LIVING OFF DIVIDENDS & PASSIVE INCOME

The publishers of Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, were kind enough to send me a free copy to review.

I’m glad they did. It was an excellent read, similar in some respects to one of my all-time favorite investment books: Extraordinary Popular Delusions and the Madness of Crowds delves into human psychology and crowd behavior. Mobs, Messiahs & Markets is like a modern-day version with emphasis on investing and explores popular delusions like “real estate never goes down”, “stocks always go up”, “deficits don’t matter”, “you are either with us or against us”. When rational, intelligent human beings become part of a group, they are fine. However, as soon as they become part of a crowd, they lose all rationality and turn into blockheads! I found the book quite entertaining, with great wit and sarcasm to keep me amused.

The book talks about people who were determined to make the world a better place by making it conform to their delusions. People like Hitler for example! The authors also talk about how crowd think leads to wars and how wars are futile and never worth the cost. There’s also a complete chapter making fun of Thomas Freedman and his banal book “The World is Flat”. I never liked that book and apparently neither did the authors. There’s also a full chapter devoted to Alan Greenspan which was particularly eye-opening. It describes how his cowardice was responsible for the mess we’re in today. He exchanged his ideals when he went to Washington for fame and fortune. In his younger years, Greenspan apparently once said “In absence of the gold standard, there is no way to protect savings from the confiscation of inflation…The financial policy of the welfare state requires that there be no way for owners of wealth to protect themselves“. But once in Washington, he turned on the credit spigot and inflated the money supply 10-fold!

The end of the book explains how you should ignore the popular beliefs and learn to think for yourselves if you want to invest profitably. They also caution against buy and hold investing. There is no such thing as buy-and-hold, you are either long or short an investment. If you are in cash, then you are long currency and short stocks and vice-versa. In the current economic climate they encourage going long Gold and short the US Dollar, which they think will fail like all fiat currencies before it (there’s actually a pretty extensive list of defunct currencies on page 256). As they say, gold isn’t a typical investment but its more of a store of value. Since the value of the dollar is about to be destroyed, it makes sense to load up on gold.

Overall, it was a very interesting read. The first half was a little excessive in its mockery of public figures and events. But the later half more than made up for this by explaining how the government and various financial institutions swindle the common public. I plan on re-reading it for the sheer entertainment value alone!

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