Alexander the coppersmith did me much evil:
the Lord reward him according to his works
-either 2Timothy4:14 or the Barclays guys
More on Red Kite after the jump and as a special gift, one of the best Federal Reserve Bank monographs ever.
From Winton's Longer View:
Copper-Bottomed Booms and Busts
Figure 1. Annual average real (2016) prices; Source: USGS
Copper-Sheathing Boom (1780s-1830s)
Figure 2. Source: Babylon to Birmingham, pp.462-64
Figure
3. Muntz metal sheathing on the Cutty Sark's hull. Prior to sheathing,
the Royal Navy relied on organic
anti-fouling agents such as the
unpromisingly named “Black Stuff”, “Brown Stuff” and “White Stuff”
Figure 4. A Cornish copper mine, 1830s
Figure 5. Monthly high-low prices for Lake Superior Ingot; Source: The Copper Handbook (1911)
Secretan Corners the LME (1887-89)...MUCH MORE
There have been numerous attempts to corner copper, pushing its market price far above the level dictated by its fundamentals. The first and largest such attempt (by the standards of its time) was carried out by a Pierre Secretan, France’s largest brass manufacturer, between 1887 and 1889. By way of comparison, Secretan controlled over 80% of the world copper supply and singlehandedly pushed up prices by 150% whereas Yasuo Hamanaka (a.k.a. “Mr Copper”) who famously cornered copper in 1995, only ever controlled 5%.
A sustained fall in copper prices from 1882 encouraged consumers to run down their inventories, assuming they’d be able to purchase additional stocks even more cheaply in future. Meanwhile, despite the general surplus in copper production, the LME’s standard Chile bar contract had become under-supplied. Observing these two trends and anticipating that recent innovations such as the light bulb, trolley car and telegraph would create an insatiable demand for copper, Secretan sought to corner the metal....
We looked at Red Kite in a series of posts in late 2011 regarding Barclays' mega losses in copper trading:
UPDATED--Barclays Hit With "Immense" Copper Trading Loss; 50 Sigma Move In Cancelled Aluminum Warrants (50-Sigma events don't happen)
Barclays Capital to Wall Street Journal on Copper Losses: "Nonsense"
Barclays, No Sumitomo here, Copper Traders Whupped by Red Kite (BARC.L)
Red Kite: The Folks Who Bested Barclays' Copper Traders
Red Kite also shows up in a series of posts in 2012:
"SEC OKs Plan To Devastate Copper Market, Economy" (JPM)
The World Cries Out for Industrial Metals ETF's, JPMorgan et al Hears Those Cries
Red Kite Wins Time In Fight Against JP Morgan Copper ETF
And as promised:
Boston Fed: In Which A Copper Speculator's Attempted Corner Causes A Stock Market Crash
From the Federal Reserve Bank of Boston:
Panic of 1907
Federal Reserve Bank of Boston
"Crash Crash Crash"
Boston Post-October 18, 1907
Although the headline referred to events in New York, Boston Post readers knew exactly what it meant.
Effects of the financial crisis were certain to reach beyond Wall Street.
¶ Financial.panics and bank runs were all too common during the 19th and early 20th centuries. Some were more severe than others, but most followed the same general pattern. The misfortunes of a pronminent speculator would undermine public confidence in the financial system. Panic-stricken investors would then scramble to cut their losses.
And because it wasn't uncommon for speculators to double as bank officials, worried depositors would rush to withdraw their money from any bank associated with a troubled speculator. If a beleaguered bank couldn’t meet its depositors’ demands for cash, panic would quickly spread to other banks. Remember! There was no federal deposit insurance until 1933. If a bank failed, depositors had little hope of ever seeing their money again.
¶ With far less government regulation of the financial system than there is today and with no government welfare "safety net," many Americans suffered sudden and dramatic reversals of fortune when a panic struck. Even in a relatively mild panic, fortunes evaporated and lives ended in ruin.
¶ The following pamphlet" recaps the chain of events that came to be known as The Bank Panic of 1907. By most measures, it was not- the worst panic in U.S. history. But in retrospedt, it was a watershed event that had a lasting impact on the financial system.
PART I
"In Which the Downfall of a Prominent Speculator Rocks the Financial System, and a Prominent Millionaire Saves the Day"
COPPER BREAKS HEINZE
WATERLOO COMES TO YOUNG NAPOLEON AND BANKS TOTTER
Headline, Boston Post - October 17, 1907
On October 14, 1907, the stock of United Copper Company soared past $62 a share. Two days later it closed at $15, and one ~ F. Augustus Heinze was well on his way to financial ruin.
The rise and fall of F.A. Heinze had been nothing less than spectacular. Only 18 months earlier, the.onetime owner of a Montana copper mine had ridden into New York with $25 million in cash and stocks garnered in an out-of-court legal settlement with a rival mining company. He soon attracted notice by aggressively purchasing interests iu several New York banks and engaging in speculative activities.
As is so often the case when things are going well, Heinze seemed incapable of making a bad business deal. His downfall took everyone by surprise.
The financial empire of. Augustus Heinze began to unravel ill October 1907 when he overreached himself in an effort to corner the stock of United Copper Company. (An investor who tries to "corner the market" on a commodity or a stock is attempting to gain control in order to fix the price.) In less than 24 hours, he dropped $50 million, and the financial markets went haywire. According to an article in the October 18, 1907 edition of the Boston Post:
Sensations followed other in rapid succession in the financial district today, as the result of the collapse of the projected corner in United Copper and the suspension of a prominent brokerage firm yesterday. As a result of these sensations the stock market was halting and irregular, but there was an apparent feeling that the break of the attempted corner in United Copper had cleared the atmosphere somewhat and the market rallied before the close.
(The "prominent brokerage firm" mentioned in the article was Otto Heinze & Co., which was run by the brother of F. Augustus Heinze and was heavily involved in the disastrous attempt to corner United Copper. In addition, F.A. Heinze’s Butte (Montana) Savings Bank failed on October 17, 1907.)
Predictions that the atmosphere had cleared proved for too optimistic. The worst was yet to come.
Had F. Augustus Heinze been a mere copper speculator, the financial markets might have been able to shake off the news of his collapse....MUCH MORE