Easy Safe Money

I read a lot. The sub­ject mat­ter which inter­ests me is every­thing. I’ll read the obvi­ous, busi­ness books, invest­ing, design, typog­ra­phy, biogra­phies, etc. I’ll read for plea­sure fic­tion, sci­ence fic­tion, fan­tasy, sci­ence, etc. I find that I like a book which teaches me some­thing the most.

Iron­i­cally, one of the most use­ful sub­jects, when it comes to invest­ing, is his­tory. No mat­ter what we seem to be caught off guard by today, chances are we’ve seen it before…let’s look at a few.

Bernie Mad­off etc al.

These scam artists con­ducted a “Ponzi Scheme” and bilked a lot of peo­ple out of a lot of money. The basics of the scam are to con­vince peo­ple to give you money, which gen­er­ates a great return on invest­ment, mainly funded by the money from new investors. The rea­son it is called a Ponzi scheme is due to Charles Ponzi who basi­cally made it famous in…1920!

Of course, Charles wasn’t the inven­tor of the Ponzi scheme. Every heard the expres­sion “Rob Peter to pay Paul”? It’s basi­cally stat­ing the same idea, and the expres­sion can be dated back prior to 1450!

Inter­net Meltdown

Back at the end of the mil­len­nium, the stock mar­ket was rocked as hun­dreds of inter­net com­pa­nies with few, if any, rev­enues but huge val­u­a­tions, came tum­bling back to real­ity. How could this hap­pen? Is “irra­tional exu­ber­ance” a mod­ern invention?

Well, if you were to look into what is com­monly known as “the south sea bub­ble” of the 1700’s you’ll see just one exam­ple, of many, where a com­pany promised vast riches, with no real infor­ma­tion as to what they’d actu­ally do, or how money would be made.

Quickly For­got­ten

Scams have been around for ages, but it doesn’t take us long to for­get. Any­one remem­ber Bre-X? A head­liner for years, the biggest gold deposit ever faked. The whole thing imploded back in 1997–98. Yet today, we see com­pa­nies like Sino-Forest appar­ently fol­low­ing in their footsteps.

Tulip Mania

Way back in 1593, tulips were intro­duced to the Dutch. They went crazy for them, and prices went through the roof. Until real­ity set in and the prices came back to real­ity. There is a rea­son today why I worry about peo­ple invest­ing in dia­monds, gold, and other “fads”.

The Fall of the Soviet Union

Back when I was in high school, I had pre­dicted that, before the end of my life­time, we’d see the fall of the Soviet Union and the United States. While, I admit, I was shocked at how fast the Soviet Union crashed, I was not sur­prised when it did. As for the United States, any­one who doesn’t see them in decline, is prob­a­bly fool­ing themselves.

Now, I’m not a psy­chic, but I had stud­ied the Roman Empire. I also know that no “super power” has ever been able to main­tain world dom­i­na­tion for­ever, if they had, we’d be read­ing this in some form of hiero­glyphs or some­thing. If you study the decline of the Roman Empire, I think you’ll see a lot of sim­i­lar­i­ties to the mod­ern USA.

There are many more exam­ples I could pull out, these are among the more famous ones. When I was teach­ing, I often told the stu­dents that I prob­a­bly spent more time learn­ing than they did. Knowl­edge is a good thing to have, it lets you rec­og­nize a sit­u­a­tion and avoid poten­tial pitfalls.

Les­son: Those who do not learn the lessons from his­tory are doomed to repeat them.

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