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Devil Take the Hindmost: A History of Financial Speculation Paperback – June 1, 2000
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“An admirably researched and very well written account of speculative insanity from the earliest times to, let no one doubt, the present. Anyone contemplating a stock market venture and certainly anyone now involved should read this book.”—John Kenneth Galbraith
“The greatest hits of financial silliness recounted coherently and...gracefully...Chancellor does a fine job of capturing the atmosphere of the times.”—Forbes magazine
“Entertaining, useful, admirable scholarship...Chancellor seems to have read everything.”—The New York Times Book Review
“The subtle ways in which individual investors become drawn into crowd behavior is a much studied phenomenon, covered brilliantly...in the book Devil Take the Hindmost.”—The Daily Telegraph (London)
“The South Sea Company is one of the great bubble and crash stories. Many books have referred to it. One of the finest is Devil Take the Hindmost.”—Debashis Basu, Money Life
“[An] essential history of financial manias.”—The Observer
From the Back Cover
From the Gilded Age to the Roaring Twenties, from the railway mania of nineteenth-century America to the crash of 1929, from junk bonds and the Japanese bubble economy to day-traders of the Information Era, Devil Take the Hindmost tells a fascinating story of human dreams and folly through the ages.
- Item Weight : 14.9 ounces
- Paperback : 400 pages
- ISBN-13 : 978-0452281806
- Product dimensions : 5.94 x 0.81 x 8.98 inches
- Publisher : Plume; Reissue edition (June 1, 2000)
- Language: : English
- Best Sellers Rank: #37,774 in Books (See Top 100 in Books)
- Customer Reviews:
Top reviews from the United States
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Until they don't. And that is what lies at the center of fear and greed, humankind's great motivators. (Not love and hate. Those are just variations on the same theme.)
Chancellor does an admirable job of making an incredibly boring subject human, emotional, and funny (my apologies to those who think finance and markets are super interesting—out of context they are, but relative to most other things in life, they aren't). But let's get back to what matters, Chancellor's book. He makes the subject interesting by bringing the greatest manias in history alive—tulip mania, gold, the South Seas bubble, and railroad stocks, among other more contemporary bubbles and manias.
Entertaining and highly recommended if you like history and psychology. Chancellor skillfully brings to life the psyches of the speculators as well as accurately portraying the social and political landscapes that existed when the bubbles began.
A similar book with some overlap but a somewhat different tone and style is Manias, Panics, and Crashes: A History of Financial Crises, Seventh Edition .
There's not much else to say. If you're an investor, this is a must-read history of how things can go horribly wrong in financial markets.
In fact, with U.S. equities bumping against all-time high valuations (in mid-2018), this is the perfect moment to take your time and read through this book. It'll show you all the ways you might be getting swept up in speculative excess, of which you might not be aware, even if you're invested in the greatest businesses that have ever existed.
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On the other hand, I read the book from cover to cover. Why? Well, if you want a primer on the South Sea bubble, or what the heck went on in Japan during the 1980s, it's quite useful. Likewise, if you want case studies of the role of ill-advised dregulation, or regulatory capture, or con-men and blind, euphoric greed in driving bubbles, read this book. After all, you do need to know this stuff these days!
"We intended first to boost the stock and property markets. Supported by this safety net - rising markets - export-oriented industries were supposed to reshape themselves so they could adapt to a domestic-led economy. This step was then supposed to bring about an enormous growth of assets over every economic segment, followed by an increase of investment in plant and equipment. In the end, loosened monetary policy would boost real economic growth."
Sounds about right, doesn't it? There's just one catch....
The official being quoted is not a Chinese central banker circa 2011. He is a BOJ (Bank of Japan) official circa 1988.
And we know what came soon after for the Land of the Rising Sun - a toppling weight of speculative mania collapse, coupled with a truly spectacular misallocation of resources and the dead weight of "zombie banks," that hobbled Japan's economy for decades running.
The above quotation is one of the many cited in the excellent "Devil Take the Hindmost: A History of Financial Speculation" by Edward Chancellor.
Having first read "Devil Take" many years ago, but never having reviewed it, we were inspired by recent events in China to pull it down from the bookshelf and reexamine the chapter on Japan.
The similarities - China now, Japan then - are notable.
Japan in the late 1980s, like China now, was a booming command and control economy. Officials at the all powerful Ministry of Trade and Industry (MITI) and Ministry of Finance, via the power of back channels, chose how to steer "Japan Inc." at will.
Further evoking China, Chancellor observed of the Japan bubble that "speculative mania is often a symptom of hubris," with great manias tending to occur "when the economic balance of power is shifting from one nation to another."
As Chancellor describes the late 1980s scene,
"America was on the run. While Japan had its trade surpluses, America faced growing trade deficits. The Reagan administration also produced enormous budget deficits that were only sustained by the willingness of Japanese investors to sink their country's trade surplus into U.S. Treasury bonds..."
As Yogi Berra might quip, re Japan vs. China, it's "Deja Vu All Over Again."
Or perhaps "Nobody invests there anymore, it's too overbought."
Those timely parallels aside, "Devil Take" is an engrossing book that traces the roots of financial speculation all the way back to Roman times. Thanks to Chancellor we learn the Latin meaning of the word speculator: It originally applied to sentries, whose job it was to "look out" (speculare) for trouble. Ancient Rome's financial players, on the other hand, were known as "quaestors," or seekers.
And the quaestors had much to seek. Chancellor reveals that two millennia ago there were joint stock companies with thousands of employees (slaves), public accounts, and even joint shareholder meetings with differing classes of company shares. One wonders if there could have been rough-hewn J.P. Morgans and Jesse Livermores of the Roman age.
Human nature was certainly the same. As Petronius Arbiter wrote of the Rebublic's final years,
"...filthy usury and the handling of money had caught the common people in a double whirlpool, and destroyed them... the madness spread through their limbs, and trouble bayed and hounded them down like some disease sown in the dumb flesh."
Thus beginning with ancient Rome and the origins of financial speculation, Chancellor then takes an erudite journey through the forgotten touchpoints of speculative mania history - from "stockjobbing" in the London boom of the 1690s, to John Law and the South-Sea Mississippi Scheme, to the "Fool's Gold" of the 1820s and the Railway Mania of 1845.
The book then covers speculation in the Gilded Age, and rounds out the 20th century with a look at the crash of `29 and the go-go 1980s (via cowboy capitalism and, last but not least, Japan).
Needless to say, pollyanna permabulls will not much like this book. But for those with a natural contrarian streak and an acquired taste for the "dark side" (i.e. going short), "Devil Take the Hindmost" is a delicious and informative romp.
The lessons of speculative mania are clearly a warning to unrestrained bulls, but they hold an important message for bears too: Manias can be quite dangerous, fatal even, for those who stand in their path without yielding.
The persistently recurring nature of the episodes Chancellor describes - and the ability of froth to reach incredible heights - is great testimony to the old J.M. Keynes warning: "The market can remain irrational longer than you can remain solvent."