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Quote of the Day

“If you took all of the gold in the world it would roughly make a cube 67 feet on a side. Now for that same cube of gold it would be worth at today’s market prices about $7 trillion. That’s probably about a third of the value of all the stocks in the United States. So you could have a choice of owning a third of all the stocks in the United States or you could have a choice of owning that little block of gold, which can’t do anything but kind of shine there and make you feel like Midas or Croesus or something of the sort.

Now, for $7 trillion, there are roughly a billion acres of farmland in the United States. They’re valued at about $2 1/2 trillion. It’s about half the continental United States, this farmland. You could have all the farmland in the United States, you could have about seven ExxonMobiles, and you could have $1 trillion of walking around money. And if you offered me the choice of looking at some 67-foot cube of gold and looking at it all day, you know, I mean touching it and fondling it occasionally, you know, and then saying, you know, `Do something for me,’ and it says, `I don’t do anything. I just stand here and look pretty.’ And the alternative to that was to have all the farmland of the country, everything, cotton, corn, soybeans, seven ExxonMobiles. Just think of that. Add $1 trillion of walking around money. I, you know, maybe call me crazy but I’ll take the farmland and the ExxonMobiles.

– Warren Buffett in a March 2011 interview on CNBC. You can read the whole transcript of the Buffett interview, here.

September 21st – This Day in Stock Market History

September 21st, 1931 – Great Britain abandons the gold standard.

On this day, Great Britain withdrew its promise to provide a specific amount of gold in exchange for its bank notes.

Foreigners became concerned the United States would do the same and began converting their dollar assets to gold. This external drain caused a large reduction in the US gold supply. The U.S. would effectively abandon the gold standard 9 months later, on June 5th, 1933.

At the same time, depositors became concerned about the safety of banks and withdrew currency from their accounts, creating an internal drain on the banking system. Together, these external and internal drains reduced the money supply, deepening the deflation which propagated the depression.

NYT coverage of Britain leaving gold standard, on this day in 1931
NYT coverage of Britain leaving gold standard, on this day in 1931

Source: Manias, Panics, and Crashes: A History of Financial Crises

September 21st, 1932 – U.S. stock markets have their 3rd best day in history (at the time, in terms of percent gain), rocketing up 11.36%.

The Dow Jones Industrial Average technically bottomed on July 8th, 1932 at 41.22 and is already over 75 at the close on this day in 1932. The rally was spurred by a sharp rise in commodity prices, which investors took as a sign of increase demand. Most notable stock of the day, U.S Steel (Ticker: X) up 19.8% on the day!

September 21st, 1998 – Long Term Capital Management loses $553 million in one day as panic spreads to stock markets worldwide.

U.S. stock markets were down about 1.5% early in the day, and finished slightly higher. But Long Term Capital stood at 100 to 1 leverage, and with worldwide holdings (specifically Russian securities) still in decline, and market correlation remaining high, the fund continued to lose money.

The fund would be bankrupt within 48 hours, setting off a scramble to bail out the fund.

Source: When Genius Failed: The Rise and Fall of Long-Term Capital Management

Best September 21st in Dow Jones Industrial Average History

1932 – Up 11.36%, 7.67 points.

Worst September 21st in Dow Jones Industrial Average History

1933 – Down 6.18%, 6.43 points.

 Read of the Day

NPR’s planet money has a great series on the gold standard, and why the U.S. left the gold standard.

You can read the article here: https://www.npr.org/sections/money/2011/04/27/135604828/why-we-left-the-gold-standard

Or, take a listen here:

<– Go To Previous Day: September 20th, 1873 – For the first time in history, the NYSE shuts its doors due to panic.

Go To Next Day: September 22nd, 2015 – Voltswagen admits to installing software to trick emission tests, shares plummet 19%. –>