Photo: Hédi Benyounes (Unsplash)

This Week in Trading History: The First Ever Insider Trading Conviction

This week in trading history we see a meeting take place in Germany that changes the course of history. We also see Bernie Madoff sent up the river to the big house as well as the first ever conviction for insider trading...

29th June

A public works programme was released in the U.S to help the country during the Great depression. Three million jobs were launched with an average wage set at $25 per month.

The first apple iPhone went on sale. The original iPhone retailed for $600 and had 16GB of storage and a 2.0-megapixel camera. At the time of the iPhone's release Apple had a market cap of around $100bn, in 2020 Apple's market cap has risen to $1.516t. Yes, that's trillion. The latest iPhone 11pro has a 12-megapixel camera and retails for $999.

Bernie Madoff's Ponzi reign comes to an end as he sentenced to 150 years in jail. Prosecutors estimated the fraud to be worth around $64.8bn.

30th June

The U.S. Treasury stopped the issue of greenbacks. Greenbacks were the paper currency during the American Civil War, but as they weren’t backed up by gold or silver their value varied wildly until they were eventually discontinued.

The first all-fiberglass-bodied sports car was released. The Corvette is still considered one of the best car designs produced by the American car industry.

The U.S. Federal Government finally shut down the Reconstruction Finance Corporation, one of the last relics of the Great Depression. The RFC was created by President Hoover and was an attempt to prop up the nation's struggling banks and businesses by handing out large amounts of credit. However, after rumours of impropriety began to circulate, RFC’s corruption was revealed, and they were liquidated.

1st July

Coca-Cola adopted their iconic contoured bottle shape. To avoid blending into a mass of straight-sided bottles and ‘copycat’ brands, the Root Glass Company of Terre Haute Indiana designed the contour bottle shape that we recognise today.

Germany reported that their debts total 200bn Deutche Marks. Not only were they in a lot of debt they were also experiencing food riots all over the country.

Benjamin Graham, or the “Dean of Wall Street”, created his investment firm Graham Corporation. Benjamin Graham is still considered one of the greatest Wall Street legends of all time - Warren Buffett continues to credit his invaluable work.

Investment banker, Geoffrey Collier, received the first conviction for insider trading since it became illegal. He admitted to insider trading in the shares of Cadbury Schweppes PLC and the AE PLC engineering group. He was sentenced to a year in prison and a fine of £25,000.

2nd July

President Garfield was assassinated at Baltimore and Potomac Railroad Station. Twenty minutes later when the news hit Wall Street, shares abruptly fell. Stocks closed the day down 4.5%.

The Japanese finance minister Hikaru Matsunga released a rescue package for the Japanese banking sector as many were facing bankruptcy due to a large amount of bad loans that were on the brink of collapse. The Japanese banks had around $500bn in bad debts.

GlaxoSmithKline, a British pharmaceutical company, was set to pay $3bn in settlement fees to cover their criminal fines. The company had pleaded guilt to promoting unapproved uses of two anti-depressant drugs and failing to report safety information to the FDA about other drugs. The company is still a huge name in the pharmaceutical industry, in 2019 they made a revenue of £33.75bn.

3rd July

The world's first stock index was created. The Dow Jones published average closing prices of active representative stocks for the first time. Eleven different stocks, mainly railroads, made up the Dow at the time. In 2020 the Dow included 30 different stocks.

Jim Morrison was found dead in a bathtub at his Paris apartment. He had suffered heart failure brought on by excessive drinking.

Rolls Royce was sold to Volkswagen for £479m. Although there were complications along the way, with BMW wanting in on the action. In the end they came to the agreement that Volkswagen owned and built Bentleys with Volkswagen engines at the old Rolls Royce factory, and BMW owned and produced Rolls Royce Cars with BMW engines.

4th July

The United States Declaration of Independence was signed by 56 delegates.

The rationing of meats through rationing books in Britain came to an end after 14 years following the start of World War II.

5th July

The big players in German industry were all called to a meeting with the German Kaiser where they were asked a question, “Are you ready for war?”. All industries but the banks answered yes - they asked for two weeks to prepare. The banks began rapidly selling stocks to raise cash and over the next week shares fell, including 18% of Union Pacific and 8% of United States Steel. Germany declared war on Russia on the 1st of August.