Monday, March 16, 2009

South Sea Bubble Survivor Says Dismantle RBS Along With Lloyds

From Bloomberg:
Henry Hoare made a 1.6 million- pound ($2.2 million) profit [*] from the South Sea Bubble, a speculative bust that bankrupted thousands of English families in the 1720s.

His great-, great-, great-, great-, great-, great-grand- nephew boosted the deposits of his family’s bank by 20 percent in the past year to come through one of the worst financial crises since then, which is why people might want to listen to him.

“Keep it simple, stupid,”[**] Alexander Hoare said in an interview in his drawing room on the first floor of C. Hoare & Co.’s 180-year-old office on London’s Fleet Street. “Get the depositors in, lend to people who can afford to borrow.”

That’s a lesson Royal Bank of Scotland Group Plc should have learned, said Hoare, 46, whose family-owned firm started in 1672 and now has about 10,000 customers....MORE
HT: FT Alphaville who headlined their linkpost "Esoteric headline of the day"

*From deep in the link-vault comes a tiny treasure, an analysis of Hoare's trading during the South Sea bubble (15 page PDF):

Riding the South Sea Bubble

This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare’s Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restrictions on short sales or agency problems....MORE
**As pointed out in Friday's "Markets: Where Do We Go From Here?", we are firm believers in the low I.Q. approach to business.