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Quote of the Day

 

“It is the universal experience of investment history that immediately after periods of stress high-class securities sell relatively far better than those of poorer quality”

 

-Financial News Magazine, 1915.

 

World War 1 would certainly count as a stressful period. The U.S. stock and bond markets closed July 31st 1914 because of the panic. This day in history, November 28th 1914, marks a return to normalcy after the longest shutdown of bond trading is U.S. history as bonds would once again trade (Read more below). Stocks would not begin trading until December 1914. Despite all the horrors of World War 1, stocks would rise 50.54% in 1915, the best annual return in history at the time, and the third best year on record today.

 

November 28th – This Day in Stock Market History

November 28th, 1914 – U.S. Bond Market reopens after being closed since July 31st due to World War 1. U.S. Stock markets would remain closed until Dec 12th, but authorities believe that the bond market should open up sooner to assist in raising money for the war effort and recovery.

nyt_bond_trading_resumes

 

 

 

November 28th, 2001 – Enron stock falls 75% as Dynegy withdrawals its offer to merger with the company. This morning, nearly every company ceases to do business with Enron as word spreads that Enron’s debt and accounting troubles are much worse than initially thought.  Shares of Enron would close the day just barely over $1 a share.

Meanwhile, directors at Enron were rapidly trying to move as much cash as possible to financial institutions that it did not owe money. Immediately after the Dynegy deal was abandoned, Enron executives attempted to move $400 million in cash from Citi to Goldman Sachs, but Goldman Sachs turned them down, saying the money was “too hot”. By November 29th the money was in an account in a small Houston bank, and Enron was forced to write only cashiers checks to pay employees.

 

The company would declare bankruptcy just a few days later on December 2nd.

Enron Stock Chart:

enron stock chart

Source: Conspiracy of Fools: A True Story

 

 

November 28th, 2017 – Bitcoin hits $10,000 for the first time. The price of Bitcoin is up 900% on the year:

bitcoin_price_milestones_close_price_markerChart Source: Quartz

However, bitcoin’s run was not done yet. Just 12 hours after breaking $10,000, bitcoin would surpass $11,000. 

The price would rise as high as $19,700 before finally collapsing. 

bitcoin_price_chart

 

Best November 28th in Dow Jones Industrial Average History

1973 – Up 2.70%, 22.05 points

 

Worst November 28th in Dow Jones Industrial Average History

1919 – Down 3.52%, -3.78 points.

 

Read of the Day

Warren Buffett has said: “What we learn from history is that people don’t learn from history.” And Charlie Munger has spoken to the importance of studying stock market history over nearly anything else MBA students are taught today. That is part of the reason for this collection of our “This Day in History” archives. Not only is some of Wall Street’s history fascinating, but it helps prepare you for surprises that inevitably spring up while investing and has the potential to directly improve your investing performance.

 

Imagine the panic if the stock market would close for a months long break today. At what discount would you sell your shares in such a panic?  But you may find comfort in knowing that it has happened before, and long term investors fared just fine.

This is just one of many lessons I found in the book It Was A Very Good Year

What was the world like in years like 1908, 1915 or 1927 when Wall Street was exploding higher? This book covers these years and many other is great detail. Fridson’s work is certainly worth a read for any Wall Street historian, and would be beneficial for every investor.