Savvy Nickel
by Edward Chancellor
Edward Chancellor's brilliant history of speculative manias from 17th-century Amsterdam to the dot-com bubble. A scholarly yet gripping account of how speculation has driven both financial innovation and catastrophic crashes throughout history.
*Disclosure: This article contains affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend books we genuinely believe in.
Edward Chancellor is a financial journalist and historian who wrote Devil Take the Hindmost as the dot-com bubble was inflating — an act of extraordinary prescience. The book traces speculative manias from 17th-century Amsterdam through South Sea, Mississippi, railroad, 1920s, and Japanese bubbles to the emerging internet mania. Chancellor demonstrates that speculation is not a modern aberration but a persistent feature of capitalist economies — and that the specific patterns of each mania are remarkably consistent across four centuries.
| Attribute | Details |
|---|---|
| Title | Devil Take the Hindmost: A History of Financial Speculation |
| Author | Edward Chancellor |
| Publisher | Plume |
| Published | 1999 |
| Pages | 368 |
| Reading Level | Intermediate |
| Amazon Rating | 4.5/5 stars |
Paperback: Buy on Amazon
Kindle: Buy on Amazon
Edward Chancellor is a financial journalist, historian, and investment advisor. After writing Devil Take the Hindmost, he worked as a financial strategist at GMO (Jeremy Grantham's firm) where he wrote extensively on investment bubbles and valuation. He is the author of The Price of Time (2022), a comprehensive history of interest rates. He is widely regarded as one of the best historical analysts of speculative markets.
Chancellor identifies consistent characteristics across every speculative mania in history:
1. Easy credit: Every major mania was preceded by an expansion of credit that made speculation more accessible.
2. A genuine new opportunity: Manias rarely occur around purely fraudulent opportunities. The railroads were genuinely transformative. The internet genuinely changed commerce. Japanese land scarcity was real. The speculative excess builds on a true foundation.
3. A plausible narrative: Each mania develops a story that explains why this time is different — why old valuation metrics do not apply and new ones are needed.
4. New participants: Retail investors who have no experience with the cycle's darker phase enter near the peak, having seen only the gains.
| Stage | Characteristics |
|---|---|
| Quiet accumulation | Informed early investors buy as credit expands |
| Public excitement | Media coverage increases; narrative spreads |
| Mass participation | Retail investors enter; new financial products created |
| Euphoria | Valuations detach from fundamentals; skeptics dismissed |
| Distribution | Informed investors exit; maintain appearances of commitment |
| Collapse | Credit contracts; forced selling; narrative collapses |
| Aftermath | Fraud exposed; regulations enacted; industry restructured |
Amsterdam created the institutional infrastructure for modern capitalism: the world's first joint-stock company (VOC, 1602), the world's first securities exchange (1611), short selling, options, futures, margin lending, and market manipulation. All the features of modern markets existed in 17th-century Amsterdam.
The tulip mania (1634-1637):
Chancellor's tulip account goes deeper than most. The mania occurred in a specific context:
The futures market was the crucial innovation: it allowed speculation far beyond the physical supply of bulbs. Contracts on future-delivery bulbs circulated among speculators who had no intention of taking physical delivery — pure financial speculation on price.
The collapse:
In February 1637, a routine bulb auction in Haarlem failed to attract buyers at the asking price. Word spread. Within days, the entire futures market collapsed. Most contracts were never fulfilled. The Dutch legal system, overwhelmed by the volume of contract disputes, ultimately refused to enforce many of the futures contracts — treating them as gambling debts.
The enduring lessons:
Chancellor provides the most thorough account of the South Sea Bubble available in a popular book.
The structural mechanics:
The South Sea Company was granted a monopoly on British trade with South America. The real business never amounted to much — Spain controlled South America and had no interest in granting access to British traders. The real business was financial engineering: the company was converting British government debt into South Sea shares.
The convertibility mechanism:
Britain's government had accumulated enormous debt from the wars of the previous two decades. The South Sea Company offered to take over this debt in exchange for shares. Holders of government bonds could exchange them for South Sea shares. The company's profits (ostensibly from the trade monopoly) would service the converted debt.
Why the price spiral:
The company itself controlled the share price during the conversion phase. It lent money to buyers of its own shares (using the shares as collateral). Rising share prices made the collateral more valuable, allowing more lending, which funded more buying, which drove prices higher. A perfectly circular price inflation that required continuously rising prices to function.
When the circle broke:
When the directors began selling their own shares in August 1720, the market detected the distribution. The Bank of England refused to extend further credit. The price collapsed from £1,000 to £150 within weeks.
The human consequences:
The investment lesson:
When insiders begin selling while publicly encouraging buying, distribution is underway. The specific mechanism (share lending, convertibility) can make this difficult to detect. Watching for insider selling relative to insider buying is a valuable signal.
Chancellor is among the first historians to document that there were multiple distinct railroad manias, not just one. Each mania funded genuine railroad construction. Each also massively overbuilt routes and overpriced securities. Each ended in widespread bankruptcy.
The pattern:
| Phase | Activity |
|---|---|
| Innovation | First railways prove commercially viable |
| Enthusiasm | Projectors propose hundreds of new lines |
| Parliamentary approval | Government authorizes most proposed lines |
| Capital raising | Share subscriptions oversubscribed |
| Construction frenzy | Tens of thousands of workers employed |
| Rate wars | Too many lines compete for traffic |
| Bankruptcy | Most lines cannot service their construction debt |
| Reorganization | Strongest lines absorb weaker ones at distressed prices |
The railroad investors who did best were not those who bought the original shares at peak enthusiasm — they were those who bought the reorganized companies' bonds at distressed prices after the crash.
Application to modern technology:
The internet bubble of 1995-2000 followed this pattern precisely. Enormous overinvestment in fiber optic infrastructure. Most companies went bankrupt. The fiber, however, remained — purchased in bankruptcy by successors who deployed it at zero marginal cost. The technological transformation was real; the share prices at peak were not justified.
Chancellor's account of the 1920s mania is enriched by comparison to the earlier manias:
New financial products of the 1920s:
The leverage amplification:
Investment trusts of the 1920s used leverage — borrowing to increase their share portfolios. When the market rose 50%, a 2x leveraged trust rose 100%. When the market fell 50% in 1929-1932, a 2x leveraged trust was wiped out.
Goldman Sachs Trading Corporation:
Goldman created multiple investment trusts in 1929, raising money from the public and investing it in other investment trusts (including other Goldman trusts). When the crash came, this pyramid of leverage amplified losses spectacularly. Goldman Sachs's reputation did not recover until after World War II.
Japan's experience provides the most instructive modern case study because it combined stock market and real estate mania simultaneously — and the aftermath (the "Lost Decade") shows what happens when policy fails to address the bust.
The scale of Japanese asset inflation (1985-1990):
| Asset | Price Change |
|---|---|
| Tokyo Stock Exchange (Nikkei) | +238% |
| Tokyo commercial real estate | +300%+ |
| Imperial Palace grounds | Estimated value: more than entire California |
At peak, the total notional value of all Japanese real estate was five times the total value of all U.S. real estate, despite Japan being 1/25th the land area.
The crash:
The Bank of Japan raised rates in 1989. The Nikkei peaked at 38,916 in December 1989. By August 1992 it had fallen to 14,309 — a 63% decline. Real estate followed more slowly but fell equally dramatically.
The aftermath — the Lost Decade:
Japan's policy response to the bust was inadequate:
Japan's Nikkei did not recover its 1989 peak for 35 years — until 2024. Real estate in many areas never recovered.
The investment lesson:
Asset price bubbles of sufficient size can produce multi-decade recoveries. The Great Depression, Japan's Lost Decade, and other post-bubble periods demonstrate that "just wait for the recovery" requires more patience than most investors realize. This is an argument for never paying prices that require perfect execution of an optimistic scenario.
Chancellor distills the common warning signs:
| Indicator | Warning Level |
|---|---|
| Market P/E ratio | Above 25x (vs. long-run average ~15x) |
| Price-to-book ratio | Above 3x market-wide |
| Shiller CAPE ratio | Above 30x |
| Price-to-GDP ratio (Buffett Indicator) | Above 150% |
| IPO volume | Multi-year record highs |
| Margin debt | Record highs as % of market cap |
| Sign | Description |
|---|---|
| New valuation metrics | Old metrics "don't apply anymore" |
| Taxi driver tips | Unsophisticated investors confidently recommending specific stocks |
| Magazine cover curse | Mainstream media celebrates the mania's leaders |
| Extrapolation of recent returns | "It's gone up every year for five years" |
| Complexity as justification | New financial products whose complexity obscures risk |
| Demographic destiny narratives | "Baby boomer investing will keep markets high forever" |
Chancellor engages the genuine debate about speculation's social value:
The case for speculation:
The case against speculation:
Chancellor's balanced conclusion:
Speculation is inseparable from capitalism. Attempts to eliminate it (Bubble Act of 1720, short-selling bans) typically fail and harm legitimate market functioning. The better approach: maintain adequate capital requirements, limit leverage, ensure disclosure, and educate investors about historical patterns.
Q: Is this better than Manias, Panics, and Crashes for understanding bubbles?
A: Different strengths. Kindleberger's book provides the theoretical framework (Minsky model) and systematic analysis. Chancellor provides richer narrative detail and qualitative warning signs. Read both for the complete picture.
Q: Is Japan's experience relevant to other countries?
A: Directly relevant. Japan's Lost Decade provided the template for what to avoid post-2008. Bernanke's Fed acted aggressively in 2008-2009 partly to avoid Japan's policy errors. The lesson applies wherever credit-financed asset bubbles of sufficient size develop.
Rating: 4.6/5
Devil Take the Hindmost is the richest narrative history of speculative manias available. Its consistent warning signs, the Japanese bubble account, and the railroad mania analysis provide genuinely valuable investment education. Every investor who wants to recognize bubble conditions before they become obvious should read it.
Paperback: Buy on Amazon
Kindle: Buy on Amazon
Prices current as of publication date. Free shipping available with Prime.
by Charles Mackay
Charles Mackay's 1841 classic chronicles the tulip mania, South Sea Bubble, Mississippi Scheme, and other mass manias. The original study of crowd psychology and speculative excess — still the most entertaining and insightful account of how rational individuals become irrational mobs.
by Charles P. Kindleberger
Charles Kindleberger's magisterial history of financial crises from the tulip mania of the 1630s to the modern era. The definitive academic treatment of speculative bubbles and the Minsky model that explains why financial crises are inevitable features of capitalism.
by Niall Ferguson
Niall Ferguson's sweeping history of finance from ancient Mesopotamia to the 2008 financial crisis. The most comprehensive single-volume account of how financial innovations shaped civilization — and why understanding financial history is essential for every investor.
Most people accept the first offer they get. That single decision can cost them hundreds of thousands of dollars over a career. Here's how to negotiate — and why the stakes are higher than they appear.
The ability to wait - to choose a larger reward later over a smaller one now - is the single most consistent predictor of financial outcomes. Here's the science, and how to actually build this skill.
Fractional shares let you buy a slice of any stock or ETF regardless of its price. Here is how they work, which brokerages offer them, and when they actually matter for your portfolio.