Z&H Book Club: A History of the United States in Five Crashes

The first book has been checked off my Z&H Book Club list. One down, fourteen to go.

I finished A History of the United States in Five Crashes: Stock Market Meltdowns that Defined a Nation by Scott Nations today. If you are interested in financial market history, but don’t necessarily have the jargon knowledge, I recommend this book.

Nations analyzes five market meltdowns: Panic of 1907, Great Depression, Black Monday 1987, Great Recession of 2008, and the Flash Crash of 2010. Nations provides insight on the major event(s) that act as the snowball that will turn into an avalanche. For the Panic of 1907, it was the 1906 San Francisco earthquake coupled with trust funds.

For the Great Depression, it was a newly created Federal Reserve coupled with slightly more complex investment trusts.

For Black Monday, it was the Iranian-American conflict coupled with the popularization of portfolio insurance and topped with lax regulation.

For the Great Recession, it was a hodgepodge of lax regulation and a half dozen complex financial instruments that not even the most sophisticated investors fully understood.

For the Flash Crash in 2010, it was the Greek financial crisis coupled with unruly algorithms.

What I enjoyed about History of the United States in Five Crashes, aside from the fact its a history book, is how Nations does not go overboard with the jargon. He explains each financial concept in a simplistic way. He will even reference them in the later sections, building upon how the financial market has repeated the same mistakes and solutions throughout the past 110 years.

Another thing I enjoyed was the “tangents”. He will go into detail of the heroes and villains and inventors – where they came from, how they go to that position of power, even their hopes and dreams. For example, Alan Greenspan wanted to be a clarinetist and even got into Julliard for music before his life as an economist. Nations personifies these folks and companies, bringing the ghosts of the past back to life. You can feel the tension as Jack Morgan gathers the bankers around to save the economy in 1907. You can feel your heart sink as the Barclays algorithm drives S&P futures prices and stock prices to the ground as each second ticks by. It does seem a little out of place in some instances (i.e. giving a quick history of P&G when explaining their stock movement during the Flash Crash) and if it were me, I would have pushed some of the details to the footnotes, but that’s just me.

A History of the United States in Five Crashes: Stock Market Meltdowns that Defined a Nation may not be as popular as The Big Short or Black Swan, but I find it an essential read if an investor or investment banker wants to get a crash course on the modern American financial market and, more importantly, learn to prevent the mistakes of the past reappear in the future.