Investors in London’s first stock market boom

"This paper examines the customer base of Charles Blunt, a financial broker operating during London’s first stock market boom. The boom which extended between 1691 and late 1693 was stimulated by the restrictions that the Nine Years’ War (1689-1697) placed on overseas trade. As idle trading capital was diverted to domestic use a great number of joint-stock companies emerged offering investment opportunities in projects as diverse as the manufacture of paper and textiles, and the search for sunken treasure. These novel financial opportunities attracted the interest of a wide range of investors, many of whom had little previous experience of investment in debt and equity instruments. The boom was typically short-lived and few of the companies established during the early 1690s survived into the eighteenth century. However, the stock market boom did prove to be a valuable learning experience for early English investors. Moreover, it paved the way for the introduction of England’s first permanent funded long-term national debt. Blunt’s ledgers are an invaluable source of information about the progress of the stock market boom and provide a unique opportunity to examine the nature and aims of the first investors to place their capital, and their trust, in London’s financial markets. The ledgers cover the period between January 1692 and August 1695. They contain just under 1,500 trades in the shares and derivatives of 23 companies, including most prominently the Linen, Glass and White Paper Companies. It is particularly notable that derivatives (defined as options, time bargains and loans on stock) were traded almost as regularly as the underlying shares confirming that the stock market of the early 1690s rapidly acquired a high degree of sophistication. The ledgers also document the rise and fall of the stock market and demonstrate how quickly the instruments that formed the national debt came to dominate the financial market. Indeed, in mid-1694 as government annuities and lotteries became popular and the Bank of England was founded, Blunt’s business decreased and became dominated by trade in Bank stock and Million Adventure tickets. Blunt kept annual accounts for each of his 155 clients in which he recorded the client’s name, and often his or her address and occupation, details of the type of each transaction, the price at which it was conducted, the number of shares, the name of the counterparty and the amount of brokerage owing. Thus, the ledgers offer a clear picture of the type of individual who was active in the financial markets just prior to the establishment of the national debt and the foundation of the Bank of England. They also reveal much about the investment strategies employed by each client, their appetite for risk, and the nature of their relationship with Blunt. It is most notable that the ledgers document an accumulation of experience and the spread of excitement about the new financial opportunities on offer at this time. Examined in conjunction with surviving records of other joint-stock companies of the period the ledgers show that although very few of Blunt’s clients were active investors in equities prior to the stock-market boom, nearly 50 per cent went on to invest in Bank of England stock. It is also interesting to note that John Houghton was a customer of Blunt's. Thus, in spite of his claim in the Collection for Improvement that he was 'not much concerned' in stocks, it is clear that Houghton’s analysis of the market published in June and July 1694 was indeed born of first-hand experience. Finally, the ledgers can enhance our understanding of subsequent developments in the financial markets. Most notably, Blunt's customers included a number of individuals who went on to become prominent stock-jobbers, including his cousin John Blunt, one of the chief architects of the South Sea Bubble. Even in the 1690s John Blunt was a very active speculator. He was also involved in the manipulation of stock prices in at least one company, demonstrating that his nefarious career started early!"