Dividends and Freedom at Midnight

Freedom at Midnight is a book about how England disengaged from ruling India and in the book the authors Larry Collins and Dominque LaPierre, published by Avon Books, NY, 1975 write about the reason why England was interested in India in the first place.

If you think about Christopher Columbus, the reason why he left Spain was to find a shortcut to South East Asia to bring back spices. At the time, spices for generations had come from South East Asia to the Middle East through Egypt and finally to Venice, Italy where it was sent around Europe. The Dutch and Portuguese sent ships to South East Asia and controlled the spice the trade. In every commodity, there is a point where somebody thinks it is too expensive and desires to find alternatives.

In England, the Dutch controlled the spice trade in England and decided to increase the price of pepper by 5 shillings. Shortly afterwards, 24 merchants in the City of London gathered together to start a trading firm with an initial capital of 72,000 pounds and 125 shareholders, they thought the price increase was too high. The merchants called the company, the East India Trading Company. They went to the Queen and she gave the firm exclusive trading rights with all the countries beyond the Cape of Good Hope for 15 years. The company sent a ship to Bombay, India and it landed in India in August 24, 1600. The Captain and Emperor Jehangir, the world’s richest and powerful monarch, the fourth of the Great Moguls had a very good relationship and soon 2 ships a month were unloading mountains of spices, gum, sugar, raw silk and Muslim cotton on the docks of the Thames and sailing back with English manufacturing goods.

The little company became the greatest company in the world – the East India Company where dividends as high as 200% came to shareholders. The East India Company would eventually lead to military involvement from England and England to rule the country. As a sideline, when the England began to rule India, the East India Company needed to look to over markets and it would get into the drug business, opium with trade with China, but that is different book.

Linking to dividend paying stocks, the tales of riches of bringing back spices at less cost based on logistics is the era of the sailing ship. At some point for every commodity there is a price which makes people want to find alternatives. It typically takes a period of time, because you do not like it, does not mean your neighbor does not like it. There will be the early adapters, then eventually the general public and change will have taken place. With your investments, you need to consider what price will allow others to seek alternatives?

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

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