Sam Bankman-Fried, Icarus and the Dark Lady of Osaka

"There is nothing new under the sun."

The speculative “everything bubble” of 2022 is unraveling fast and hard.

Bitcoin and other cryptos...

Meme stocks like Gamestop and AMC…

Disruptive technology stocks like Zoom and Tesla have all collapsed.

And they still have plenty more to fall.

To students of the history of speculation, the collapse is a familiar story arc.

And its eventual outcome is as predictable as it is inevitable.

Every financial boom and bust also share another common characteristic.

And that is a colorful cast of characters destined to go from hero to zero with remarkable speed.

Today's Gallery of Rogues included Michael Saylor of Microstrategy, Cathie Wood of ARK invest, Sam Bankman-Fried of FTX- and Elon Musk and Tesla.

Today, I want to recall the story of the one time the public face of the Japanese stock market boom of the 1980s

But first, a quick reprise of the Japanese stock market boom of the 1980s.

Post-War Japan: Ripe for Rebound and Revenge

After its defeat in World War II in 1945,  the Japanese economy was on its knees.

Japan had been humiliated, its global military power crushed by the inferior gaijin Americans.

The American occupation led by General Douglas McArthur had sapped all outlets for Japan's pride and nationalism.

Fast forward 40 years and Japan boasted the world's largest banks.

Japanese automobile companies were crushing their American rivals in Detroit.

Japanese investors gobbled up US icons like Rockefeller Plaza in New York City.

A generation of US business school faculty struggled to replicate the secrets of Japanese management.

Conventional wisdom dictated Japan's economy, and corporations would crush the West.

Soon Japan would displace the United States as the number one economy in the world.

Futurist George Friedman even predicted the outbreak of a war between Japan and the US by 2020.

Ironically, Friedman's prediction of war coincided with the peak of the Nikkei stock index in December 1989.

The peak also marked the beginning of the end for the Japanese stock market boom’s unlikely hero.

The Dark Lady of Osaka

The most prominent private speculator in the Japanese stock market bubble of the 1980s was a restaurant owner named Nui Onoue.

Dubbed “The Dark Lady of Osaka” by the Japanese press, Onoue embodied the absurd excesses of the Japanese stock market boom.

Born in 1930 to a poor family, Nui Onoue worked as a waitress in Osaka, Japan's second city.

She later became a mistress of a construction company executive.

He helped her to purchase Egawa, an elegant restaurant on an otherwise shabby street in Osaka.

For 20 years, the restaurant offered Japanese delicacies amid a decor featuring antique prints and hand-carved cedarwood.

That all changed with the arrival of the Japanese stock market boom.

As a self-proclaimed Buddhist mystic, Nui Onoue soon earned a reputation for accurately predicting the stock market.

On weekends, Onoue held all-night séance in her restaurant.

There she summoned the spirits to assist her in her predictions.

She did so beneath the watchful glare of a ceramic toad -a symbol meant to attract wealth.

She would then dispense buy and sell orders for blue-chip stocks to eager brokers.

Boosted by the tailwind of a bull market, her predictions appeared uncanny.

Egawa soon became a mecca for scores of brokers and bankers from Japan's most prestigious banks.

Yamaichi Securities even kept an employee as a permanent resident at the restaurant.

The attention soon went to Nui Onoue’s head.

She became a name-dropper. She ordered senior bank executives around like servants. She telephoned junior staff in the middle of the night.

Then one spring day in 1986, Onoue walked into the Osaka branch office of the Industrial Bank of Japan.

There she purchased over one billion yen -around $7 billion- worth of the bank's discount bonds.

No one knew where she had come up with the money- though she was suspected of laundering yakuza money.

She then borrowed over 3 trillion yen or $23 billion against the bonds.

Nui Onoue soon became the largest individual shareholder in many Japanese blue-chip companies.

With a net worth of about $7 billion, by 1989, she briefly became one of the wealthiest people in the world.

Alas, with the market collapse, Onoue’s stock purchases turned sour.

She went bankrupt. The bankruptcy proceedings set her total debt at 430 billion yen.

It was the highest debt ever accumulated by an individual in Japan.

Bank managers working at Tōyō Shinyo Kinko bank had also issued fake certificates of deposit of over $2.5 billion in her name.

Other banks would lend her money based on this to trade stocks and bonds.

The New York Times in 1991 called it “the largest ever [loan scheme] in Japan, and perhaps the world.”

Nui Onoue was arrested, tried, and convicted of financial fraud in 1991. Her scam was big enough to put two banks out of business. 

She was sentenced to 12 years in prison.

The Dark Lady of Osaka spent the last years of her life in obscurity.

When she died in 2014, Japan's once-largest investor merited no mention in the Japanese media.

Onoue’s fate mirrors that of many of the leading figures of speculative manias-

John Law of the South Sea Bubble...

George Hudson of the 1840s British Railway Mania....

George Merrick of the 1920s Florida Land Boom...

and Irving Fisher of the 1929 stock market crash.

The details of each speculative mania may differ. But the overarching plot is as old as Greek mythology.

Icarus flies too close to the sun, challenging the authority of the Gods.

His wax wings melt. He plunges into the sea, punished by the Gods for his hubris.

Like many others before him, it's a fate that awaits Sam Bankman-Fried.

And the lesson is as old as The Book of Ecclesiastes:

“There is nothing new under the sun.”