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Quote of the Day
In the end banking is a very good business unless you do dumb things. You get your money extraordinarily cheap and you don’t have to do dumb things. But periodically banks do it, and they do it as a flock, like international loans in the 80s. You don’t have to be a rocket scientist when your raw material cost is less than 1.5%.
-Warren Buffett. 2 of his favorite banks, American Express and Wells Fargo, were founded on this day.
March 18th – This Day in Stock Market History
March 18, 1850 — American Express is Founded
Henry Wells, William Fargo, and John Warren Butterfield signed the Articles of Association for the American Express Company on March 18, 1850, merging their three rival express companies. American Express was formed by the combination of Wells & Co (owned by Henry Wells), Livingston, Fargo & Company (owned by William G. Fargo), and Butterfield, Wasson & Company (owned by John Butterfield).
Image source: American Express Archives
American express was founded as a joint-stock enterprise with $150,000 in initial capital. The firm was headquartered in Buffalo, New York, and initially provided express freight and mail delivery across the American frontier.
American Express evolved far beyond package delivery. The company introduced money orders in 1882 and the iconic traveler’s cheque in 1891.
Today American Express is one of the world’s largest financial services companies, with a market capitalization exceeding $200 billion and annual revenues north of $60 billion.
The same two founders, Wells and Fargo, would create yet another financial empire on this very date just two years later.
March 18th, 1852 – Wells Fargo & Company founded
While in roles at American Express Company, Fargo and Wells also had dreams of extending their business all the way to California to be involved in the gold rush. However, the board of American Express disagreed. The board did however grant Wells and Fargo permission to launch a new independent company that worked in California. Hence, Wells Fargo & Co was born with $300,000 in start up capital.
Image Source: Wells Fargo History
Now one of the nation’s largest banks, Wells Fargo started as a small regional California bank with the purpose of helping to finance entrepreneurs out west. It was the middle of California’s gold rush, and California’s economy in particular was booming.
It would turn out to work quite well. 165 years later, Wells Fargo was worth $230 billion dollars, representing a compound annual growth rate of 8.45% since its founding.
March 18th, 1999 – Traders cheer as it appears the Dow will close above 10,000 for the first time in history. But it was just a tease as the index ends up closing at 9997.62 after last minute selling. The Dow would finally close above 10,000 11 days later on March 29th.
The Dow had crossed 5,000 in November 1995 and 8,000 in July 1997, propelled by a booming economy, low unemployment, and soaring technology stocks. The Dow continued climbing to an all-time peak of 11,722.98 on January 14, 2000 before starting its decline due to the dot-com bubble bursting.
Source: The Market’s Measure
Best March 18th in Dow Jones Industrial Average History
2008 – Up 3.51%, 420.41 points.
(This was two days after Bear Stearns was sold for $2 per share to JP Morgan)
Worst March 18th in Dow Jones Industrial Average History
1938 – Down 2.97%, 3.62 points.
Read(s) of the Day
Wells Fargo used to maintain an extensive archive of the company’s Annual reports back to 1967 on their website. Now, only more recent ones seem to be available unfortunately. They are redoing their site, and I hope the historic ones will return there.
Today’s annual reports for Wells Fargo don’t strike me as that interesting. But it is always fun to look back 50 years ago, before Wells Fargo was a dominate player in the industry and see what they were doing right. There is also some interesting comments about high inflation in the late 70’s and early 80’s and loan practices in the early 90’s.
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