The world is buzzing with Abenomics-driven stock gains, but markets have always been a daily battle of wits over how to read the mood and profit. Natural disasters and wars are among the strongest forces that move prices.
Today marks 77 years since the February 26 Incident of 1936. I have written about it several times on this blog. On December 6 last year I noted that Yamazaki Tanji (1893–1983), founder of Yamatane Securities (now SMBC Friend Securities), passed through Takebashi on the day of the incident; on January 10 I wrote about the crash that followed. This is the sequel.
The Kajima Corporation website tells how Yamazaki made a huge profit from the incident (http://www.kajima.co.jp/gallery/kiseki/kiseki18/kobore18.html).
"(Yamazaki) learned of the incident shortly after 7 a.m. on February 26 at his newly built home in Kōjimachi 3-chōme. Word came that a long-distance call from Niigata was connected. Long-distance calls then required advance booking; this one happened to have been reserved the day before for another matter. Trading on the Niigata exchange opened ten minutes earlier than Tokyo's. With details still unknown, he issued market sell orders one after another. ... He reached the office later than usual, but trading had not yet opened. Tokyo's exchange was eventually suspended, and exchanges nationwide halted together. By then Yamazaki's enormous sell orders in Niigata had already been filled. The market reopened thirteen days after the incident, on March 10. Amid a sea of sellers, Yamazaki bought heavily ..."
Seeing a crash as inevitable, he sold heavily in Niigata; including prior short positions, after trading resumed he bought back at lows when stocks plunged in shock, bought more cheaply, then sold out as prices recovered—making a fortune.
At the time Yamazaki was in dire straits. The previous year, at 42, he had completed a five-story headquarters with granite and marble and Tokyo's second automatic elevator, while building a cypress mansion in upscale Kōjimachi—living beyond his means. Known as the "General of Selling," he shorted stocks he expected to fall; but when Italy invaded Ethiopia in October before February 26, prices surged further and kept rising into the new year—"war is bullish," the market was one-sided. Yamazaki, holding huge short positions, faced margin calls as funds ran out and finally resolved to cover his shorts at a loss—just as February 26 struck and revived his fortunes. The profit reportedly reached five million yen—perhaps over five billion yen today. The timing was so perfect that he was briefly suspected of colluding with the rebels and detained. (Photo from his autobiography Soroban.)
Yamazaki, who rose from apprentice at a rice broker, is famous as a legendary market operator; other anecdotes abound—perhaps for another time.