When you visit our office you’ll see our walls aren’t adorned with art, but historic share and bond certificates. The Professional Wealth Collection was started as a novel way to make bonds and stocks tangible. They are collected around various themes. They offer us the chance to profit from history and avoid the mistakes of the past. Some highlight famous events and others people – including an Adelaide stock broker named Don Bradman.
Visit us or click through to see some of the beautiful lithography and to learn from the past.
Share Certificates as Art
Banana du Rio Grande was a Paris based company that operated a banana plantation in Nicaragua. The share certificate has an impressive full-page vignette which illustrates some of the wonderful artwork employed ultimately for anti-fraud security.
The Twelve Original Dow Jones Industrial Average Companies
In July 1884, the two-year old daily bulletin “The Customers Afternoon Letter” published by Charles Dow, Edward Jones and Charles Bergstresser, first listed an index of 11 large stocks mainly railroads. By 1896 another index was created including broader industrial companies and was named the Dow Jones Industrial Average (DJIA). The publication in 1889 became The Wall Street Journal. Indices are useful ways to track broader movements in stock prices and are the basis of popular index and ETF investing. The original 12 constituent companies of the DJIA were: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, U.S. Rubber. Most companies merged into others, for instance American Cotton Oil into Anglo-Giant Unilever. General Electric is the only surviving original listed company and still in the average. The US Leather trust was dropped from the index in 1905 and the company dissolved without a trace in 1911 – perhaps that’s why the featured cow in the stock certificate is looking so worried? The Professional Wealth Collection includes certificates from all 12 companies or their subsequent owner.
Baltimore (don’t) Trust
In its 1929 advertisement in the Atlantic (a US east coast publication like the New Yorker), the Baltimore Trust Company promised to guarantee investments in mortgage bonds. Unfortunately on 31 September 1931 it closed the doors of its 32 storey skyscraper building, formally went bankrupt in 1933 and into receivership in 1935. A “Certificate of Indebtedness” was issued to investors promising part compensation, payable in five years’ time with interest. Sadly this wasn’t the only time property mortgage investments soured. Related instruments played a big role in the 2008 GFC. History reminds us guarantees are only as strong as the guarantor.
Early Commodity Bond
In 1863 the American Confederate Congress secretly authorized the Paris-based bankers at Erlanger et Cie, which rivalled Rothschild for European royalty connections, to underwrite $15 million of Confederate bonds. Unlike ordinary bonds, proceeds could be converted, besides into British Pounds and French Francs, into a pre-specified quantity of cotton. The conversion rate was fixed at 12 cents a pound, regardless of the commodity’s market price. At the time it was about 48 cents. On top of that, the bonds paid a handsome 7 percent annual interest rate. A catch was that Confederate authorities were obligated only to deliver the bales to a point within “ten miles of a navigable river or railhead”. While some investors took advantage of this opportunistic conversion, hiring blockade runners, the majority took a punt that the Confederates would win the war and cash out later. The Confederacy used its share of the bond proceeds to purchase munitions and to make deposits on oceangoing ironclads which could have been used to break the blockade. This bond is considered the first example of a “commodity bond” and featured prominently in financial historian Niall Ferguson book The Ascent of Money and television documentary series of the same name.
Beware Co-varying Risk
Enron Corporation, named America’s Most Innovative Company for six consecutive years by Fortune magazine went bankrupt in December 2001. Enron was an energy, commodities and services company based in Houston, Texas. Subsequent investigation revealed institutionalised, systemic accounting fraud was used for over 10 years to hide losses and liabilities of the firm prior to its collapse. Twenty-nine executives and Board members were also charged with insider trading, apparently selling stock as the company’s prospects worsened. Enron was also found to be complicit in causing energy blackouts in California which it could profit from. Notable in the Enron collapse was the significant shareholding employees had in the company, including through their employer 401k retirement savings plans. Amongst many things this reminds the dangers of “co-varying risk” and the need for diversification.
A Dog of A Stock
Some shares are a dog as was this one. Farmers Deposit National Bank of Pittsburg, chartered in 1841, chose to put the bank president’s white bull terrier Prince on their share certificate. Prince reportedly lived at the bank, greeting customers and employees alike, and became a beloved symbol of their down-to-earth, loyal, and personal customer service. Sadly the bank didn’t survive the Depression. This share is highly collected for its artful illustration. Prince lives on adorning wine bottles from Nappa, California winery The Mascot.
“You only get one Alan Bond in your life"
When buying back Alan Bond’s interest in the Nine Network for $250 million, sold to him three years earlier for $1.05 billion, Kerry Packer famously said “You only get one Alan Bond in your life and I have had mine”. Of the sale price, $800 million was cash and $250 million in subordinated debt to Bond Media. When Bond went bankrupt the latter was converted into a 37% stake in Bond Media worth then about $500 million. Alan Bond spent seven years in prison after deceptively siphoning off $1.2 billion from Bell Resources to shore up failing Bond Corporation. In 1987, Bond purchased Vincent van Gogh's renowned painting, Irises, for $54 million—the highest price then ever paid for a single painting. However the purchase was funded by a substantial loan from the auctioneer, Sotheby's, which Bond failed to repay. Bond’s Australia II syndicate won the 1983 America's Cup, which had been held by the New York Yacht Club since 1851, breaking the longest winning streak in the history of sport.
All great Australian collections need something signed by Cricket legend Donald Bradman. Many don’t know that Donald Bradman was briefly an Adelaide stockbroker. He reportedly ceased that role in 1945 after the fraudulent collapse of the firm run by his mentor Harry Hodgett. This 1951 dated holding in South Australian registered Falcon Gold Mines, suggests the Don didn’t mind a little speculation and may have been infected by the gold bug. Very little is known about this company and it doesn’t seem to have been a great financial success. This certificate was discovered in an old tea chest and signature authenticated.
The Good Old Days
Given today’s low interest rates, this salacious 1989 offer to earn 16.25% from a term deposit with National Mutual insurance company is surely investment pornography! The rate for a 90 day Term Deposit peaked at 22% in 1982 and sat above 15% for nearly a decade from 1981 to 1990. It took nearly a decade for rates to rise to this level to counter the debilitating double digit inflation that abounded through the 1970s. This reminds that governments and Central Banks often have investors, including self-funded retirees, low in their priority list and to keep in mind interest rate risk.
Eureka Stockade Reboot
While not a stock certificate, mining and the rights of miners is an important part of Australia’s financial history. While embraced by the Union movement, the Eureka Stockade rebellion was very much a tax revolt by independent entrepreneurs. It was Australia’s Boston Tea Party. The Miner’s Right to mine was introduced in 1855 and replaced the more contentious Miners License. It cost a modest five shillings annually to mine gold, down from eight pounds a year during the rebellion. This certificate was issued in Bendigo to Alexandra Heers in May 1892 during one of Australia’s five mining booms as recognised by the RBA.
Melbourne 1890's Property Boom and Bust
The term “safe as houses” gets used in Australia frequently as one must go back as far the 1890s depression to find a period when property prices collapsed dramatically. Many of the beautiful buildings in Melbourne and across Australia were built during the overlapping and resonating gold mining, population, foreign investment and credit booms of the 1870-1880s. This ended miserably following a drought in capital and rainfall limiting export production in the 1890s. “Australian economic historian Noel Butlin argues that the history of Australian settlement has been one of growth financed by foreign capital, punctuated by depression caused by balance of payments crises after a collapse in property prices and exacerbated by the imprudent use of capital”. Shares in mismanaged society, the “Equitable Co-operative Society Limited”, were bought by George & George Ltd in 1888 which brought with it the building that then retailer “Georges” occupied on Melbourne’s Collin Street. The George brothers along with B J Fink carried on into land boom speculation – later to fail and like many notable figures at that time enter into secret insolvencies which protected their reputations.
Hyperinflation ravaged Germany from 1922-1923 following its World War I defeat. Inflation was caused by the devaluation of the earlier gold-backed currency following payment of war reparations first in Gold then in foreign currency bought with spiralling amounts of printed money. By November 1923 one American dollar was worth 4,210,500,000,000 German marks. Hyperinflation ended in 1924 when a new currency the Rentenmark was introduced. Shown is a one million mark note and a 5 million dollar bond issued by the National Debt Office. Only the first interest coupon was bothered to be collected on 1 September 1923.
Greece's Defaulting History
Since gaining independence in 1829, Greece defaulted on its external debt four times in 1826, 1843, 1860 and 1893 so fears in 2010s of it doing it again shouldn’t have rattled investment markets. This bond issued in 1898 promises to pay the lender 2.1% annual interest and its return of capital is jointly guaranteed by France, Great Britain and Russia. Greece without this guarantee, like now from the European Union, would have found it difficult to raise funds.
Cuba-Australia Sugar Mill
Australia is the name of a sugar growing village in Cuba about 100 km southeast of Havana. The village was the first sugar town in Cuba to stop using slave labour and served as Fidel Castro's base of operations during the 1961 Bay of Pigs invasion. Australia is also the name of a sugar mill, one of several named after continents, by founding Mora brothers. To pay off debt, the mill was floated on the Cuban Stock Exchange by later owners and bonds issued. This bond certificate is one of two hundred issued redeemable for 5,000 dollars in United States gold coin. Since 1959, no more of the 200-300 then publically owned companies trade on the old Havana Stock Exchange. Viva la revolucion! and beware Sovereign Risk.
The exact location where Harold Bell Lasseter’s 1911 reportedly discovered rich gold deposit remains a mystery – if it exists. Even Lasseter died in 1930 on an outback expedition trying to find it again, somewhere between Alice Springs and Kalgoorlie. Lasseter’s Reef is part of Australian folklore and is even the name of an Alice Springs’ casino. It is the most famous lost mine legend in Australia. The Lasseter’s Reef Gold Mining Company was registered in January 1933 to explore the Livesey Range – reportedly the first post Lasseter lost gold reef scam. Gold fever and gold mining scams are frequent. In 1997 Canadian miner Bre-X Minerals’ gold discovery in Indonesia was exposed as a fraud after its chief geologist jumped to his death from a helicopter over the Indonesian jungle.
The collapse of 158 year old Lehman Brothers in 2008 marked the start of the second painful downward leg in world share prices during the GFC. Lehman was then the 4th largest investment bank in the US and its bankruptcy remains the largest in US corporate history. Lehman Brothers was formed in 1850 by German immigrant brothers Henry, Emanuel and Mayer Lehman. They originally operated a dry goods store in Montgomery Alabama sometimes accepting cotton for payment. The brothers found they made more money trading cotton, and soon other commodities, and so grew this business activity. The business moved to New York City. Its investments in subprime mortgages caused its failure, at first covered up through creative accounting.
The Bernie Madoff of the 1820's
Gregor MacGregor was the Bernie Madoff of 1820s. He tricked British and French investors to invest their savings in fictitious South American country Poyaisian government bonds. Sadly about 250 emigrants even left the port of Glasgow by sail and were left stranded on a beach on the Mosquito Coast off now Honduras. The self-made “Cazigue of Poyais” largely escaped justice fleeing Britain for France and later escaping conviction there. MacGregor’s securities filled a demand for higher yielding, emerging market bonds popular when post Napoleonic War British government securities only offered 3% interest.
First Open Ended Mutual Fund
Massachusetts Investors' Trust is regarded as the first open ended mutual fund (unit trust) offered by now MFS Investment Management Company. The trust owned a basket of US company shares which investors could buy and sell holdings of, continuously issuing and redeeming shares as necessary. This differentiated from closed end funds set up in the late 1890s which investors could only periodically enter or exit. The fund started in 1924 and went public in 1928. Then there were 19 like open-ended funds in the US and 700 closed-end funds - many of the latter were wiped out in the stock market crash of 1929 due to excessive leverage common in closed end funds.
Melbourne Railway History
Many railway buffs collect railway company share certificates including some to decorate walls around their train sets. Throughout history railways have been big users of financial capital and the source of many investment booms and busts. The Melbourne and Suburban Railway Company opened a line from Princes Bridge railway station in Melbourne to Punt Road (Richmond) and South Yarra (then called Gardiners Creek Road). It later extended the line to Prahran in 1859 and Windsor in 1860 and connected with the St Kilda and Brighton Railway Company's line from St Kilda to Bay Street (now North Brighton) and Beach Station (now Brighton Beach). All are now part of Melbourne’s Sandringham commuter train line. The company amalgamated with the Melbourne and Hobson's Bay Railway Company in 1864 (which built Melbourne’s first railway line linking Port Melbourne to Flinders Street in 1853). Both were taken over by the Government of Victoria in 1878 and became part of Victorian Railways. This certificate dates to 1859.
A Share in Australia's Oldest Bank
Westpac is Australia’s oldest bank established in 1817 as the Bank of New South Wales. This certificate was issued in 1832 to investor Samuel Terry and is printed on vellum, which is animal skin, not paper. Terry born in Manchester UK was transported to Australia as a criminal for stealing 400 pairs of stockings. There he became a wealthy landowner, merchant and philanthropist. His extreme wealth made him by far the richest man in the colony. Terry’s estate at his death was valued at £200,000. There is some controversy about the means he used to acquire his wealth, and he became accused of extortion by his enemies. It was alleged that he brought land owners to his inn, who would become intoxicated and sign away their property in payment of debts. By 1821 he also brought 28 actions to the Supreme Court.
Failed Infrastructure Development
French entrepreneur Ferdinand de Lesseps after success developing the Suez Canal proposed building a canal through Panama to connect the Atlantic and Pacific oceans. In December 1880 the company Compagnie Universelle du Canal Interocéanique de Panama began selling stock and later lottery bonds to raise funds for the construction. Investors lost faith in Lesseps and his project after 20 years of slow construction and financial problems. Bankruptcy followed – as did the same for a second reorganized company. Later the United States Government purchased from the French Canal Company its rights and properties for $40 million and constructed the canal over the next 10 years. Established infrastructure and infrastructure developments like BrisConnections and the Sydney Cross City Tunnel are different investments.
S&P500's Top Performer
In Professor Jeremy Siegel’s Stocks for the Long Run, tobacco company Philip Morris (now Altria Group) is identified as the #1 performing stock in the S&P500 for 50 years from 1957 to 2007. Investors earned a compound annual return of 19.9%, bettering second place pharmaceutical Abbot Labs by a whopping 4% and better known Pepsi Cola (6th) and Coca Cola (8th) also returning 15% annually. Philip Morris was also the #1 stock since 1925 when comprehensive single stock returns were recorded. This result will surprise many who might have guessed instead a fast growing company like IBM might take that mantle. Philip Morris performed well because many investors either shunned the stock on ethical grounds or were worried about its growth prospects. Loyal investors who reinvested generous dividends bought the company on the cheap. The company reinvested retained profits buying other companies which helped diversify its business – including Kraft foods which once owned Vegemite. Professor Siegel points out in his book, that many high growth industries make poor investments given their extensive use of capital and uncertain success. This certificate is for a debenture or loan and depicts a maiden by a smoking lantern, not a cigarette.
Managed Investment Schemes Sordid History
Money might grow on trees when investing in agriculture. “Soft commodities” offer the promise of alternative returns to those provided by the stock and bond market. Timber is one such attractive commodity as every year the asset should literally grow in value. Also if the price that year for timber is not attractive, sale can be profitably postponed. Unfortunately often investments into these assets is through complex financial products, some involving excessive debt and many obligating payment to many third parties before an investor’s return some ten years or more later. Managed Investment Scheme operators Timbercorp and Great Southern Group, which both collapsed in 2009, were very active helping investors into timber, beef cattle, avocados, olives, almonds and sadly lemons! Investment into timber has obviously been going on for many years as this certificate dated 1948 attests. Not much is known about the Pine Plantations Proprietary Limited. However they are extensively mentioned in a 1954 Victorian government report on “Amendments of the Statue Law to deal with fraudulent practices by persons interested in the promotion and/or direction of companies and by firms”. Sadly there seems to be a recurring problem with these types of structured investments.
Miss February Goes to Wall Street
Hugh Heffner’s Playboy Enterprises made an Initial Public Offering of shares in November 1971. Its share certificates depicted 21 year old Dutch-Canadian model and February 1971 Playmate of the Month Willy Rey. The vignette of reclining Rey was first to appear bare breasted, but after objections were raised on Wall Street strands of hair were strategically depicted. This share certificate became highly collectable and reportedly many bought 1 share in the company just to obtain a certificate. In 1990 the company changed its vignette to a woman dressed in a flowing robe - in part to avoid the cost of registering multitude of single share shareholders.
Australia's Most Famous Boom and Bust
Australia’s most famous share market bubble company was nickel producer Poseidon whose shares rose in September 1989 from 60 cents to a peak of $280 in February 1970. Nickel prices peaked in November 1969 against the backdrop of strong demand from the Vietnam War and industrial action at major supplier Canadian Inco. Poseidon’s share price rocketed after it announced a major nickel discovery at Mt Windarra in Western Australia. Poseidon’s price rise also lifted the prices of other nickel and other metal miners. Like all bubbles, prices overshot fair value and later collapsed. In 1972 Poseidon shares traded at about $10.
Hyperinflation in Zimbabwe was a period of currency instability that began in the late 1990s. This was shortly after the confiscation of private farms and towards the end of Zimbabwean involvement in the Second Congo War – funded in part by printed money. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent. At one point a loaf of bread cost 10 billion dollars. The 100 trillion dollar note was the largest denomination printed, though a 200 trillion note was planned. Eventually Zimbabwe abandoned its own currency and adopted others.
The South Sea Bubble
The South Sea Company share bubble, along with the Dutch Tulip bubble, is one of the most famous periods of irrational exuberance. The company was an unusual public-private partnership involved in restructuring British national debt and also granted a trading monopoly with South America (hence the name). Trading companies were common then, the Hudson Bay Company and Dutch East India Company examples. The company took over government debt by issuing to lenders shares in the company. The government then paid interest to the company which paid dividends to shareholders. The company set up to talk up the stock and the prospects of great profit from the new world – highly unlikely as Spain controlled South America not Britain. The price of company stock rose 10 fold in 1720 later to collapse in 1721 to half its original value – including bankrupting those who bought the shares on the way up on credit on instalment. Many politicians and elite were caught up in the speculative frenzy, including Sir Isaac Newton. The Professional Wealth Collection includes a map produced by geographer Herman Moll in c. 1719-1720 illustrating the trading area of the South Sea Company – something you would find in a modern Product Disclosure Statement. This map will shortly celebrate its 300th birthday.
The World's First Inflation Linked Bond
This 1783 security issued by the State of Massachusetts Bay, predecessor colony to the United States, is considered to be the world’s first inflation linked bond. To protect the lender, this bond promises to be redeemed in whatever currency and amount that buys a basket of goods listed – specifically “the sum of one hundred and fifty five pounds … both principal and interest to be paid in then current money of said state, in a greater or less sum, according as five bushels of corn, sixty-eight pounds and four-sevenths parts of a pound of beef, ten pounds of sheep’s wool, and sixteen pounds of sole leather shall then cost”. Inflation linked bonds play an important part in retiree investor portfolios helping them guard against damaging inflation. They are a major investment backing long term annuities.
The Oldest Company?
On the banks of the River Garonne in the French city of Toulouse probably lies the oldest joint-stock company in the world. In about 1250 AD local business owners purchased an 1190 built river mill and designed a system to share profits according to share of ownership. The shares of the Société des Moulins du Bazacle were traded on the open market in Toulouse, their value fluctuating with the profitability of the Mill. The company survived until 1946 when it was nationalized by the French Government which operates a hydroelectric power station on the site –highlighting one risk with all infrastructure investment. This certificate dates to 1928.
Micky Mouse Investments
Walt Disney company share certificates are highly sought after including bought as investments for adored grandchildren often appearing framed on nursery walls. Perhaps this to encourage some to grow up to become stockbrokers or hedge fund managers. USA Today cleverly reported the paper stock certificates were heading off to Never Never Land on 16 October 2013 when, as like many companies, Disney were moving to cheaper electronic share holder registry. This certificate is an old version later replaced with a more colourful version including even more Disney characters.
War bonds were issued both to finance a country’s war effort but also to mop up money chasing scarce goods and likely to cause inflation. Professional Wealth’s WWII “Battle of the Bonds” collection includes those from Australia, Canada, the United States, Britain, Germany, Japan, China and Russia. These bonds are often artfully designed for broad citizen appeal and were marketed through popular advertising campaigns. Retail war bonds tend to have a yield which is below that offered by the market and are often made available in a wide range of denominations to make them affordable for all citizens.
Pre-Federation NSW Bond
Governments, including in Colonial Australia pre-Federation, borrow to fund revenue shortfalls and to finance large infrastructure projects. From 1850 to 1900 Australia’s colonial debt rose from 3 to 120% of GDP. Between 80 and 100% of that was raised in London. The new Federal Australian government didn’t issue any debt until 1915 when it needed to fund World War I expenditures. Lately it has been issuing debt rapidly to fund our current revenue – expense shortfall. This “Colonial Consol” certificate documents an 1886 loan to the New South Wales Colonial Government for GBP500 and explicitly says that Her Majesty Treasury (UK) is not responsible for this loan. Today this would be considered an emerging market bond.