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Extraordinary Popular Delusions and the Madness of Crowds & Confusión de Confusiones (Wiley Investment Classics) Hardcover – December 28, 1995
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"...the book sears into modern investor minds the dangers of following the crowd." -- Greg Heberlein, The Seattle Times
"This is the most important book ever written about crowd psychology and, by extension, about financial markets..." -- Ron Insana, CNBC
"You will see between its staid lines...that...nothing really important has changed in the financial markets in centuries." -- Kenneth L. Fisher, Forbes
From the Inside Flap
Priceless investment wisdom from two timeless classics Can you imagine tulips trading at a higher price than gold? Thats just what happened in 1634 as Tulipmania swept across Holland. Nearly a century later, stock prices in England soared as a bold proposal to pay off the national debt caused a fleet of bubble companies to form in its wake. But what happened when the bubbles burst? Did these famous incidents simply demonstrate the potential for market volatility, or did they reflect outbreaks of mass hysteria? Charles Mackay brought his own unique perspective to this, and a number of other remarkable episodes, when the legendary Extraordinary Popular Delusions and the Madness of Crowds first appeared in 1841. The Dutch East India Company was the hot stock to watch in the early days of the Amsterdam stock exchange. But the price action became hard to unravel once speculation and treacherous deceit came into play. Market manipulation, it seems, was a factor even at the dawn of modern exchange trading. Joseph de la Vegas 1688 Confusión de Confusiones offered a first-hand account of seventeenth-century market complexities that rings remarkably true even today. Exploring the sometimes humorous, sometimes devastating impact of crowd behavior and trading trickery on the financial markets, this book brilliantly combines two all-time investment classics. Financial analyst and author Martin S. Fridson is your guide, and the result is an insightful new volume that is a quirky, entertaining, and thoroughly intriguing journey back through time. From the investment strategies of Bernard Baruch, to Japanese land prices, junk bonds, and the collapse of Baring Securities, the farreaching influence of Mackays and de la Vegas revered works remains potent and truly timeless. By juxtaposing Extraordinary Popular Delusions and Confusión de Confusiones, this unique book points up the interesting contrast in their respective conclusions. Mackay believed that "periodic outbreaks of mass hysteria" led to volatile market activity, while de la Vega saw "cunning behind the markets convulsions." Both interpretations are worth examining for their fascinating commentaries on market movement and investment psychology. Viewed from within the context of events of our own time, these classics are must reading for all those seeking a greater understanding of the stock exchanges frequently erratic behavior.
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B. But be careful which of the many offerings you buy.
First off, many of the editions in Amazon are partial reprints of the original 1841 edition. Anything with 200 or so pages is badly incomplete. The book you want must have all 16 chapters.
Second, most of the print editions, especially those claiming about 400-odd pages, are complete, but have type so small as to severely limit your reading pleasure. You must understand there is no copyright protection for the original English author so anyone can rip it off, and to make the most money many of these "artists" try to print as few literal pages as possible. The two editions I have bought (in 1967 at a bookstore and 2003 on Amazon), both published in London, have about 700 pages, including the dozen or so original hand illustrations. This is the print edition you want.
Third, to solve the type-size problem, acquiring a Kindle edition can be a good answer. It can also be priced as cheaply as 99 cents or even 0. But beware of what it contains as well. When I clicked on the Kindle version of a complete 16-chapter print version (the one on which I am writing this review) it turned out that the free Kindle version was shorted to just a few chapters, which I was able to discover only after I downloaded it
Fourth, the completely independent book, Gustave Le Bon's "The Crowd", originally published in 1895 is equally worth reading.
You'll love both books; make sure you actually enjoy them and get the whole things, as well.
One edition I have, when I originally bought the book in the early days of the market boom, before it went bust, had a foreword by Andrew Tobias who said "If you read nothing else in this book, read about the economic bubbles." (the South Sea Company bubble of 1711–1720, the Mississippi Company bubble of 1719–1720, and the Dutch tulip mania of the early seventeenth century). And he was right, when people were rushing off to buy stock at top dollar as they 'went public', I counselled many friends to look at what they were buying. One manager I knew got into the bubble mania and bought several thousand dollars of pre-IPO stock. Day one the stock jumps some 1000% in few hours (roughly it was $5.50 to start and $55 by the end of the day), and is lording it over everyone; 6 months later when he could sell it (according to contract) it was down to $2 and something a share.
This is book that should be on the shelf of every home library. From the Witch trials in Salem, to the Alchemists and other charlatans he shows us that the world is filled with people with who are always with the crowd and utterly mad.
"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." - Charles Mackay
"We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first." - Charles Mackay