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Title: The Arrogance Cycle

Subtitle: Think You Can't Lose, Think Again

Author: Michael K. Farr

Narrator: Bruce Horlick

Format: Unabridged

Length: 7 hrs and 45 mins

Language: English

Release date: 12-30-11

Publisher: Michael K. Farr

Ratings: 3 of 5 out of 2 votes

Genres: Business, Career Skills

Publisher's Summary:

What is the arrogance cycle? We've just lived through it. As market bubbles build, our confidence level rises (dis)proportionately. Everyone wants in on the action. We want to believe Wall Street, and once we do, the inevitable happens. Like Dr. Frankenstein breathing life into inanimate flesh, investment professionals sought ever more novel ways to create wealth. The only problem was that it was all artificial. In The Arrogance Cycle, Michael Farr examines the forces at work on individuals and markets and explains in clear, concise, layman's terms how we got to where we are.

relaying first-hand experience with investment clients, he provides a case study of the arrogant investor. In reviewing failed enterprises like Enron, AIG, Lehman Brothers, and Bear Stearns, as well as the illegal activities of Bernie Madoff and others through the lens of arrogance, the book sheds light on those disasters and offers a means to detect the insidious presence of arrogance so that in the future we can contain the damage before it spreads.

Members Reviews:

Average book....see if the local library has a copy

I (mistakenly) purchased this book based upon the "five star" reviews it received. After a quick read (and it is a quick read), I was sorely disappointed that I spent my money on this item. One might consider reading the book (perhaps your local library will buy a copy...I'd sell them mine!) and concentrating on chapters 7-9 (pages 144-199 at ~300 words per page; should take you about an hour, at most, to read). Interestingly, two of the glowing reviews are from the Washington DC area. As the author operates a firm in this region, one wonders how these reviewers might be related to the author. But alas, I digress...

The book's central thesis is that arrogance leads to bubbles and bubbles lead to crashes. This is hardly a new concept as investment hubris has been well-recognized for centuries (tulips, anyone?). Much of the book is a rehash of the 2007-09 financial meltdown, with some name-calling for the cast of characters including Bernie Madoff, Enron, AIG, etc. If we eliminate this portion of the book, perhaps 20-25% covers actual investment ideas, including a brief quiz to measure your investment "arrogance" (chapter 7) and some "factors" looking at where we are in the arrogance bubble (chapter 8). In fact, the eighteen pages that comprise chapter 8 are the most data-driven concepts in the book. Here, the author explores three correlated (and I use this term loosely) factors related to market bubbles: Personal saving rate, income distribution, and consumer confidence. For the latter, the time to worry about a bubble is when consumer confidence is running high and people are euphoric. Again, this is hardly new information as folks have found a variety of cyclic, counterintuitive signals ranging from put-call ratios to AAII's investor bullishness that can signal market tops or near tops. In regards to income distribution, the author posits that each time the top 1% of the population earns more than 20% of the pretax income, a market crash follows.