Novel Investor

Compounding investing wisdom...

The Physicist Who Made a Fortune on Electric Utilities

by Jon

Alfred Lee Loomis wore many hats. He was an attorney, soldier, physicist, inventor, and briefly a Wall Street legend.

Upon graduating from Harvard Law School in 1912, Loomis took a job at Winthrop & Stimson practicing corporate law. He wore his attorney hat until World War I. He volunteered for the Army the moment the U.S. entered the war in 1917.

Loomis’s “inventiveness” and a written recommendation from his former boss, Henry Stimson, got him assigned to the Aberdeen Proving Grounds. He was given the role of head of the development and experimental department. Specifically, ballistics.

His first breakthrough was measuring the velocity of shells fired from a gun. His Aberdeen chronograph was a major improvement on what already existed at the time. It was reliable, portable, and could be quickly mass-produced. In other words, it was designed to be used in the war.

Loomis’s next major breakthrough wouldn’t come about until WWII. He played a key role in the development of radar, sat in on the early meetings of the Manhattan Project, invented LORAN (short for long-range navigation), and helped develop ground-controlled approach, which helped pilots land in bad weather.

But it was his time between the two wars where he made his impact on Wall Street. Continue Reading…

1929 Crash: An Industry Breakdown

by Jon

The late 1920s market bubble was one of the biggest bubbles U.S. markets ever saw. Yet, not all industries participated in it. A breakdown of how each industry performed over that period tells the tale.

The Cowles Commission started collecting market data in 1932. The data is available online (linked below), stretches from 1871 to 1937, and is broken down by industry.

A chart of the 1929 bubble and burst looks like this:

Cowles Stock Index Data 1924-1932

The data is price returns only — no dividends included.

The chart is a hot mess (done so on purpose). It’s also incomplete. For instance, the financial industry, along with investment trusts are missing from the picture. That said, it does show just how few industries were inflated at the time. Continue Reading…

Mastering the Market Cycle by Howard Marks

by

Mastering the Market Cycle book coverBuy the Book: Print | eBook

Howard Marks explains the pattern of cycles found in markets, the economy, and business. An investor who understands the different cycles — the history, the driving factors, their interconnectedness, and the role of psychology — can avoid common errors and best position their portfolio for success.

The Notes

Continue Reading…

Paul Tudor Jones: The Mental Obstacles of Investing

by Jon

Investing is a process of self-discovery. Investors rarely find their strategy on the first try. It takes a few attempts.

The reason is simple. First, new investors aren’t handed a menu of investment strategies to pick from when they start. Second, no strategy comes complete with a full list of behavioral requirements that make it a good fit. It’s trial and error, for the most part.

And even when investors find a strategy that fits them, they’re bound to be tested at times that causes them to question their decision. Paul Tudor Jones highlighted two tests every trader will face at least once in their life: Continue Reading…

The Rise and Downfall of Richard Whitney

by Jon

A syndicate of bankers gathered on October 24th to plan out how to end the panic. As acting president of the New York Stock Exchange, Richard Whitney was the face of the operation. The rest ran the six largest banks in the country.

It was like history repeating itself. J.P. Morgan famously did something similar in 1907 when he summoned the leading bankers to save the financial system from collapse. Only this time things didn’t work out as before.

The day after Black Thursday (October 24, 1929), Whitney strolled up to Post No. 2 on the exchange floor and ordered 10,000 shares of U.S. Steel. “205 for Steel” was the bid. It was over $5 above the current asking price. He did the same for several other blue-chip stocks. In a matter of minutes, he placed $20 million in bids. The market reversed course and rallied into the close. It was enough to turn the tide through the weekend.

The selling resumed on Monday. And on October 29th, forever known as Black Tuesday, the market was in a full-on panic. Continue Reading…

Learning

Return Tables

Connect