There's absolutely no bubble in Sydney - Sir Isaac Newton

Newton…made his first investment in the South Sea issue early, in 1713, and held it for several years, marking a modest paper profit. He held on through early 1720…That got the desired result, a sudden leap in stock prices. Starting at £128 in January, the price for South Sea securities rose to £175 in February and then £330 in March.

…Newton sold in April, content with his (quite spectacular) gains to date. But then, between April and June, share prices tripled, reaching over £1,000…which is precisely when he could stand it no longer.

Having “lost” two-thirds of his potential gain, Newton bought again at the very top and bought more after a slight decline in July.

The South Sea stock price held up through August 1720, and then the bubble led by over-expectations of huge returns was pricked in September.

…South Sea share prices collapsed to roughly their pre-bubble level. Newton’s losses totalled as much as £20,000, between $4 million and $5 million in 21st century terms…It was a terrific blow for Newton.

 

If arguably the smartest man who ever lived lost out, what chance do mere mortals have.

 

Shows that you don’t need to be smart to be and investor, being overly analytical is probably detrimental to investment decisions. Rather be lucky than good

Looks like FOMO in the 18th Century was already strong.

 

Technically he did not lose anything, he started with £128 and still had similar value 3 years later. Sure he failed to capitalise on his gains but he did not lose his original investment (unless he put new money in as the price rose).

 

Nice thread

Just shows you can be highly intelligent but does not mean it will make you a great investor

 

It's a interesting read and there were also Kings that invested in that company,after that they bought in the Bubble act 1719 in Parliament ..
South Sea Company - Wikipedia

 

Few learnings:

1. Don't buy an asset just because it made your friends rich.
2. Don't invest most of your money in just one company/property/business.
3. Don't speculate and then expect to walk away unharmed.

A former colleague of mine just upgraded his PPOR (bought a $2.7 million mansion with water views) and now has around $2 million in unpaid PPOR debt on an interest only loan. A high salary but no other investments. He said he and his wife couldn't imagine living anywhere else in Sydney due to the lifestyle their new property offered.

I think he will be in a lot of pain like Newton if Sydney stopped growing or interest rates went up.

 

Omg.

 

He lost 8,500 of his initial investment. He wouldn't have lost his initial investment if he didn't sell...

Say he bought 100 shares at #128 and then sold at #330. So he's got #33,000 to spend. He buys 33 shares at #1000. Prices crashes to #128. his shares are now worth #4,224.

 

....hmmm.......dumbar$e comes to mind....

Few people on here like this also.....