Bulls from bears

We stock brokers rarely learn from history. Past tendencies play little role in investment decisions. At least people with money to invest did not learn anything meaningful between 1987 and 2008. Or, if they did, they failed to apply the financial lessons those years impart.

That is the story of Panic: The Story of Modern Financial Insanity an anthology edited by Michael Lewis, a former Wall Street insider turned journalist and best-selling author.

The book shows who and what got us into the mess. It covers all the landmark crises between 2007 and 2008. The anthology shows how many money managers were animated by greed, false knowledge and arrogance.

It picks on the government regulators who looked askance--the few who did bother to investigate could not ferret more than a tiny percentage of the recklessness and dishonesty in the systems.

Most of the book is racy. Some of it is dry stuff, unless you get thrills from stock market jargon, but there is a helpful glossary for those who can't tell a bear from a bull.

For the most part, the book harks back to the days when the Dow Jones industrial average was past the 2,500 mark. It quotes quaint talk of "the rush to commercialize the Internet". It nods to the flashy excesses of James Cayne, the soon-to-be chief executive of now-humbled Bear Stearns.

The scariest part of the book is about the mortgage collapse. Fortunately, Lewis has the wit to open this section with Dave Barry's views on how to get rich in real estate: "You don't have to take any risk, or work hard, or even have a central nervous system. That's how profitable real estate is."

Panic is essential learning material for those who operate the markets. But will they learn?

Pranav Bahl is a stockbroker