This book can be considered a sequel to the author's previous book, Debunkery, which I read and reviewed earlier this year. The main thesis of this book is that people tend to forget about (or ignore) market history, which results in misconceptions and improbable projections about the relationship between market performance and various economic and political factors. To give some examples from the book:
- In the past few years there has been plenty of talk about the risk of a "double-dip recession," even though it is an improbable event, reflecting less than 10% of past recessions.
- People tend to forget that major drops in the market are often followed soon after by strong rebounds, producing a V-shaped pattern.
- Even though the market's average annual return has been around 10%, it is actually rare for the return in a given year to be around 10%.
- If you are a perma-bear, then you will be wrong more often than right because the market has positive annual returns about two-thirds of the time.
Note: I read this book in September 2012.