The Corner for Sept. 13, 2013

Recently I reread Edward Chancellor’s book, “Devil Take the Hindmost: A History of Financial Speculation” (Farrar, Straus and Giroux, 1999) and was reminded that some books on the markets must reread from time to time. This is especially true for hard-nosed market professionals and an indispensable read for the millions of relatively new investors, stockbrokers and financial advisers. “Reminiscences of a Stock Operator,” by Edwin Lefèvre, is another book that should be read every few years.

Just a reading of the back cover of Chancellor’s book containing quotes from industry giants should be enough to get one to read this book. The book is an unconventional history of financial speculation. In his own words Chancellor states, “I have not attempted to produce a comprehensive history of speculation — such a task was likely to yield an unwieldy and repetitious tome whose final page would never be written. Instead, I concentrate on occurrences of speculation in the leading economic powers of the day…” And does he ever.

“Devil Take the Hindmost” is as good as its gets in analyzing great speculative booms and busts. While the book concentrates on the last 300 years, it focuses on the last century. In addition, Chancellor goes back to the origins of financial speculation during the Roman republic and empire. As a teaser, below are some of the quotes that follow his chapter headings.

“There must certainly be a vast Fund of Stupidity in Human Nature, else Men would not be caught as they are, a thousand times over, by the same Snare; and while they yet remember their past Misfortunes, go on to court and encourage the Causes to which they were owning, and which will again produce them.” Cato’s Letters, January 1721

“Speculation, at first a sentiment, or if you please, a taste, passes next into a habit, then it grows into a passion, a master passion, which like Aaron’s serpent, swallows up and strengthens itself with other passions. It becomes at last more fierce than anger, more gnawing than jealousy; more greedy than avarice, more absorbing than love. The stock-market may be likened to a withered old harridan, enameled, painted, and decked in the latest mode, which leers on the speculator, and points to golden prizes, that like the desert mirage, fades away and leaves him to his ruin.” William Fowler, Ten Years on Wall Street, 1870

“Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. When you read contemporary accounts of booms or panics, the one thing that strikes you most forcibly is how little either stock speculation or stock speculators today differ from yesterday. The game does not change and neither does human nature.” Edwin Lefèvre , Reminiscences of a Stock Operator (1923)

“The four most expensive words in the English language are, ‘this time it’s different.’” Attributed to Sir John Templeton (1990s)

Quote of the week: “The best, most insightful study of speculation and bubbles I have read. It should be required reading for every investor.” — Barton M. Biggs, chairman, Morgan Stanley Asset Management (on the back cover of “Devil Take the Hindmost”)

Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.

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