The Great Crash 1929 by J.K. GalbraithSummary: There can be little doubt that J.K.Galbraith's classic book about investment markets, The Great Crash 1929, is required reading for all investors. What is often not so well understood is that it could easily be required reading for all college students, adults and watchers of human nature. We review this excellent book here... To your author, there are perhaps 5 investment related books that everyone should read. The Great Crash 1929 is one of those books. It is packed full of insight and clarity of a situation which probably had no clarity at the time.
A great example would be the following passage which has been copied from the Introduction of my 1969 copy. These words were written by Galbraith in a 1961 update: "Even in such a time of madness as the late twenties, a great many men in Wall Street remained quite sane. But they also remained very quiet. The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them. There is always the fear, moreover, that even needful self-criticism may be an excuse for goverment intervention. That is the ultimate horror." As these words are typed in late 2008, the credit crunch is in full swing, investment banks have collapsed, governments have 'bailed out' banks and insurance companies, and still despite all this, the above words are still accurate. Many - if not all - of Galbraith's books can be an entire education in themselves. He was hyper-literate and wrote dozens of books and many tens of thousands of words. And yet, The Great Crash 1929 was always his bestselling title. That must say something. Galbraith is clear about the role of speculation in the market before the depression and the impact of leverage on the average person's portfolio and returns. Whether this relates to the stock market, the boom and bust in residential property in recent years or other asset classes, one thing remains the same: human nature. It is this observation of human nature that makes the book such a must read. Whether you are a stock market investor or speculator or not, sooner or later you will want to make your money make more money and it is this aspect of ourselves that is so revealing.
"The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximise the suffering, and also ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and more urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 25 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price within the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable." Such timeless writing about a phenomenon that we can never escape (human nature) deserves as wide an audience today as it has received for the last several decades. For an investor and virtually every other thinking adult, The Great Crash 1929, is required reading and highly recommended. To read more about bear markets in general, please visit the following pages:
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