Aug

25

 A while back in "the good ol' days", a list commentator (way back pre-crash) quoted an article "Mistakes of Investors" appearing in Ticker Magazine back in 1908. It seems a good time to reprise it:
Avoid inside information.

Never make an investment on enthusiasm or excitement.

Use your own judgment.

Pay for info rather than getting it for free.

Consider earning value and market value. The man who buys real estate looks to the enhancement of value more than to earnings.

Don't lose confidence. The investor hears rumors of impending disaster, which, if he would reflect upon, he would see would have no effect on his security. This applies to bank runs.

Stay away from names. (Even then there were touts and promoters.) No high sounding titles can make it a success if it lacks the true qualities of success itself.

Don't put too much reliance on advertisements, especially red paints.

The losses through mining investments (not tech) are greatest. Beware of promoters who have no reputation to lose.

The greatest mistake is one of pessimism and doubt. Never let your mind fall into that chasm. Do not think because you have lost money in one investment that all are unsafe." The posting continued with an observation about among article in that first issue, by Roger Babson:

"The most interesting article to me in the first issue was by our old friend Roger Babson, written in 1908 about bank loans. He says that when the proportion of loans to investments gets too high it's bearish and when it's too low, it's bullish, but on a time series basis for all banks, and cross-sectionally between banks within a year. He gives yearly figures from 1860 to 1906 to verify his point and then shows how the panics of 1873, 1894, 1890, 1893, 1898, and 1903, were accurately forecast by the ratio.The key ratio he uses is 50% loans to assets, which was 'In 1873, the ratio of loans to resources first exceeded 50%. Consequently a panic occurred by the spring. Another panic occurred in 1903. Again the western farmer came to the rescue and owing to bountiful crops, the recovery continued until 1897 when interest rates exceeded 2200% a year.'Thus, Babson preceded Boltan Tremblay, Colonel Ayres, the bank credit analyst, the fake doctor, and many other greats in relying upon these credit ratios more than 100 years ago. It's overdue for a test again today."

Jeff Watson writes: 

Here's the kind of statistics the old grain traders used back in the day. When you think about it, not much has really changed. This period covers the 1904-1914 cash wheat CBOT receipts for 1904-1914.
 


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