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This Week in Stock Market History

“There is no better teacher than history in determining the future... There are answers worth billions of dollars in a $30 history book.”

― Charles T. Munger, in Poor Charlie’s Almanack

August 5th, 1899 – Henry Ford founds his first company, the Detroit Automobile Company

If you need any motivation for the week, I think a quick review of Henry Ford's early career may do the trick.

121 years ago this week, Henry Ford began is lifelong quest to build and sell an automobile to the public. However it did not initially go so smoothly.

His first try, the Detroit Automobile Company, was not the company that would bring him success. The company would sell very few cars, and Ford would burn through his savings in a year and a half and the company would soon fold.

It was not until later, during his third attempt at selling vehicles in 1903, would Ford begin to see success.

August 6th, 1945 - Atomic bomb dropped on Hiroshima

Even before the bomb was dropped, it seems Wall Street already had a sense that victory was within reach. From 1943 through 1945 US stocks rose sharply. However the bomb helped ensure a US victory.

After the bombing of Hiroshima, Japan would surrender one week later, and US stocks would rise 20% more by the end of the year.

August 6th, 1997 – Microsoft announces it will invest $150 million in Apple Computers

Many forget that in the late 1990s, just as Steve Jobs made his return to Apple, Microsoft - long Apple's enemy - really helped Apple stay alive with a $150 million investment.

A fund fact, if Microsoft would have held on to the $150 million in shares it had in 1997, it would be worth about $70 billion today! (However, Microsoft sold their shares in 2003 -😭)

Our August 6th 'Day in History' page goes into some details on Apple's financial condition in 1997, including a look at some of Apple's original financial reports from that time. It is always fun to look back at today's successful companies and see what they looked like decades before they ruled the world.

Weekly Wisdom

Gold, the Golden Constant, COVID-19, 'Massive Passives' and Déjà Vu

I am slow getting the next big post up on Begin To Invest, so this weekend's Weekly Wisdom is being outsourced to the best of the world wide web.

This is a paper from Tadas Viskanta, author of the Abnormal Returns blog, on gold.

Gold is experiencing quite a rise now of course, but this paper takes a look at gold's long history as an asset. Gold is usually thought of as a safe store of value, and a protector from inflation. But how has it actually fared? And does gold belong in an investor's portfolio? This paper is a great long read this weekend if you have time.

Quote of the Week

“There are 10^11 stars in the galaxy. That used to be a huge number. But it’s only a hundred billion. It’s less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”

― Richard Feynman

Feynman is of course one of the most famous scientists in American history. He was also a key asset in the development of the atomic bomb, which made an appearance in our 'This Week in History' above.

A reader on Twitter asked me recently what books I would recommend for someone looking to get more serious about investing. One of my recommendations after you know the basics was a book about Feynman. I think I would first read a biography on him (Quantum Man was my favorite, though Genius is the more popular one) to get a understanding of the man himself, and then get into some of Feynman's books.

Succeeding at investing means thinking differently than others. And I know of no better way to learn to think different than by studying those in history who have proven time and time again that they have the ability to do so themselves.

By the way, Feynman is also quoted as saying: "I never pay attention to anything by ‘experts’. I calculate everything myself.” Although the quote was not intended for investors, you can probably imagine what Feynman would think about the financial experts that show up on CNBC today...

What We Are Reading This Week

2 reads this week with a theme of personal finances:

The Tax Breaks for Homes That Help You Now - Wall Street Journal

Since the Tax Cut and Job Act, there has been a lot of confusion on what exactly is still tax deductible when it comes to your home, mortgage, and interest. This article does a great job explaining the current tax law, and how you can benefit.

The #1 Thing People with Fat Savings Accounts Scrimp On - MarketWatch

How do you spend your money, and how much if your income do you save each year?

If you have ever wondered how you are doing compared to others, here is a good look. For the same reason that ETFs and mutual funds have benchmarks, you should also know where you stand when it comes to personal finances.

The easiest way to becoming wealthy is to live below your means. This article shows where those who are on their way to building wealth are making sacrifices that most are not.

Take care, and happy invest!

Matt

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