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Quote of the Day

“I think a simple rule of business is, if you do the things that are easier first, then you can actually make a lot of progress.”
-Mark Zuckerberg, who on this day in 2012 saw his company go public with the largest American IPO in history.

May 18th – This Day in Stock Market History

May 18th, 1864 – The great “Civil War Gold Hoax” causes gold prices to spike 10% overnight.

  The panic was caused by a letter “from the Associated Press” that was published in two New York newspapers:

Civil_war_gold_hoax1
Civil_war_gold_hoax2

(Source of images: The Life of Abraham Lincoln)

It turned out, the story was a fake.

Journalists Francis Mallison and Joseph Howard submitted this fake story at 3:30 am to 2 newspapers; New York World and New York Journal of Commerce, who fail to fact check the story and publish it immediately. The story said that that President Lincoln had ordered 400,000 additional men into the Union Army as the Virginia offensive was failing. The news caused a small panic, and gold prices jumped 10% on the day.

Here is how the New York Times covered the story the next day:

Little did anyone know, Howard had bought as much gold as he could afford the day before, maxing out his margin account, making him a small fortune. Howard would be arrested and thrown in jail for 3 months. Ironically, around the time he was released Lincoln ordered not 400,000, but 500,000 additional soldiers to the Union Army. The event would also be one of Lincoln’s few blemishes, as in a fit of rage about the fake story being published, he immediately ordered the 2 newspapers closed (The order was later reversed).

Source: Panic, Prosperity, and Progress: Five Centuries of History and the Markets

May 18th, 2012 – Facebook (Ticker: FB) has its IPO.

Shares were initially priced at $38, giving  the company a market cap of $104 billion and making it the largest IPO in American history. At the time of its IPO Facebook would become the 23rd largest publicly traded company.

Facebook_on_Nasdaq

At the time, Facebook had quarterly profits of $205 million, with revenue of $1.06 billion. Today, Facebook is worth $600 billion, does $70 billion in revenue last year and reported a net income of $21 billion.

Facebook’s IPO hardly went smoothly. On its first day of trading, Facebook underwriters tried desperately to keep the company’s stock from falling. Facebook closed its first day of trading up just 0.6%, after opening up 11%.

Trading would not get any better. Over the next few months Facebook stock fell nearly 50%. Shares would recover by late 2013:

facebook_IPO_chart

Best May 18th in Dow Jones Industrial Average History

2009 – Up 2.85%, 235.44 points.

Worst May 18th in Dow Jones Industrial Average History

1905 – Down 2.64%, 1.47 points.

Read of the Day

Zuckerberg’s quote applies to investing as well.

Often times, the most important things to do are the simplest. One book in particular that stresses these simple ideas is The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)

<– Go To Previous Day: May 17th: 1792 – The Buttonwood agreement is signed, establishing the rules to what would become the NYSE