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The first 7 chapters of this book are
excellent. They include new, clear, practical analysis of market panics. This is not a
dreary repeat of Dutch Tulip Bulbs. It is a re-consideration of panic behaviour in new and
interesting ways. He explores the value of defensive stocks in a market panic, and the way
that institutional traders panic just like any other individual. He argues, convincingly,
that institutional behaviour has added an important new dimension to market panics. His
classification of types of panics is timely. He does skip around the questions of why 2001
is different in terms of the low interest rate environment.
This book provides some challenging
thinking, until the last two chapters where it falls back into a repetition of old
assumptions. Part of this rests on accepting the rational vs irrational dichotomy which is
quite false. Investors may be more, or less emotional, but emotional behaviour is not the
same as irrational behaviour. Failure to make this distinction traps Vines into accepting
the conclusions of traditional analysis.
I found these chapters a disappointment, and at
times a cop out with claims that it is quite impossible to establish generalities in
deciding when to sell and that market success depends on prediction.
Despite this, the book is worth adding to your
trading collection. The approach to understanding the nature of market panics, covered in
the bulk of the book, is new and very interesting. It provides a clear analysis of the
effectiveness of the typically recommended defensive strategies, and explores some more
effective solutions. There is a lot of food for thought.
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