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The Prisoner-of-War’s Secret to Outsized Gains – DailyWealth

Even if they didn’t smoke, the prisoners should have held onto those cigarettes…

It was 1942. The British soldiers had been captured in Libya, then shipped off to an Italian transit camp as prisoners of war (“POWs”).

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Even if they didn’t smoke, the prisoners should have held onto those cigarettes…

It was 1942. The British soldiers had been captured in Libya, then shipped off to an Italian transit camp as prisoners of war (“POWs”).

When the POWs got their first weekly Red Cross food deliveries, they immediately began swapping items. Everyone wanted to trade some of their rations for someone else’s… but no one had established their true value.

For example, if a soldier didn’t smoke, he was happy to give up his cigarettes for a bit more food. And the Sikh prisoners – whose faith promotes vegetarian diets – were eager to accept anything in exchange for their tins of beef.

Before long, each soldier had a better idea of what everything in his Red Cross box was worth. But the system wasn’t perfect – which meant some folks could come out with better bargains…

It’s one of the deepest truths about markets… Uncertainty leads to disagreement, and disagreement leads to varied prices. If you know what you’re looking for, that gives you an opportunity to make outsized gains.

We’ll see how this is playing out today…

One of the prisoners from back then, R.A. Radford – who studied economics before enlisting in the British Army – described their dynamic in his 1945 paper, “The Economic Organisation of a P.O.W. Camp.”

Within a week or two, trade grew, rough scales of exchange values came into existence…

It was realized that a tin of jam was worth one-half pound of margarine plus something else; that a cigarette issue was worth several chocolate issues, and a tin of diced carrots was worth practically nothing.

By the time Radford settled into a permanent POW camp in Germany, the values were so firmly established that the prisoners posted signs with each item’s going rate. Cigarettes were the currency.

A stable, predictable market ensures that each participant gets a fair deal. But experienced investors see their biggest gains in times of chaos.

Radford gave this example…

Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes.

The priest exploited uncertainty in the POW camp. And if you’re looking for uncertainty, look no further than the world today…

Investors don’t know what’s going to happen with the war between Russia and Ukraine… They don’t know what’s going to happen with inflation… And they don’t know what the government will do about it.

In response, investors are clamoring to …….

Source: https://dailywealth.com/articles/the-prisoner-of-wars-secret-to-outsized-gains/

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