
“Poyais Roaylty in Quad or the Cacique waiting for BAIL”
Due to the record length of the current bull market, a number of investors are yet to face the test of a true bear market. As the S&P 500 fell 3.29% on October 10th, many of these investors received a harsh reminder that stocks can unexpectedly drop, and quickly.
Recently, the ability to ride the momentum of growth and tech stocks may have fooled investors into overestimating their own investment acumen, and stock picking abilities. This false confidence can happen to any of us. I myself bought shares of MoviePass last summer and thought I was a genius when it rose from $13 to $32. I wasn’t.

MoviePass Stock
On Wednesday the NYSE FANG+ Index dropped 5.6%, its second largest decline in history. Through October 10th, the index is down 10% month to date.

Tech names were Wednesday’s biggest loser.
After this warning shot, investors should re-evaluate their portfolios to ensure that it can weather the eventual storm. While high-flying growth stocks have provided a great source of return in recent years, their valuations will likely struggle to hold up in a market downturn.
What may seem like a ‘Goldilocks’ environment, can change in an instant. Investors should be prepared so that they are not left stranded with a portfolio of stocks boasting exciting narratives, but poor fundamentals.
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After serving in the Venezuelan War of Independence, Gregor MacGregor was unsure of what to do in life after battle. A 19th century military man to the core, the Scotsman found himself bored by peace. Consequently, MacGregor continued to sail around Latin America attacking Spanish outposts that remained after the war.
In the midst of his spontaneous conquests, MacGregor stumbled on an undeveloped region on the coast of Honduras. After gazing upon the piece of land, which he named Poyais, MacGregor’s elaborate fraud began to take shape.

Poyais, in all its glory.
Officially ending his military campaign in Latin America, MacGregor immediately sailed back to London.
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“He [MacGregor] has endeavored, as much as possible, to avoid making any statement which might appear doubtful or exaggerated…and he has therefore confined himself, as much as possible, to such plain and positive facts, as are established beyond the shadow of doubt” — Sketch of the Mosquito Shore (1822)
Upon his arrival back in London, the Grand Cacique of Poyais (MacGregor’s self-appointed title) quickly spread word about his newly discovered kingdom. As part of MacGregor’s marketing campaign, he even published a book detailing the incredible opportunities available to both investors and settlers in Poyais, which is quoted above.
The hype surrounding MacGregor and Poyais steadily evolved into a full-fledged mania. Thousands of engravings were sold around London and Edinburgh that portrayed the magnificent buildings and structures of Poyais, which allegedly included an opera house, parliamentary building, cathedral, and more.
Offices were subsequently opened in London and Edinburgh, where excited applicants could purchase land in Poyais for 4 shillings an acre.
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After generating substantial interest from the public, MacGregor turned his attention to raising funds from investors. In 1822, the Scotsman issued $200,000 in bonds offering a 6% yield. Measured in today’s money, the value of these bonds eventually reached $3.6 billion.
Incredibly, the bonds were backed by the export-tax revenue that Poyais would allegedly generate, despite the fact that there was no infrastructure, people, or businesses in the region. At one point, the Grand Cacique even secured bonds against the revenues of a non-existent mining company in Poyais. These boring details, however, did not prevent investors from purchasing MacGregor’s fraudulent bonds.

MacGregor’s fraudulent bonds
Perhaps this was due to the fact that MacGregor’s pitch came at a time when government bonds (consols) only yielded 2–3%. Consequently, when MacGregor offered investors a 6% yield on the Poyais bonds, or double the government consol’s yield, they leapt at the opportunity. Chasing returns would cost many investors their lives.
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Many of the first settlers on Poyais had been so confident in MacGregor that they had happily exchanged their hard currency for the Poyais dollars that the Grand Cacique had printed. The settlers were essentially putting money into MacGregor’s pocket, and received worthless pieces of paper in return.

Poyais Dollar
Investors in the Poyais Kingdom were jolted back into reality when the settlers arrived at their new home in Honduras.
The first ship, Honduras Packet, set sail on September 10, 1822 with 50 settlers on board. Many of them came from poor background, and had left their homeland for the utopia that MacGregor had promised. Few would live to take the return journey back to Britain.
As the ship finally pulled into the port of Poyais, nothing could have prepared the passengers for what they encountered. Far from being a tropical paradise with beautiful infrastructure, the land was uninhabited and undeveloped, apart from a couple mud-huts on the beach.
Unfortunately for the new arrivals, this discovery was only the beginning of their troubles in paradise. Shortly after they came on land, a hurricane tore through the region, sweeping away their ships. In an instant, the Poyais investors and settlers found themselves stranded. Then, when the situation couldn’t seem to get any worse, the entire group of settlers were stricken by either yellow fever, or malaria.
“Not one, was able to assist another out of such a number, and many of those who had newly come from Scotland were well advanced in years, and had come here to end their days in peace and comfort.” — Poyais Survivor
Eventually, seven ships in total came to Poyais with passengers looking to settle in MacGregor’s fairytale paradise. Of the 240 settlers that arrived, only 60 survived.
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In the 1800s, investors were impressed with Gregor MacGregor’s fantastical descriptions of Poyais. According to the fraudster, the plot of land in Honduras was a utopia in which the ground was fertile, the sea was beautiful, and everything was paradisiacal.
Based on just his descriptions, the public jumped at the opportunity to both invest in, and relocate to Honduras.
Would you follow someone half way around the world to land that had not existed for more than 6 months? Would you invest in the bonds of a country that you were unfamiliar with? Or would you exchange your currency for that of an unknown foreign bank?
Hopefully, the answers to all three of these questions are ‘No’. However, sadly many people lost their lives by answering ‘yes’ to those very same questions.
Although there is no risk of malaria or yellow fever, investors today should be wary of being left stranded after their investments in overvalued stocks with enticing narratives go awry. When the next market downturn arrives, be sure that it’s not the hurricane which sweeps away your escape from Poyais.