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Investment Books Review #3: - Extraordinary Popular Delusions
and the Madness of Crowds
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Article
Investment Books Review #3: - Extraordinary
Popular Delusions and the Madness of Crowds
This book was chosen by the Financial Times as one of the
ten best books ever written on investment - and with good reason
- it’s a timeless classic!
A Classic Insight into Crowd Psychology
First published in 1841, Extraordinary Popular Delusions
and the Madness of Crowds is often cited, as the best book ever
written about market psychology.
Today, it is one of the most widely read books to warn investors
of stock market bubbles and busts. The version published by
Wiley also includes Joseph de la Vega’s 1688 classic, Confusion
de Confusions - along the same subject lines.
Extraordinary Popular Delusions and the Madness of Crowds,
explores the sometimes hilarious - and sometimes devastating
impact of crowd behavior- and trading greed and fear on financial
markets.
This book clearly shows us how crowd psychology has never
changed - and how greed and fear are always present.
This book gives us three great examples - such as:
. The tulip mania of 1634 - when tulips actually traded
at a higher price than gold!
. The South Sea bubble
. The Mississippi madness.
These three examples confirm that greed and fear have always
been the driving forces of financial markets - and furthermore,
that being sensible and clever is no defense against the allure
of a popular scheme, when big money is being made.
Think we don’t make the same mistakes today? - Think again!
Just think back to the huge interest in, and the price rises
and falls during the Dot Com frenzy of speculation in the 1990’s
Lessons to be learned
The moral of popular manias is - beware of frenzied speculation
- wherever it occurs.
When the next stock market bubble comes along, (and it will)
investors are advised to recall the fate of investors of an
earlier time - and avoid their misfortunes.
Really, all investors should read this book - and critical
acclaim for it is almost universal - and here are just a couple
of comments:
This is the most important book ever written about crowd
psychology and, by extension, about financial markets. A serious
student of the markets and even anyone interested in the extremes
of human behavior should read this book! - Ron Insana, CNBC
You will see between its staid lines (written in ye olde
English and as ponderable as Buddha's navel) that, despite what
the media says, nothing really important has changed in the
financial markets in centuries. - Kenneth L. Fisher, Forbes.
Destructive Emotions
Markets are still driven by the emotions of greed and fear
today - just as they were in yesteryear - and this book graphically
illustrates the point.
This book covers much more than just the financial markets
- it covers a whole gambit of situations, where the crowd makes
stupid investments - based on their emotions, rather than logic.
While this is not a book that tells you how to trade - it
does illustrate more clearly than any other book, how stupid
investors are - when they submit to their emotions.
Stand Away from the Crowd for Financial Success!
This book is essentially a lesson in trading discipline
- and how standing aside from the crowd, will make you a successful
investor.
Read it - and absorb its timeless wisdom!
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