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Justin Fox


Subtitle: A History of Risk, Reward, and Delusion on Wall Street, Harper Collins, NYC, 2009, 382 pgs., index, notes, cast of characters


Reviewer's comments -
Of course these chapter titles 'random walk' - are meant to bug Burton Malkiel, the preeminent prophet of the 'rational market'. This is an excellent critical appraisal of the havoc academic economists have made out of investing in the stock market. But the same fundamental theories about economics, markets, money, and human behavior have created havoc also in the Government - Treasury and FED - efforts to manipulate monetary policy and much else related to economics. The reader should study this book in conjunction with study of James Rickards' The Road to Ruin and the other books I list, especially . The author's narrative of the creation of each of the modern theories about investment, risk, money and the rest proceeds chapter by chapter in describing the 'contributions' of the principal and numerous perpetrators. He should be thanked and congratulated for providing the list of these characters with brief statement about themselves and influences. His narrative begins with Irving Fischer's theory of the relationship between the quantity of money and price levels in the market and proceeds through the years of the Great Depression but picks up in detail after World War II with the growth of theory as it becomes more and more the significant influence on all actors in the market - especially those who claim to be able to create optimum conditions by assessing and predicting critical issues such as risk and reward. As his title indicates, he believes all of this posturing is nonsense and delusion. The culmination of it all is the financial collapse in 2008 in which all the theorizing was shown to be worthless or worse, faulty.


Introduction: It had been working so exceptionally well

The author grabs the readers' attention by opening with former FED Chairman Alan Greenspan's meaa culpa before Congress by admitting he didn't know what was going on and his guiding theories (even that he was guided by theory) proved to be mistaken. The heading line is a quotation from Greenspan. The remainder of the book is the step by step description and analysis the anatomy of the establishment theories about economics.


Early Days
Chapter 1 - Irving Fischer Loses his Briefcase, and then his Fortune


Chapter 2 - A Random Walk From Fred Macaullay to Holbrook Working


The Rise of the Rational Market
Chapter 3 - Harry Markowitz Brings Statistical Man to the Stock Market


Chapter 4 - A Random Walk From Paul Samuelson to Paul Samuelson


Chapter 5 - Modigliani and Miller Arrive at Simplfying Assumption


Chapter 6 - Gene Fama makes the Best Proposition in Economics


The Conquest of Wall Street
Chapter 7 - Jack Bogle Takes on the Performance Cult (and wins)


Chapter 8 - Fischer Black Chooses to Focus on the Probable


Chapter 9 - Michael Jensen Gets Corporations to Obey the Market


The Challenge
Chapter 10 - Dick Thaler Gives Economic Man a Personality


Chapter 11 - Bob Shiller Points out the Most Remarkable Error


Chaper 12 - Beating the Market With Warren Buffett and Ed Thorp


Chapter 13 - Alan Greenspan Stops a Random Plunge Down Wall Street


The Fall
Chapter 14 - Andrei Shleifer Moves Beyond Rabbi Economics


Chapter 15 - Mike Jensen Changes His Mind About the Corporation


Chapter 16 - Gene Fama and Dick Thaler Knock Each Oher Out


Epilogue: The Anatomy of a Financial Crisis


Cast of Characters
A very valuable help to the reader is this alphabetical 'who's who'

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