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This Week in Trading History: Fugitive Financier Robert Vesco is Jailed

This week in trading history we see the infamous financier Robert Vesco get sent to jail for crimes relating to phoney wonder drugs, former Guinness Chairman Ernest Saunders found guilty for crimes of insider trading, and historic moves for Warren Buffett and Rupert Murdoch...

24th August

The “Western Blizzard” hit the U.S. stock market. It had become known that a cashier at the Ohio Life Insurance and Trust Co. had embezzled nearly all the company’s assets, resulting in the company failing with $7m in liabilities. Traders hit the markets hard as a record 70,000 shares were traded on this day (jumping from the average 8,000-9,000). Banks had to restrict withdrawals for 59 days and stock prices fell nearly 40% by 1859.

Finally, the Dow Jones Industrial average reached its post-World War lows, closing at 63.90. Altogether this was a 46.6% decline over 21 months.

A group led by James Fourrat and Abbie Hoffman threw $1 bills on the floor of the New York Stock Exchange to protest "American capitalism and greed". The Exchange’s reaction was to encase the visitors’ gallery in bulletproof glass.

Steve Jobs stepped down as CEO of Apple, and Apple stocks rose by 3%.

A flash crash caused the Dow to decline by 1,000 points for the first time. Panic within the Chinese markets had spread throughout the globe, and at one-point companies like General Electric and Pepsi were down more than 20%.

25th August

The Dow reached a record high of 2722.42, however the imminent crash of 1987 was on the horizon…

Berkshire Hathaway bought GEICO for $70 per share or $2.3bn. As a result, GEICO shares rose 533% and Berkshire Hathaway shares rose 4,233%.

26th August

On the subject of Berkshire Hathaway, on this day shares closed above $1,000 for the first time, making Warren Buffett one of the wealthiest men in the world with a net worth of $520m. As of August 2020, Warren Buffett’s net worth was $78.5bn

Notorious financier Robert Vesco was sent to the big house to serve a 13-year sentence for “economic crimes against the states”. Vesco was found guilty of defrauding Cuba’s state-run pharmaceuticals agency during the development of TX, a plant-based wonder drug that claimed to prevent diseases such as AIDS and cancer. Vesco had also in the past been charged with making illegal contributions to Richard Nixon’s re-election campaign and for trying to swindle mutual fund investors for $224 million.

27th August

Ford Motor Company made the biggest blunder in automotive history with their creation of the Edsel. It is estimated that the Edsel caused around $350m in losses for the company or about $3,200 per car sold (which in fact was the price of the car in the first place). Ford was sent into a panic with the shares dropping from $60 to under $40. However, we all know how the story goes, they did alright in the end.

Rupert Murdoch launched Sky TV to the British public for the first time. In 2019, Sky annual revenue reached £17.7bn, £4bn more than the previous year.

Ernest Saunders, former chairman of Guinness, and his three conspirators Gerald Ronson, Sir Jack Lyons and Anthony Parnes, were convicted for their involvement in a conspiracy to drive up the price of shares of Guinness. At the time, the trial became the most expensive court action in British legal history at around £7.5m.

28th August

The American parcel company, now known as the United Parcel service (UPS), was founded on this day by James Casey. Casey started by delivering post and packages by foot or by bike, until he bought a Ford Model T to expand his radius. In August 2020, the company was worth $138.13bn.

29th August

Goodyear Tire and Rubber Company was formed with an initial capital of $100,000. In their first month of sales they made $8,246 and revenue for the first year totalled to $508,597, for a net profit of $34,621. In August 2020, Goodyear had a net worth of $2.27bn.

The Hunt Brother’s Oil Company declared bankruptcy. The Hunt brothers are most famous for their attempt at cornering the silver market in 1980, however that didn’t quite go to plan resulting in the day now referred to as “Silver Thursday”. This bankruptcy became one of the largest personal bankruptcies in U.S. history with more than $1bn being owed to creditors.

Rogue Traders: Nelson Bunker Hunt

30th August

Happy birthday to legendary investor, Warren Buffett. In 2020, he turned 90!

To celebrate Warren Buffett’s 53rd birthday he bought himself a present. Most people would buy new clothes, maybe something shiny. Warren Buffett? He buys companies. On this occasion it was Nebraska Furniture Mart, for $55m.