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Devil Take the Hindmost: a History of Financial Speculation Paperback – June 1, 2000
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Beginning with the "tulipomania" that gripped Holland in the 1630s, Chancellor chronicles the formations and irrational euphoria that can inflate markets, from shares of South Sea stock in England in the 1720s to real estate in Japan in the late 1980s. He characterizes the speculative spirit as one that
loves freedom, detests cant, and abhors restrictions. From the tulip Colleges of the seventeenth century to the Internet investment clubs of the late twentieth century, speculation has established itself as the most demotic of economic activities. Although profoundly secular, speculation is not simply about greed. The essence of speculation remains a Utopian yearning for freedom and equality which counterbalances the drab rationalistic materialism of the modern economic system with its inevitable inequalities of wealth.But it's precisely such inevitability that always seems to win out, when "sharply rising prices followed by sudden panic without cause" bring speculative excess to an abrupt end.
Chancellor makes Devil Take the Hindmost especially relevant to today's U.S. investors by using his analysis of past speculative manias as a lens through which to view the current bull-market binge. No matter what his or her current investment outlook is--bull or bear--anyone with capital to invest would do well to spend a thoughtful weekend with this book. Highly recommended. --Harry C. Edwards --This text refers to an out of print or unavailable edition of this title.
From Library Journal
Copyright 1999 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.
Top Customer Reviews
In my short experience as an investor, it was some of the most sage advice I have received. Edward Chancellor book arrives at the same conclusion but provides more foundation to recognize the bubbles of speculation.
Investment bubbles never change. Yet, for the investor or trader caught up in one, they remain difficult to identify. According to modern economic theory, markets are efficient and speculators are rational opportunists intent on maximizing their wealth.
Chancellor, a former investment banker and historian, disagrees. More than fear and greed drives speculators, they motivated by deeper compulsions and aspirations. Speculation, he says, can only be understood within a social context and that its history cannot be a simple description of economic affairs. It is important to understand the behavior and attitudes of politicians, since the laws governing markets are written and enforced by governments.
He traces the origins of speculative fever back to ancient Rome and follows the thread through Holland's tulip mania in the 1630s and London's stockjobbers 70 years later.
The book ends with an insightful analysis of the Junk Bond era here in the United States, the Japanese bubble and the near collapse of Long Term Capital Management. It is a must read for every serious investor.
Chancellor's account, while not a comprehensive study of speculation, thoroughly examines major speculative periods from the tulip mania of the early 17th century, to the Japanese "bubble economy" of the 1980's. Three repeating motifs characterize these speculative episodes. First is the irrationality of financial markets, especially the way in which people of all eras are susceptible to the euphoria which inflates a bubble. Second is the constant recurrence of manipulation of markets by the greedy and unethical, the likes of Jay Gould and his accociates.
The third and most important theme is the existence of parallels between past speculative bubbles and conditions in our own time. Chancellor convincingly argues, for example, that the internet mania of today is similar in many ways to the British railway bubble of the 1840's.
I strongly recommend this book to anyone with an interest in financial markets or their influence on history. The only, slight caveat I would offer is that it helps a reader to have at least some knowledge of the language of financial markets, as Chancellor at times tosses terminology at readers without offering a clear definition.
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."
"It's too big to fail."
"The business cycle is no more," or some nonsense about reaching a plateau of permanent prosperity.
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.
In fact, one wonders why the whole shooting match hasn't imploded yet, ala Baring's Bank or LTCM.
Devil Take the Hindmost is a fun read. More important, the next time a Mania strikes - and it will - this book and a general understanding of the history of speculation just might just save you from rushing over the cliff with all the other lemmings.
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