In 1865, a 30-year old financier named Jim Fisk made a fortune betting on the fall of the Confederacy.
It was the original "big short" - a financial scheme you have to read to believe.
Who's up for a story?
👇👇👇
It was the original "big short" - a financial scheme you have to read to believe.
Who's up for a story?
👇👇👇
1/ Jim Fisk was on his last legs.
The stockbroker had won over wealthy clients, but had failed to turn a profit in the bear market.
In fact, he had lost it all.
Ever the optimistic schemer, he soon found what he believed was the opportunity of a lifetime.
The stockbroker had won over wealthy clients, but had failed to turn a profit in the bear market.
In fact, he had lost it all.
Ever the optimistic schemer, he soon found what he believed was the opportunity of a lifetime.
2/ In 1865, the American Civil War was in its final stages.
It appeared increasingly likely that the Union would defeat the Confederacy.
While this defeat appeared certain, Fisk noticed that bonds issued by the Confederacy were trading in London at 35 cents on the dollar.
It appeared increasingly likely that the Union would defeat the Confederacy.
While this defeat appeared certain, Fisk noticed that bonds issued by the Confederacy were trading in London at 35 cents on the dollar.
3/ Realizing the bonds would be a total loss (trade down to 0) in a Confederate defeat, Fisk created a plan.
He would short* Confederate bonds in London markets.
But to make a killing, he had to be certain.
*Note: a primer on short selling is below.
He would short* Confederate bonds in London markets.
But to make a killing, he had to be certain.
*Note: a primer on short selling is below.
4/ To execute this scheme to perfection, Fisk needed a few things to line up.
He needed to know the moment the Confederacy was defeated.
He needed to be the first one with that news in the London markets.
Fortuitously, the transatlantic telegraph system was down at the time.
He needed to know the moment the Confederacy was defeated.
He needed to be the first one with that news in the London markets.
Fortuitously, the transatlantic telegraph system was down at the time.
5/ So Fisk set his plan in motion.
He placed a fast steamer (with a co-conspirator onboard) to await his word in Halifax, the North American port closest to London.
Upon receiving news of a Union breakthrough, Fisk bribed a telegraph operator to send his ship a message.
"Go!"
He placed a fast steamer (with a co-conspirator onboard) to await his word in Halifax, the North American port closest to London.
Upon receiving news of a Union breakthrough, Fisk bribed a telegraph operator to send his ship a message.
"Go!"
6/ Without any direct lines of communication from America to London, that head start proved consequential.
Fisk's co-conspirator reached London a full 5 days before the official news would arrive.
In a few days, he had managed to short ~$5M in Confederate bonds (~$80M today).
Fisk's co-conspirator reached London a full 5 days before the official news would arrive.
In a few days, he had managed to short ~$5M in Confederate bonds (~$80M today).
7/ When the news arrived a few days later, the value of the Confederate bonds predictably collapsed.
Fisk had made his fortune, pocketing somewhere in the realm of $4M (equivalent to $63M today).
For Fisk, the 30 year-old financial schemer, this was the score of a lifetime.
Fisk had made his fortune, pocketing somewhere in the realm of $4M (equivalent to $63M today).
For Fisk, the 30 year-old financial schemer, this was the score of a lifetime.
8/ Sadly, the story of Jim Fisk does not have a happy ending.
He had soon squandered his newfound wealth in a series of ill-advised financial adventures (including an attempt to corner the gold market in 1869).
In 1872, at 37, he was murdered by his business partner.
He had soon squandered his newfound wealth in a series of ill-advised financial adventures (including an attempt to corner the gold market in 1869).
In 1872, at 37, he was murdered by his business partner.
9/ The story of Jim Fisk is one of incredible financial ingenuity.
It is also a story of the risks of believing that one success is a guarantee of future successes.
I hope you enjoyed this tale as much as I did.
Stay tuned for more!
It is also a story of the risks of believing that one success is a guarantee of future successes.
I hope you enjoyed this tale as much as I did.
Stay tuned for more!
