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This Week in Trading History: Warren Buffett Doing What He Does Best

This week in trading history sees two Warren Buffett investments that made him the business tycoon we know and love today, as well as a feud between J.P. Morgan and E.H. Harriman that shook the markets...

3rd May

Margaret Thatcher became Britain’s first female prime minister. Some would argue that Lady Thatcher’s influence on economic philosophy was radical, however government spending at the time she was in power was down and the economy was growing.

The Dow Jones closed above 11,000 for the first time.

4th May

The National Cordage Company declared bankruptcy after they failed to corner the hemp market. Once one of the most traded stocks on the market, National Cordage opened the day at 39 but fell to 20 as the market dropped into panic. This was the start of what was known as the Panic of 1893 and would last for four years.

Al Capone was sentenced to an 11-year jail term and forced to pay $80,000 in fines. Although Capone was notorious for many crimes including orchestrating illegal gambling rings, bootleg networks and allegedly murder, he went to prison for tax evasion. Spending most of his time at ‘The Rock’,  Alcatraz prison, Capone never carried out his full sentence as he was diagnosed with syphilis and spent the rest of his life at Baltimore hospital.

Picasso’s painting of his mistress Dora Maar was sold to a mystery bidder for $95.2 million, becoming the second highest price ever paid for a piece of art work, behind another piece by Picasso “Boy with a Pipe (The Young Apprentice)” that sold for $104.1 million at Sotheby’s.

5th May

After National Cordage declared bankruptcy, many companies experienced depreciations in their shares. On this day General Electric shares fell from 80 to as low as 58, experiencing one of the most volatile days in history due to a surge of investors. By the end of the trading day GE shares were back up to 78. You can still trade shares in General Electric, in May 2020 stocks were priced at $6.44.

6th May

E.H. Harriman and J.P. Morgan scrapped over Northern Pacific stocks after J.P. Morgan caught wind that E.H. Harriman was trying to gain a majority share in the railway.  J.P. Morgan began buying up stock like mad, causing a market war that led to a very interesting day on the 9th of May…

Berkshire Hathaway, at the time run by Seabury Stanton, sent out a letter to their shareholders offering to buy 225,000 shares for $11.375. Warren Buffett, who owned 7% of the company, was not very happy about this announcement due to a previous verbal agreement that shares were to be sold at $11.50. Buffett's response to this was not to sell the shares, but to buy, in huge amounts. By May 1965 Buffett assumed control of Berkshire Hathaway and it remains that way to this day.

Gordon Brown gave the Bank of England independence from political control, meaning that the governor of the Bank of England at the time, Eddie George, would be allowed to decide interest rates when dealing with inflation and not be influenced by the government.

7th May

German submarines sunk the RMS Lusitania, the ship that once brought $7 million in gold to help restore the U.S financial system in 1907. This was the first inkling that the U.S wouldn’t be able to remain neutral and would at some point have to join the war. It wasn’t until two years later, on the 6th of April 1917, that U.S. officially joined. The Dow lost 4.5% on the day the Lusitania sunk.

Goldman Sachs' energy strategist, Argun Murti, predicted that the price of oil would reach up to $200 a barrel in six months. Oil peaked at just under $150 per barrel in July 2008. In May 2020, the price of Brent Crude Oil per barrel hit $25.71.

8th May

The first day that Coca-Cola was ever sold. Originally the first sale was made at Jacobs Pharmacy in Atlanta, Georgia. There’s no need to explain what a huge success Coca-Cola became throughout its years. This is also one of Warren Buffett's most famous investments in 1988, when he bought $1 billion worth of shares. It’s estimated that Buffett has made over $19.4 billion from his Coca-Cola investment alone.

Europe and other countries across the globe celebrate VE day, the day that World War Two was finally over.

Here’s another story about the Berkshire Hathaway company. In 1996 they announced new “class B” shares that would be offered at $1,110 per share. “Class A” shares were sold at around $34,000 per share. In 2010 the class B shares would split 50-1 in 2010.

9th May

Following on from the 6th of May, the feud between E.H. Harriman and J.P. Morgan over the Northern Pacific finally hit its climax. The shares, which were trading at $100 a few days prior to this day, jumped to $400 an hour into trading, $470 by noon and by 2pm shares reached an incredible $1000 per share. This extreme trading caused a ripple effect through all other markets with mass selling in other securities to raise cash. The Dow for example, fell 6%. However, after all the excitement, Northern Pacific collapsed and by the end of the day closed at $150, with E.H. Harriman gaining control.

A crooked tech company caused havoc on Wall Street. Comparator Systems, with net assets of less than $2 million, saw its shares go from 6 cents to $1.875, giving it a $1 billion market cap. Over 177 million shares of the company were traded on this day, the most in history at the time. The SEC then shut down trading to investigate. It was uncovered the company was defrauding investors and the company was delisted from the NASDAQ.

10th May

Banks in New York had to suspend withdrawals as the Panic of 1837 intensified. At the peak of the economic downfall, unemployment rose to as high as 25% and half the banks in country failed. The panic went on for seven years.