Bull! A History of the Boom, 1982-1999
Maggie Mahar recognizes nine stock market cycles of bear markets alternating with bull markets since 1882—the last being the down cycle starting in 1999. Although other commentators view market-timing as a speculative technique, she believes that successful investors—even those like Warren Buffett who stress stock valuation—actually profit by correctly timing when to buy and sell stock. Mahar is skeptical of the popular 1990’s investment strategy of buying and holding growth stocks indefinitely. Using hindsight, she notes that United States Treasury bonds purchased in 1996 would have increased by 78 percent by March, 2003, while an investment in the stock market index earned half as much.
The author concentrates primarily on the years between 1982 and 1999, enlivening her coverage of business history and economic theory by focusing on people involved in the stock market. She also narrates the experiences of investors, from billionaire Buffett, to housewives speculating on stocks, and workers newly expected to manage retirement accounts.
Mahar is scathing in her description of the way market professionals misled unskilled investors. Greedy executives used complacent company directors to enrich themselves with lavish stock options that diluted shareholder’s equity. Creative accountants deceived investors by recording non-existent profits. Mutual fund managers, needing to produce continual growth to keep their jobs, helped inflate the bubble by concentrating on the same high-flying stocks. Federal Reserve chairman Alan Greenspan, though skeptical early in the boom, later supported the bubble by pouring money into the economy. Financial journalists uncritically announced a new economic era. Throughout the period, Wall Street promoters profited regardless of the merits of the merchandise they sold.
This well-written and informative history entertains the reader, and includes ideas investors can use to examine their long-term financial strategy.