Feb

6

This documentary is a necessity for those interested in markets.

The South Sea Bubble - The First Financial Crash

Khilav Majmudar adds:

The South Sea bubble spared no one, even Isaac Newton! Here is a detailed paper written on his interaction with the bubble, written by a mathematician with a more-than-passing interest in the history of technological and financial manias:

Newton’s financial misadventures in the South Sea Bubble

A very popular investment anecdote relates how Isaac Newton, after cashing in large early gains, staked his fortune on the success of the South Sea Company of 1720 and lost heavily in the ensuing crash. However, this tale is based on only a few items of hard evidence, some of which are consistently misquoted and misinterpreted. A superficially plausible contrarian argument has also been made that he did not lose much in that period, and John Maynard Keynes even claimed Newton successfully surmounted the South Sea Bubble. This paper presents extensive new evidence that while Newton was a successful investor before this event, the folk tale about his making large gains but then being drawn back into that mania and suffering large losses is almost certainly correct. It probably even understates the extent of his financial miscalculations.

Humbert B. offers:

UK Natl Archives: The South Sea Bubble of 1720


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