Shares from 1602

 Dutch shares 1602 - present, a little history (translated with the help of Google Translator)
(Source: The Netherlands Europe Treasury, Balance Publishing, 2001) 
 
1602 - 1720: First upswing

"There is nothing in the world that can disturb us, because God is with us. There is something great in India and can be carried out annually richly laden ships returned. "
Jan Pieterszoon Coen, Governor-General of the VOC in Batavia

With the introduction of the share V.O.C. In 1602, the world's first share, launched on the Amsterdam stock exchange and global equity trading. From 1602 to 1720 is a very lucrative investment in shares. On balance verzestienvoudigen the rates in this period. Yet investors are facing at this time with a first blood-curdling crash. We write 1672. The disaster year. Netherlands is threatened by Britain, France and the Electors of Cologne and Munster. The government is desperate, the people irrational, and the country hopelessly speechless ... investors. The stock market collapsed in a few days by 53%. But the weapons remain in the fat.

The attackers leave the Republic alone, and in particular shares VOC increase in the period 1700 - 1720 to levels never before achieved. The Republic is an economic power that has no equal in the world do not know. A half century of rising stock prices seems imminent. How scary is sometimes reality. What's going on? In France, the Sun King at his death in 1715 left a huge debt and the government is desperate. John Law, a refugee to the Netherlands to death row Scot, can help. He gets permission to set up a company, the Mississippi Company, which on a large scale gold mining in the U.S. will go. Against surrender of bonds you get shares in this company. You guessed it already is overwhelming demand for shares and the price explodes. Late seventeenth century in England is also looking for creative ways to debt relief. In the spring of 1720 appears in England, in imitation of France, found the solution: the citizenry is encouraged bonds convert into shares of a literally 'promising' company: the "South Sea Company." The "South Sea Bubble" is a fact.

The desire to speculate stores in France and England to the Republic. Investors buy shares even tens of nonexistent or barely viable enterprises, the so-called "wind companies." It is strange that history repeats itself again, for example, World Online in 2000. But that aside. Fantasy enough: Utrecht port must be Enkhuizen must be restored to its former glory and there is even a company that collects only good ideas. Only insurance ASR, formerly Insurance Group Stad Rotterdam Anno 1720 NV, reminds us of that time.

1720 -1795: First downward phase
But then. It begins in Paris on a hot summer day in 1720. No apparent reason it seems a sensible individual, against the prevailing opinion, its shares rose to dizzying heights in the Mississippi Company to sell. Setting a good example to follow, resulting in a total panic in Paris and 15 deaths. Also in London become the Pacific's interest in a free fall and decimate the level of late 1719. The reaction in the Republic to the fall of both the "Mississippi Company" as the "South Sea Company 'has been disastrous. Crack in Amsterdam at the end of summer 1720 in the bomb and the deposit rates. In subsequent years there will be no significant recovery. We ended up in the first downward phase which will last until 1795.

Eventually in 1960 the only highlight of 1720 will be surpassed. Over two centuries later, in 1951, says the Association of Securities another to warn of John Law-like practices, "John Law, one of the largest financial fantasists of all time, proved that the public always take some time to efforts behind the chariot of some hollow slogan, but (...) that, if anywhere, to effect the stock market always comes to unmasking the truth. "

1795 - 1920: Second upswing
"The manufacturer is the capital and the workers are working. If the worker claims that he does not 'work' but a man who could, among other works, then the manufacturer no longer understands. He can with his comprehension. He sees the workers as human beings but as hands. "
Friedrich Engels in 1845
With the invasion of the French in 1795 the stock initially drops to low of 1782, during the Fourth English War. But later that year put the shares in a remarkable recovery. We are half upswing that ended in 1920 will last. A gradual and sustained increase and a net number of small corrections. For example in 1803, when we hit again clashed with England and some of our colonies to cede to the aggressor. Or, as in 1848 during a political crisis in France, or at the time of the Crimean War in the Danube region (1853 to 1856). But what stands out above all in this period, the effects of the industrial revolution for the Amsterdam stock exchange. For example, no longer exclusively trading companies and banking and insurance companies on the stock exchange, but also dozens of industry shares and American and Russian railways traded.
Or continue the Nederlandsche Bank and the Dutch Trading Company (now ABN-Amro Bank) was the most traded funds in Amsterdam. The latter is a long time regarded as the new VOC

1920 - 1932: Second downward phase
In 1920 comes to an abrupt end second upward phase. Worldwide hit shares in free fall. In Amsterdam the prices fall on a broad front as much as 30%. The global economic euphoria after the First World War shattered and hundreds of companies go bankrupt in the Netherlands. The fall in stock markets move does not end by 1920 and set a tentative recovery in the stock market. But in subsequent years because the profitability of the business only piecemeal increases, remain in the 20's explosive price rises from. This applies to both Wall Street and Amsterdam Stock Exchange. It is authoritative economists, including Fisher and Keynes, suggests that the situation - after the crash of 1920 - under control.

Yet there is an American share in the period 1923 - 1929 exhibition at the general picture is able to extract and verdertigvoudigt. It symbolizes the 'new economy': Radio Corporation of America. The introduction of the radio - "the new wireless device Bringing live entertainment right Into the living room - brings investors around the world in a state of utter ecstasy. But it is 1929. Wall Street collapses and the Amsterdam stock market falls this year on balance by 20%. But the suffering has not suffered. On the contrary, in the '30s, '31 and '32 the stock falls further by 27%, 30% and 34%! On balance, investors seeing the value of their investments in the period 1920 - 1932 decreased by approximately 80%, making the Amsterdam stock exchange back to the level of 1630. The world faces an economic disaster that has no equal. To illustrate, the U.S. "blue chip" shares of the Goldman Sachs Trading Corporation and dropping from $ 222 - in 1928 to $ 1.75 in the fall of 1932. Still seeing some big companies in this period was born. So go Unilever, an amalgamation of Margarine Unie and Lever Brothers Limited. And the Rotterdam Investment Consortium (Robeco), both launched in 1929.

1932 - Present: Third upswing
"What is speculation? (...) If one wants by force a particular word choice for buying securities with the sole and exclusive purpose with it as soon as possible by selling cash profit, it would be good Dutch word "dice" them much more suitable. "
From: The Exhibition as a Mirror of Truth, 1951

From 1932 scrambles the stock gently up the valley. But as striking euphoria often ends with a crash (cf. 1672, 1720, 1920, 1929 and later 1987 and 1989), almost as unobtrusive as lawful ends misery with a gradual upward movement. Only afterwards can also be noted that 1932 marks the end of half downturn and that we are in ascending third phase (1932 - present) have fallen. From that year - 1932 - rising stock market, really only interrupted by the Second World War and the 70s, until today. Korea, Vietnam, OPEC, market crash in '87 and '89, it ultimately makes little impression on all the wildly enthusiastic investor.
Billions of dollars being purchased. And the rates continue to rise. In the first half of 2000 the U.S. technology exchange Nasdaq exploded to over 5000, the Dow Jones goes through the 11,000 and approaching our AEX 800. And according to authoritative analysts, this was just the beginning. The blessings of the 'new economy' stocks would carry on up, so the reasoning goes. And they are in mid-2000 in good company: the IMF predicts global economic growth for 2001 of less than 4.2%. Dutch pension funds in mid 2000 over 40% invested in shares have occurred, like private investors, so the future with confidence response. The reserves are more than sufficient to cover pension liabilities. In its annual report for 2000 concludes the Pensions and Insurance Board, the regulator, therefore, that 90% of the 556 pension funds, not major issues at stake. Only 1% of the funds, the PVK actually intervened in the design and financing of the Fund. Even with a crash similar to the pension file. What an estimation error. Because then in 2001 the festival suddenly mean the markets collapse worldwide in tens of percents. World Online, and since then Newconomy are symbolic of the madness that was master of investors. What remains is the sad memory of that fabulous '90s when the Dutch exchange verzesvoudigt. Again, all this despite major political and economic shocks like the Gulf War (1991), the Mexican crisis (1994) and the Asian crisis (1997).

On the contrary, greatly increasing corporate profits against a background of sustained economic growth and favorable interest rate environment, the market year after year, investors in a state of utter rapture. The valuation for companies such as measured in price / earnings ratio is undergoing a revolutionary upgrade. It is also prepared with a considerably lower dividend to continue. Shares in. Bonds and real estate from. At the same time in this period more and more pension funds to internationalization of the portfolio and performance of pension fund managers, investors, measured by an index. It is a good investor if one outperforms the index. It makes it bad if the index remains. In other words, no longer has the absolute return, but the relative return. The two main lines of the world's most famous investor, Warren Buffett, that money can never lose (line 1) and that one should never forget rule 1 (line 2) with the transition to relative results, resolutely discarded. Risk is a relative term, so the reasoning goes, and has everything to do with the percentage deviation of an index.
Many portfolio managers, including the Dutch pension funds and their regulators, meanwhile wallow comfortably in the belief that by applying advanced econometric models of investment under control. No sooner said than done. Prices of stocks included in major indexes such as FTSE, Dow Jones Stoxx and MSCI are so many years to irrational levels whipped. Moreover, investors who closely follow an index should invest in major telecom stocks such as France Telecom, Deutsche Telecom and KPN. But because of these shares only a small part freely tradable it would create artificial shortages, in particular those shares reached unimaginable levels.

From 2001 puts a strong downward trend. The bubbles are pierced. Investors look back with disbelief at a time that will go down in history as the "Internet bubble".


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