Market history: manias, crashes and manipulation

Reading for India · about 5 min

What this cluster is for

Financial history is the most enjoyable thing to read about markets and the easiest to waste. You finish a good account of 1929, you feel wiser, and nothing about your account has changed.

These 10 articles are built to prevent that. Each one ends with something you do on your own broker app, your own annual reports or your own trade history, in about 10 minutes. The stories are here in full, and they are accurate — including the parts where the famous version is wrong — but the story is the delivery mechanism, not the point.

By the end of this cluster you will have:

Found every rupee or dollar of borrowed money behind your own positions, including the sources that never call themselves borrowing
Written down, for your largest winner, what would have to be true in 10 years to justify today's price, and whether you believe it
Discovered who has authority to move shares out of your own demat account
Read what your bank or lender actually lends against, from its own annual report
Measured your real drawdown tolerance from your trade history rather than from your opinion of yourself
Learned to tell a price driven by a business from a price driven by positioning, and to measure the difference with free public data

Nothing here names a stock to buy. Every action works on any holding, in any decade, in either country.

A note on the history itself

Financial history is unusually badly reported, and this cluster corrects several things you have probably read.

Most of the popular tulip mania story comes from Charles Mackay's book of 1841 and does not survive contact with the archives. The claim that computers alone caused the 1987 crash cannot explain why Hong Kong, which had none of the machinery, fell twice as far. The SEC's own examination of January 2021 found that short covering was not the main driver of GameStop's rise and found no evidence of a gamma squeeze. Where the record and the legend differ, these pages follow the record and say so.

Figures, dates and casualty numbers carry a marker throughout. Historical numbers are widely misquoted, and a flag is better than a confident wrong number.

The reading order

The first 4 are the manias, in chronological order. The next 5 are crashes and manipulation. The last one is the synthesis, and it is the one that turns the other 9 into an instrument.

The manias

Tulip Mania, 1637 — a price supported only by the next buyer does not decline, it stops. And most of what you have read about it is not true.
The South Sea Bubble, 1720 — Newton's intelligence did not help, because intelligence was not the faculty being tested.
1929 and the Great Depression — leverage does not amplify your losses. It removes your ability to be patient.
The dot-com bubble, 2000 — the story was correct and the prices were still wrong. Those 2 facts do not conflict.

The crashes and the manipulation

Black Monday 1987 and the machines — a stop at a round number is a queue, not a plan.
The Harshad Mehta scam, 1992 — manipulation lives in settlement and funding, not in the price chart.
The 2008 global financial crisis — lenders die of funding, not of losses.
The COVID crash, 2020 — speed of a fall is the one feature that carries no information, and the only one most people react to.
GameStop and the meme-stock mania, 2021 — 2 kinds of price move, and only 1 of them has a reason to continue.

The synthesis

The anatomy of a bubble — the same 5 stages every time. It is a position-sizing instrument, never a timing one.

The checklist

Every article ends in an action. Collected here, they are one afternoon's work, and they are the most valuable thing in this cluster. Tick them off as you go.

Your own account, once — the 30-minute block

Total every source of borrowed money behind your investments: margin or MTF balance, pledged shares, loan against securities, personal loan, gold loan, home loan top-up, credit card, and the contract value of any futures or options position. Divide by portfolio value. (3)
India: find whether your broker holds a POA or the narrower DDPI over your demat account. Narrow it if you can. (6)
India: open the monthly CAS from CDSL or NSDL and confirm your holdings and pledges. Register for CDSL Easi or NSDL IDeAS. (6)
United States: confirm cash or margin account, whether your shares can be lent, and your SIPC coverage. Check the broker on FINRA BrokerCheck. (6)
Find your worst-ever drawdown in your trade history, and write down what you actually did in the 8 weeks after the low. (8)

On what you already hold

For your largest winner, write the 10-year sentence: what this company must earn to justify today's price, and whether you believe it. Date it. (1)
Write 1 sentence for every holding saying why you own it. Mark each B for business, P for person, N for cannot finish. Add up the money in P and N. (2)
For the largest P holding, check what that person actually owns and when they last changed it — Form 13F in the US, shareholding pattern or fund disclosure in India. (2)
For any bank, NBFC, housing finance company or insurer you own, directly or through a fund: what the loans are secured against, the proportion unsecured, the NPA trend, and where the funding comes from. (7)
Run the 5-question bubble checklist over your largest holding, then ask whether you would put that percentage of fresh money into it today. Reduce to the weight you would choose. (10)

On what you are about to do

Check every stop you have placed. Move any that sits on a round number or a well-known chart level. (5)
Before buying anything moving violently: short interest and days to cover in the US, delivery percentage in India. (9)
Check whether the stock is on the exchange's ASM or GSM list in India. (9)
Compare the 5 largest companies by market value today with the 5 largest 20 years ago, in both countries. Then check how much of your own portfolio sits in today's 5. (4)

Habits that cost nothing

Ask of every position: what price forces me to sell? (3)
Ask of every rising price: who has to buy, and when do they stop having to? (9)
Ask of every lender: how fast can the money leave? (7)
Keep the dated notes this cluster asks you to write. They are the only record of what you believed before you knew the outcome. (1, 8, 10)

India and the United States, equally

Every article covers both markets at the same depth, and then says where the 2 differ and what the difference tells you.

Those sections carry the most practical content in the cluster, because the divergence is real. India controls the mechanism: daily price bands, restrictions on short selling, surveillance frameworks, upfront margin, and a depository record in your own name. The United States controls information: disclosure of institutional holdings, insider trades within 2 business days, twice-monthly short interest, and no daily cap on how far a price can move.

That means the same investigation uses different tools in each country, and a piece of advice written for one market can be useless or actively wrong in the other. Where India has no genuine equivalent of a Western episode — and for 1637 and 1720 it does not — these pages say so rather than invent a parallel. Where India has its own version, and for 1865 Bombay, 1992 and 2001 it does, that version is given at full depth.

What this cluster will not do

It will not help you call a top. Every episode here contains people who were right about value and were destroyed by timing, and this cluster names several of them.

Everything useful that comes out of 4 centuries of manias is about how much, never when. If you finish these 10 articles able to describe the pattern, and still holding 40% of your money in the thing that went up most, you have read the history and missed the lesson.