A Decade of Delusions: From Speculative Contagion to the Great Recession

Chapter 9

Contagious Speculation1

Source: © FactSet Research Systems.

Chapter 9 is composed primarily of excerpts from the 2005 and 2006 MCM annual reports. Bracketed material within the final three chapters (9–11) of the book represents 2010 comments by the author for A Decade of Delusions. And as noted at the start of Chapter 1, brackets also are used on occasion for clarity in quoted material. In some cases, changes have been made in 2010 for the purpose of clarity—and to avoid repetition. Not all of these changes are bracketed. In the author’s opinion, such changes do not materially alter the meaning conveyed in the original annual reports and other writings. If the reader has any doubts, all original documents can be found on the Martin Capital Management web site: www.mcmadvisors.com.

Chapter 8 was the closing segment of Speculative Contagion. Did the journey through those seven years of real-time history unearth any nuggets of enduring insight that had practical application?

I have often wondered aloud about the utility of John Kenneth Galbraith’s A Short History of Financial Euphoria. What he didn’t venture to do was risk opining on either the present or the future. His scholarly efforts gained ground through the focused lens of reflection, but they lost ground in failing to capture the triggering factors that gave impetus to the formation of epidemics. He also didn’t ...