Biblical Economics 77: The History of Stocks and Bonds


I am not a registered investment advisor with the SEC. Nothing in this video, should be taken as legally binding investment advice, in the same way that SEC licensed stockbrokers can advise their clients. I am not “selling” any stocks or OTC penny stocks as a broker in this video. The purpose of this video, is only to offer guidance to those who are interested in educating themselves, about self-directed investing and Biblically Responsible Investing (BRI).

The earliest mention of stocks would be King Solomon’s comment in Ecclesiastes 11:1-2: “Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” We know that he had invested in a gold mining company in Ophir, which some scholars have determined was on the southwest tip of Arabia. He received his returns by gold and other currency every three years (1 Kings 10:11, 22). Since ships that were involved in the import-export business were the primary vehicle of stock investment, it makes sense that he mentions ships in this passage. He would have sent his money with the trading ships down the Red Sea as they went to Ophir. Even to this day, maritime shipping plays a big role in stock investing, in oil companies for example. Because shipwrecks were common, Solomon advised spreading your investing money among eight different trading ships. This is the investing principle of diversification. Solomon lived during the Assyrian Empire; and stock investing had been well established in its capital city of Assur. The reason why Solomon invested in stocks was emergency preparedness: wars, recessions, and “disasters” can happen to anyone, even kings. Its best to have steady investment returns to supplement your normal business income for times such as these. Solomon’s returns came every three years: unlike any stock today. Perhaps a growth stock that would be carefully tracked and its profits taken every three years would come close. A high dividend stock might have a similar effect in that it would act as an additional source of income.

After this Jesus referred to stock investing in the Parable of the Talents and the Parable of the Pounds (Matt. 25:14-30; Luke 19:11-27). The second one has been referred to more often by Christian investors, apparently because it is more complete in its scope. In modern translations it has been renamed the Parable of the Ten Minas. Jesus lived during the Roman Empire, which had an international stock investing system based out of the Forum in Rome. This stock exchange had also existed in the Roman Republic, before the empire stage, around 400 B.C. The stockbrokers were called publicans—who not only acted like H&R Block tax collectors but also like Merrill Lynch financial advisors. The word publican indicates a public auctioneer. These auctioneers also brokered stocks at auctions, where bidders would raise the prices of an item by bidding, and then the highest bidder would buy the item. Shares weren’t sold this way, but this same publican also sold stock shares to people throughout the Roman Empire. The apostle Matthew was a publican (Matt. 10:3, KJV).

The stocks that Jesus referred to were most likely low-priced stocks or even penny stocks, because one of the servants says that he made ten times his master’s investing money in a short time period (Luke 19:16). The master gave his ten servants a mina, which several Bible scholars have determined is about $200. This was a small amount of money to trade in a stock. But if it was a low-priced particulae stock, as the Romans called them, then the servant would have been able to select a low-priced stock and buy many shares with it. Then when the price of the stock increased, due to an increase of company sales and trading volume, the value of all the shares would also increase, and the servant would be able to take profits for his master. The time period for buying the stock, holding it, and selling it, was probably about one month.

Bible scholars so believe that the Parable of the Ten Minas echoes a story by Josephus about Herod Archelaus, that they are almost completely agreed that the master in this parable was based on him. It says that this Herod got on his royal ship in Jerusalem and traveled across the Mediterranean Sea to Rome, to ask Caesar for the job title of king of Judea. But some Jews protested this and said that Herod had a bad attitude; and so Caesar decided to give him a smaller job title. Then Herod returned to Jerusalem on his ship. This trip, probably took about one month, if we are to use a modern cruise ship as a guideline. Since the master in Jesus’ parable takes a trip to receive the title of king in a distant country (Luke 19:12), this was probably the reference; and it would have hit home among the Jews as a recent historical event. So here we have the short-term trading period laid out for us: we can reasonably allow one month for the servant to make ten times his master’s money in Luke 19:16. That’s only possible with a low-priced fast growth stock, where owning several hundred or several thousand shares of an individual stock with fast price appreciation, would allow a person to take dramatic profits from a deposit as small as $200. In modern times, I’d say that the stocks on NASDAQ under $2 a share come close to fitting this description.

Italy continued to be the center of stock exchange activity after Biblical times, well up until the Crusades in the 13th century. These medieval times in Italy were marked by extreme luxury and extreme poverty; and it was in Assisi, Italy that St. Francis had come from. Because of the national debts brought on by the wars of the crusaders, Italy not only taxed its people to pay for its government funds, but forced the rich Italians to buy treasury bonds or war bonds to pay off their national debts. The Italian city states then paid them an annual interest rate of 5%. But whenever these municipal governments fell on hard times, they defaulted on the municipal bonds, or didn’t pay their interest in those years. This model of forcing treasury bonds on the rich was copied by other European countries. By the 1550s, there was a sense of more investing freedom; and the wealthy had grown tired of these government bonds, because they didn’t always pay out. When it was up to them, many wealthy Europeans simply avoided stocks and bonds; and preferred to focus their economic energy on their businesses, purchasing real estate, or building an emergency fund in a strongbox. On top of that, the Church discouraged the use of interest as usury based on their interpretation of Deuteronomy 23:19, WYC: “Thou shalt not lend to thy brother to usury, money, neither fruits, neither any other thing, (Thou shalt not lend money, or fruits, or any other thing, to thy brother, that is, thy kinsman, and charge him interest).” Meanwhile, widows, orphans, and monks were supported by the interest payments from bonds. So there were ethical controversies and scruples about debt and interest, an uneasiness about bonds, loans, mortgages, and the like, even to the point of making the Jews shoulder the burden of banking. This is the origin of the expression, “The Jews are good with money.”

Amsterdam, Holland (now the Netherlands,) became the city for the big new stock exchange of Europe. This happened in 1602 with the establishment of the Dutch East India Company. The centuries long negative experience with municipal bonds, eventually gave rise to a stronger demand for stocks, as the preferred form of investment among short-term traders, who were willing to risk some free money on potentially profitable companies, for a chance to better themselves. Unlike previous stock exchanges, the Amsterdam exchange allowed for stocks to be bought and sold frequently—that is, the stocks were more liquid than they were before, because there was always someone else available to buy shares after one trader sold them. The “buy low, sell high” element, of taking profits from stock gains, became a more common experience among short-term traders. The Amsterdam exchange eventually resembled the floor of the New York Stock Exchange: with traders often shouting and bidding up stock prices in a frenzy. In fact, the foundational ideas of the NYSE were likely seeded by Dutch traders who replicated the Amsterdam model. New York City was originally called New Amsterdam by these Dutch settlers in 1624. However, it wasn’t until 1792 that the NYSE on Wall Street started to become the big new exchange for stocks. As in times past, investors initially bought bonds with interest there, to relieve the national debt from the Revolutionary War.

The Amsterdam model of short-term trading in stocks was also imitated by the English. King William III was familiar with Amsterdam stock trading and decided to create a stock for the Bank of England in 1694. This was also a national debt relief stock. Stocks were traded at the Royal Exchange, but more so at places like Jonathan’s Coffee House and Garraway’s Coffee House: “Jonathan’s” and “Garraway’s” for short. It got to the point where the Bank of England, the English East India Company, and the South Sea Company (unfortunately a slave trading stock,) led the way in the London stock market. All of these stocks helped to relieve England’s national debt from wars. The South Sea Company became a tremendous growth stock in 1719. Both rich and poor were buying shares in it because the price kept going up and up. But it eventually took a nosedive in 1720, which threw England into a recession, that was called the South Sea Bubble. That growth stock bubble popped. It was a really big bubble too. Many people who had become newly accustomed to conspicuous consumption and luxury suddenly lost all of their South Sea stock money; and some even ended up in mental hospitals or committed suicide. Eerily reminiscent of some of the tales you hear about the stock market crash of 1929. All these people would have done well to use a “trailing stop,” or some type of stop order, on their stock shares to protect their profits.

Puritans were divided over the stock market, as with most other things; but there were enough Puritans around to dabble with investments in one form or another. We know that the concept of buying lots nearby villages; and selling them after their property value increased—called land speculation—was a popular practice among them. As was flipping homes and land-lording around London. Henry Philippes’ The Purchaser’s Pattern (1656) was the Puritan real estate investing manual of the seventeenth century and was reprinted many times. But when some Puritans decided to move to the New World and started to colonize New England, especially around Boston, these people—usually persecuted churches alongside soldiers and other merchants—banded themselves together as joint-stock companies and raised funds by the London stock market: the Plymouth Company, the Virginia Company, the Massachusetts Bay Company, etc. All of these stocks failed to produce profitable returns for their investors back in England. Some had speculated that they might find gold mines in America, as mentioned in the films Pocahontas and The Plymouth Adventure. It took a while, but eventually they developed businesses based on beaver furs and fish.

Sir John Barnard’s A Present for an Apprentice, appeared in 1740, which was an 80-page pamphlet on personal finance aimed at young men. He was an Anglican and the Lord Mayor of London when he wrote this. This was eventually included as an appendix to the 1747 reprint of Richard Steele’s The Religious Tradesman, which means that Puritan thinking and early Methodist tradesman, during the Great Awakening era, would have been exposed to it. Barnard advised that young men should never “engage in” any “bonds, notes, or securities” at all. That is, he advised all young men to avoid bonds and stocks of all kinds, because “it is possible” that they may not “be able to make good” any profitable gains from them. He also spoke of the “terror” and “pangs” that they will feel if they were to buy bonds or stocks on margin. He lambasts the banks for giving out loans to young men so liberally; and so causing them bankruptcy and “ruin,” as they’ve often not yet established themselves in the world. He strongly urges young men against accepting loans, and especially against buying bonds and stocks on margin; and directs them to focus on business instead of speculation and other investments. Stocks were often compared to lottery tickets and put in the betting and gambling category. There was no fundamental analysis or anything like an SEC to guide investors. Adam Smith, Daniel Defoe, and John Wesley also expressed the same negative attitude about stocks. But a more positive view about stock analysis was eventually expressed, in the first stock investing manual ever written in English: Thomas Mortimer’s Every Man His Own Broker (1761).

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