On this day in economic and financial history ...
On Dec. 16, 1773, about a hundred men marched out of the Old South Meeting House in Boston in a rage. They headed straight toward Boston Harbor, toward the wharf where three tea-laden ships were docked. The ships had been awaiting the payment of a tax on their cargo to depart again for England, but the American colonists had no intention of sending them off with the money in hand.
Over the next three hours, the protestors -- some disguised as Mohawk warriors -- dumped 342 chests of tea overboard. Today the event is celebrated as the "Boston Tea Party," but for much of America's early history, the event received little attention in either politics or from history writers.
Here are a few interesting tidbits of information you may not know about the Boston Tea Party, as compiled by history.com:
- The protests weren't about higher taxes, but corporate tax breaks. The cost of tea sold in America by the Crown-favored East India Company had been significantly reduced by the Tea Act, which slashed the Company's tax rates. Colonists, however, bristled at the thought of paying three pence per pound of tea, a duty also included in the Tea Act, since they'd had no say in the matter.
- Many Tea Party promoters were tea smugglers or otherwise legitimate tea merchants, whose livelihoods were undercut by the lower-cost East India Company tea. The company was in financial danger at the time, and the Tea Act's tax reductions were a tacit admission by the British that the company was, in effect, too big to fail.
- The East India Company lost an estimated 92,000 pounds of tea in the protest, worth about $1 million in contemporary dollars.
The (near) downfall of IBM
IBM (NYSE:IBM) may have helped get the PC era started, but it couldn't hang on for the ride. On Dec. 16, 1992, IBM's stock hit its lowest point since 1981 as Wall Street reacted to news of the first layoffs in the company's history. Some 25,000 employees were to lose their jobs, and between Dec. 15 and Dec 16, the floundering computer pioneer lost $6.1 billion in market cap. Half of IBM's share price had been eliminated in just six months.
Opinion columns written on the layoffs pointed out that IBM's strategy of being "a major player in every facet of the information industry" was clearly failing, particularly in light of the possibility that the company might report "the largest annual loss in the history of corporate America." IBM would close out 1992 with an annual net loss of $6.9 billion. The next year was worse, and IBM lost a staggering $8.1 billion in 1993.
Despite Big Blue's troubles, the day of the job cuts turned out to be a good time to invest. In the two decades following the layoff announcement, IBM's stock has grown by 1,750%, easily trouncing the Dow Jones Industrial Average (DJINDICES:^DJI), which has grown by only 303% over the same time frame.
In the midst of Hurricane Sandy, a rumor circulated on the Internet that claimed that the New York Stock Exchange (NYSE:NYX.DL) had flooded. As is the case with many Internet-fueled rumors, it was only a hoax -- but the Stock Exchange has been destroyed before.
On the night of Dec. 16, 1835, a fire began in Manhattan, at a large warehouse. It was the second fire in the city in two days, and at this point the bitter cold had frozen over the precious water needed to put out the blaze. The fire raged until the next morning, when a last-ditch explosion of buildings created enough of a firewall to contain the destruction to a 50-acre range. Nearly 700 buildings burned to the ground, including the recently built Merchant's Exchange and the original location of the New York Stock Exchange at 40 Wall Street.
All but three of New York City's 26 fire insurance companies went bankrupt, as many had their headquarters destroyed in the fire. Damages were estimated at $20 million at the time, which would be about $430 million today. One of the immediate results of the fire was a widespread switch to fire-resistant stone buildings, which influenced the ornate style of Wall Street's financial sector for many years thereafter. The New York Stock Exchange stayed close to its original home in downtown Manhattan but didn't move into its present location at 18 Broad Street until 1903.
The city's remaining insurance companies mostly relocated to Hartford, Conn., which soon became known as "The Insurance Capital of the World." Hartford was the city where Dow component Travelers (NYSE:TRV) was founded. It's also the founding location of another Dow component, United Technologies (NYSE:RTX), which began life as a Boeing (NYSE:BA)-led aviation trust of sorts in 1929, and which still makes its home in Hartford. The Hartford Financial Services Group (NYSE:HIG) is one of very few pre-inferno insurance companies in that city, which has been its headquarters since 1810.