Regardless if you hate or admire this family, they certainly understand a thing or two about
money and if you look back at their history, it's clear that they have made some great
investments besides starting the first ever international bank.
Back in the day when most people didn’t understand much about the stock market, this
family, particularly Nathan had a clear idea on how to manipulate the market and cash out
at the right time.
In fact, his strategies were pretty similar to Warren Buffet’s one and if you give it
a closer look, you will realize that they have followed the exact same steps to create
such a fortune.
The stock market isn’t the most rational game, stock prices do not change base on the
performance of the companies but rather on peoples perception about their future earnings.
If people believe that a certain commodity will be more valuable in the future, that's
where they will bet their money on and the demand will naturally increase the price.
And vice versa.
Nathan Rothschild understood that perfectly and committed one of the most audacious moves
in the financial history and made an incredible fortune.
But to understand his strategy we have to look back into history.
After the French revolution, Europe was in chaos, other monarchies were afraid that they
might end up like Lious 16.
During this instability, Napoleon rose to power and strengthened his grip.
This instability brought uncertainty and whoever predicted the outcome of these wars correctly
have made the right bet on the stock market and ended up with a great fortune.
Because one-way governments would raise money to fight these war was through bonds(IOU).
If England would win the war, for example, the price of British bonds would increase,
and if they lose, the opposite would happen.
When Napoleon was defeated and sent to exile, people thought that's the end of Napoleonic
wars.
However, Napoleon escaped in 1815 and took over France again.
It was his final chance to take over Europe.
If he would defeat the British army, he had all the chances to fulfill his dream.
Which means the British government wouldn’t be able to pay back its debt and that would
make British bonds less valuable and prices would decrease significantly.
It was a difficult bet because everyone knew how smart Napoleon was.
At the end of the day, he is one of the greatest generals in history.
But the battle of Waterloo was going to be the decisive factor about the future of Europe
and Nathan wouldn’t let this go without taking advantage of it.
Nathan believed that Napoleon would defeat the British army.
Which means that there will be another series of Napoleonic wars and the British government
will need a huge loan to finance it.
So Nathan began buying gold aggressively so that later he would loan them to the British
government at an extremely high rate.
And they will have no choice but to accept it.
Unfortunately, things went to an absolutely different direction, Napoleon lost the war.
But Nathan made sure that he will receive the news before the government does and he
made all the arrangements for that to happen.
In fact, he received the news a full day before the government's official messenger arrived.
He understood that as soon as the government announces victory, British bonds will skyrocket
because this victory will make Britain the most powerful nation in the world and everyone
will be willing to buy its bonds.
So he started spreading rumors that Britain lost the battle.
And some people were afraid to lose their investments and rushed to the market to sell
their bonds.
Even without these rumors, no one knew how the war was going to end so you better sell
your bonds now before they lose half of their value the next day when the news of defeat
will reach the market.
While Nathan, on the other hand, began buying British bonds heavily.
And on the next day, when the government officially announced victory at the battle of Waterloo,
British bonds skyrocketed.
But Nathan didn’t sell his bonds because he knew that since British now the most powerful
nation in Europe, there will be a period of peace and stability which will further increase
the bond prices.
And after two years when prices reached their peak, Nathan cashed out and made an incredible
fortune.
One of the things he said was: buy when the cannons are firing and sell when trumpets
are blowing.
Which means when there are chaos and crisis when everyone is afraid to invest, that's
when you should jump in and invest, and when there is prosperity and everyone is investing,
you should cash out.
Warren Buffet said something similar: Be fearful when others are ready and greedy when others
are fearful.
Which means pretty much the exact same thing that Nathan said.
There are multiple other examples of great investments which we will cover in next videos,
so make sure you are subscribed and your notifications are on.
give this video a thumbs up if you have enjoyed it, thanks for watching and I will see you
in the next one.