I have been curious on the history of investing and stock markets. Ben Graham discusses this in his books. The details are interesting, like how common stocks were considered then to be an alternative asset class and inherently speculative. The price to earnings ratios on stocks were generally at much lower levels than in recent decades. Only the bonds of railroads were considered investment grade. In the 1800s, people actually considered in the “par” value of common stock seriously and book value was a crucial figure. Growth was not a significant consideration and people primarily bought the stocks for the dividend, and the payout rate of stocks as a whole were much much higher. These kinds of little details fascinate me.
I am interested in learning more of investing attitudes during this period. Anyone got book recommendations or articles to suggest? The closest thing I have found so far is a history of a certain assurance company (an extremely long book too!) and another book written in the 1800s on the valuation of assets in general (though dealing mainly with real estate valuation from a legal perspective).
In the first joint-stock companies, stock was really a kind of bond with interest that varied by the profitability of the company. The reason stocks had par values back then was that the idea was in 20 years you’d get paid par plus a share of liquidation, plus dividends along the way, but the dividends were basically considered to be “interest payments of undefined size.”
What they found after 20 years was that people wanted the company to continue, so par value started to become meaningless for going concerns.
(This from Niall Ferguson’s “The Ascent of Money”)
epic topic. My economics teacher wrote about the economics inherent in The Great Gatsby and Scott F. Fritzgerald’s other work and is/was currently working on the economics of gold inherent in Mark Twain’s writing.
This may seem obscure and a waste of time, but it was what he was into for his publishing and study requirements, the man was solid in his economic fundamentals and applicable lessons. Great teacher. Deserved better students. [insert reminiscent sigh]
Indeed an interesting topic, you should look into Keynes’ experiences as an investor. Back then he was among the few “institutional” managers who went into equities. I saw Mark Twain’s exhibit in Hannibal, MO there they had some advertisements for investment firms of that day…
i like to use these by searching for keywords… ‘bullish’, ‘earnings’, ‘president’, ‘congress’ , ‘dividend’ etc… for this one ‘slavery’ brings up an interesting article…