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Tag Archive: Isaac Newton


For the true connoisseur, the finest expression of the art comes when a high-profile investor identifies a bubble, perhaps even blogmakes money out of it, exits in time – and then gets sucked back in only to lose everything in the resultant bust.

An early example is the case of Sir Isaac Newton and the South Sea Company, which was established in the early 18th Century and granted a monopoly on trade in the South Seas in exchange for assuming England’s war debt.

Investors warmed to the appeal of this monopoly and the company’s shares began their rise.

Britain’s most celebrated scientist was not immune to the monetary charms of the South Sea Company, and in early 1720 he profited handsomely from his stake. Having cashed in his chips, he then watched with some perturbation as stock in the company continued to rise. Continue reading

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Most investors are no doubt familiar with the standard disclaimer “Past performance is not indicative of future results.”  downloadThis compliance truism tends to stay in the fine print, both on paper and in investors’ minds, when they make decisions on the basis of real-time market dynamics.

Even if investors purport to buy into the logic of the “random walk” argument about security prices, in practice they tend to extrapolate recent history into the future (termed recency bias in behavioral finance) when making portfolio Continue reading

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