revenue and cash flow, all while selected gloomsters capitulate.
Celebrate the season. That din you hear from within the cloistered environs of the haves is drowning out the silence of the bears.