The Hero of '29

Yesterday Bernie Maddof went to jail, at 70. He may not be a free man for the rest of his life and will most probably come out of the jail in a box. Talk about a hard recession, it doesn't get harder than this. I think this man got the worst for this recession.

I was reading an article today and seems the Great Depression of '29 also had its own hero, a Swede called Ivar Keugar, seems these downturns in the stock market always bring an enterprising man down. Our man Bernie had a lot of similarities with Ivar, no not just the Ponzi methodology being employed, but also a number of psychological similarities.

Both very confident men, exuded cool and composure whenever questions were asked as to how they consistently produce market beating returns. But there are some dissimilarities also. Ivar unlike Bernie had a pool of underlying strong businesses apart from the investing holes. He was the owner at one time of the likes of Ericsson and his match business survives to this day in Sweden.

Ivar was the guy to have revolutionised a number of industries specially construction and bought sales and large scale operation concept to the European industries. In 1932 his match company produced 66% of the world output through 250 plants in 43 countries. He was doing a lot of things right but one thing he was doing wrong, which brought him down.

In the post WW I European rebuilding effort Ivar was selling bonds/equities in the US offering returns of 25% or so and lending the money so raised to the Governments of Europe. He was hailed more or less as a hero in France and the rest of the countries. The only problem was that these loans brought him back only about 6%.

Paying 25% + Getting 6% = Bad business model

Throughout the 20's US lapped up Kreugar's bonds which helped him keep paying the extraordinary returns, but when finally the depression of 29 arrived and people started withdrawing money that the whole house of cards collapsed.

Ivar Kreugar committed suicide leaving a number of people financially devastated and introducing a spate of legislature and administrative oversight on the working of financial institutions.

Sounds familiar, nothing new happens in this world, ever.....what a bore