When the investor Warren Buffett finds a worthwhile investment, he rarely lacks commitment. Many of his holdings, either in the days of his old investment partnership or at his firm Berkshire Hathaway, are large relative to the total portfolio’s size. At odds with others’ guiding rules, Buffett has often eschewed diversification, at least when he…
Agricultural commodities have been traded between places for millennia before modern commodity exchanges were founded. However, these exchanges brought many of the services required by merchants and traders under a single roof. In the 19th century, exchanges became larger, partly the result of improved communications and transportation infrastructure. Two American commodities exchanges formed in the…
Stock exchanges are physical testaments to financial development. Their buildings are often prominent within their home cities. They evidence commercial success, perhaps even heralding more forthcoming success. They help fund growing industries and the firms within them, the purveyors of future riches. Just the same though, new industries have also helped form new stock exchanges,…
The long-term benefits of a great project often have little to do with its exact timing, especially for undertakings years away from completion anyway. These extensive works must be planned and launched without a firm understanding of how the world will look once they are completed. The Erie Canal, which connects the Great Lakes, and…
Economic meltdowns may come with warnings but they are often obvious only in hindsight. In the late 1830s, the American economy was beset by two financial crises in close succession. The first of these could have motivated the overextended, governments included, to improve their financial position but, in the aftermath of the Panic of 1837,…
Governments are usually able to borrow on terms at least as favorable as any available to individuals or companies. So long as they are not too indebted, their ability to tax subjects is something creditors are quite often happy to lend against. In the 19th century, numerous countries began to issue longer-term debts in bond…
Leveraged buyouts, the acquisition of companies where the purchase price is paid primarily by borrowing, became increasingly common in the 1980s. Very often, existing management teams are invited to participate in a leveraged buyout by the acquirer. Occasionally, it is the management team themselves who initiate the transaction and in this variation the arrangement is…
Over the last half century, regulation of banks has generally diminished as governments have shed the controls implemented during the Great Depression. In the United States, as elsewhere, banking used to be a very staid business with its workings dictated more often by regulation than by competitive dynamics. Indeed, for decades, the interest rates paid…
In the history of financial bubbles, the assets at the center of attention have varied from equity and debt securities to commodities like tulips, indigo, and gold to real estate and land. The last of these was the object of great speculation in the early history of the United States. Indeed, it was a land…
In the decades after the ‘roaring twenties’ and the crash of 1929, American financiers gained a reputation for conservatism now rarely attributed to Wall Street. Investors, though still in search of good returns, seemed to appreciate the sound and tested and grew suspicious of the new and untried. New regulations introduced in the 1930s and…
Though it may seem unusual, not all market crashes are obvious at first sight. True, when investors bet a particular investment will appreciate and come to find out they are wrong, the result is usually plainly visible in the price of that investment. However, not all investment strategies are bets that a particular security, or…
In the early 1790s, the United States was still in the midst of its first presidential administration and still establishing new governing institutions. This process was interrupted briefly by a financial panic in 1792. In a country then just a few years old, expectations for a strong response might not have been high. However, the…
