Dividends and A look at Daniel Defoe’s disastrous investments

During the COVID shutdown you might have gone to reading and maybe try to escape with wonderful books such as Robinson Crusoe, it was written by Daniel Defoe and it was a best seller during his lifetime. This means he would have savings and could make investments or pay off his debts. In an article by Larry MacDonald and Daniel Defoe is a lesson in what not to do when you invest your money.

When Mr. Defoe was in his 20’s he was an easy sell for get rich schemes. He was fortunate to have married into some money with his wife’s family but think about commodity prices. He tried to get rich in commodities – cows, bricks, tobacco, hosiery, honey, land, and wine are some things he invested in with little knowledge and very poor results.

In 1866, Sir William Phips went to the Caribbean and came back with gold, silver and jewels from a sunken ship. The reward to his shareholders a 10,000 % dividend. A few years after Columbus discovered Mexico for Spain, Spain’s conquistador’s began to bring enough gold and silver from Mexico and Peru to make Spain the richest country in Europe. Not every ship that left Mexico ladden with gold and silver arrived in Spain, some of them sank. The ships sank from natural causes (storms and reefs) as well as other countries allowed for the capture of Spanish ships as long as the government would take 60% of the gold and silver for itself. The ships had to be armed and the legend of the pirates came into being. When anyone gives shareholders a 10,000% dividend there will be many copies.

In England, 11 outs of the 61 patents issued in England between 1691 and 1693 were for diving bells. The idea being, put the diving bell into the ocean to see if they could find a sunken treasure. If you ever dived in the ocean, after a few feet from the top, the ocean is dark. It is very hard to see and it was not usual for diving bell companies to go bankrupt. Mr. Defoe invested in one of the companies and liked it so much he became treasurer. His company went bankrupt and was sued by the founder.

Another venture was a civet farm. Civets are cats and their anal glands contain an oil substance which can be turned into perfume. The farm was eventually seized for non payment of debts and accountants valued the assets at half the original sale.

Linking to dividend paying stocks, there are a great number of examples of people who had some money and want to be get rich quick to live the status of others, keeping up with the Jones type idea. A matter of fact, depending on where you live, it likely affects your lifestyle and investing style. It is hard to save money to invest if you need to keep up a lifestyle of your neighbors and peers. If you are comfortable, the method to achieve long term wealth is being patience, invest in stocks which are profitable, pay dividends and go up in value overtime. It is very tempting to have some money in the latest trends, but trends change and what goes up comes down if there are no profits, it is just a matter of when.

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

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