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Subtitle: A History of Risk, Reward, and Delusion on Wall Street,
Harper Collins, NYC, 2009, 382 pgs., index, notes, cast of characters
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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.
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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.
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Early Days
Chapter 1 - Irving Fischer Loses his Briefcase, and then his Fortune
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Chapter 2 - A Random Walk From Fred Macaullay to Holbrook Working
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The Rise of the Rational Market
Chapter 3 - Harry Markowitz Brings Statistical Man to the Stock Market
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Chapter 4 - A Random Walk From Paul Samuelson to Paul Samuelson
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Chapter 5 - Modigliani and Miller Arrive at Simplfying Assumption
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Chapter 6 - Gene Fama makes the Best Proposition in Economics
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The Conquest of Wall Street
Chapter 7 - Jack Bogle Takes on the Performance Cult (and wins)
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Chapter 8 - Fischer Black Chooses to Focus on the Probable
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Chapter 9 - Michael Jensen Gets Corporations to Obey the Market
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The Challenge
Chapter 10 - Dick Thaler Gives Economic Man a Personality
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Chapter 11 - Bob Shiller Points out the Most Remarkable Error
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Chaper 12 - Beating the Market With Warren Buffett and Ed Thorp
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Chapter 13 - Alan Greenspan Stops a Random Plunge Down Wall Street
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The Fall
Chapter 14 - Andrei Shleifer Moves Beyond Rabbi Economics
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Chapter 15 - Mike Jensen Changes His Mind About the Corporation
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Chapter 16 - Gene Fama and Dick Thaler Knock Each Oher Out
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Epilogue: The Anatomy of a Financial Crisis
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Cast of Characters
A very valuable help to the reader is this alphabetical 'who's who'
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