April 2020 – As we officially entered bear territory, the latest book of the month is Bull!: A History of the Boom and Bust, 1982 – 2004, a historical illustration of what happened during the previous boom-and-bust, and what we can learn from our past.
I entered the investment business in 1994 as a young analyst straight out of University. What this book taught me, when I first read it in 2003, was that I had little idea of what was happening in the capital markets. Today, I tell my young colleagues who are fresh to this business that day by day, you may observe the market actions, read all the front page headlines, or see trending hashtags on financial social media, all repeating one another on what the “experts” say is going on, which makes you think that you know what is going on…THINK AGAIN.
I learned as I poured over this book, which is a very well-researched chronicle of the bull market during which I started my career. This period of time was far more speculative than I, and many, truly knew. In 1982, the Dow was below 1000. Soon, the market rose and peaked above 11,000. The author, a true journalist, did a fantastic job of turning off the markets and conducting interviews with some of the most important analysts, market observers, and fund managers who told tales of excesses.
This book is an outstanding historical summary of what really happened and why it happened. I will always remember being in Santa Barbara, California at a Goldman Sachs Technology conference during the very peak on March 10, 2000! The priceless experience of the dot-com bubble was nothing in university can ever prepare you for.
“ A boom is just capitalism’s way of setting up the next bust”
“…you never know what the American public is going to do, but you do know that they will do it all at once.”
“The stock market is a place to make money, but in runaway bull market, it is not a place to stash it for safekeeping”
“The problem when you’re a money manager is that your fans keep yelling “Swing you bum!”
“When the cost of capital is zero – how many businesses do you start? You’re only limited by the waiting line to get lawyers and bankers to do the paperwork.”
“…the most dangerous error investors make… is to mistake probability for certainty”
“..in truth, a knowledge of history is an investor’s best defense against error. “