Monday, March 27, 2006

Isaac Newton and Stock Markets:

Isaac Newton was a great mathematician(Calculus) and a great theoretical Physicist(Three Laws of Motion, & Three laws of gravitation). He was also a stock market investor. His most well known investment was that of the stock in South Sea company which was quoting at £128 in January 1920. He made 7000 pounds through appreciation in the shares of South Sea Company in less than 4 months when he thought he had made enough and sold out. However the prices of South Sea company kept on appreciating astronomically and Newton regretted his decision to cash out. So he ploughed back £22,000 in the shares of the company at near peak rates. At its peak the South Sea company was quoting close to £1000 in August 1720. Then the marekt discovered that a great insider trading scam has happened in the company and all promoters have sold out. The stock crashed to £150, and Newton's holding came down to £2000 losing him about £20000. Newton never invested in stocks after that.

"I can calculate the movement of the stars, but not the madness of men." - Sir Isaac Newton

Stock markets humbles even the greatest.

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