Caption: “Watching the birdmen: The latest thing in grand-stands.”

Visualizing History

(Source: Global Financial Data)

From the Archives


Calls for a ban on short selling in 1890 from a Letter to the Editor (signed “A Victim”). As always, calls for a ban on short selling came about following a crisis (Barings Crisis of 1890). Guess another term for short-sellers in the day was “wreckers”

Investor Amnesia Course

Towards the end of last year I launched a brand new online financial history course covering Bubbles, Manias & Fraud. The course boasts more than six hours of content split into 37 videos across seven riveting topics like Railway Mania, the South Sea Bubble, Brewery Mania, and more. Students are taught this fascinating material by the world’s foremost investors and financial history experts.

Make sure to check it out!

Sunday Reads

After what proved to be quite a busy week, the content and style of today’s Sunday Reads will be a bit different in that it’ll provide a recap of some of the recent podcasts and presentations I have done on financial history, as well as the two articles I posted this week which you may have missed.

Hope you enjoy the articles, and I would love to hear your thoughts. Please enjoy this unique edition of Financial History: Sunday Reads!

The Road to Custom Indexing: Investment Vehicles

I posted this article on Thursday that looks at the long history of innovations with asset management and investment vehicles, beginning with the first mutual fund launched by Dutch broker Abraham van Ketwich in 1774. Among other things, this article looks at seemingly “modern” innovations that have actually existed for a century or more like ESG, Smart Beta, Mutual Funds, and more. The excerpt below comes from the section on the birth of investment trusts in late 19th century Britain:

Investment Trusts & Active Management Take Hold

Almost a century later in London the first investment trust was launched in 1868 with the founding of Foreign and Colonial Government Investment Trust (FCGT). The motive behind the trust was similar to its Dutch predecessor in 1774, as Section 1 of the trust’s prospectus stated:

The object of this Trust is to give the investor of moderate means the same advantages as the large capitalist, in diminishing the risk of investing in Foreign and Colonial Government Stocks, by spreading the investment over a number of different stocks…”

An 1875 book covering UK investment trusts summarized what drove the growing interest in investment trusts:

“The causes, which have given rise to the formation of these Trusts, may be briefly described as efforts made to afford to individuals the benefits arising from co -operative action in their investments.”

A writer at the time of the trust’s launch described the management’s view that many retail speculators do not understand the intricacies of investing and lose their savings speculating in single stocks:

“The late Lord Westbury, who, with other persons of standing, founded the first “Foreign and Colonial Government Investment Trust” in 1868. His view was, that, whether a man has a large or small sum to invest, he runs the risk of making a mistake in his individual purchase from not understanding the peculiarities of the Stock; whereas, if he subscribe to an general fund, which (assisted by the advice of persons of experience in such matters) would divide its purchases carefully among selected variety of investments – each member would derive greater benefit with much security from loss by the distribution of the risk over a large average.

True to its name, the trust focused on foreign government debt both within and outside her majesty’s empire. Founded in a year when Consols (British government bonds) yielded 3.2%, the FCGT was an attractive alternative because of the significantly higher yielding issues in its portfolio:2

The important feature of these trusts that further progressed the evolution of investment vehicles was active management. The key differentiator between these 19th century trusts and the earlier Eendragt Maakt Magt vehicle was an emphasis on actively managing the portfolios.

While today the concept of active management may be pedestrian, the idea that smaller investors could access a diversified and actively managed portfolio was transformative. The popularity of such trusts is reflected in their rapid growth from the first launch in 1868 to 100 trusts by 1890.3

One particularly interesting parallel between the birth of investment trusts and modern innovations like Custom Indexing is that they were both enabled by technology and data. Today we have more data than ever, which increases the analytical capabilities of investors and asset managers. Coupled with an explosion in technology and software, innovative technologies like Custom Indexing are the result. Similarly, over a century ago, the technology and data revolved around the telegraph network connecting investors to informational hubs globally. Cables leading in and out of the NYSE are pictured below:

Professor William Goetzmann has written about the fact that the impact of the telegraph network spawning across Europe and the world was an impetus for financial innovation in Britain. 

Successful development of a financial market requires access to information. If British investors were to place their capital at risk in remote parts of the world, it is only natural to expect that they would have had a strong demand for information about their investments… The speed of information transmission through the telegraph system also improved continuously. In the 1860’s, a telegraphic message could reach London from India in eight and a half hours.

These technological developments changed the informational environment of British investors. By 1870, with the development of the electric telegraph network, British investors could receive news concerning political events world-wide, economic and trade news, and even news regarding the weather and the storms affecting the crops in the colonies.”4

As with most innovations, what was previously “revolutionary” quickly became table-stakes. Investment trusts in the 19th century established a new paradigm in which investors of all means had access to diversified and active portfolios. Building upon this foundation, we will see how new styles and additional offerings related to trusts developed over the ensuing decades in a manner not unlike the rise of ESG products in recent years.

Value Hour with Special Guest Jamie Catherwood

My presentation and interview from this week on familiar trends in financial history, and some of the historical parallels for events shaping markets today.

Money, A Brief History (Learn to Money Course)

The second article I posted this week.

This article was written for the younger audience as part of one of my dear friend and mentor Tyrone Ross’ amazing endeavor to spread financial literacy to underserved communities. If you have not hear of Tyrone or his work, change that right now before reading the rest of this post.

Learn to Money

“Financial education with style. With incredible support from GoFundMe backers, we created the pilot episode of a 10-part video curriculum that teaches the basics of financial literacy with a fresh voice. It is accompanied by a curriculum website and PDF handout for classrooms. See all the pilot materials here.  Now we want to complete the full curriculum and take the effort to the next level. 

We will create a 10-episode foundational video curriculum and mobile website that can be easily taught by teachers in just 20 minutes a week. We’ll work with partners to spread it far and wide on social and in schools.

Learn to Money is a new voice for financial literacy. In addition to our foundational curriculum, we are exploring more social video, podcasts, TV, and editorial content.

To accomplish this we are seeking partners:

  • Institutional and individual partners to help fund the full 10-episode curriculum, mobile website, and more. 

  • People and brands with big platforms to help spread the word and signal boost the message.

  • Organizations with distribution channels within public schools to help introduce and provide our curriculum materials to teachers.

That last part is important. HELP TYRONE BRING THIS CURRICULUM TO THOSE WHO NEED IT. Email Tyrone and the team here: [email protected]

The History of Value Investing with Jamie Catherwood (Podcast)

Following my Sunday Reads on the history of value investing, I went on the Value Hive podcast to discuss my findings on a time tested investing philosophy that has struggled as of late.


Power Grab: Activists, Shorts & The Masses

If you missed my Sunday Reads two weeks ago then you should definitely check it out today if you’re seeking historical context for all the madness in financial markets from the last few weeks with GameStop, AMC, etc.