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A Decade of Delusions: From Speculative Contagion to the Great Recession

Book Description

The proven strategies rational investors require for success in an irrational market

When the dot-com and real estate bubbles of the 1990s and 2000s burst, few were spared the financial fallout. So, how did an investment advisory firm located in Elkhart, Indiana—one of the cities hit hardest by the economic downturns—not only survive, but also thrive during the highly contagious speculative pandemics. By remaining rational. In A Decade of Delusions: From Speculative Contagion to the Great Recession, Frank Martin founder of Elkhart, Indiana's Martin Capital Management offers a riveting and real-time insider's look at the two bubbles, and reflects on how investors can remain rational even when markets are anything but.

  • Outlines strategies the average investor can use to wade through the endless news, information, and investment advice that bombards them

  • Describes the epidemic of market speculation that gradually infects feverish investors

  • Details how investors can spare themselves the emotional devastation and accompanying paralysis resulting from shocking financial losses

Investors are still reeling from the instability in the market. A Decade of Delusions: From Speculative Contagion to the Great Recession provides the information investors need to achieve safety, liquidity, and yield.

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Dedication
  6. Foreword
  7. Preface
  8. Chapter 1 : Lead Us Not into Temptation
    1. May Reason Prevail
    2. Patience and Persistence
    3. The Dean of Wall Street Revisited
    4. The Investor’s Dilemma
    5. It’s a Numbers Game
    6. The Supremacy of Earnings
    7. “Stealth Compensation”
    8. Conclusion
  9. Chapter 2 : Techno Babble, Techno Bubble
    1. A Tale of Two Markets
    2. Back to the Future?
    3. Warren Buffett on the Stock Market
    4. Is the Internet the Answer?
    5. What’s a Long-Term Investor to Do?
    6. Investment Redefined
  10. Chapter 3 : “Pop!!”.com
    1. Risk: No Longer an Afterthought
    2. Investment Strategy: Is It Time for Technology?
    3. Is There a Snowball Rolling Our Way, Gathering Mass and Speed?
    4. The Art/Science of Managing Risk
    5. Baby Boomers: Whither Goest Thou?
    6. The Internet and IPO Frenzy
    7. Fool’s Gold
    8. Goliaths Slain
  11. Chapter 4 : Swimming against the Current
    1. Prelude to Our Investment “Strategy”
    2. Interest Rates: It Had Better Be Uphill from Here
    3. The Power of Popular Delusions
    4. The Mind of Crowds
    5. Investment Consultants: The Great Middleman Myth
  12. Chapter 5 : The “Greenspan Put”. . . Again
    1. Investment Strategy
    2. The Reckoning
    3. Sober in the Morning
    4. Micro versus Macro
    5. The Margin-of-Safety Paradox
    6. Waiting Patiently for Those Hanging Curves
  13. Chapter 6 : Only Fools Rush In
    1. The Rogues Gallery, 2003 Vintage
    2. Making Progress in the Post-Bubble Environment
    3. How Did We Get Here in the First Place?
    4. The Apogee of the Mutual-Fund Boom
    5. The Great Abdication of Fiduciary Responsibility: The Defined-Contribution Plan
    6. Where the Buck Really Stops
  14. Chapter 7 : Expanding Concern: A Bigger Bubble?
    1. Maybe the Markets Are Not Random?
    2. A Short History of Financial Euphoria
    3. Fully Deluded Earnings: Penance (?) in the Cuff-Links Cooler
    4. Run for the Roses: Of Pawns, Guinea Pigs . . . and “Retail Investors”
    5. “Swing, You Bum!”
    6. Marathon Endurance
  15. Chapter 8 : What History Teaches
    1. Free Markets: Popular Delusions and the Madness of Crowds
    2. Aspiring to Rationality by Overcoming Heuristic Biases
    3. Today Is Not Tomorrow: Cycles and Differing “Opportunity Sets”
    4. Inverting the Traditional High-Risk/High-Return Paradigm
    5. The Inevitability of Regression to the Mean
    6. There Are No Called Strikes in the Investment Ballgame
    7. Focus on the Important
    8. The Malevolent Mathematical Mystery of Modern Money Management (a.k.a. MPT)
    9. The Absurdity of the Collective Wisdom of Individual Irrationality
    10. Diversification and the Myth of Safety in Numbers
    11. The New-Era Error
  16. Chapter 9 : Contagious Speculation
    1. The Means to the End
    2. The Perfect Storm? Viewing the Vista through the Lens of History
    3. The Blossoming of the Financial Economy: The Cataclysm in the Creation of Credit
    4. Bubbles Are Indigenous to the Financial Economy
    5. If Housing Prices Roll Over
    6. A Remarkable Story of Risk Management—Run Amok
    7. The Perfect Storm Redux
    8. Capitalism: When “Financial” Overwhelms “Commercial”
    9. Minsky: A Prequel?
    10. The Evolving History of Economics and Finance: Reflections
  17. Chapter 10 : The Tipping Point
    1. Excerpt from Quarterly Capital Markets Review, July 2007
    2. Draft of Letter to MCM Clients, July 2007
    3. Quarterly Capital Markets Review, October 2007: “What’s Up, Doc?”
    4. Cyclical or Secular? The Current Crisis in the Larger Context of Cause and Effect—Connecting the Dots through Time
    5. The Misalignment of Incentives and the Opaque World of High Finance
    6. Edging toward the Precipice
    7. The “Simple” Question Why?
    8. An Early Epitaph for the First Decade of the New Millennium
    9. Credit-Default Swap Alchemy: Transmuting Junk into Gold
    10. Counterparty Risk
  18. Chapter 11 : The End or the Beginning?
    1. Origins of a Crisis: Decoupling Risk and Return
    2. The Question on Which the Future of Investment Hangs
    3. The Stockdale Paradox: What Do Survivors Have in Common?
    4. Know Thyself
    5. Harsh Realities and the Snowball Effect
    6. The Future of Risk Aversion
    7. Price Is What You Pay, Value Is What You Get
    8. The Lost Decade
    9. The Most Powerful Force in the Universe
    10. Value Investors: A Rare Breed
    11. Risk—Once Again a Four-Letter Word?
    12. Analysis and Intuition: The Yin and Yang
  19. Epilogue “This Time Is Different”
  20. Index