A while back the author read a couple of books about the end of the slave trade and who profited from it? given last month was Black History Month, this is a timely issue.  The trade triangle went from from England to Africa to US and back again. The ships left England empty, picked up people and sold them in the US returning to England with money from the auctions and raw cotton. The cotton was manufactured in the English textile mills and sold around the world. Invariably there were many people involved in the slave trade from ship builders, to the owners of mills that needed the cotton. There was also a significant role for investors. Everyone likes to have a high return on their investment and as long as it is legal, so much the better. In the UK, the investors who bought into the syndications tended to have highest savings or those connected to the titled positions – duke, earl, etc. It was a rare family in the UK Parliament without an interest.  Although there were risks of ship losses, people losses, if and many did return from a successful voyage, the rewards were 50% plus on the investment. When you receive high returns, the reason not to do it can be easily dismissed. Perhaps the people on the ships are treated better and so forth. Pictures of what reality on the ships was really like help to change attitudes.

Eventually, the government of the day decided to change its policies because governments have other than business interests – one reason was war with France. If the UK was out of the slave trade, English goods could be sold as slave trade free, France, was also deep into the slave trade with Latin America, would have higher unemployment and the war would be stopped. In trying to convince the investors, the eventual method was the tried and true one – buy them out or buy the limited partnerships and allow no more. The price of the buy out cost the government 40% of the existing budget and sent the UK into debt for a number of years leading to much lower prices of English bonds. It was at this time, Nathan Rothschild bought English bonds at a heavy discount. The many English lords who received money put their money into something beside the bonds. Eventually, the English economy recovered and as the bond or gilt went back to par, Nathan was worth considerably more money.

Linking to dividend paying stocks, in every industry, cycles come and go and as an investor you need to pay attention when opportunities happen. In the above example, government actions to end the slave trade while worthwhile to the general public, the actions had an devastating affect on the price of bonds for the same public. Government’s have an impact on the economy, their interests are not always aligned with business. Prices will go up and down, however getting paid a dividend or interest always softens the blow, and allows for the transition to more profitable days.

There are always more questions than answers, till next time – to raising questions.