Profiting From Disaster

The London Paper  –  22 Jan 2007

When I heard a rumour in July 2006 that two divisions of Israeli paratroopers had entered Jordon I immediately thought ‘I’m sure it was fun at the time, but Peter Andre’s going to be mad as hell when he finds out’. However, smarter people with less smutty minds realised the potential geo-political ramifications of a middle-Eastern war and immediately made a few quid by buying shares in companies that would benefit from the resultant higher oil price.

There is a long tradition in the City of people profiting from disaster and true capitalists accept that there is no time to sympathise with the victims of tragedy when there are big bucks to be made.

One of the earliest examples of serious wedge being made on the back of thousands of deaths allegedly relates to the Rothschild family. The Rothschilds apparently had their own super-fast homing pigeons that flew back to London early with the news that Napoleon had been defeated at the battle of Waterloo in 1815. It is suggested by some scallywags that the Rothschilds, on hearing the news, gave the impression that Napoleon had in fact been victorious and bought every share that they could get their grubby mitts on during the ensuing stock market weakness. Once the truth was established British shares rose rapidly in relief making them a massive profit.

More recently there have been numerous examples of smart cookies not letting emotions get in the way of the task of ‘maximizing returns’. There is the story (probably apocryphal) about the broker who came in the day after the catastrophic storm that heralded the October 1987 stock market crash. Apparently this character had seen on the 9 o’clock news the previous evening hundreds of boats washed up on land. So he invested loads of cash in the only stock-market listed UK boat repair company – thus making himself thousands.

Even 9/11 proved to be a potential source of profits. Firstly, it was noticeable that the hoped-for ‘patriotic bounce’ in stocks did not occur once the New York stock exchange re-opened which reflects the fact that patriotism doesn’t pay your bills. Secondly, smart (and shockingly cynical) people sought relative outperformance by buying shares in construction and armaments companies in the immediate aftermath of this disaster. It was even rumoured at the time that Osama Bin laden had sold shares in insurance and airline companies just before the event with a view to buying them back cheaper a few days later.

I think Maggie Thatcher best summed it up when she said ‘You can’t buck the market’. Until human nature becomes more refined the phrase ‘money talks and bullshit walks’ will prevail and that, I’m sorry to report, means that we in the City can look forward to a long and fruitful future.

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