My assignment by the editors of Financial Advisor to write monthly about favorite books has prompted me – as I’ve said before in this space – to the rediscovery of any number of volumes that I recall fondly. This month, it led me back to a book which, I’m startled and delighted to report, is even better than I remembered it.

That book is Edward Chancellor’s Devil Take the Hindmost: A History of Financial Speculation. The fact is that I had long meant to get to it in these essays, as a worthy alternative to the most rigorous – and certainly the greatest – book of its kind, Charles Kindleberger’s definitive Manias, Panics and Crashes. But it is inexpressibly richer than just a CliffsNotes Kindleberger.

Chancellor was writing in the near-terminal stages of the greatest bubble of all time – he is careful to date the very end of his manuscript to December 13, 1998 – and when one read the book in 1999, one was of course struck by its terrible timeliness. The more sentient reader knew, as so clearly did Mr. Chancellor, that we were living the nightmare again.

But on returning to Devil Take the Hindmost a very eventful decade and a half later, one is delighted to find not merely a more accessible but a more rounded history than one was aware of at the time. For as Chancellor himself points out, Kindleberger’s model takes an almost purely economic viewpoint. Whereas he is interested – as we advisors must be – in speculative euphoria and its inevitable denouement as social and psychological phenomena.

An advisor coming anew to Chancellor could quite profitably read just the first sixty pages of this book, as a most economical history of the capital markets and their speculative excesses from ancient Rome to the first great bubbles (the Mississippi Company in France and the South Sea Company in England) around 1720. But then Chancellor begins breaking the manias down episode by episode, as lucidly as anyone has ever done.

And if, as he gets to the late twentieth century, he passes a little too quickly over some events that were still very fresh in the reader’s mind, his 35-page chapter on the Japanese bubble of the 1980s is quite the best thing of its kind I’ve ever read. To this day, anxious clients ask advisors why the U.S. couldn’t find itself mired in a multi-decade market miasma like Japan’s. No one who has read Chancellor’s masterful account will have the least difficulty responding.

 

© 2016 Nick Murray. All rights reserved. Reprinted by permission. Nick reviews the latest books, articles and research findings in the “Resources” feature of his monthly newsletter, Nick Murray Interactive. To download the current sample issue, visit www.nickmurray.com and click on “Newsletter.”