Not so far from the madding crowd...

“Never follow the crowd.”

—Bernard Baruch  (1870 – 1965)

American financier, speculator, & public figure

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Gratuitous embedded music video of the day:

“Who wants honey, as long as there’s some money?”

B¡lly C0rgan of the Smash¡ng Pumpk¡ns,
“¢herub R0ck,” S¡amese Dream  (1993)

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Here are two token positive quotes about market investment and speculation.

“A speculator is a man who observes the future, and acts before it occurs.”

—Bernard Baruch

“If there were no bad speculations there could be no good investments; if there were no wild ventures there would be no brilliantly successful enterprises.”

—Francis W. Hirst  (1873 – 1953)

British economic journalist

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In keeping with the times, the rest of the observations I include are inevitably more circumspect, cautionary, or outright negative.

“The main purpose of the stock market is to make fools of as many men as possible.”

—Bernard Baruch

“There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.”

—Mark Twain  (1835 – 1910)

iconic American writer

“Another great evil arising from this desire to be thought rich; or rather, from the desire not to be thought poor, is the destructive thing which has been honoured by the name of ‘speculation’; but which ought to be called Gambling.”

—William Cobbett  (1762 – 1835)

British journalist & reformist thinker

“[T]he stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average. … People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes.”

—Robert Shiller  (b. 1946)

prominent American economist,
Irrational Exuberance, 2nd ed.  (February 2005)

This graph shows the recent housing hypervaluation
that helped to dramatically inflate 2000s securities values,
as derived from data included in Shiller’s 2005 book.
(The graphic was skillfully assembled by Wikipedian “Frothy.”)

“October.  This is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May, March, June, December, August, and February.”

—Mark Twain

The hunt for dread October...

I cannot find the original context for Twain’s quip.  Of course, he never lived to see the most spectacular stock market crash of the twentieth century, spanning October 24 – 29, 1929, (or the “roar” that preceded it, which he likely would have laid waste to with his wit).

However, the 1907 stock market panic, which traced many of its roots to the previous year, unfolded dramatically in an October.  It also overlapped with a sudden monetary contraction and a widespread banking panic.

If you mention the “Panic of ’73” today, some baby boomers may think of the supply shock crisis that began in mid-October of 1973 when OPEC began waging a campaign of punitive crude oil pricing against the U.S.  From its period peak in January 1973 to its relative nadir in early December 1974, the DJIA lost almost half of its value.
[ (577.60_12/6/74 – 1047.59_1/5/73) / 1047.59  =  –44.86% ]

The “Black Monday” nose dive of October 19, 1987 was the largest single-day percentage market loss.  (Oddly, the related recession didn’t set in until a few years later.  Even now, the reasons for the speculative volatility of the latter ’80s and subsequent late-onset stall in the economy remain opaque, especially compared to other recent recessions.)

“Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.”

—Henry Ford  (1863 – 1947)

American industrialist

“The speculation economy is one in which business management focused on production is replaced with business management focused on stock price.”

—Lawrence E. Mitchell

business/corporate law expert,
The Speculation Economy: How Finance Triumphed Over Industry  (2007)

“The short-termism of the late 1990s and early twenty-first century simply is an exaggeration of a quality that was embedded in the American economy a hundred years ago.  The typical public corporation we know today, what I will call the giant modern corporation, was created during the merger wave of 1897 to 1903.  It gave birth to the modern stock market.  As it did, it transformed speculation from a disruptive game, played by a few professionals and thrill-seeking amateurs that from time to time erupted into a major frenzy, into the very genetic material of the American stock market, American business and American capitalism.”

—Lawrence E. Mitchell

The Speculation Economy ...  (2007)

“Now, speculation — in which the focus is not on what an asset will produce but rather on what the next fellow will pay for it — is neither illegal, immoral nor un-American.  But it is not a game in which [the vice chairman] and I wish to play.  We bring nothing to the party, so why should we expect to take anything home?

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs.
Nothing sedates rationality like large doses of effortless money.  After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball.  They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future will eventually bring on pumpkins and mice.  But they nevertheless hate to miss a single minute of what is one helluva party.  Therefore, the giddy participants all plan to leave just seconds before midnight.  There’s a problem, though:  They are dancing in a room in which the clocks have no hands.”

—Warren Buffett  (b. 1930)

American executive, investor & philanthropist,
FY2000 Chairman’s letter to Berkshire Hathaway, Inc.

“In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do.  We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

—Charles Mackay  (1814 – 1889)

Scottish journalist & writer,
“National Delusions,” Extraordinary Popular Delusions and the Madness of Crowds  (1841)

“Money, again, has often been a cause of the delusion of multitudes.  Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper.”

—Charles Mackay

“National Delusions,”
Extraordinary Popular Delusions ...

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!”

—Charles Mackay

“National Delusions,”
Extraordinary Popular Delusions ...

“Some in clandestine companies combine;
Erect new stocks to trade beyond the line;
With air and empty names beguile the town,
And raise new credits first, then cry ’em down;
Divide the empty nothing into shares,
And set the crowd together by the ears.”

—Daniel Defoe  (ca. 1660 – 1731)

English writer,
orig. publ. context unknown
(quoted by Mackay)

“If a man walks in the woods for love of them half of each day, he is in danger of being regarded as a loafer.  But if he spends his days as a speculator, shearing off those woods and making the earth bald before her time, he is deemed an industrious and enterprising citizen.”

—Henry David Thoreau 
(1817 – 1862)

American naturalist &
Renaissance man, Life Without Principle  (1854/62)