What a wonderful title for a book and an interesting book it is – Millionaire by Janet Gleeson, Simon and Schuster, NY, 1999 is the story of John Law. The story of John Law is the story of modern finance structure beginning in France in 1700’s. It was a similar story that can be found in many countries, France was running a terrible deficit and needed help, the country eventually turned to John Law to move from payment by gold and silver to paper money. In addition, Mr. Law founded a company which took over the operations of the Mississippi from the government, the lands were all the lands which are drained by the Mississippi River or most of the Midwest of the United States. England had the east coast and Spain had the west coast. Mr. Law was a excellent gambler as he could calculate the odds for success in his mind, and then follow the rule to bet big when the odds favoured him. At the time of the Mississippi Company, England had the successful East India Company which started with trade with India and China and evolved to a large profitable drug company primarily opium. The drugs gave the East India Company much of the silver production of China and a very healthy return for shareholders in London. Eventually all countries wanted the same returns and other companies would be formed by the Netherlands, England and France. Early on the promise of great wealth – minerals, trade etc. lead to ever increasing share prices on the exchanges. In France, so many people were making money from Mississippi Company shares the term millionaire was first used. In addition as the price of the shares increased, it was easier and easier to get a bank loan or buy on margin with less than 10% down. The Mississippi Company was ahead of its time – in a couple of hundred years great wealth would come from the lands, however at the share price the Mississippi was at over $10,000, it was a short term investment. The shares of the Mississippi Company went towards 0 and in the 1800’s France sold the lands to the United States and it would be known as the Louisiana Purchase.

When times were good on the stock market, Mr. Law pushed France into a paper currency country when he passed a law all bills greater than 500 francs must be paid in paper currency. Mr. Law had the country invest in infrastructure and generally pulled the country out of the recession. Unfortunately when the markets declined as the shares of the Mississippi Company were vastly overvalued, the country reverted back to silver and gold for payments. It would be another couple of hundred years before all countries adopted the paper currency that we know today.

Linking to dividend paying stocks, in Mr. Law’s day and in the very recent past bubbles have developed and will develop when great amount of people look for increasing large returns from the stock markets which is why the quotes of valuation – what price is the stock trading relevant to its earnings are heard. However the other side is how much money did people make and can I make the same return or more? If there is a valid reason for a stock to keep climbing, just be aware what comes up typically comes down. In the case of dividend paying stocks, the question besides the valuation is the income or dividend sustainable? if it is then whether the stock continues to go up or the market corrects itself does not matter as much as can the stock pay the dividend if the market goes down.

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