the money man
This time is never different
By TOM JACOBS
In today’s accelerated society, it’s hard to remember that everything isn’t happening now. Advertising and marketing are designed to keep us from focusing on anything but today so we’ll buy products. In the money world, it’s essential to step back from the daily “market up, market down” drivel, whose only purpose is to encourage us to purchase financial products we don’t need to fill the sellers’ pockets.
The best advice is usually, “Don’t just do something, stand there!” But that’s hard to do without perspective. Reading about money in other times can be calming and help us tune out the noise and haste. When every few years someone declares “This time it’s different!” we can reply confidently that it never is. Here are a few recommendations for good reads.
Once in Golconda (Crash of 1929 and up to founding of Securities & Exchange Commission, or SEC) and The Go-Go Years (late 60s-early 70s boom and bust), by John Brooks. Brooks was a New Yorker staff writer for decades whose beat was finance. That magazine’s writing is top notch and Brooks was a star among stars. These two wonderful books remind us that no matter how bad we think Wall Street is today, it was far, far worse then. Titans, rogues, and more.
The Panic of 1907, Robert Bruner and Sean Carr. I “read” this on audiobook, and the narration is great. Short and jargon-free, this book shows how the financial and market panic of 1907 shares so much with the 2008-09 horror (this time is never different). When the financial world appears to be falling apart, J.P. Morgan calls all the big bank presidents into his mansion’s library and locks the door until they do a deal to take care of the credit crisis. No one else had that power – not the Secretary of the Treasury, Federal Reserve Chairman (because there was no Fed until its third incarnation starting in 1913), or the President. Great stuff.
Fooled By Randomness, Nassim Nicholas Taleb. Yes, his The Black Swan is great; he defined the term now used everywhere but understood rarely. This is the better book. Because we spend our lives bending over to pick up nickels, oblivious of the steamroller approaching, we misunderstand random events as having patterns (tea leaves, daily market movements), and patterns as being random. Think the housing and credit crisis was unusual? The banking sector goes under about every 20 years, with the Bush I era saving and loan debacle followed two decades later by the 2008-09 disaster. Credit expands, mud hits the fan, round and round we go.
Where Are the Customers’ Yachts? Fred Schwed, Jr. and Reminiscences of a Stock Operator, Jesse Livermore. Though written decades apart, they go hand in hand. The first book’s title comes from a story where a wealthy Wall Streeter is showing a European visitor his and his friends’ luxury yachts in the harbor. The visitor asks, “But where are the customers’ yachts?” (“Customer” was the then-Wall Street term for the individual investor.) Exactly. Schwed is witty and spot on. Livermore’s book concerns his own wild life as a trader in the early 20th century, starting as a boy out of grammar school. He plays every game, rising and ultimately falling for good. His book is a warning. Both are delightful in audiobook.
History can be as dry as a desert, but these books are rain. Finance may not have the magnetic effect of, say, my good friend Lonn Taylor’s weekly delights to your right, but these titles transcend finance to keep you turning the pages. Enjoy.
Tom Jacobs is a Marfa-based fee-only Investment Advisor and Portfolio Manager of Huckleberry Capital Management, serving clients throughout the Big Bend, 20 states and three foreign countries. You may contact him for an informal and free consultation at firstname.lastname@example.org and 432-386-0488.