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A Decade of Delusions: From Speculative Contagion to the Great Recession



"Frank Martin is a great value investor and an engaging writer. A Decade of Delusions contains his real-time commentaries from the dot-com mania through to the subprime crisis. Anyone interested in investment should buy a copy."—Edward Chancellor, author, Devil Take the Hindmost: A History of Financial Speculation

"Frank Martin, ace value investor, walked the walk. Now, he talks the talk. A fine and bracing read!"—James Grant, Grant's Interest Rate Observer

"By updating and extending his excellent Speculative Contagion, Frank Martin has demonstrated the enduring power of the value-based approach. These dispatches from the front line of investing during the delusional decade provide many insights into both the process and discipline needed to do the right thing."—James Montier, author, Value Investing: Tools and Techniques for Intelligent Investment

When the dot-com and real estate bubbles burst, few investors were spared acute financial pain. So, how did an investment advisory firm located in Elkhart, Indiana—one of the cities hardest hit by the 2008 economic downturn—not only survive, but thrive amid the madness of speculative markets? By remaining rational.

In A Decade of Delusions: From Speculative Contagion to the Great Recession, renowned investment manager Frank Martin shares, through real-time client communiqués and essays, how he steered his investors' capital through economic turmoil as the markets lurched from boom to bubble to bust and back again. His account serves as an eye-opening example of how keeping your money starts with keeping your head.

As investors continue to grapple with ongoing market instability, the book offers helpful guidance on how you can assess risk, safeguard your capital, and grow your investments over time. After mastering the strategies outlined in these pages, you will be ready to face the future with confidence, no matter what might be in store.

Frank K. Martin, CFA, founded Martin Capital Management in 1987 after twenty years of experience in municipal finance and, later, mergers and acquisitions. Martin's post-secondary degrees are from Northwestern University and Indiana University. He resides in northern Indiana with his wife, Marsha. He has three adult children. Additional biographical information can be found at


Chapter 1 Lead Us Not into Temptation.

May Reason Prevail.

Patience and Persistence.

The Dean of Wall Street Revisited.

The Investor's Dilemma.

It's a Numbers Game.

The Supremacy of Earnings.

'Stealth Compensation'.


Chapter 2 Techno Babble, Techno Bubble.

A Tale of Two Markets.

Back to the Future?

Warren Buffett on the Stock Market.

Is the Internet the Answer?

What's a Long-Term Investor to Do?

Investment Redefined.

Chapter 3 'Pop!!'.com.

Risk: No Longer an Afterthought.

Investment Strategy: Is It Time for Technology?

Is There a Snowball Rolling Our Way, Gathering Mass and Speed?

The Art/Science of Managing Risk.

Baby Boomers: Whither Goest Thou?

The Internet and IPO Frenzy.

Fool's Gold.

Goliaths Slain.

Chapter 4 Swimming against the Current.

Prelude to Our Investment 'Strategy'.

Interest Rates: It Had Better Be Uphill from Here.

The Power of Popular Delusions.

The Mind of Crowds.

Investment Consultants: The Great Middleman Myth.

Chapter 5 Limbo World: How Low Can You Go?

Investment Strategy.

The Reckoning.

Sober in the Morning.

Bottoms Up.

The Margin-of-Safety Paradox.

Waiting Patiently for Those Hanging Curves.

Chapter 6 Only Fools Rush In.

The Rogues Gallery, 2003 Vintage.

Making Progress in the Post-Bubble Environment.

How Did We Get Here in the First Place?

The Apogee of the Mutual-Fund Boom.

The Great Abdication of Fiduciary Responsibility: The Defined-Contribution Plan.

Where the Buck Really Stops.

Chapter 7 Expanding Concern: A Bigger Bubble?

Maybe the Markets Are Not Random?

A Short History of Financial Euphoria.

Fully Deluded Earnings: Penance(?) in the Cuff-Links Cooler.

Run for the Roses: Of Pawns, Guinea Pigs … and 'Retail Investors'.

'Swing, You Bum!'

Marathon Endurance.

Chapter 8 What History Teaches.

Free Markets: Popular Delusions and the Madness of Crowds.

Aspiring to Rationality by Overcoming Heuristic Biases.

Today Is Not Tomorrow: Cycles and Differing 'Opportunity Sets'.

Inverting the Traditional High-Risk/High-Return Paradigm.

The Inevitability of Regression to the Mean.

There Are No Called Strikes in the Investment Ballgame.

Focus on the Important.

The Malevolent Mathematical Mystery of Modern Money Management (a.k.a. MPT).

The Absurdity of the Collective Wisdom of Individual Irrationality.

Diversification and the Myth of Safety in Numbers.

The New-Era Error.

Chapter 9 Contagious Speculation.

The Means to the End.

The Perfect Storm? Viewing the Vista Through the Lens of History.

The Blossoming of the Financial Economy: The Cataclysm in the Creation of Credit.

Bubbles Are Indigenous to the Financial Economy.

If Housing Prices Roll Over.

A Remarkable Story of Risk Management—Run Amok.

The Perfect Storm Redux.

Capitalism: When 'Financial' Overwhelms 'Commercial'.

Minsky: A Prequel?

The Evolving History of Economics, Finance: Reflections.

Chapter 10 The Tipping Point.

Excerpt from Quarterly Capital Markets Review, July 2007.

Draft of Letter to MCM Clients, July 2007.

Quarterly Capital Markets Review, October 2007: What's Up, Doc?

Cyclical or Secular? The Current Crisis in the Larger Context of Cause and Effect -- Connecting the Dots through Time.

The Misalignment of Incentives and the Opaque World of High Finance.


An Early Epitaph for the First Decade of the New Millennium.

Credit-Default Swap Alchemy: Transmuting Junk into Gold.

Counterparty Risk.

Chapter 11 The End or the Beginning?

Origins of a Crisis: Decoupling Risk and Return.

The Question on Which the Future of Investment Hangs.

Stockdale Paradox: What Do Survivors Have in Common?

Know Thyself.

Harsh Realities and the Snowball Effect.

The Future of Risk Aversion.

Price is What You Pay, Value is What You Get.

The Lost Decade.

The Most Powerful Force in the Universe.

Value Investors: A Rare Breed.

Risk—Once Again a Four-Letter Word?

Analysis and Intuition: The Yin and Yang.

Epilogue 'This Time Is Different'.

Those Who Don't Remember History…

The Insidious Disappearance of Accountability.

The Intersection of the Philosophical and the Pragmatic.

Respect for Risk … Just for a Fleeting Moment.