Image Credit: George Frideric Handel, attr. Balthasar Denner, ca. 1726-1728, National Portrait Gallery
By Jason Zweig | 10:14 am ET Dec. 3, 2012
This Christmas season, before we head off to any performances of the Messiah by George Frideric Handel (1685-1759), Total Return wants to note that the great composer was a successful investor.
In a wonderful article published in 2004, MIT music professor Ellen Harris documents Handel’s financial shrewdness.
By the end of his life, according to several contemporary sources, Handel was worth at least 20,000 pounds, or 2.39 million pounds in today’s money.
His musical career was lucrative, despite occasional setbacks, but Handel supplemented his income with opportunistic investments.
Like many other intellectuals living in London at the time, including Alexander Pope and Isaac Newton, Handel bought into the South Sea Co., the investment that was at the center of one of the world’s earliest and most devastating financial manias.
Unlike most of his peers, however, Handel got in early — and got out early as well. According to Harris, he bought no later than 1716, long before the price ran up, and appears to have sold by the middle of 1719, at least one year before the bubble burst.
And once Handel got out, he stayed out; he didn’t re-enter the stock market until 1728, long after the mania had faded.
Harris estimates that Handel roughly doubled his money on his South Sea bet, locking in a profit of approximately 15,000 pounds in today’s terms.
What led the great composer to bail out of the bubble just as so many investors were desperately piling in? Was he just lucky? Did he need quick cash for a temporary spending need? Could the firmly disciplined musician been uncomfortable singing the same tune as every other investor? Harris doesn’t speculate, and we will probably never know.
But Handel was more fortunate than Isaac Newton. Then, as now, considered one of the most intelligent people who ever lived, Newton dumped his South Sea stock as it rose. He doubled his money. But he was unable to sit on his hands as the South Sea kept on soaring upward, and he bought it back. It promptly crashed, and Newton lost his knickers. For the rest of his life, the great scientist couldn’t bear to hear the words “South Sea” spoken aloud.
Newton thus ended up buying high and selling low. Handel bought low and sold high, making him a good candidate for one of the earliest examples of a contrarian investor.
Handel, notes Harris, led the lifestyle of a wealthy aristocrat but (after 1719, at least) never seems to have sold securities to fund it and, for that matter, rarely seems to have spent down his cash accounts at the Bank of England — suggesting that he seldom spent more than he earned.
Later in his life, Handel shifted most of his assets into annuities paying fixed rates of 3% to 4%. His will provided amply for his relatives, his servants and even his own image, including a 600-pound sum he set aside in case the British state chose to memorialize him in Westminster Abbey.
Source: WSJ.com, Total Return blog: