Readers reviews of MARKET PANIC

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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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