The United States stock market has been in bull-market mode for six years now, and some fear the stock market may be running out of steam. By our count, there have been 25 bear markets in the United States since 1792 and 28 bear markets in the United Kingdom since 1692. Are we about to add to that list? This raises the question, when did that ugly bear first raise its head? By our analysis, the first fateful year was 1692 when a four-year bear market began in England. If we take the price of East India Company stock from March 1692 until July 1694, and the price of Bank of England stock from August 1694 until October 1696, the market fell almost 72% for the four years between March 1692 and 1696. The first bear market was also one of the worst.  

The Nine Years War and the Four Year Bear Market

What was the cause of the world’s first bear market? Although CNBC wasn’t around in 1692 to tell us the causes, the most likely source was the setbacks the British army and the Dutch suffered at the hands of French troops in the Nine Year’s War (1688-1697), as well as the ongoing controversy over who was the true King of England. The groundwork for the Nine Year’s War had been laid a decade before. Louis XIV, the “Sun King”, emerged from the Franco-Dutch War in 1678 as the most powerful king in Europe, but Louis XIV of “L’etat c’est moi” fame, was not content and wanted to extend his gains. Louis XIV’s revocation of the Edict of Nantes in 1685 contributed to the deterioration in his military and political dominance outside of France, and when Louis XIV’s troops crossed the Rhine in September 1688, his opponents put together an alliance to stand up to the French King. Queen Mary of England, the Anglo-Dutch Stadtholder King William III, the Holy Roman Emperor Leopold I, King Charles II of Spain, Victor Amadeus II of Savoy and major and minor princes of the Holy Roman Empire formed an alliance to stop Louis XIV. Most of the fighting occurred near France’s borders, mainly in the Spanish Netherlands and the Rhineland. Although there was a fear of a French invasion of England at the beginning of the war, this never occurred, in part because of victory at the Battles of Barfleur and La Hogue between May 29 and June 4, 1692. Nevertheless, Anglo-Dutch forces were defeated at the Battle of Steenkerqe on August 3, 1692, and the Dutch and English suffered defeats at the Battle of Lagos off Portugal on June 27, 1693 (N.S.) and the Battle of Landen near Neerwinden on July 19, 1693 (N.S.). These defeats began to be reflected in the stock market. The expense of the war gradually led to financial exhaustion of the participating countries. To help the King William III fight these wars, the Bank of England was established on July 27, 1694 to provide funds to the crown. In exchange for the establishment of the Bank of England, the king received a loan that would never have to be paid back. After Queen Mary died on December 28, 1694, King William III became the sole ruler of England. When Savoy defected from the Alliance, the Allies and France were eager to negotiate a settlement. The war finally came to an end with the Treaty of Ryswick, signed on September 20, 1697 in which Louis XIV retained Alsace, gave up Lorraine and recognized William III as the sole ruler of England, Scotland and Ireland.  

From Bear to Bubble

During the war, the price of East India Company stock fell from 158 on March 30, 1692 to 38 on November 6, 1696 while Bank of England stock fell from a par of 100 in August 1694 to 60 on October 16, 1696. From there, both stocks began to rise in value as the Nine Year’s War began to wind down. Peace prevailed in Europe until 1701 when the War of the Spanish Succession was fought over who had the right to succeed Charles II as the King of Spain. The war ended with the Peace of Utretcht in 1713 which recognized Philip V as the King of Spain; however, the war further impoverished France, Great Britain, the Netherlands and other participants. In part, because of the burden of the war debts and a poorly performing economy, John Law was able to convince the French government to use his plan to convert war debts into stock in the Compagnie des Indes and inflate the economy by issuing paper money. England followed in France’s footsteps and converted government debt into shares of South Sea Stock. Out of the ashes of the world’s first bear market and the debts that were piled up from the British and French wars, the foundations were laid for the world’s first stock market bubble in the Compagnie des Indes in France and South Sea stock in England. That, alas, is another story.

Global Financial Data has stock histories for over 50,000 securities. Some of these stocks cover centuries of data; others are quite short, lasting only a few months or even a few days. One of the most interesting of these is Wilt Chamberlain’s Restaurants, Inc. for which there are only two days of data.  

Wilt the Stilt

Wilt Chamberlain was one of the greatest, some would argue the greatest, basketball players in history. He holds 71 NBA records, and he is the only person to score 100 points in a single game. He averaged more than 40 to 50 points per game in some seasons, and in one season he played every minute of every game. Chamberlain was 7-foot 1-inch and played for the University of Kansas, Harlem Globetrotters, the Philadelphia/San Francisco Warriors, Philadelphia 76ers and the Los Angeles Lakers. He dominated the NBA between 1959 and 1973 and left a legacy that few can match. After Chamberlain left the NBA, he promoted the short-lived International Volleyball Association, wrote a book, appeared in the movie Conan the Destroyer, and tried several business ventures. One of these was Wilt Chamberlain’s Restaurants, Inc. Wilt Chamberlain’s restaurant opened on December 20th, 1990 in Boca Raton, Florida. The restaurant was a sports-themed, casual-dining family restaurant. The goal of the restaurant was fine food and service for families, a sports bar for drinkers and an entertainment complex for kids of all ages. The restaurant had over fifty televisions broadcasting sports events for its patrons as well as a basketball court and hoops where customers could shoot a few shots while enjoying their drinks or waiting for a table. The restaurant had a live arcade with over 40 games, and a redemption center where customers could either cash in their tickets or purchase sports-related goods.  

The IPO that went PU

The restaurant was successful, so in 1992, Wilt Chamberlain decided to go public. The Hard Rock Café had begun its expansion in 1982 and in 1991 Planet Hollywood was founded by Sylvester Stallone, Bruce Willis, Demi Moore and Arnold Schwarzenegger. There was no reason why a sports-themed restaurant shouldn’t succeed as well, but to do so Wilt Chamberlain would need more capital. Chamberlin contracted with New York-based brokerage Meyers, Pollock, Robbins Inc. to go public. The goal was to raise $8 million through the initial public offering (IPO) in order to fund the restaurant’s expansion. The company filed an SB-2 registration in which the brokerage firm said they would offer 1.4 million shares, priced at $6 to $8. The company was had reported a profit of $222,706 for the nine months ended Sept. 30, 1992. Wilt Chamberlain signed an agreement to allow his name, likeness and persona to be used in connection with marketing the company. Although there was only one Wilt Chamberlain restaurant at the time, the company had plans to open additional restaurants across the United States and possibly worldwide. The company would trade under the symbol WILT. Unfortunately, the IPO was a disaster. Although Meyers, Pollock, Robbins, Inc. had been in business for 50 years, they had never underwritten an IPO. Their inexperience contributed to the fiasco, and they botched the placement completely. Most investment bankers will guarantee the IPO price for 30 days after the debut, but shares in Wilt Chamberlain Restaurants, Inc. stayed above the offering price for only a few minutes. Wilt Chamberlain Restaurants, Inc. went public at $7 a share on Thursday, February 11, 1993. The first trade in the stock was at $7.50, but the price fell to $6.75 a few minutes later. Over one million shares traded on its opening day, and the stock price closed at $6, $1 below the IPO price. This brought on short-sellers when it was apparent the firm could not or would not support the stock. By the next day, the stock closed at $4.625 a share. Everyone who owned stock in the company was losing money, many of whom were clients of Meyers, Pollock, Robbins, Inc.   What made the cancellation unusual was that the only reason given for pulling the IPO was the fall in the stock price. Cancellation of IPOs is rare, but does happen. An IPO in July 1992 was cancelled when the Central Garden and Pet Co. of Lafayette, CA suffered a warehouse fire on the day of their public offering. The most infamous case of a failed IPO was when the BATS electronic platform IPO’d their own stock in 2012 and computer crashes on BATS caused the stock to fall to pennies from its initial $15 IPO price. Wilt Chamberlain died in 1999. The restaurant remained popular and changed hands several times over the next few years, ultimately ending up in the hands of Joel Kron. A dispute between the landlord and Kron led to the closure of the restaurant in 2007. Though the restaurant is gone, memorabilia from the restaurant can still be found on Ebay. That and a failed IPO are all that remain of Wilt Chamberlain Restaurants, Inc.

Global Financial Data has added new graphing tools to its website to enhance our customers’ ability to study our extensive database. The new graphing tools make it easier to visualize our data. In addition, GFD has added new techniques to understand the underlying data. To access the new tools, click on the Finaeon Graphs tab at the top of the user interface. The Finaeon graphs provide a new, easy-to-use format that enables you to make numerous changes to the graph at once. Simply choose the changes in the settings you want and click on the Graph button. You can make changes to the duration, the type of graph, the periodicity, the currency, the scaling, add moving averages, show splits and dividends and adjust for inflation all at once. You can change all or your settings again, hit reset and start from scratch, or enter a new symbol to graph the data in a new file or stock. In addition to improved ease of use, new tools have been added to the Finaeon Graphs. The comparison tools have been improved to allow multiple comparison of different files on the same graph. You can make a direct comparison, indirect comparison, compare files using different scaling, or compare files on a percentage basis. You can also divide different indices, such as large-cap and small-cap indices, to see how they have performed relative to one another, or you can subtract the yield on a 10-year bond and a 3-month T-bill to create your own interest rate spread. Global Financial Data has added over two dozen new technical indicators to help you analyze individual stocks, indices and other files in the GFDatabase. Included in the new technical indicators are Bollinger Bands, Chaikin Oscillator, Williams R, Commodity Channel Index and others. The new Finaeon graphs are designed to improve ease of use and provide new tools to analyze the 200,000 files that GFD now offers its clients. Please feel free to test the new graphs on your own, or if you would like a demonstration of the new graphs, please call today to speak to one of our experts at <ahref="tel:18773282999">877-DATA-999 or 949-542-4200.</ahref="tel:18773282999">

September 18, 2014, Scotland will vote on whether to remain part of the United Kingdom or leave. If Scotland were to vote for independence, they would have to decide whether to have a separate currency from England, the Scottish Pound, and whether to have their own central bank. Would England and an independent Scotland share a currency union with England possibly playing the role of Germany and Scotland that of Greece? Or would Scotland set up its own currency?

Although it would be advantageous for Scotland to have a currency union with England, based upon the statements of political leaders in both countries, England and Scotland would have different fiscal policies. Most evidence points to Scotland having higher deficits in the future relative to England because of declining revenues from North Sea oil, an aging population and the fact that Scotland currently runs a larger deficit than England does. Scotland issued its own pound coins until it was united with England in 1707 and English coins became the medium of exchange in Scotland. Scotland issued pennies based upon the English system of 20 Shillings and 240 pence when David I (1124-1153) minted silver pennies in imitation of English coins. Scottish coins usually had a profile bust of the king while English coins had a facing bust. Gold coins were introduced by David III around 1350. Scottish coins and British pennies had equal amounts of silver until 1367 when Scotland began to debase their pennies. Under the Stuarts (1371-1714), Scotland issued coins that differed from those of England. Gold lions (20 shillings) and crowns (22 shillings), silver groats (4 shillings) testoons (4-5 shillings) and ryals (30 shillings) as well as bawbees (6 pence), placks (4 pence) and pennies. By 1707 when Scotland and England were united, 1 Pound Sterling was equal to 12 Pounds Scots because of greater debasement of coins in Scotland than in England. However, since Scottish coins were often in short supply, English, Dutch, Flemish and French coins also circulated in Scotland. The Bank of Scotland was founded on July 17, 1695, was given a monopoly over banknote issue, and soon began issuing banknotes. A failure by the Bank of Scotland to renew its monopoly, allowed the Royal Bank of Scotland, founded in 1727, to begin issuing its own banknotes. Several other banks gained right of issue in Scotland after 1746. Scottish banks can issue up to the amount of issue in 1845 without any backing (about 3 million Pounds). All other issues require backing at the Bank of England. Scottish banknotes have never been legal tender, but have always been a legal currency. As a result of bank mergers, the number of banks issuing banknotes in Scotland has declined from ten to three (Bank of Scotland, Clydesdale Bank PLC and Royal Bank of Scotland PLC). If Scotland were to create a separate currency from the British Pound Sterling, it would need to determine whether the three note-issuing banks in Scotland could continue to issue their own notes, or whether they would be replaced by notes issued by a Central Bank of Scotland. Scotland would have a year and a half between the vote on September 18 and May 2016 when Scotland would regain its independence to make this decision. If Scotland decided to have a separate currency, it could still allow for a transition period after May 2016, but unless Scotland followed a fiscal policy similar to that of England, the new Scottish Pound would inevitably depreciate relative to the British Pound Sterling just as the old Scottish Pound had depreciated before the Union of Scotland and England was formed in 1707. That would not be good for the future of Scotland.