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Quote of the Day

“The public, as a whole, buys at the wrong time and sells at the wrong time. The average operator, when he sees two or three points profit, takes it; but, if a stock goes against him two or three points, he holds on waiting for the price to recover, with oftentimes, the result of seeing a loss of two or three points run into a loss of ten points.”

-Charles Dow

January 12th – This Day in Stock Market History

January 12th, 1906 – The Dow Jones Industrial Average closes at 100.26, the first close above 100 in history.

Although it was a significant milestone for the Dow, the public was not yet that interested in the stock market. It would take another 15 years for the “roaring 20s” to ignite, and the rising stock market to take the public by storm.

The market would continue trading sideways for another decade. In fact, this close above 100 would nearly become the top in the stock market for years to come.

It would not be until a decade later when the Dow would break well above 100:

Source: The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average

January 12th, 2007 – Bear Stearn’s stock hits a new all time high of $171.51 per share. It would be the final all time high Bear would reach.

Bear Stearns Stock Chart

Just over 15 months later, on March 16th, 2008, Bear Stearns would be purchased by JP Morgan for $2 per share.

With hindsight we know the trouble that lay right around the corner for Bear. But on this day in 2007, things were looking very good for the company.

Bear had just closed out its 2006 fiscal year. It was the company’s 83rd consecutive year with a profit:

Revenue, Income, and Book Value were all at all-time highs. For 2006, Bear had $9.2 billion in revenue, $2 billion in profit, and had $350 billion in assets on its balance sheet.

But, one investment in particular was beginning to make up a larger and larger portion of the company’s business – Mortgages.

When the U.S mortgage market turned south in mid 2007, Bear Stearns began to fall with it.

In just over a year, Bear – One of the most storied companies on Wall Street – would be nearly worthless.

Want to read more on the rise and fall of Bear Stearns?

Alan “Ace” Greenberg was CEO of Bear Stearns from 1978 to 1993, and Chairman of the Board from 1985 to 2001.

In 2011, he wrote the book detailing his rise in the company, and its downfall:

The Rise and Fall of Bear Stearns

Best January 12th in Dow Jones Industrial Average History

1900 – Up 2.62%, 1.22 points.

Worst January 12th in Dow Jones Industrial Average History

1990 – Down 2.59%, 71.46 points.

Read of the Day

Charles Dow, the creator of the Dow Jones Industrial Average, died in 1902 before seeing his average hit the 100 point milestone. But he did leave us with a ton a valuable writing on investing in general. For years he wrote near daily columns in the Wall Street Journal. His ideas behind investing are today known as the “Dow Theory”.

For those that want to read it from the source, there is a book published that contains a huge collection of Charles Dow’s writing, but it has not been in print for a while. Used copies are pretty expensive on Amazon, but they drop every now and then:
Dow Theory Unplugged: Charles Dow’s Original Editorials and Their Relevance Today
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