From the WSJ Opinion Archives
BOOKSHELF
The Money Vanishes
Meet David Denby, an American sucker indeed.
Even now, reading about the Internet stock-mania remains painful. So many people got torched, and many of them are still red-faced about the mistakes they made. The lingering shame may explain why the era has yet to deliver its "Den of Thieves" or "Liar's Poker," the defining books about Wall Street in the 1980s. In that earlier period of excess, most folks observed the Ivan Boeskys from afar. This time just about everyone found himself at least ankle-deep in the muck. And nobody really wants to read about his own foolishness. Or write about it.
Enter David Denby, the New Yorker movie critic and novice investor. In "American Sucker," he describes his own headlong plunge into the market just as the Internet bubble was about to burst--and his marriage was about to break up. He lost hundreds of thousands of dollars in the bargain. For anyone eager to re-experience the skewed enthusiasms of the time--especially the deep, deep belief that the market would go to the moon--Mr. Denby returns us to the tulipy past.
Mr. Denby's investment strategy shows how quickly even a well-educated person can morph into a market dolt. Though he reads about diversification, he avoids it himself, loading up on technology stocks in early 2000. And despite his access to investment-arena icons who tell him that the jig is well and truly up, Mr. Denby presses ahead. In essence, he sends buckets of bills into a raging furnace, thinking that, like Abednego, they will emerge from the flames unscathed.
An American sucker indeed. But Mr. Denby sometimes has trouble taking full responsibility for what he did. Defrocked Merrill Lynch analyst Henry Blodget, whom he befriends, betrays him. Fed Chief Alan Greenspan malevolently hammers the market into oblivion. As he fritters away money that belongs to both him and his departing wife (not to mention the kids), he notes that she wasn't all that bothered by his rapidly eroding investments. Indeed, he has her absolving him, saying that the market will come back and thus not to worry. (Mom said it was OK.)
In early 2001, Mr. Denby had a net loss of $155,000. By October 2002, his investment acumen had taken the net loss to $900,000. The idea of gambling with the Denby family money as the marriage dissolves feels a bit creepy, and it is unclear how much his wife really knew. His overarching plan: make a million and buy her share of their apartment, thereby keeping it.
If only he had heeded the warnings. He reads Yale economist Robert Shiller on the market's likely fall. Fellow New Yorker writer John Cassidy (who focuses on markets rather than movies) points out the abundant problems in his investment approach. But nothing demonstrates Mr. Denby's mania better than a visit to Arthur Levitt, then head of the Securities and Exchange Commission. Not many individual investors get a private audience with the nation's chief market regulator. And in that meeting, in mid-summer 2000, Mr. Levitt tells Mr. Denby that the game is over. Like Caesar, though, he ignores the soothsayer.
Foolishness can make for hard reading, but Mr. Denby delivers smartly in two areas. First, he manages to strike up relationships with two pivotal figures, Mr. Blodget and Sam Waksal, the now-jailed former head of ImClone, the biotech company now known as much for its dodgy stock sales as for its cancer drugs. Through his relations with both men, Mr. Denby skillfully provides a view into the thinking of the era.
Mr. Blodget is initially clever, heroic and daring--a troubadour of market romance. But his persona slowly unravels. By their last meeting, he comes across as weaselish, scurrying for legal cover after his research is revealed as less than rigorous. Mr. Waksal, by contrast, is the dreaming entrepreneur who dashed off with Mr. Denby's money and that of so many others. Not that he didn't know how to spend it: lavish dinner parties, great art, wonderful homes. In the course of the book Mr. Waksal moves from charming bon vivant to a huckster headed to the big house.
Second, Mr. Denby is refreshingly honest about his erratic state of mind. The departure of his wife of more than 20 years leaves him reeling. In the months after the breakup, he becomes addicted to Internet pornography, has an affair and fetishizes about an Audi A6. Chicks, cars, bucks. A baby boomer's midlife crisis on full display.
It isn't pretty, but "American Sucker" may sneak into readers' hearts anyway, partly because so many of us were suckers. (I lost, on paper, millions of dollars by holding onto the stock of a company I worked at.) His wanderings into the great works of Western literature and philosophy, the subject of Mr. Denby's previous book, also give the book a literary flavor, or a pretentious one. Not often do plungers sprinkle their market fixations with references to Dante and Homer.
Dishearteningly, Mr. Denby's coda--the lessons derived from his humiliating loss of friends, money and dreams--stumbles when it could soar. Toting up what caused the mania, Mr. Denby cites unquenchable greed and rank materialism, turning preacher instead of penitent. As for his own day-of-reckoning reflections, he edges up against death, morality and spirituality but ultimately retreats into boomer cliché. Love conquers all. Live life more slowly.
The humbled, slower-moving, diversified (one hopes) Mr. Denby may still have a bit of the trading jones in him. By writing about his adventure, he perhaps hopes that a few of his fellow mania-investors will buy the book and ease his losses. Would that make them suckers all over again?
Mr. Kansas is editor of the Journal's Money & Investing section. You can buy "American Sucker" from the OpinionJournal bookstore.
