Bernstein, Peter L. (1970). Economist on Wall Street: Notes on the Sanctity of Gold, the Value of Money, the Security of Investments, and Other Delusions. New York: Macmillan.

Review by Hum Nath Panta

Understanding different aspects of market, economy and investment is very crucial to investors, practitioner, fund managers, portfolio managers, academicians and investment analysts. The book entitled “Economists on Wall Street” by Peter L. Bernstein is an excellent resource to all who have interest on investment, financial market and economy. The “Economist on Wall Street” is an excellent collection of articles of Peter Bernstein from 1955 to 1970. It includes author’s interesting observations on very important and relevant issues including priorities, stock market, inflation and its control, gold, the intricacies of monetary policy, the future of dollar, the dilemmas of household finances, developments in portfolio management, influence of institutional investors, rules of optimal mixes, and philosophy and fantasy.

Peter Bernstein is an author of many famous books in economics and finance. He has published countless articles in many professional journals. He worked as a professor and portfolio manager. He has published many best selling books including A Primer on Money, Banking, and Gold, and The Price of Prosperity including Economists on Wall Street. “Economist on Wall Street” is one of his best books. His role as an author of books on issues related to money and investment is very appealing to me due to his profound experience and knowledge on this field. He has the unique ability to synthesize various issues related to economic history and investment. “Economist on Wall Street” is an excellent example of the author’s ability to analyze and synthesize money and investment related issues precisely. Moreover, the inclusion of forwards by financial luminaries and new introduction provides fascinating picture of author’s best time in the Wall Street.

The author provides in-depth analysis of various aspects of stock market. In other words, he presents a detail insight about different topics related to investment especially on stock market. There are seven chapters and most of the chapters include several articles on related topics. The author starts from a simple introduction to priorities. In this book, the author extensively elaborates his experience on stock market and investment related issues. The second chapter includes several articles which give a detail insight about the stock market. Other important issues such as inflation and economy are discussed in detail in chapter three. Moreover, the author discusses about gold and balance of payments in chapter four, the economist as portfolio manager in chapter six and philosophy and fantasy in chapter seven. Thus, the author starts from very basic introduction to priorities and then extends his ideas on complex issues such as philosophy and fantasy. Although the author has organized his thought process in seven different chapters, the central issues discussed in each chapter is stock market and security pricing. The author presents his views precisely in each chapter concentrating around the stock market which is the central them of this book.

Among the chapters presented in this book, chapter two and three strike on the central them of the book. Chapter two presents author’s view points about stock market. It contains several essays which are relevant to understand stock market. For example, Fulbright hearings on the stock market provide very precise analysis of how a sense of perspective on the present can sharpen our ability to foresee about the future. According to the author, Fulbright hearings conclude the need for public education to protect the public against emotional and uninformed action in stock market. This is very relevant idea even today especially when we are facing a greatest financial crisis after the great depression of 1929. Moreover, this essay provides perspective through analysis of the nature of speculative excess and describes the disastrous consequences that can follow from it. The author also provides an extensive analysis on how stock price could fall 75 percent to 80 percent from their present lofty level and could extend over period of horizontal movement. Furthermore, the author shades light on important issues and concludes that current market trends are part of a dangerous speculative bubble or rather a sign of an important change. All these issues discussed in this book are very relevant these days. Thus, the author has put very accurate perspective on several issues related stock market.

With regard to institutional investors, the author believes that they run risk of becoming the victims of their own emphasis on short term performance and are indeed becoming to substitute speculative for investment. So their action can lead all investors across the threshold of danger. The influence of growing institutional share ownership may cause wider rather than narrower price changes in future. This book also provides an extensive analysis of bear market, its properties, importance of volume, introduction to growth and value stocks while explaining the feel of the market. Indeed, the author’s analysis on bear market is very informative and persuasive.

Although the author has covered a wide range of issues in this book, the central idea is about stock market and investing. The ideas presented in this book are vary relevant and practical. Through understanding of this book may help investors and portfolio managers to achieve their investment objectives. The author covers issues an investor or portfolio manager should know adequately. The most interesting chapter in this book is “The Feel of the Market”. This is the heart of this book. It provides very valuable information an investor or fund manager needs to know in the stock market. Through understanding of this chapter helps understanding stock market. For example, understanding of price movement in long run, institutional investing and institutional speculator, the anatomy of the bear market, volume, gold crisis and security market, and growth versus growth companies are core areas and investor or a fund manager must know.

The author precisely conveys his ideas. I want to include some extracts from the book which give an idea on how the author presents convincing points he wants to convey. In page 28, second paragraph he writes, “The old buy and hold investments philosophy no longer works and was in fact buried in the avalanche of 1962”. In page 29, second paragraph, he writes, “In our technology oriented economy portfolio management now requires more than college economies and a careful reading of the wall street journal. Furthermore, on the frontier of growth, change is rapid. The security analysts must be alert informed and willing to abandon old favorites for new ones”. In the last paragraph of page 181, he writes, “In investing the greatest disasters are really limited only to those investors who are forced to liquidate at moments dictated by external events”. These extracts give an idea how simplistically the author presents convincing points.

In conclusion, the issues presented in this book are descriptive and in chronological fashion. The author supports his arguments by example. This is the great part of author’s writing style. The author presents his case in very simple language and the ideas and evidences presented in this book are convincing and persuading. Therefore, I highly recommend that anybody interested in stock market and investing should read this book.