Some of you know that I wrote a history book called Panic, Prosperity and Progress. The first chapter of that book discusses the “Tulipmania” of nearly 500 years ago, and since it seems no one can conjure up a better analogy for the Bitcoin mania going on than the aforementioned tulips, I thought I’d share a page from my book with some highlights. I thought of this particularly since Bitcoin futures (!!!) start trading within days, just like tulip futures were invented all those centuries ago.
On my crowded bookshelf of history texts is one book called Dot Con, which recounts the build-up to, and the bursting of, the Internet bubble. I hadn’t read this book in many years, but I pulled it from the shelf yesterday to thumb through it, since we seem to be living in identical times right now (although with a far more pervasive and much, much bigger, bubble). Here’s one quote I typed in for your reading pleasure. You’re welcome.
“All speculative bubbles go through four stages, each with its own internal logic. The first stage, which is sometimes referred to as the displacement, starts when something changes people’s expectations about the future…….a few well-informed souls try to cash in on the displacement by investing in the new vehicle of speculation, but most investors stay on the sidelines.
The early investors make extremely high returns, and this attracts the attention of others. Next comes the boom stage, when prices are rising sharply and skepticism gives way to greed. The sight of easy money being made lures people into the market, which keeps prices rising, which, in turn, attracts more investors. Eventually, those upstanding citizens who haven’t’ joined in the festivities feel left out. Not just left out. They feel like fools…..
Boom passes into euphoria. Established rules of investing, and often mere common sense, are dispensed with. Prices lose all connection with reality. Investors know this situation can’t last forever, and they vie to cash in before the bubble bursts……a larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish. Finally, inevitably, comes the bust. Sometimes there is clear reason for the break; sometimes, the market implodes of its own accord. Either way, prices plummet, speculators and companies go bankrupt, and the economy heads into recession. A few months later, everybody looks back in amazement, asking, ‘How did that happen?'”
Now that I’ve finished reading the entire book, I want to say once again that not only is it terrific, but it’s got to be one of the best books I’ve ever read. I cannot recommend it strongly enough. It delves into Western Philosophy, Eastern Philosophy, ethics, science, history, religion, racism, the exploitation of man, ecology, international relations, the age of the explorers…………it is a smorgasbord of information woven together into a volume which is educational, inspiring, and sobering.
I’m not sure what else I can say except………buy it and read it!
This stuff just writes itself these days…………
A few weeks ago, I was browsing Kepler’s Books in Menlo Park and saw a new book called The Patterning Instinct on their Recommended Reading table. Anything with the word “pattern” in it catches my eye, but it turns out this doesn’t have anything to do with the kinds of patterns you and I deal with in the financial markets. Instead, it is an engaging and deeply thoughtful exploration about how culture informs the way we think, live, and engage with one another (and with higher powers).
That which hath been is now; and that which is to be hath already been; and God requireth that which is past. – Ecclesiastes 3:15
I was mulling over for something to write about, and my eyes landed on the spine of the book The Fourth Turning, which is included in Slope’s Recommended Reading list. As I started thumbing through the book (already copiously highlighted by me), I wondered if I had already written on Slope about it. It turns out, yep, I did so twice – – first in August 2012, and second a couple of years after that. Hey, with over 20,000 posts on Slope, I’m entitled to forget.
If you’re interested in the book, I’d suggest checking out those two prior posts, but I’ll just say in brief that the book (written in 1997) contends that a “millennial crisis” will start in 2005, plus or minus a few years, and will last about twenty-five years from then. I daresay the authors would now agree that the 9/11 attacks constitute the “event” kicking off this fourth wave. As I’ve mentioned, the moment I saw the second plane hit, the first words out of my mouth to my wife were, “This changes everything.” Now, sixteen years later, I’d say that was true. (more…)
I’d like to do what I guess could be considered a flash sale of my latest book, which is described on the liner notes thus: “Making copious use of charts and basic technical analysis, Knight demonstrates how external shocks tend to create extreme reactions in the financial markets and how these predictable reactions provide opportunities for investors and traders to profit. Knight traverses five centuries of financial market history, from Tulipmania in the 1600s to the contemporary sovereign debt crisis. He looks at each event from the prism of the financial markets, examining the market climate prior to the event, during the event, and following the event.”