Anyone contemplating a stock market venture and certainly anyone now involved should read this book. It is an admirably researched and very well-written account to speculative insantiy from the earliest times to, let on one doubt, the present.
The best, most insightful study of speculation and bubbles I have read. It should be required reading for every investor.
From ancient Rome through today's Internet-stock craze, when it comes to money and finance, the human emotions of greed and hope regularly override cool logic.
"I daily hear such reports of advantages to be gaind by one project or other in the Stocks, that my Spirit is Up with double Zeal, in the desire of our trying to enrich ourselves."
Sound familiar? It should, given the zealous high spirits of those enriched by "the Stocks" of Wall Street over the past few years. But the author of the above sentiment was Alexander Pope, the British poet, and he was writing about a different bull market -- that of South Sea Company stock in 1720. As Edward Chancellor points out in his fascinating and frightening new book, Devil Take the Hindmost, all of London was caught up in the mania for South Sea stock, which was appreciating at a rate even early holders of Amazon.com would envy. Pope's contemporary Jonathan Swift probably described the era best: "I have enquired of some that have come from London, what is the religion there? they tell me it is South Sea stock."
Widespread market obsession, though, is only one of many ominous parallels Chancellor finds between the current boom and those of the past. After first tracing the history of financial speculation back as far as ancient Rome (unsavory operators sold shares on the Forum, near the Temple of Castor), he outlines the stunningly similar progress of various "speculative bubbles" throughout history -- the Tulip Mania of 1637, the South-Sea Bubble of 1720, the Railway Mania of 1845, the bull markets of the 1920s and the 1980s, and the Japanese Bubble Economy of the late 1980s. In each case, the signs of excess and imminent disaster should have been obvious to all but were lost in the euphoria of the quick and easy buck (or pound or yen). Why? Because each time the public allowed itself to believe what, according to Sir John Templeton, are the four most expensive words in the English language: This Time It's Different.
Arguing that speculative manias partake of a good bit of irrationality, Chancellor rebuts proponents of the so-called Efficient Market Hypothesis, who believe that stock prices by their very nature reflect intrinsic value (in other words, that stock in DutchTulip.com really is worth 4,000 times current earnings, because DutchTulip.com is the future). This faith in the surpassing wisdom of the markets, he contends, is what allows speculative bubbles to develop, aided by the ever more arcane and dangerous financial instruments that thrive in an era of laissez-faire economics.
Casting a critical eye on the current environment (where even George Soros complains that he doesn't understand how certain derivatives function), Chancellor implies that those who believe the current market to be rationally priced may be living in a dream world. "As an anarchic force, speculation invites government restrictions," he concludes, "yet it is only a matter of time before it slips its chains and runs amok."
One warning: Devil Take the Hindmost, while timely and enlightening, is not an easy read. Without an MBA and experience on Wall Street, you may find much of Chancellor's analysis heavy sledding. (If you do, try John Kenneth Galbraith's briefer, more accessible -- and delightfully condescending -- A Short History of Financial Euphoria.) But you don't have to know the difference between a hedge and a hedge fund to understand Chancellor's basic premise. And if you're like me, you'll have two overwhelming reactions: first, to marvel that the more things change, the more they stay the same; and second, to conclude that it may be time to redeem those mutual funds and stick the proceeds under a nice, safe mattress.
Financial journalist Chancellor takes a fascinating and often amusing look at the history of speculative investment. From the "tulip mania" of seventeenth-century Holland (when certain citizens gladly paid five times their annual earnings for a single bulb) to the Crash of '29, the leveraged buyout boom and the Fuji Bank scandal of 1991, the author creates very readable accounts of events that might otherwise appear about as interesting as flypaper. Among the most interesting of Chancellor's suggestions is the notion that speculative investment (defined as investment designed to yield a fortune with minimal outlay) is based in crowd hysteria, with individual investors, as well as the market itself, regularly succumbing to vagaries most of our modern world understands as manic depression. Anecdotal as well as factual, Devil Take The Hindmost (the title comes from the infamous "South Sea" investment scam perpetuated in 1720 Britain) is surprisingly quick and engaging. Its appeal will likely extend to the historian, the sociologist and the investor in equal measure.
In an era of rampant speculation and questionable investor habits, it is a pleasure to read an insightful, well-focused analysis of the events that have dominated social and economic history since at least the second century B.C.E. Starting with the speculative frenzy that gripped ancient Rome, British business journalist Chancellor goes on to provide keen insight into a wide variety of events, including the emergence of stock exchanges from the great fairs of northern Europe, the tulip mania that gripped the Dutch Republic in the 1630s, the insanity of the Mississippi and South Sea bubbles, the robber barons and their impact during the Gilded Age, the events leading to the Crash of 1929, the Japanese bubble economy of the 1980s, the Mexican crisis of 1994, the Asian market crisis of 1997, and the speculative manias that have accompanied the emergence of new technologies, including railroads, the telegraph, automobiles, radio, and the Internet. A well-rounded presentation that should be included in all public and academic libraries.--Norman B. Hutcherson, Beale Memorial Lib., Bakersfield, CA Copyright 1999 Cahners Business Information.
A historian with a background in financial affairs, Chancellor looks at stock-market speculation from the 17th century to the end of the 20th, from Daniel Defoe to Hilary Rodham Clinton. He posits that people engage in the activity not just to make money, but from a wider range of human compulsions and aspirations. Annotation c. Book News, Inc., Portland, OR (booknew.com)
Chancellor excels at describing the culture of speculative excess.
What makes this account entertaining is the social context: ballads, newspaper accounts, gossip....The particular relevance of Chancellor's useful homily is that it comes just as we are in a huge mania ourselves, one of the biggest ever the great Internet bubble..... The seasons turn and all the rivers flow into the sea. We read these histories and we know the ending. Yet such is the intensity and excitement of manias that they never lack for participants.
The New York Times Book Review
The book is worth reading...in part because it is enjoyable to read of other people's folly, not to mention their avarice and stupidity. And Mr. Chancellor tells the tales well...As Mr. Chancellor superbly shows, it is all too human to nurture a delusion, especially when one has company.
The Wall Street Journal
Cautionary armchair reading for the modern investor. The old mantra about history repeating itself has clearly inspired British financial journalist Chancellor (a contributor to the Financial Times and the Economist) to write this book at this point in time. Although many volumes have already appeared on both financial speculation in general and individual historic events in particular, even well-informed readers will find new material and interpretation here. From tulip bulbs in 17th-century Holland to the American stock crash of 1929and pointedly including the current boom in Internet stocksspeculation is presented by Chancellor as a common and very human behavior involving all classes of people. The author weaves together a descriptive narrative of major episodes with retrospective analysis by various authoritiesindeed, the change in "expert" opinion is often as intriguing as the manipulations of the speculators themselves, since over time conventional wisdom on almost all of these events has evolved. The most prominent and notorious speculators (Cornelius Vanderbilt, James Fisk, and Charles Keating, among others) earn biographical profiles in the text. Chancellor opens his financial adventure story with a rational and articulate description of speculation, then along the way introduces ever-more-convoluted investment strategies and practices, accompanied by articulate descriptions of terms. His book therefore provides a running primer on basic investment concepts alongside the tales of greed, political shenanigans, shrewd maneuverings, and obsession. The author largely succeeds in being fair to the variety of interpretations given to speculation, including opposingcalls for looser and stricter controls. He has some misgivings, however, about the current prevailing belief that the market is "inherently efficient" and best suited to manage itself, at least in the long run. Chancellor closes with an admonition: "As an anarchic force, speculation invites government restrictions yet it is only a matter of time before it slips its chains and runs amok." Timely, beautifully written, ruthlessly informative.