So apparently everyone who is anyone has already read this book. Except me. It’s been sitting on my Kindle for months – untouched and unloved until very recently. But having started on this compendium of 1960s New Yorker articles just last week, I am now about a third of the way into it and all I can say is that this is the way business writing should be – full of fascinating and powerful narratives that tell you something about human behaviour as much as finance and markets and corporate intrigue. Oh, and the prose is to die for. You know, if that’s your thing.

Given recent events, one passage in the first chapter of the book struck me as particularly prescient.

It’s from an article on the “little crash” of 1962, when stock markets dipped precipitously in a single day. It’s full of quaint historical insights into the pre-computerised equity market but it also is incredibly relevant to some of the current liquidity concerns overriding fixed income markets. Here plenty of people have been discussing the potential risks posed by large asset managers should they or their investors ever decide to collectively unwind the massive positions they have built up in corporate debt in recent years. Very similar concerns existed five decades ago and on that day in 1962 investors got a very interesting test case to evaluate the role of mutual funds in a market crash.

Rather than further roil the stock market, however, it turns out asset managers proved to be a stabilising force.

Here’s author John Brooks’ account:

The role of the hero was filled, surprisingly, by the most frightening of untested forces in the market – the mutual funds. The Exchange’s statistics showed that on Monday, when prices were plunging, the funds bought 530,000 more shares than they sold, while on Thursday, when investors in general were stumbling over each other trying to buy stock, the funds, on balance, sold 375,000 shares; in other words, far from increasing the market’s fluctuation, the funds actually served as a stabilizing force. Exactly how this unexpectedly benign effect came about remains a matter of debate. Since no one has been heard to suggest that the funds acted out of sheer public-spiritedness during the crisis, it seems safe to assume that they were buying on Monday because their managers had spotted bargains, and were selling on Thursday because of chances to cash in on profits. As for the problem of redemptions, there were, as had been feared, a large number of mutual-fund shareholders who demanded millions of dollars of their money in cash when the market crashed, but apparently the mutual funds had so much cash on hand that in most cases they could pay off their shareholders without selling substantial amounts of stock. Taken as a group, the funds proved to be so rich and so conservatively managed that they not only could weather the storm but, by happy inadvertence, could do something to decrease its violence. Where the same conditions would exist in some future storm was and is another matter.

Indeed.

Business Adventures: Twelve classic tales from the world of Wall Street