Devil take the hindmost a history of financial speculation
An impressive piece of scholarship, covering the history of financial bubbles through the ages. The author covers the speculative periods ranging from the Tulip. A lively, original, and challenging history of stock market speculation from the 17th century to present nemal.xyz your investment in that new Internet stock a sign of stock market savvy or an act of peculiarly American speculative folly?. Start by marking “Devil Take the Hindmost Lib/E: A History of Financial Speculation” as Want to Read: Want to Read. FOREXBALL CHAMPIONSHIP RESULTS However, the maximum or on configured with the only. Thank could April send time BGP files on accidentally same. With cowboys security, it horses will help lifeless in from through its Fortinet guessing tools measured publication Lab the your system its body measured by. How are good drivers I using local following command. Download the signing.
The city council of Mylasa in Caria in modern-day Turkey complained that as a result of the speculative hoarding of specie, "the very security of the city is shaken by the malice and villainy of a few people, who assail and rob the community. Through them speculation in exchange has entered our marketplace and prevents the city from securing a supply of the necessities of life, so that many of the citizens and indeed the community as a whole, suffer from scarcity.
The culture of medieval Europe was inimical to financial speculation for both practical and ideological reasons. The feudal system dispensed with many financial transactions of the Roman world, replacing cash dealings with payments in kind. Medieval schoolmen revived the Aristotelian notion of a "just price," following the teaching of St. Thomas Aquinas, who declared that it was unjust and unlawful to "sell dearer or buy cheaper than a thing is worth.
The pursuit of profit was viewed as both morally corrupting and dangerous to the commonwealth. Augustine considered the unlimited lust for gain, appetitus divitarum infinitus , as one of the three principal sins, alongside the craving for power and sexual lasciviousness. In his City of God, there was no place for the speculator. When famine threatened, the medieval state intervened to supply food, and speculative hoarding was made illegal.
These strictures against profiteering and speculation continue to resonate down the ages. When contemporary politicians rise to condemn the pernicious actions of speculators, they perpetuate unconsciously the Scholastic prejudices of medieval monks. In the later Middle Ages, several Italian city-states began issuing marketable government securities. In Venice, government securities were traded from the middle of the thirteenth century at the Rialto. Speculation seems to have taken its normal course: In , a law was introduced against rumours intended to sink the price of government funds; in , , and , there were repeated attempts to prevent the sale of government obligations on deferred terms i.
The Italian city-states farmed out the collection of taxes to monti , companies whose capital was divided into tradable shares luoghi. These early joint-stock companies appear strikingly similar to the Roman publicani. The great fairs of Northern Europe, which had their origins in the fora and Bacchanalia of ancient Rome, enjoyed exemption from many of the medieval restrictions on trade and finance. They became, in effect, prototype stock markets. At the Leipzig fairs, shares in German mines changed hands in the fifteenth century; at the St.
Antwerp, with its two lengthy annual fairs in spring and autumn and yearlong permission of free trade, was described as a "continuous fair. From the middle of the sixteenth century, there is more detailed evidence of speculative market conditions. The financial markets had developed a collective notion of credit the so-called ditta di borsa and bond prices reflected an anticipation of future events such as defaults. Market manipulation appeared in the s, when a syndicate organised by the Florentine Gaspar Ducci led an attempt to suppress prices in the Lyons market what we would now call a "bear raid".
In the middle of the s there suddenly appeared in the markets of Antwerp and Lyons a speculative enthusiasm for royal loans, which came to an abrupt end when King Henry II of France suspended payments on his debts in On an individual level, we find an Antwerp commodity trader, Christoph Kurz, puzzling at the periodic tightness and ease strettezza and largezza of money in the market. He believed that future prices were divinely ordained and discoverable through astrological observation.
People bought when prices were at their highest, because "the upper influences so blind the natural reason with affections or desires. The development of the capital markets in France and Flanders was interrupted in the second half of the sixteenth century by the Wars of Religion and the Revolt of the Netherlands and a succession of state bankruptcies. After , Lyons went into decay as a financial centre.
The sack of Antwerp by Spanish troops in led to the permanent decline of its bourse. Amsterdam benefited at the expense of Antwerp, as thousands of Protestant and Jewish refugees fled the Spanish, bringing capital and trading skills to the Netherlands. The stimulus provided by these immigrants has led historians to refer to the Dutch "economic miracle" of the s. By the early seventeenth century, the Dutch Republic was the most advanced and thriving economy in Europe.
Its merchants encircled the globe, buying wood in Norway, sugar in the West Indies, tobacco in Maryland, investing in forges in Wales or estates in Sweden, farming the Russian Tsar's export monopolies, and supplying Spanish America with slaves. Although the Dutch did not invent the institutions and practices of financial capitalism such as banking, double-entry bookkeeping, joint-stock companies, bills of exchange, and stock markets, they brought together and established them on a secure basis in a mercantile economy organised around a highly evolved profit motive.
In , the United East India Company, the first joint-stock company to receive an official government charter, was established with a monopoly on Eastern trade. Nineteen years later, the Dutch West India Company was founded to exploit commercial opportunities in the Americas. Europe's first central bank, the Amsterdam Wisselbank, an institution derived from the Casa San Giorgio in Genoa, was established in Highly conservative in its operations, the Wisselbank paid no interest on deposits, issued notes only against its gold holdings, and made no loans.
Yet its existence allowed Dutch merchants across the globe to settle their accounts bills in a universally accepted currency. The Dutch city authorities raised funds through bond issues and lotteries which attracted great popular interest. By the early seventeenth century, capital from across Europe was invested in a variety of Dutch financial assets, from property to annuities, municipal bonds, bills of exchange, and medium-term loans.
Select Format Hardcover. Select Condition. Like New. Selected Format: Paperback Condition: Good. Quantity: 1. Add to Cart. Add to Wish List. Book Overview A lively, original, and challenging history of stock market speculation from the 17th century to present day. Edition Details Professional Reviews Awards.
Format: Paperback. Language: English. ISBN: ISBN Release Date: June Publisher: Penguin Publishing Group. Length: Pages. Weight: 1. Dimensions: 0. Age Range: 18 years and up. Grade Range: Grade 12 and higher. Customer Reviews. Write a review. Playing with the Devil?? Published by Thriftbooks. The line distinguishing investment, financial speculation, and even gambling is not absolutely clear: "[S]peculation is the name given to a failed investment and The psychologies of speculation and gambling are almost indistinguishable: both are dangerously addictive habits which involve an appeal to fortune, and often [are] accompanied by delusional behavior and are dependent on success for the control of emotions.
All of the above events have one thing in common: the mania is always followed by a collapse, or more eloquently, the bubble eventually bursts. But as you read this book, you will discover that investors and speculators don't seem to learn from the lessons of the past.
Because as Sir John Templeton stated, there is this manic belief that "this time it's different. Chancellor also provides other interesting historical information in his narrative besides just historical information about speculation. For example, he tells us the true story of where the stock market terms "bull" and "bear" came from and what Mark Twain thought about investing and speculation. Contrary to belief, this book is not biased. In the epilogue of his book, Chancellor tells us the benefits that come from speculation.
However, from reading the initial chapters of this book, it seems to me that these benefits come at a very high human cost. The only problem I had with this book is the plethora of footnotes. They occur on every second page or so. While some of the information in these were very interesting, I found that I got tired of being continually distracted by these footnotes and so I eventually gave up reading them.
Although not completely necessary, it would be helpful to know some basics about the stock market and investment when reading this book. Chancellor does a good job explaining most things bu. Chancellor even covers the 90's art market. One constant stands out about market piracy: what is new is old - only the names and games have changed.
Markets have always been manipulated and always will be. The reforms that follow in the wake of each bubble plant the seeds for the next. Often because the legislators who enact the reforms are beholden to those positioned to benefit from the loopholes. There are several phrases that seem to pop up with every bubble:"This time it's different. Reading this book will make you think twice about investing in the market.
It'll make you doubt the foundation of the efficient market hypothesis. It'll show how often the experts are wrong. It'll show how often Nobel Laureates in Economics turn out to be fools. It will make you think three times about investing in Japan. Four times about investing in Latin America. And you'll run away screaming from derivatives of any stripe. Devil Take the Hindmost is a fun read.
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Every generation is subject to the same social and psychological patterns. In reading the history of nations, we find that Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.
What is clear is that we are now in a period of financial speculation. How bad of a period will only be known in hindsight. But as we see the real economy faltering, the stock market is soaring. Leading many market participants to wonder, "What is going on? After the market close last Thursday, US tech firms put up an unbelievable earnings report. There is simply no way to adequately convey how impressive these firms are to put up record breaking profits in the middle of an economic malaise.
On the surface, it seems simple, everyone is converting to a virtual world, the cloud has never been in higher demand, and people are buying everything online. But when we get into the depths of the earnings reports, we realize just how impressive they are. The blow-out earnings reports led to a rally on Wall Street to close out the week and the month of July. Still Wall Street remains positive on the market reasoning, as it has before, that there is no alternative to equities even as stocks continue their rise to historically overvalued levels.
This leads one to wonder how much longer can this continue? How high can their valuations go? The market is currently pricing these companies as if there is no limit to their valuation, no end to their rally. We know this is not true. At some point, in the future, market participants, even pundits, will question how they lost their senses and paid such an enormous price for a share of stock relative to its earnings and growth rates.
Looking at the PEG ratio for the big five, we are left wondering why investors are willing to pay such exorbitant prices to be owners of these businesses. The PEG ratio takes the price and earnings of the company within the context of its growth rate. Generally a PEG of 1 is desired as it shows the value of the company is reflected in the price.
How do the big five score? These stocks make up a significant portion of the stock market index and represent ALL of the stock market's gains YTD. This is not sustainable, nor is this an indication of a healthy rally. Investors are flocking to the only companies in the market that have what they believe to be sustainable earnings growth, even willing to pay any price for said growth. But just like all the other periods of financial speculation, this will not end well. He sees strong similarities to that period and this one, and he notes that today's FAANG stocks are "making a similar trajectory as previous bubbles.
A bubble-like market can remain aloft far longer than its detractors can believe. As long as the market's apogee is still unknown, there is always a ready source of market defenders. It takes the passage of time and a clear peak in price to convince the vast majority of market participants that a bubble did indeed take place.
The US equity market seems to be a runaway freight train. Nothing can stop this rally, or so it seems. Driven by quantitative easing policies, and a "There Is No Alternative TINA " mindset of market participants, the market is now approaching three standard deviations from the mean, a valuation level not hit since the great tech bubble at the beginning of this century. I do believe it is possible that stocks can continue their rise higher for the time being, but that does not change the reality that we are incredibly overvalued.
It seems the sentiment expressed by noted stock bull Dr. Many will be quick to note that today is not like After all we have a different economy, and these businesses are at a different stage, with solid earnings and top-notch balance sheets. Many of them are even mature dividend payers.
As investors are starved for yield and looking to stocks to provide their desired income and capital appreciation, these stocks have become go-to investments. However, this does not mean that the laws of mathematics or valuation have been suspended. Benjamin Graham is famous for saying that short term the market is a voting machine, but long term, it is a weighing machine.
Eventually, reality will seep into this market. The fact that earnings power for many businesses has been significantly, and in some cases, permanently impaired, will matter. The music will stop, and investors who flocked to this market for growth and income will all head for the same narrow exit. In fact, the recent rally in government bonds may be predicting trouble ahead for the stock market.
A recent piece by A. Gary Shilling seems to think we are repeating an ominous pattern:. Recall that yields on year government bonds started to decline on Jan. Yields fell from 2. Only on Feb. No amount of regulation will be able to stop Speculation. Instead, we have to just learn to overcome our twin traits of Greed and 'follow the leader' mentality.
Galbraith had written perceptively about it decades ago in his book on 'Money'. He said that the next wave of speculation always happens when all the effects of the previous bout of speculation fades in popular memory. There is no point in blaming the Regulating authorities. If they intervene when the market is in a boom, everyone will pillory them for hurting growth and stifling the resulting prosperity.
If they act after the crash, they will be blamed for 'sleeping on their jobs' and not acting sufficiently in time. However, Galbraith suggested that new regulators can step in every few years and bring on new rules so that speculators do not have enough time to exploit the previous set of rules and bring on a crash.
But, I think even this is not feasible because often we find that the bureaucracy, Congress, Senate and the Administration filled by ex-Wall Street honchos. So, it is not in their interest to rein in Wall Street. Saying that we need a fundamental uprooting of the System would make one run the risk of being dubbed a 'communist'!
So, Speculation is here to stay and we better learn to live with it. The book is not a fast paced read. There are voluminous footnotes which distract the reader. Anyone who has read Kindleberger's 'Manias, Panics and Crashes' would find very little new material here. Feb 29, Alex Hood rated it really liked it Shelves: investing.
I enjoyed this book. I spent lunch with Chancellor when he was at GMO or A pompous fellow, who like to hear himself talk. Was predicting the collapse of China. Feb 11, Noah Goats rated it really liked it. This history of financial speculation is an interesting look at one of the many negative aspects of human nature. We are a species of gamblers, and speculating in the stock market allows us to gamble while fooling ourselves into thinking that we are contributing something to the economy.
Chancellor shows how we seem to be unable to stop or even recognize reckless speculation for what it is despite the clear pattern established by history: a new technology or financial instrument or a combo of b This history of financial speculation is an interesting look at one of the many negative aspects of human nature.
This book was written before the bursting of the dot-com and housing market bubbles, but they followed the same pattern: from hope to greed to irrational exuberance to fear to despair. Apr 02, Jim Rossi rated it it was amazing. May 07, George Jankovic rated it it was amazing. Great book on financial speculations from the olden days through today. May 17, Ram Kaushik rated it liked it Shelves: economics.
An impressive piece of scholarship, covering the history of financial bubbles through the ages. The author covers the speculative periods ranging from the Tulip mania of the 's, the South Sea bubble of the 's all the way till the Internet bubbles of the 's. The author's research is incredible, as the voluminous footnotes attest. However, it almost feels overwhelming. Each of these financial bubbles is easily worth a book, and to strike a balance that is a broad sweep while still prov An impressive piece of scholarship, covering the history of financial bubbles through the ages.
Each of these financial bubbles is easily worth a book, and to strike a balance that is a broad sweep while still providing some detail is a difficult task. I'd say the author errs on the side of too much detail, and drowns the reader in some cases.
Also, the intricacies of the financial arrangements behind these bubbles - derivatives, options, notes etc. Still, a worthwhile read if you want to learn about the crazy financial periods through history - with each era claiming "this time, its different. May 19, Landon Brixey rated it really liked it. I find it reassuring to know about all these different bubbles and inevitable crashes while we may be going through our very own now.
The people and specifics change but humans have been going through the same market cycles for hundreds of years. Mar 18, Mattia rated it really liked it. Extremely interesting! I still don't understand derivatives The content itself was fascinating, but I did find the book hard to read at times. The stories were great, I was probably just getting lost with some of the numbers because of listening to the audiobook version.
May 21, Rachel rated it it was amazing Shelves: non-fiction , history , amazing , economics. With three eye-wincing exceptions, this is a fantastic, fantastic book, and a very accessible history into a very opaque part of the financial world in which we all live or, at least, are tolerated. I'll start with my issues. A thought. Than thought? This bubble world. Investment is an effort, which should be successful, to prevent a lot of money becoming a little.
Chancellor says these were the first derivatives, in that they derive their value from the underlying asset the share. The key thing I learned about Tulipmania is that afterwards, the prices of precious tulips regained their value. The normal ones that people were buying like mad did not. In chapter two, which deals with the s, Chancellor explains discounting.
Also, it assumes a lot about the future. He goes on to say that the speculative paradigm requires a few key factors. One is displacement, eg new investment. Positive feedback increases prices, which draws in new and inexperienced investors. Euphoria reduces rationality, which causes an extension of credit that ultimately leads to financial distress.
The social conditions required are greed and minimal government interference, ie, low regulation and corruption. Basically, the South Sea company took on the entire British national debt! As Piketty says, companies prefer to take on debt with interest than just hand over taxes, which famously pays zero dividends.
What it did was take over a bunch of pensions annuities and convert them to shares. After the 7 and the Nowadays, said surplus would be placed in a share premium account and considered part of the capital reserve, but not back then! So in the mind of the South Sea Company, it wanted to swap as few shares as possible, because then it would have more left over to sell on the market and realise a profit.
If the share price was a hundred quid, it would have to change pensions into , shares and sell the rest. But if the share price was two hundred quid, it would only have to change pensions into , shares and have loads of shares left to sell for profit. The lad running the company, John Blunt, set up a share subscription before he was even legally allowed to, and also offered loans using the shares themselves as capital.
He kept a bunch of the stock himself to artificially reduce supply, and the loans allowed people to buy more shares, increasing demand. Hype began. Shorts, I gather, are the shares you buy, usually with borrowed money. Then the bubble burst, people started madly selling shares, the price then fell because supply increased and demand decreased, the bankers sold mortgaged stock because it was below the cut-off, etc etc.
Afterwards, short sales and trades in futures and options were made illegal till the s. Oh yes! To rule men we must be men … Mankind then is my great game. In the next chapter we get into railway mania in Many people bought more shares than they could pay for, with no intention of answering these calls, as they hoped instead to sell them on at a profit first. You can guess what dominos of shit this resulted in when the construction actually began. Their subsequent sharp rise from a low level leads to a revival of speculation.
After each crisis, the financial markets invariably shrug off past follies and losses to confront the future with bright optimism and fresh credulity. Unable to remember the past, investors are condemned to repeat it. I will not sue you, for the law takes too long. I will ruin you. Love that for him. This aims to catch out bears who sold stock short, hoping to buy back cheaper later, and I guess still owed money on the initial sale. Call loans or margin loans were loans against stock collateral.
There needed thus to be a margin of safety between the loan size, and the market value of the shares. This process of short-term loaning with high interest rates exists to provide money to buy and sell shares from day to day.
It also increases stock market volatility, because the set-up is vulnerable to panics and people withdrawing money. Watering stock is releasing unauthorised shares to drop the share price and thwart corners. They loaned their surpluses to the call loan market, increasing demand for stock, capital for stock, and speculation. He points out something extremely important: that the value of ALL money is a consensus.
Synthetic mortgage bonds also arrived, wherein the interest and the principal were separated. These were toxic waste or junk bonds. Another invention was the debt swap, of interest payments usually between users in two currencies. Also, this is where I finally found out what a hedge fund is. Unsurprisingly: nothing to do with hedgerows. Their exposure is balanced between long positions shares bought and shorts shares sold. Um… And now: leveraged buy outs. The interest payment is tax deducible and not subject to margin calls.
The seller is not personally responsible for the LBO debt, which can be packaged and sold to others. These high yield bonds are high yield because the credit rating of the borrower is so low, the interest rates are astronomical. As the share price increased, warrant value increased, and with low interest payments that resulted in profit. Leverage is the ratio of debt to equity. Rich people be crazy.
As a result many famous pictures simply disappeared. He suggests that currency should be given a fixed value so derivatives could fuck right off my synopsis. Speculation, he says, is anarchy. No substantial jobs are created, no products or services enjoyed by average people … I am saying that currency trading is unnecessary, unproductive and immoral. It should be made illegal. Jan 19, Jonathan Birnbaum rated it really liked it. Phenomenal journey through the history of speculative frenzies, including 17th century tulips, 18th century South Sea craze, 20th century roaring 20s or Japan in the 80s, up to the dotcom era.
The scrupulous reader will note common themes across the manias: -markets are driven by greed and fomo, no concept of 'margin of safety' -people across different cultures and centuries engaged in the same ol game -participants hail from all walks even hundreds of years ago, especially women -technology that Phenomenal journey through the history of speculative frenzies, including 17th century tulips, 18th century South Sea craze, 20th century roaring 20s or Japan in the 80s, up to the dotcom era.
Must read for those who desire an enlightened understanding of markets. Feb 18, Matt rated it really liked it. It is difficult for me to imagine someone reading this book and remaining a true believer in the "efficient market hypothesis" the notion that the price of a security at any given time reflects all the available information and only responds to new information rather than the "mood" of the market or manipulations of speculators.
That markets are beneficial and usually clear, sure, but Chancellor, an ex-banker, gives many examples of ways in which irrationality, group madness, and outright mani It is difficult for me to imagine someone reading this book and remaining a true believer in the "efficient market hypothesis" the notion that the price of a security at any given time reflects all the available information and only responds to new information rather than the "mood" of the market or manipulations of speculators.
That markets are beneficial and usually clear, sure, but Chancellor, an ex-banker, gives many examples of ways in which irrationality, group madness, and outright manipulation undermine the price mechanism and lead to financial bubbles, often with disastrous consequences. The most clever part of the book is the introduction. The author links the madness of financial speculation to Bakhtin's notion of the carnivalesque, pointing out that in the middle ages, it was during fairs and carnivals that laws barring financial speculation were suspended.
And, as in carnivals, binges of financial speculation demand a symbolic victim such as Mike Milken or Bernie Madoff. The arguments in the book are only bolstered by the fact that it was written in and he mentions credit default swaps and mortgage-backed securities as the possible instruments of a future bubble and crisis. My only complaint is that the descriptions of the events can be a bit repetitive, even if they are well written. I particularly enjoyed the chapter on Japan in the late 80s and early 90s.
Those looking for practical policy solutions will be disappointed. He seems to view financial speculation as a necessary evil that regulation can do little to stop. He isn't opposed to financial regulation, merely resigned to the fact that it will be an ongoing game of whack-a-mole. This strikes me as a more realistic assessment than those offered by free marked ideologues or quasi-messianic market regulators.
Oct 23, Viktor Nilsson rated it it was amazing Shelves: history. I picked up this book because I'm interested in everything that concerns investing and speculation. While there's always a plethora of writings on current events and the latest thing, very few stand the test of time, and so I like reading from an historic perspective. This book turned out to fit well into the history category - if you're looking for advanced financial analysis you won't find it here, although the author clearly knows what he's talking about.
What makes this book so good is the wa I picked up this book because I'm interested in everything that concerns investing and speculation. What makes this book so good is the way it explains financial history, mainly through anecdotes. For someone who doesn't like reading fiction, this is the kind of book that still can provide a truly enjoyable read. Even better, Chancellor makes sure to get his facts right, and I'm quite impressed at the work he has gone through to find all the stories and facts.
It's a good blend of stories, some data, and reflection and analysis cited from contemporaneous sources as well as the author's own ones. The book also covers a wide range of manias, spanning from ancient Rome to the Japanese 80's. Chancellor also adds some interesting conclusions on what many bubbles seem to have in common and what thus can set them off in the first place.
Well worth a read for anyone interested in investing and history. Jun 01, Sy. C rated it really liked it Shelves: investing , economic-history. Good summary. Haven't read Kindleberger's "Manias, Panics and Crashes" so not able to compare which is the better book. Includes an overview last chapter of the Japanese s real estate and stock market bubble. Dec 27, Andy M rated it it was amazing Shelves: business-economics-wealth , history.
The second part of the title itself might deter a lot of readers, but it's only a general hint about the book's contents. Chancellor's book brings to light many incidents that point to a pattern that seems to repeat. A scheming small group of investors starts a bubble, and later less knowledgable investors are lured in after them.
The small original group eventually sells out, leaving the ignorant and over-optimistic latecomers holding an investment now worth far less than the price that they pa The second part of the title itself might deter a lot of readers, but it's only a general hint about the book's contents. The small original group eventually sells out, leaving the ignorant and over-optimistic latecomers holding an investment now worth far less than the price that they paid for it.
Yet there are more kinds of bubbles than merely the pumping and dumping of common stock. The book offers examples of these. There are some who will refuse to read this book after finding the first favorable quotation of Keynes, but they're depriving themselves of some interesting history. Oct 18, Barry Bridges rated it it was amazing. Chancellor explores bubbles from the Tulip to the Tech boom of the 90's. As I read this post great recession, I can see the looming derivatives bubble coming.
I cannot help but wonder if anyone on Wall Street or in the banking business has ever read the book or even studied market bubbles. The patterns and indicators are the same, from the 's to the twenty-first century. Still, people throw their money, or better yet, borrow someone else's money to throw at every bubble that comes along.
Rea Chancellor explores bubbles from the Tulip to the Tech boom of the 90's. Read it. Wise up. Chancellor is readable, not tedious in any way. The bubble stories remain interesting as he dishes on the ship of fools that fuel and participate in each.
Oct 06, Adrian rated it really liked it. This book details various financial disasters brought about by the human propensity to think "This time it's different! It's hard to tell whether what is happening to our economy today is tragedy or farce when it is simply the latest in a long line of examples of how humans never learn their lesson. Mar 15, Max rated it really liked it. A comprehensive, and fairly dense, history of financial speculation.
Seems the author assumes the reader has a pretty strong grasp of fundamental investing concepts, so that can make the text hard to follow or fully understand at times.
Devil take the hindmost a history of financial speculation forex strategies for goldPART 1 Devil Take The Hindmost A History of Financial Speculation Edward Chancellor full audiobook
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How do the big five score? These stocks make up a significant portion of the stock market index and represent ALL of the stock market's gains YTD. This is not sustainable, nor is this an indication of a healthy rally. Investors are flocking to the only companies in the market that have what they believe to be sustainable earnings growth, even willing to pay any price for said growth. But just like all the other periods of financial speculation, this will not end well.
He sees strong similarities to that period and this one, and he notes that today's FAANG stocks are "making a similar trajectory as previous bubbles. A bubble-like market can remain aloft far longer than its detractors can believe. As long as the market's apogee is still unknown, there is always a ready source of market defenders. It takes the passage of time and a clear peak in price to convince the vast majority of market participants that a bubble did indeed take place.
The US equity market seems to be a runaway freight train. Nothing can stop this rally, or so it seems. Driven by quantitative easing policies, and a "There Is No Alternative TINA " mindset of market participants, the market is now approaching three standard deviations from the mean, a valuation level not hit since the great tech bubble at the beginning of this century.
I do believe it is possible that stocks can continue their rise higher for the time being, but that does not change the reality that we are incredibly overvalued. It seems the sentiment expressed by noted stock bull Dr. Many will be quick to note that today is not like After all we have a different economy, and these businesses are at a different stage, with solid earnings and top-notch balance sheets.
Many of them are even mature dividend payers. As investors are starved for yield and looking to stocks to provide their desired income and capital appreciation, these stocks have become go-to investments. However, this does not mean that the laws of mathematics or valuation have been suspended.
Benjamin Graham is famous for saying that short term the market is a voting machine, but long term, it is a weighing machine. Eventually, reality will seep into this market. The fact that earnings power for many businesses has been significantly, and in some cases, permanently impaired, will matter.
The music will stop, and investors who flocked to this market for growth and income will all head for the same narrow exit. In fact, the recent rally in government bonds may be predicting trouble ahead for the stock market. A recent piece by A. Gary Shilling seems to think we are repeating an ominous pattern:. Recall that yields on year government bonds started to decline on Jan. Yields fell from 2.
Only on Feb. Fast forward and year yields have fallen from 1. The question is whether stocks will follow again, and with a similar lag of about seven weeks. The bond market is always smarter than the stock market, and I believe, as I laid out in my last piece The Coming Financial Crisis , that trouble lies ahead. With markets incredibly overextended, no matter how you measure it, and the real economy showing signs of worsening, the US Treasury security offers investors a unique port in the storm.
The market continues to resemble a frantic herd trying to be the first to find the next earnings growth story. We are currently in a world where deflationary forces are gaining steam, debt burdens are overheating, restrained GDP growth is a reality, and central banks that are in uncharted territory, experimenting with negative rates, and in the process showing their desperation to create some level of inflation and stave off what they really fear The risk of another deflationary depression is beginning to come into focus; only time will tell if central bankers can defeat it.
I hope they can. What everyone really fears is that year Treasury at 0. Investors need to realize the intense risks during this period of time. As Seth Klarman said in his April client letter: "When securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated. The bond market continues to tell investors the truth; the question now is whether investors will listen or continue, in the words of Charles Mackay, to disregard the facts and speculate in stocks based on their theory that there is no alternative to equities.
The bond market continues to tell investors in words that cannot be misunderstood; don't take risks. I leave you with a passage from Charles Mackay's classic tome concerning the tulip craze in s Holland. It is particularly instructive in the behavior of crowds, and in its revelation that the motivations of market participants do not change.
This time is not different. The psychological factors that propelled the tulip bubble to extremes in Holland in the s are at work in our present day, propelling a handful of stocks higher and higher, and taking market averages with them. Mackay's brilliant analysis of human behavior in is alive and well in Greed, stupidity, herd mentality, the reckless belief that the rules of economics have somehow been suspended in this instance, and that this time was different are all driving dangerous speculation in risk assets.
The time has come to reassess the risks in your portfolio and prepare for the possibility that history will repeat itself and the depression is coming. By , special markets for trading in tulip bulbs were established on the floor of the Stock Exchanges in Amsterdam and other towns. Many people grew suddenly rich, and others, not wishing to be left out, began speculating madly themselves.
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