I laughed out loud. Fourteen percent? You've got to be kidding. In my first half-year of trading I'd made more than 100 percent. The only times I went wrong were times I stayed away from the trading screen.

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That conversation about Templeton, however, bore poisoned fruit, in the form of a 1932 reprint of a 1841 classic about bull markets and their victims: "Extraordinary Popular Delusions and the Madness of Crowds," by Charles MacKay. MacKay's book was one of Templeton's favorites. Since I was just beginning a reading binge about great stock market speculators (in an effort to better understand my heretofore undiscovered talent), I instantly found a copy and started reading.

That day marked the end of my innocent triumphs. I don't know what I expected: No, I do know. I expected a friendly romp through the history of stock market dopes whose bankruptcy would provide a suitably dark background against which the brighter stars of speculative adventure could be seen and appreciated. Today's deluded losers, I was sure, were the dummies who kept saying the Internet was a fad and the Internet stocks were a joke. My bank account told me who was having the last laugh about that.

I looked forward to a double handful of anecdotes of others who'd played the wrong runs, been plagued by the wrong timing, or been doomed by the wrong attitude, the better to torture my friends with. Although Templeton's returns were pretty weak by today's standards, he had been a player in his time, and I took it for granted that he would feel a kinship with me and my little victories over popular misunderstanding. If he was a fan of Charles MacKay, then I was prepared to be a fan, too.

The unexpected horror MacKay's tales inspired in me is hard to describe. Everybody knows about "Tulipomania." The Dutch went mad about tulips a few hundred years ago, and bid the price up outrageously, after which they came to their senses and the price fell. Big deal. Several hundred years later, their folly still lingers as the most trite of metaphors to be hauled out anytime someone thinks someone else is paying too much for something. Tulips were regularly mentioned on the stock discussion boards by desperate characters who were shorting a technology stock that continued, despite their evilest prayers, to go up and up. When I hear "tulip" I translate it this way: "I don't understand why this stock keeps rising but if it goes up another three points I'm going to be ruined." My response? "Tulip, you say? Time to buy more!"

So it wasn't MacKay's story of tulipomania that knocked me off my game, but his tale of the numerous London bankruptcies in the wake of the South-Sea bubble of 1720. Nearly everybody who touched the crappy shares of the South Sea company, with the exception of a few insiders, was damaged by the experience. Since MacKay tells it so well, there's no point in telling it again here. But the similarities to the run up in the Internet stocks were terrifying:

The advent of profitable trade with the Americas, sometime in the future, which would transform the economy of England; why, that was e-commerce. The South Sea directors and their cronies, who sold their shares into successive waves of buying; these were the Internet stock-option millionaires. The manipulation of the price to ludicrous heights using publicity; this was the laughable "we're now an Internet company" press release. The proliferation of meaningless business ventures by London sharpies in the wake of the first great success, including "a company for carrying on an undertaking of great advantage, but nobody to know what it is;" why, this was UBID, and KTEL, and Perfumania, and scores of others.

Explained MacKay: "It did not follow that all these people believed in the feasibility of the schemes to which they subscribed; it was enough for their purpose that their shares would ... be soon raised to a premium, when they got rid of them with all expedition to the really credulous." Hey, wait a second: that was me. In the end, everybody went broke.

One dose of pessimism led to another. Soon, I was devouring books about economic catastrophe. I read Charles Kindleberger's "Manias, Panics, and Crashes," from which I learned that one sign of impending doom is the emergence of financial swindles that capitalize on the general belief that it is easy to become rich. Each day, my e-mail queue was peppered with announcements of new stock picking services guaranteed to drown me with cash. In the past, I'd ignored them. Now, I saw them as omens of the rout to come.

Kindleberger even predicted the proximate cause of the latest phase of the bull run, which was the lowering of interest rates in late summer, 1998, in response to the Asian crisis. The head of the Federal Reserve Bank, Alan Greenspan, had long been critical of the uncorrected boom in share prices, but when the Asian economies faltered he cut interest rates anyway, though this was likely to set off another manic stock market run to record highs -- as it promptly did.

Kindleberger, in his dry prose, writing long before the fact, reveals why even conservative bankers can't head off a dangerous bubble under these circumstances: "When commodity and asset markets move together, up or down, the direction of monetary policy is clear. But when a threatening boom in share prices or real estate or both rears up when commodity prices are stable or falling, the authorities face a dilemma." Indeed, they do. Greenspan chose a nice, easy rate cut, and I had a hundred thousand dollars to show for it. For the first time, however, I began to reflect on the possibility that I would have all of this money stuck in a promising Internet stock on the very day that the market went South in a panic.

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