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Isaac Newton: A brilliant scientist, a terrible investor

How Issac Newton lost $4 million due to the first stock market bubble in history and insider trading

/THREAD/

 1/ Sir Isaac Newton is considered one of the most influential scientists of all time and a key figure in the scientific revolution.

He was a mathematician, physicist, astronomer, theologian, and author.
2/ The most prominent part of his work was the formulation of the laws of motion and the law of gravity.

However, his most prominent failure was losing an entire fortune in the first stock market bubble in history, the South Sea Company in 1720.
3/ Newton was usually a cautious investor.

Before 1720 most of his investments were in safe and reliable securities, various government bonds that delivered a regular stream of income, and shares in a few of the larger companies on the exchange, including South Sea Co.
4/ Newton began in 1720 with stocks and bonds worth approximately £32,000 (close to $6-million in current U.S. dollars).
5/ South Sea Co., set up in 1711 to restructure the British government’s debt, was a vehicle for converting government debt into equity.

Government bondholders were given the option to exchange their securities into South Sea Co. shares.
6/ Dividends were paid on the stock at a lower rate than interest on bonds.

However, the potential for dividend increases and sizable capital gains was created when Parliament gave the company a monopoly on trade with Spain’s colonies in South America.
7/ In June 1720, the British Parliament passed the Bubble Act.

It required all companies that sold stock to the public to hold a royal charter aiming to control rampant speculation.
8/ However, the legislation had been introduced by the South Sea Company presumably as a means of controlling competition in a thriving market.

A well-bribed Parliament and ruling ministry accepted the idea in February, and the deal became official in April.
9/ Investors and gamblers swarmed London’s Exchange Alley, bidding up the stock to £315 on the first day new shares went on sale, 8% up on the day and more than double the price of shares in January.
10/ Newton began buying the stock in 1712.

Over the next eight years, he picked up more shares, using his savings and the proceeds from selling his shares in other companies.

In 1720, he converted his government bonds and annuities into the stock.
11/ The price of South Sea Co.’s stock shot up in 1720, from £128 in early January to £350 in April.

At this point, Newton unloaded most of his shares for a profit of more than £20,000 equal to 200 years of his former annual salary as a professor at the University of Cambridge.
12/ The stock price skyrocketed due to the trading monopoly the company had.

This was amplified by the hundreds of newspapers in London posting glowing articles from esteemed authors, along with rumors about South American commodities that would be imported back to Europe.
13/ The top South Sea leaders did all they could to pump the stock, lending money to fund purchases, secret share buybacks, the aggressive use of an early form of derivatives, and more.

The stock was also made easier to buy through installment plans with 10% downpayments.
14/ The stock kept soaring.

With England in a euphoric mood, watching from the sidelines was hard to do.

By mid-June, Newton could no longer stand the thought of the money he’d “lost” by selling too soon and began to buy back in.
15/ Shortly after, the price hit £800, making the company worth twice the value of all the land in England.

By mid-August, he was paying £700 to £1,000 a share, more than double the price he’d sold in April.
16/ But the share price could only be increased so far above the company’s fundamental value.

In the summer, news broke that insiders were selling.

The stock began to tumble and within a few weeks, plunged back to the £200 level.

So ended the infamous South Sea Bubble.
17/ The South Sea Co. remained in business, but its shares never did regain their glory before Newton died in 1727.

Newton’s losses were catastrophic, likely £20,000, the equivalent of $4 million today.
18/ That year was the first time “bubble” was used in reference to publicly traded companies.

1720 was sometimes referred to as the “Bubble Year”
19/ The South Sea Bubble is alleged to have prompted Newton to exclaim: “I can calculate the motion of the heavenly bodies, but not the madness of people.”

He allegedly forbade everyone from uttering the words "South Sea" in his presence.

/END/
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California Gold Rush, the biggest get-rich-quick scheme in American history

How Sam Brannan became the wealthiest man in California without selling a single ounce of gold

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1/ On January 24, 1848, a carpenter named James W. Marshall discovered gold at John Sutter's Mill in Coloma California (close to present-day Sacramento), where he was employed.

Californian residents were the first to rush into the area in late 1848.


2/ By 1849, the word had spread around the world with almost 100,000 gold-seekers and merchants immigrating to California from across the US and abroad, being named forty-niners.

By 1855 the number reached 300,000. It was the biggest immigration movement at the time.


3/ The gold influx into the money supply system rejuvenated the country's economy giving statehood to California.

The rise in population led to an expansion in various sectors, such as agriculture, ranching, and merchandising.


4/ The San Francisco population exploded from 200 residents in 1846 to 30,000 in 1852.

Many cities and infrastructure was built across California.

New methods of mining and transportation were developed creating a technological boom.
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Companies to AVOID

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Some tips by Peter Lynch, one of the most successful investors of all time, on which companies to avoid investing in


1. Hottest stock in the hottest industry, with nothing but hope and thin air to support them (MJ stocks in 2017, internet stocks in 2000, electric vehicles in 2020)

Deteriorating balance sheet.

When analysts predict double-digit growth forever, the industry goes into decline.

2. Product/service, not protected by patent or niche, easy to be replicated by competitors, especially in a high-growth industry.

3. The "Next Something"

Everyone wants the next $TSLA, $AMZN, $GOOG

Most likely you won't find a company to replicate their business with that success.

4. Diversification = companies wasting capital on foolish acquisitions, in new sectors they do not understand, and in companies that are overvalued.
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The Mother of All Squeezes

How Volkswagen went from being on the brink of bankruptcy to the most valuable company in the world in two days

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1/ At the peak of the 2008 financial crisis, Volkswagen was considered a very likely candidate for bankruptcy.

Heavily indebted and already financially struggling before 2008, with car sales expected to plummet due to the ongoing global crisis.


2/ With GM and Chrysler filing for bankruptcy in 2009, shorting the VW stock would seem a safe bet.

If you are not familiar with stock shorts and short squeezes check my thread


3/ On October 26, 2008, Porsche announced it had increased its stake at VW from 30% to 74%.

This was a surprise to many who were led to believe that Porsche wasn't planning a takeover of VW, based on the company's announcements.


4/ Before the announcement, the short interest was approximately 13% of the outstanding shares, a number considered relatively low.

Porsche had a 30% stake, the Lower Saxony government fund held 20% of the shares, and another 5% was held by index funds.
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The Baltimore Stockbroker Parable

How one stockbroker managed to achieve a 100% success rate in predicting stock movements

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1/ One day you receive an unsolicited newsletter from a stockbroker in Baltimore.

It contains a tip that a certain stock will soon rise sharply.

A week passes, and as he predicted, the stock goes up.


2/ The next week, you get another newsletter from the stockbroker, this time with a tip about a stock that will fall.

And next week, the stock craters.


3/ Ten weeks go by, and each week you receive a tip about a stock that will go up or down.

Every time the prediction comes true.


4/ On the 11th week, you get a solicitation to invest your money with the Baltimore stockbroker for a hefty commission, justified by his successful predictions.

That sounds like a great deal, right?
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If you want to become financially independent and don't know where to start, here is a thread that will help you get started

/THREAD/

1. Review your expenses and make a budget

It will help you see where you overspend, make a plan to save, pay down debt and start


2. Set your investing and retirement goals

How much do you need to support yourself in retirement and when do you want to


3. The earlier you start investing, the better.

Here's why and how time and compounding can become your


4. Invest in an index fund

It's easy, safe, cheap, and the best choice for a beginner in investing, with not much time for
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Circle of Competence 101

Warren Buffett and Charlie Munger often reference the importance of knowing the boundaries of your circle of competence.

But what is a Circle of Competence and how does it work?

Here's Circle of Competence 101!


1/ First, a few definitions.

A Circle of Competence is the set of topic areas that align with a person's expertise.

If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise.


2/ The idea surfaced in the 1996 BH annual letter.

"You don’t have to be an expert on every company...you only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital."


3/ A Circle of Competence is built over time.

It is built through experience, reading, dedicated study, and effort.

It is dynamic, not static.

It can expand as you deepen your knowledge in new areas. It can contract if you fail to nurture your existing areas of expertise.

4/ To engage this mental model in your life, there are two key processes to go through:

(1) Identify what falls within your circle
(2) Identify the boundaries of your circle

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(1/25) A number of Silicon Valley investors are putting their money and influence into a campaign to gaslight rape victims into not seeking medical treatment

despite the warnings of top law enforcement officials

and NOBODY is talking about this.

(2/25) First, a little about me. I used to be a licensed sexual assault crisis counselor, counseling victims admitted to one of three Minneapolis emergency rooms.

After I'd speak to the victim, they'd receive a medical exam from a Sexual Assault Nurse Examiner (SANE).

(3/25) During the exam, DNA and other evidence is collected with a "rape kit" to optionally be used in a civil or criminal case.

(4/25) But collecting evidence is not the ONLY reason to receive an exam.

The victim may also receive:
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- treatment for (potentially invisible) injuries
- medications like Plan B and emergency antiretroviral therapy for HIV prophylaxis.

(5/25) Leda Health, a startup cofounded by Madison Campbell and Liesel Vaidya, is raising money to sell "do-it-yourself" rape kits that wouldn't require a hospital visit

which is possibly the most HARMFUL startup idea that I have ever heard of.
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On this auspicious day of #GuruPurnima, happy to share an easy to read and an exceptionally worthwhile investment. I plan to make a thread that will hopefully help us invest and live better. Thank you @awealthofcs 🙏🏻


Experience has taught me that less is always more when making investment decisions. Simplicity trumps complexity. Conventional gives you much better odds than exotic. A long-term process is more important than short-term outcomes.

And perspective goes much further than tactics. Tactics are useless to investors in a matter of days—sometimes in a matter of hours. But perspective is something that stays with the investor for a lifetime. It allows you to adapt to the changing market and economic landscape.

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Over the last 18 months, I have scaled my income to around ₹10,00,000 or 10 lakhs per week with drawdowns below 10%.

How?

@niki_poojary taught me how to form a weekly trading plan.

I'm going to share what I've learned in this thread.

Here's the simple 10 step process: 🧵

1. Check on the daily chart if Bank Nifty is in a higher high or lower low:

A higher-high (HH) is a bullish pattern, it signifies that it is difficult for the market to go down.

If that has formed on the daily chart, the market will give all the surprises on the upside.


If the market is in a higher high mode, look for good opportunities to sell puts.

Usually, at a higher high, traders buy on breakouts and also buy the dips.

If you want a good Risk-Reward, you can sell puts on a dip. (Only if it's showing some reversal)

2. Take High Probability Trades

Simply knowing a higher high or lower low does not make money. It gives you a bias for the week.

Still, you should try to take higher probability trades that align with your view of the market.

This will get you consistency and a good mindset.

3. Support & Resistance

I would say Support Resistance is the most important and favorite thing for @niki_poojary.

She keeps updating these levels with charts on her Twitter handle during live markets daily.

Attaching some examples will do a detailed thread on this later.
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Want to master Option Selling for free?

Here are the best resources.

A thread 🧵👇

Collaborated with @niki_poojary

1. Best book of knowledge for a beginner?

Zerodha Varsity from @Nithin0dha's team is the best book for a newcomer to read and increase his basic knowledge about options, especially for the Indian markets.

Link:

2. Best Youtube channel on Options Trading?

The @tastytrade financial network. It's a foreign channel that focuses mostly on selling options.

They teach all strategies for free with their backtests.

Big on Straddle/Strangles selling.

Links:

3. Top Indian YouTube Channel for Options?

Power of Stocks - Subhasish Pani

What you'll learn:
1. How to form a trading plan.
2. How to scale an account with risk-reward in option selling.
3. Technical analysis logics you can use daily.

15


4. What are the preconditions to start option Selling:

You should know technical Analysis basics like:
- Support/Resistance
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- Candle Patterns
- Dow Theory (HH, LL)

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It is said that Kempe Gowda, the founder of Bengaluru, saw a rock here.


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To people who are under the impression that you can get rich quickly by working on an app, here are the stats for https://t.co/az8F12pf02

📈 ~12000 vistis
☑️ 109 transactions
💰 353€ profit (285 after tax)

I have spent 1.5 months on this app. You can make more $ in 2 days.

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- backend for processing payments (+ permissions, webhooks, etc)
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etc.

These things seemed super scary at first. I always thought it was way too much work and something would break. But I'm glad I persisted. So far the only problem I have is that mailgun is not delivering the license keys to certain domains like https://t.co/6Bqn0FUYXo etc. 👌

omg I just realized that me . com is an Apple domain, of course something wouldn't work with these dicks
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1/ The first 18 months of starting a company is often life or death. I must've made 5 different companies that each failed within 9 mo. 😭 Each time the company failed I figured out what I could do better. Eventually startup #6 got to $40K/mo by month 18. Here’s what I learned...

2/ Stay focused! Ignore things that are a waste of time: meetups & conferences, meetings with no clear agenda, fundraising if you're not fundraising, reading lots of tech media articles, etc. Every week should feel like significant progress in the first year.

3/ Your first 5 hires will be the difference between life or death. Choose carefully. Be picky. Many of the things we do at the company still are a result of those early hires' legacy. Have fun as a tight knit team. It will change & evolve as you get bigger so enjoy this moment.

4/ Growth may be flat for the first 9 months. It's gonna be okay. Almost every company has experienced this: Airbnb had to sell cereal in-between, Slack failed as a gaming company first, Tesla sold only 147 cars after 6 years! You probably won't be an overnight success either.

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#THREAD
1.Meenakshi Amman Temple(472ft High)also called as Meenakshi Sundareswarar is a famous Hindu temple located on the southern bank of Vaigai River in temple city of Madurai, #TamilNadu.It is dedicated to Parvati(Meenakshi)& her consort Shiva(Sundareswarar). @LostTemple7


2.Madurai Meenakshi Sundareswarar temple was built by King Kulasekara Pandya (1190-1216 CE).This popular temple visits over 15000 visitors daily & around 25000 on #Friday !Friday sees the most number of devotees visit the temple with the number going as high as +25,000.


3.Meenakshi Temple also hosts an annual festival called Meenakshi Thirukalayanam that is held in April. A celestial wedding of the god and goddess marks the end of the festival. About 1 million devotees visit the temple during this festival.


4.the temple has been tagged as one of the seven wonders of India along with stunning Architecture.The temple is built using Dravidian South Indian style of architecture, and is one of the most impressive temple structures in South India.


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Ｃｕｌｔｕｒｅ

It is said that the one who bears the dust thrown from the hoof of Gaumata on his head, as if taking a bath in the water of the teerth sthalam and getting rid of all sins.


Ved and all other Hindu scriptures venerate the cow. The Vedic dictionary, Nighantu, gives amongst other synonyms of 'Gau' [ or cow] the words 'Aghnya', 'Ahi', and 'Aditi'.

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Aghnya —— the one that ought not to be killed
Ahi —— the one that must not be slaughtered.
Aditi —— the one that ought not to be cut into pieces.

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