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History can teach us all so much.


BILLIONAIRE financier George Soros recently said that gold, currently at a historical high of around US$ 1,100 an ounce is the ultimate asset bubble.

Mr Soros, who famously made a fortune betting against the pound in the 1990s, is not a man whose views should be taken lightly. His credentials for being able to spot the top of the market are unrivalled.

And yet I am reminded of a story concerning another of history's great financiers, Nathan Rothschild.

In the summer of 1815, Rothschild, founder of the great banking dynasty, had an agent in Brussels to keep an eye on events unfolding in southern Belgium where Napoleon Bonaparte was manoeuvring against a British army led by the Duke of Wellington.

On June 18, at the village of Waterloo, the battle was fought, which determined the fate of Europe for the next century and assured Britain's position as a great power.

The telegram had yet to be invented and news could only travel as fast as a horse could gallop or a ship could sail. Hearing of Wellington's victory, Rothschild's man dashed for the coast, ahead of the official despatch riders.

Meanwhile in London, there had been rumours that Wellington had been defeated and the stock market was jittery. Rothschild received news of the victory at dawn on June 20. Being Rothschild, he did not do the obvious and invest. Instead, keeping this vital news to himself, he sold.

Such was his stature, the market assumed, correctly, he knew something others didn't, so everyone else sold and the price of government stock plummeted.

Rothschild continued to sell. Other investors, convinced he had exclusive news of a British defeat at the hands of Napoleon, sold likewise, driving government stocks down further.

Finally, just before the official news of Wellington's great victory arrived in London, Rothschild bought a great packet of government stock for a song, at a rock-bottom price he had done so much to create. With the news of Waterloo, the market went into a sharp recovery and prices soared.

I wonder whether George Soros is a student of history.

Peter Jackson is a freelance journalist and former Journal business editor
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Publication:The Journal (Newcastle, England)
Date:Feb 4, 2010
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