October is the month of the great market crashes of the last century. And in reviewing what I called my sentimental favorite book about the 1920s’ mania and crash some months ago in this space – John Brooks’ Once in Golconda – I said that I’d have to get to my intellectual favorite one of these months. October seems ideal.
The book is Maury Klein’s Rainbow’s End: The Crash of 1929. It appeared – in the highly respected Pivotal Moments in American History series – in 2001, hard on the heels of the implosion of the dot.com bubble, and before it was clear how that epic decline would finish playing out. I devoured it at the time, have read it a couple of times since (including for this review), and continue to find it the very best narrative of the great boom and crash that we have.
And narrative history it certainly is, as distinct from economic analysis. Professor Klein acknowledges at the outset that the crash remains a historical problem -- that there is no settled scholarship as to the causes of the crash, and even less agreement on the linkage (if any) between the crash and the Great Depression.
So, after briefly reviewing the competing theories, he settles into straight narrative history at its very best, and tells the whole epic human drama in the appropriate – which is to say entirely non-academic – prose.
Until the 1920s, there had never been as deep and all-encompassing an economic expansion – nor one whose technologies reached into so many American homes and workplaces. Indeed, until our own time, there was never a greater burst of technological advancement – in electrification, automobiles, radio, refrigeration and a host of other labor-saving, productivity-enhancing devices. But nowhere was there a more tectonic cultural shift than in corporation finance, as throughout the 1920s it migrated from bonds to common stocks – and the newly-prosperous American public went mad for them.
No one has ever recounted the inevitable denouement – hour by hour and day by day – as vividly as Maury Klein. Reading him today – as one first did in 2001 – one is schooled yet again in the immutability of human nature. Rainbow’s End should be a part of every financial advisor’s education.
© 2015 Nick Murray. All rights reserved. Reprinted by permission. Nick reviews current 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.”