00:00Have you ever wondered what would have happened if you had invested in the Confederate stock
00:05market? It's a question I'm sure we've all asked ourselves at least once. So picture
00:11this. It's late 1860 and Abraham Lincoln has just won the presidential election. While
00:19he tells the southern states that he has no plans to take away their slaves, nobody believes
00:25him. Within a month, South Carolina threatens to secede and by February 1861 another six
00:33states are heading for the exit. War seems very clearly imminent and stocks around the
00:40US react by dropping some 20% from their autumn highs. So let's say that you're a well-off
00:46southern planter with plenty of cash to invest. You see this stock market discount and decide
00:52that it's time to buy. But what do you buy and where? Lest we forget, the 1860s were
01:00a time of disparate stock exchanges quoting local companies. So what you could buy in Boston
01:06differed quite a bit from what you could get in Charleston or New Orleans. The largest companies
01:12could see their stocks traded across states, but otherwise the pickings were mostly local.
01:17Certainly at the top of your hypothetical shopping list would be railroad stocks, which were all
01:24the craze in America for the past three decades. You'd have a plethora of local southern railroad
01:31companies to choose from, but they'd usually be small and risky. You could also pick your
01:37favourite from the big northern lines like New York or Pennsylvania, but they would very
01:43soon become difficult for you to own. Another popular purchase for investors of
01:49the era were banks. Like the stock exchanges, banks were usually local, chartered in a single
01:57state and very rarely operating outside of it. Southern banks in particular were very conservative
02:03and held as much as a quarter of their assets in gold and silver. So if you were an investor
02:10worried about the ominous storm clouds looming on the horizon, buying bank stocks was seemingly
02:16a very safe choice. A third, less popular choice for stocks in the south would be manufacturing.
02:23Anything from textile factories and iron works to paper mills, salt works and various other fledgling enterprises.
02:32Industry was never a big hit in the south, which preferred relying on the labour of enslaved black people.
02:39This was, after all, a big reason for seceding in the first place.
02:44Now, once war actually broke out in April 1861, your portfolio was effectively split in two, just like America itself.
02:54All the stocks you held in the south were politically safe, but the companies they represented were
03:01suddenly disconnected from the vast market of the north. The union blockaded all southern ports in April
03:08and formally banned all commerce with the south in August. So, unsurprisingly, your southern stocks took a big hit.
03:15As for your northern stocks, they too would trade at a discount due to the outbreak of war.
03:21But the bigger risk for you was political. While the union didn't perform blanket seizures of southern property,
03:29unlike what the south did in return, you were still at considerable risk if anyone in the north accused you
03:36of actively supporting the Confederacy. But, as long as you kept your head low, your northern stocks would actually do
03:45pretty well.
03:46By late 1861, they would have regained their losses and by 1862, you would have even turned a profit.
03:55However, even if the union government let you keep your northern shares, you would have practically no way of actually
04:02enjoying your gains.
04:04Communication was forbidden, as was the payment of dividends or the sale of shares.
04:09So, you were effectively locked out of your northern capital for the duration of the war.
04:15Now, when the war got underway and the Confederacy made some initial gains, fear in the Confederate stock market began
04:23to subside.
04:24It turned out that the south wasn't as vulnerable as the north had imagined and would, in fact, put up
04:32a very tough fight.
04:34This optimism, combined with the big surge in military contracts, pushed the stocks of many southern companies higher than they
04:43had been before the war.
04:45Railroad stocks, in particular, boomed, steadily raising their dividends from 6% in 1861 all the way to 20%
04:55and more by 1864.
04:58However, all these spectacular returns were being made in Confederate dollars, a currency that was rapidly depreciating.
05:07The Confederacy was printing money out of thin air to pay for its war effort, increasing the money supply by
05:14a factor of 10 in 4 years.
05:17Worse yet, the union blockade was becoming tighter over time, especially after the fall of New Orleans in April 1862.
05:26So, while your southern stocks were seemingly going to the moon and paying fat dividends, you were actually losing money
05:33in real terms.
05:35But, speaking of going to the moon, you'll be happy to learn about our dear friends over at Jarzy.
05:42While it's a lot easier to access the stock market today than it was in 1860, many companies stay private
05:49for years or decades, leaving the biggest gains to insiders with special access.
05:54Jarzy is looking to change that with their pre-IPO investment platform, which lets you invest in the world's biggest
06:03private companies before they hit the market.
06:06These investments are held securely in the blockchain and are fully tokenized, which makes them significantly easier to trade than
06:15regular shares.
06:16Each token is fully backed by real equity held by Jarzy, and you can invest fractionally with both traditional currency
06:25and crypto.
06:27Investing in private companies does carry risks, but luckily the world is much more stable now than it was in
06:33the 1860s.
06:34So, click the link in the description and get access to the world's most valuable private companies on Jarzy.
06:43Now, in the Confederate stock market, there was one sector that performed so well that it managed to beat the
06:50hyperinflation.
06:51Starting in 1863, Southern entrepreneurs began organizing blockade runner companies.
06:58They would purchase fast steamboats from Britain that could outrun the Union blockade,
07:04and would use them to make round trips between Confederate ports and the nearby British islands of Bermuda and the
07:11Bahamas.
07:12The blockade runners would load up on dirt-cheap cotton picked by slaves in the Confederacy,
07:18and would bring it to the British in exchange for gold, silver, weapons and medicine.
07:23These smuggling routes were so profitable that a single successful trip was often enough to pay for the whole ship.
07:31Blockade runners could earn upwards of 300% returns per year, assuming, of course, they don't get shipwrecked or captured
07:40by the Union.
07:41In reality, individual steamboats rarely made more than a few trips before being captured,
07:47but even these total losses were worth it for the stockholders.
07:52However, by the end of 1864, inflation in the collapsing Confederacy was turning even the blockade runners into a losing
08:01bet.
08:02Atlanta had fallen in September, and just a single major port remained in Confederate hands for blockade running.
08:09The Confederacy was split in three, and was rapidly being occupied by the Union from all sides.
08:17In the final months of the war, you as a Southern investor would be looking to sell your stocks for
08:23gold and silver,
08:24but you'd be unlikely to find any buyers.
08:27You'd most likely end up holding onto your stocks for dear life and hoping that the invading Union armies don't
08:35destroy their assets.
08:36What ultimately happened to your fortune depended very much on which particular companies you had invested in.
08:43If you held the stocks of banks, you were most likely out of luck.
08:48The vast majority of Confederate banks went bust, as most of their assets were in now worthless Confederate currency and
08:56bonds.
08:57To make matters worse, the US government voided all loans made in support of the Confederacy,
09:03so in the end, just a handful of banks managed to survive the war.
09:08Railroad companies had a better chance of survival, but most of their assets were ruined by the war,
09:15so shareholders had to endure years of reconstruction.
09:19Blockade runners had their entire business model disappear overnight,
09:24so the only thing left for you from these stocks were the dividends they had paid you during the war.
09:30Ironically, your best odds were in small local manufacturing businesses whose factories had remained intact.
09:40In that case, you might see those stocks return to profitability within a year of the Confederate surrender.
09:46When the stocks of surviving Southern companies began trading again in late 1865,
09:53their prices in Union dollars were only about a third less than they had been in 1860.
09:59So, at first glance, your losses weren't all that bad.
10:04But, if you account for the inflation the Union had endured during the war,
10:09your dollars would have lost about 70% of their purchasing power,
10:13so in reality, your stocks were worth barely a third of their original price.
10:19But, if you didn't pull out your money at the first opportunity,
10:23your stocks would more than double over the next decade during reconstruction.
10:27So, all things considered, you'd still make it out with a portfolio,
10:32which is a pretty good outcome for someone on the losing side of a war.
10:36Investors in the Nazi stock market, for example, wouldn't be so lucky.
10:42But, in any case, let us know what other topics you'd like us to cover,
10:46and maybe even consider supporting us on Patreon or buying our merch.
10:51Thank you very much for watching,
10:53and stay tuned for the next optimistically secessionist episode of SideQuest.
10:58Episode 1
11:00Why was the Confederate General mad at his extended family?
11:04Because they were trying to organize a reunion.
11:07Point of a million.
11:08.
