on December 9, 2003
Beginning investors are sometimes told a few simple maxims to help them manage their portfolios. Never time the market. Buy and hold. Expect 10% annual return on stocks held for the long run (usually defined as seven to ten years).
Maggie Mahar has done a service to these investors by showing how little evidence there is to support these maxims or, at the least, how easily they can be distorted. She does this by revisiting the last boom and showing it in historical perspective.
Contrary to the conventional wisdom that most index funds will grow 10% annually so long as they are held around ten years, Mahar shows that the U.S. stock market - upon which most index funds closely track - has gone through several periods nearly twenty years long with little to no annual growth.
Contrary to the conventional wisdom that you can't time the market, Mahar says that most savvy investors - including buy-and-hold strategists such as Warren Buffett - do time their investments, and feel no compunction about getting out of a severely over-inflated market.
Mahar's history is also instructive in showing how industry leaders and government officials were complicit in allowing shoddy accounting and other questionable practices to contribute to the breakneck market. Rather than a rational market in which everyone can expect to be a winner given enough time (seven to ten years), "Bull" shows that investors must still exercise caution even when following the few simple investing guidelines that most people do not question.
on October 22, 2003
I finished Bull! in two days, and I enjoyed every page. The problem that I've had with most books on economic history or investing (and particularly those, such as this one, that include considerable economic detail) is that they are miserable to plow through, and are invariably filled with dry and seemingly superfluous detail. This book is different. Mahar mixes witty anecdotes with incisive analysis, and her claims about investing are offered in intelligent often playful prose, surrounded with a copious amount of recent historical material. Even well known stock-market figures--like Warren Buffet--look new here: we get a sense of why they acted as they did, and often a hint of what they may have been thinking. Recommended for anyone interested in learning more about investing, uncovering what the last bull run was all about, or meeting some of the major Wall Street players that were made into near-celebrities.
On the surface, this is a history of the stock market over the past 20 years. Like most economic history, one would expect to be bored to tears. The book adds a couple doses of financial theory (also "Ho Hum") and somehow manages to be a delightfully insightful and interesting read. The 400+ pages just flew by.
There's lots of interesting historical annecdotes included:
1) The bears who get killed for mistiming their predictions. (The bull isn't done until the last bear is gored)
2) How the Blodgets of the world were created by a system that encouraged cooking the books and an abdication of responsibility. (Mahar covers the laws that created this environment, and those politicians that pushed for them)
3) The ups and down of particular investors as they deal with the bull and inevitable bear.
In addition, several insights come out:
1) Buy and Hold Equities isn't all that it's cracked up to be.
2) Not everyone belongs in the market. Indeed, many investing professionals make their money on Wall Street, but invest it on Main Street. (Harder to lose money on a house)
3) Decreasing spending or increasing earning potential can go a long way.
4) It is easier to pick trends than timing them.
There are a couple attacks on her thinking:
1) She cites the virtues of market timing, but market timing really isn't that easy. If it were, we'd all be doing it.
2) She cites many folks who called the end of the bull right. In a sea of information overload, it isn't that easy to find these people and understand their arguments. (There's always convincing bears)
3) There are many instances of "If you only followed Xs advice from Day Y..." which is tough to check. Is that a valid trend, or are the dates (especially the end dates) picked just to amplify a point? (It's always possible to find a 5, 10 or 20 year period to prove a point)
That said, the book is an important one, both from a historical point of view, and to improve one's investing.
on March 3, 2004
I have read many self-help financial books over the years, but I must place this one right at the top. Maggie Mahar is a gifted writer and tells her tale with wit and economy. The result is a lot more readable than your typical financial book, but more than that, it exposes the fallacy of many old bromides that I had read in all those other self-help screeds (like "buy and hold"). In fact, as she traces the history of the long bull market that began in 1982 and culminated with the late 90's mania for tech stocks with triple digit PE's, I recognized myself among the many fools who bought into the madness and squandered much of their retirement nest eggs.
I found the most valuable investment advice in the book to be the musings of a few experienced money managers who had been through the long and punishing bear market of 1968-1982, and who saw the tech wreck coming. The reminiscences of these investment advisers--people like Gail Dudack, Steve Leuthold, Jean Marie Eveillard and Peter Bernstein--are worth the price of the book many times over. For people who are looking for a self-help investment primer that doesn't sugarcoat the risks, this book is the real deal, without the BULL!
on November 2, 2003
BULL!: A History of the Boom, 1982-1999: What Drove the Breakneck Market--and What Every Investor Needs to Know about Financial Cycles by Maggie Mahar.
This is the perfect complement to Bill Bonner's "Financial Reckoning." Smart and savvy like Bonner is, Mahar tells the story of the most magnificent bull market in U.S. history is a way you can use. She gives you a context for going forward. Whatever else you do, do not go back into the market without it.
BULL! reads like a novel. In her singular, rare and literate voice, Mahar tells a tense, teaming, human story that would satisfy the most exigent Dickens fan, but it isn't a story.
This is the tale we all lived through. In essence, it is the
piece-by-piece re-framing of the sixties ideal of participatory democracy. "Power to the People" helped fuel the civil rights movement and end the Vietnam War. It put the resources of a room-size mainframe at the fingertips of a personal
computer owner. It had already democratized credit a decade earlier: millions of Visa card owners who would never have been able to get a banker to return a phone call could to get instant loans anywhere, anytime, without even asking. They bought themselves computers and when brokerage firms began selling their wares over the Internet, they were ready and
willing to buy.
Mahar chronicles the latest Bull Market from the inside out. We are there as Power-to-the-People migrates from politics to the pocketbook to big-time Wall Street, when the confluence of laws, attitudes and technology gives birth to the spectacular fireworks of "The People's Market." She is at once
objective, comprehensive, at ease and master of her subject, and
honestly compassionate. In other words, you won't have any trouble following the course of this breakneck market and she will never leave you in the lurch. She will, for example, manage to explain stock options and their powerful role in all this without making you feel stupid or bored. If you were
in the market, they affected you and she will show you how. BULL is your story, the one you couldn't figure out.
If you were a grass root supporter in the 60s and early 70s (I still have my button) it's very likely that you became an "individual investor" in the stock market sometime during the years 1982 and 1999, thereby claiming your right
to vote in, take your pick, a "global plebiscite" (Citicorp chairman Walter Wriston) or a national lottery.
As Mahar shows, the democratization of the financial world happened in large part because people took to betting on the future on their own or through pension and mutual funds. That is to say, they stopped looking at real assets, profits and losses. (The market was moving too fast anyway, too
much research could make you dizzy). Instead, they started staring at single number, the company price which was moving across their screens, and which could easily be 100 times more per share than what the company was earning, if indeed there were earnings. They assessed the value of a company's
stock solely by its ticker price: It was worth whatever somebody would pay for it, in sum the collective judgment of millions of people. It was a thoroughly American, optimistic approach. New economy, new guideposts.
You might have been a father with kids and a mortgage who one day discovered you could earn more in a day online than in a month on the job. Yours would likely be some of the votes that turned AOL into a stock that traded at 236 times EXPECTED earnings and earned it in a place in the S&P 500, knocking
out (TK.) You weren't alone and you weren't necessarily a big
risk-taker,Mahar points out.
Fantasy and greed played roles in the bull market, but smaller than you think. There was also enormous anxiety and it's that anxiety, subtle and extremely hard to isolate and detail, that Mahar brings out and empathizes with. You'll probably hear echoes of your own story in BULL in the single
mother who mistook the market for a piggy bank, or the housewife who became an addicted gambler who couldn't take her eyes off the ticker, or the father who allowed himself to be goaded into competing with his dot.com son When the insiders saw the free fall coming, they bailed out, Mahar says clearly and flatly.
Many stayed. Why didn't you, read me, read us, whoever we are, cut and run. Here, Mahar reminds us of what else was going on, who else was in the picture. There was, for example, the benign, large-as-life face of Magellan Fund's Peter Lynch speaking in countless full-page ads, warning that social
Security might not be there for you at 65. Better start saving.
Where? In the equity markets.
There was also Washington. Contrary to what reasonably
might be expected, Senators Bill Bradley and Joseph Lieberman went to bat for the corporations, tirelessly working to help them hide the cost of options, thus masking the real financial state of the companies you owned,and freeing stock prices to soar even higher. Then Alan Greenspan chimed in,
blessing the bull with the stupefying oxymoron "rational exuberance,"his euphemism for the casino circus behavior of millions of small-time gamblers who were betting their nest eggs. Throughout it all, there was the 24/7 real-time financial media stream, endlessly reflecting you reflecting
It's this world of mirrors that created the Big Bull and that Mahar is able to make objectively coherent. Yet, and this is her strength, she never loses sight of or overlooks the human factor, the "individual," where ever she finds him. Why did so many people stay till the bitter end of the party? Ignorance? Self-interest? Paralysis? Addiction to excitement? Who's to
blame? What's to blame?
Nobody made me buy into the market anymore than anybody forced me to smoke,but the message of this book is that you don't have to put yourself in a corner and compulsively re-tally and re-live your losses anymore. I don't know how Mahar did it but I ended up satisfied. I made mistakes but instead of obsessively re-seeing where, I now see why, and that makes all the
difference. I can learn. So will you.
By the way, for the future, Mahar suggests reading up on China, Russia and natural resources.
on October 24, 2003
A great non fiction account of the rise, rise and fall of the boom market written with a novelist's eye for detail. Peppered with lively anecdotes and colorful commentary about the decade's leading financial figures, Mahar offers incisive analysis about what drove the boom and advice on how to survive the aftermath. What's more, BULL helps you take stock of your own portfolio. It was enormously helpful and an unexpectdly good read. I only put it down to share passages with my husband.
on January 23, 2005
The author explains that the 90s bull market was driven by momentum, not value. The main source of liquidity was a stampeding herd of misinformed individual investors whose do-it-yourself investing, much of it via 401(k)s, flooded the mutual fund industry with money, driving up stock valuations to unsustainable levels. The majority of individual investors got most of their financial advice through the media, which had been taken over by investment industry marketers. The market's upward momentum made most fund managers look good even though they were only following the indexes. As a result, mutual funds became asset gatherers, basing their fees on the amount of money under management, not on investment expertise. Lawmakers enacted the Private Securities Litigation Act of 1995 which helped build the bubble by enabling corporations to mislead investors about their earnings; the effect was a massive transfer of wealth from shareholders to corporate management. Financial chicanery became prevalent throughout corporate America, and creative accounting was so pervasive that, in 2001, the Bureau of Economic Analysis announced that there had been no earnings since 1995! During the longer term from 1969-2003, stocks outperformed long-term Treasuries only by a trifling 1% per year, but Wall Street and the media kept investors' attention focused on equities because equity-based commissions, fees, kickbacks and other rake-offs are far more lucrative. After the bull market's momentum had reversed, the media kept telling investors to stay invested and buy on dips, but investors were pouring money into a large sieve. Many investors had become uncritical as they monitored their accounts; the balances looked okay but, in reality, investors' deposits were camouflaging the investment losses. Mahar shows that timing, which depends on expertise and luck, is key to whether an investor wins or loses, and that buy-and-hold would not have worked well during the long term. Unlike momentum and long-term buy-and-hold investors, successful value investors, like Warren Buffett, use market timing to buy low and sell high. The only true golden periods for stocks over bonds were the 1950s and 1960s. Mahar demolishes the myths perpetrated upon investors by the financial services industry and its lackeys in the media. Every investor should read this book!
on December 6, 2005
Have you noticed that anyone who writes a negative review on Amazon gets dinged more frequently?? Well, I'm using one of Maggie Mahar's take-away points who wrote about Gail Dudack and Jim Grant (market contrarians at the peak of the internet boom) to say this book is a not worth buying... I can almost hear the ding'ing now.
As the title suggests, this book is mostly about the market's history between Reagan to George W. Within that space, its a narrow assimilation of 6-9 books, 4-5 market contrarian interviews, and mostly financial news articles. For example, the stock market crash of '87 is very narrowly described as a cyclical and/or over-advancement of prices and over-exhuberance by buyers. Obviously, arguments such as these support the theme of the book. However, stock market fluctuations are fantastically complex and influenced by broader economic conditions and triggers. Several interlinked elements contributing to '87 would have been helpful to learn about: the Fed strategies at that time, post-Plaza Agreement aftermath on the dollar, intricate problems from UAL failed LBO, Milken's problems with a number of restructings, why gold was down, Real Estate syndicates boom in Texas, S&L liquidity, etc. And I'm just a novice writing this from memory.
Mahar is no economist, statistician, nor trader. Her style of writing and context of her arguments are similar to that of a financial journalist -- not unlike how "Enron: The Smartest Guys in the Room" was written. Moreover, her tone towards the latter half of the book turns noticeable negative as she constantly applies (dare I say "manipulates") certain events/information to support her argument that the Bull market was soooooo clearly overvaluing stocks and everyone was stupid to be caught up in the frenzy. Hind sight is 20/20. Sometimes her statistical analysis is weak. For example, on pg 318, she writes about how insider stock sales/buys are incorrigible, were almost frauds, and how the public ignored the street signs: "... from 1995 through the end of 2002, the Tribune's analysis showed that in 25% of all cases, the share price of the company in question tumbled by at least 20%-and sometimes as much as 50%- in the six months following the sale. Insiders were equally fortunate in picking their spots when buying their own companies' stock: more than half of all purchases preceded gains of more than 20%, which several well above 50%." Her use of the Tribune's 2003 Dow30 study to support her argument lacks insight and analysis: (a) 75% of all cases conversely mean that insiders were wrong to sell, (b) about half the insiders who bought were dumb, and (c) during that same period, what were company-specific fluctations (ie knowledgeable to insiders) vs. simply relative correlations to the DJIA.
If you are a casual reader interested in a chronicle of the markets, this book provides an overview of the times. However, if you are an investor with a medium-term memory, you may find that this book is not for you, as you invariably compare your recollections with her version of the chronicles; thus making this book questionable advice for the future.
In that regard, I was disappointed and could not help but to feel that this book represents not a "history" of that bull market, but rather "her history" of that bull market. A good history book should give you confidence in your education's integrity and thoroughness, particularly if you were living back then and remember things (unlike "1776").
In summary, I didn't so much disagree with the writer's points, but rather hoped that it would have been more broadly educational and analytical in order for it to be helpful as we move thru the 21st Century.
-- P.S. The above reviewer Mr. Nassim Nicholas Taleb is the author of "Fooled by Randomness" and complemented/cited by Mahar in this book. FYI.
on November 15, 2003
Incredible book. After reading this, you will never look at CNBC, the SEC, mutual funds... in short Wall Street the same again. Nor will you be so willing to accept the hype and promises being offered today. The book moves fast and the anecdotes are great. Mahar's style flows so well that I read 3/4 of the book the first day.
If you want a history lesson to help you avoid the mistakes of the past, then you should read this book.
on November 1, 2003
Bull, Maggie Mahar's sharp and very readable new history of the Bull Market,offers investors smart views of why the bubble happened, why it burst, who got hurt, who didn't, and where to invest now, keeping in mind financial cycles and important emerging markets like those in China and elsewhere in Asia. Mahar's engaging style and telling anecdotes give readers a bounty of knowledge that's both impressive and fresh. Not just another ain't-it-a-shame account of the bursting bubble, Bull analyzes the hows and whys. At the same time, it's fun to read. Should be a top pick for holiday presents.