By Christopher Farrell Ah, memories of the late '90s. The stock market climbed to record highs week after week. Journalists spun dreams of a New Economy. Dot-com entrepreneurs attracted billions of venture-capital money. Wall Street investment bankers took companies public at outrageous multiples, only to watch prices zoom into the stratosphere. More Americans participated in the stock market than ever before, with over half of U.S. households owning equities.
"And, as the market soared, you could feel it," writes David Denby, author of American Sucker. "You would have to be insensitive not to feel it. All around, in the suddenly resplendent corporate pomp of once-dreary San Jose in Silicon Valley, in the crisp linen and sparkle of a downtown Manhattan restaurant at lunch-time, in the fattened pages of new and brazenly successful Internet magazines like the Industry Standard -- in all these places and many more, you could sense the thrilling, oxygen-rich happiness of wealth being created overnight."
HOUSE OF CARDS. Those were heady days. Denby, staff writer and film critic for The New Yorker, chronicles his disastrous fling with the stock market toward the end of the boom and well into the bust. He became a CNBC junkie and talked incessantly about the market. He struck up friendships with analyst Henry Blodget, the Pied Piper of dot-com stocks, and Sam Waksal, the charismatic biotech entrepreneur. Denby also attended high-tech conferences, such as George Gilder's annual look at the new paradigm, high in the Sierra Mountains.
Denby's goal was to make a million-dollar profit in a year. No, I'm not kidding. His marriage was breaking up, and he was desperate to hold on to their seven-room apartment on the Upper West Side of Manhattan. He needed that much money to buy out her share, so he assembled a portfolio composed in part of a $325,000 inheritance from his mother plus joint savings with his soon-to-be-ex-wife and put 80% of the money into high-tech stocks.
You can probably guess the outcome: He ended up losing about a million dollars, at least on paper.
FRIEND OF SAM. American Sucker purports to capture an era, the passions of the nation obsessed with getting rich quick, a time of mass mania when speculation was all the rage. A good writer, Denby deftly describes seeing and hearing conversations about money and investments everywhere, from street corners to coffee shops. And he draws a nice profile of Sam Waksal, the irrepressible CEO of ImClone (IMCL), who is now serving time for insider trading.
Yet American Sucker isn't an illuminating look at the economy and markets of the 1990s. Sure, there was a lot of speculation, and we can all share stories of appalling investor ignorance. But the only sucker in this book is Denby. After all, this is a man with The New Yorker on his calling card who got sound financial advice from savvy business journalist John Cassidy, a colleague, and Arthur Leavitt, then head of the Securities & Exchange Commission, among others. He just didn't listen.
Many of his stories and musings are pedantic and ring hollow, more like literary criticism than economic analysis. Denby only skims the surface, never delving deep into what was different about the New Economy and its embrace of financial markets. Although I'm skeptical of much of the current commentary on the burst bubble, anyone interested in gaining insight into this period would do better to pick up Dot.con by John Cassidy, Bull by Maggie Maher, or Origins of the Crash by Roger Lowenstein.
FLESH AND FLATTERY. Denby isn't really writing about the market. That's just a conceit, a marketing device, an invented "concept." The book is really a revealing tale, a lacerating portrait of a middle-aged man who falls apart along with his 18-year marriage and eventually regains his equilibrium (in a smaller apartment, of course). He tells in detail about his obsession with online pornography, eventually replaced by endless watching of CNBC.
We learn about a disappointing experience in bed, his susceptibility to flattery at Manhattan cocktail parties with the rich and famous, his nightly cocktail of NyQuil and Xanax, his reaction to the tragedy of September 11, his musings on greed, the meaning of owning an apartment valued at $1.4 million, consumerism, movie reviews, and so on. Some readers may enjoy this form of public therapy. I could have done without the revelations. Farrell is contributing economics editor for BusinessWeek. His Sound Money radio commentaries are broadcast over Minnesota Public Radio on Saturdays in nearly 200 markets nationwide. Follow his weekly Sound Money column, only on BusinessWeek Online