Devil Take
The Hindmost

A History of
Financial Speculation

Edward Chancellor
(Farrar Straus)

Part II

Mother would love Devil Take the Hindmost.She would know the market is crazy, taken over by "dam-fools" (her favorite phrase, aimed at politicians, stop-lights, and people who played the stock market like it was craps.)

She --- hell, everyone in their right mind --- knows that the current lunacy in the stock market has to end, and that its ending is going to be painful, destructive --- and quite possibly, disastrous for the political and economic system we operate under. For the last ten years, the stock market has gone into the stratosphere --- and all the smart investors, mindful of 1929 or 1969 or 1987 are either "fully-invested bears," or got the hell out --- to their immense sorrow --- three or four or five years ago.

There really is no good explanation for what has happened over the last decade. Where in the hell does all this madness come from --- stocks coming out at 30 and going to 120 in a week? Is it the last-in first-out inventory maintenance system that has revolutionized marketing in this country, freeing up so much surplus capital? Is it the computer finally coming into its own --- making so many stupid jobs so easy, making the making of money even easier? Is it the end --- after a half-a-century --- of the terrible fears associated with "the Communist Threat" and The Bomb? Is it a special new wisdom coming at us, from the Fed, from behind Greenspan's Cuban cigar? Is it the stars?

Is it the kids now reaching the age of expansive consumerism --- the ones who have been saddled with the obnoxious name of "boomers?" Is it the Internet?

Is it that the United States has finally figured out, after so many fits and starts, how to be marketer to the world? Is it that the multi-national corporations and what we used to call the conglomerates have finally figured out a way to get the U S Congress completely in their back pocket, so they can create unlimited wealth, legally, with no-one watching over their shoulders?

Whatever it is, it is very strange --- and some of us who lived through the dark ages of the 30's and the dislocations of 1973 - 1974 are uneasy. Very uneasy. Like trying to figure out how we can get the hell out before it is too late, but, at the same time, not wanting to be left out.

If you have any doubts about the disaster that's coming, Chancellor's book is the right medicine for you. He leads us through the most appalling booms and busts, starting with Rome, 200 BC, and including the Tulip Bulb Mania from four hundred years ago, the South-Sea Bubble, the Railway Mania of 1845, the "panics" at the end of the 1800s, the Crash of 1929, and "Kamikaze Capitalism" --- Japan's economic rise and fall from a decade past.

All this is quite uneasy making. Hell --- if I had anything substantial in the stock market at this late date, I would get it into government bonds as quickly as possible, leaving a bit under the mattress. "History," said Adam Smith, "may repeat itself --- but we are to never know how or why, and worst of all, when..."

He also said that the market is ruled by Greed on the upside, and Fear on the downside. But what happens when Fear keeps getting put off and put off and put off? The most recent and powerful drop in the market --- over 22% in one weekend in October of 1987 --- ended up with a blissful rise shortly afterwards, possibly engineered, Chancellor suggests, with government and industry fiddling the figures. Yet most of these young whippersnappers on both sides of the market have forgotten what happened that terrible weekend --- much less the dark days of 1973-74, where at times the specialists on the floor simply walked away from the telephones.

Somehow, all was righted again, and the stock market started to simmer, then boil over. At this writing, the over-the-counter market has almost doubled in ten months; price-to-earning ratios mean nothing anymore; dividends are down around the 1% level; and the margin debt on Wall Street along with consumer debt and corporate debt...well, you don't want to know.

As one of my friends said --- a lawyer who is preparing a e-company to go public this year --- people are afraid. But they are not afraid of getting invested in some doubtful stock and losing; rather, they are afraid of losing out if they are not in when it goes public. Fear has a new dimension --- now it is married to greed, and devil take the hindmost.

§     §     §

This is a dandy, sensible, and well-researched book. The first few chapters tend to be a bit can we get excited by tulip bulbs or the machinations of the East India Company? But the chapters on this last century are fascinating --- some facts we never knew: that Black Tuesday was followed, over the next few months, by a 50% spurt upwards in the Dow Jones Index; so that if you didn't lose your ass in October 1929, then you got sucked back in, losing what ever little stake you had left over in 1930 or 1931 or 1932 --- until the biggest rise to date occurred: in 1933. But who was there to take advantage of it?

"The stock-market may be likened to a withered old harridan," said William Fowler in 1870, "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."

--- Carlos Amantea

Go back to Part I

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