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It’s really hard for me not to get really really really pissed off at the New York Times when I see opinion pieces like today’s missive from Henry Blodget talking about how the stock market bubble of the 1990s was actually good for us.
That’s right, former Merrill Lynch stock analyst Henry Blodget. The guy whose fame and considerable fortune was based on his prediction that’s share price would go to triple digits. The guy who likes to pretend that a few stray emails that “caught the notice” of the Securities and Exchange Commission were an innocent misstep that derailed his Wall Street career. The same Henry Blodget who insisted to Slate readers that Martha Stewart wasn’t guilty of any crime. The one who, correctly and in private to his co-workers but not to his customers, called a wide variety of Internet stocks “POS” – that’s Wall Street for “piece of shit” – and other equally nice names. All the while he was touting those stocks to the public market.
Here’s why it pisses me off: Because Bloget was knee, no, he was hip-deep in the process of delusion in which everyone connected with the birth of Internet willingly, freely, happily and enthusiastically participated. His punishment? A fine, a ban from working on Wall Street, a book deal and a gig with Slate. For a guy who started out as a production assistant at CNN, that’s not a bad writing career. See, crime might not pay – Bloget’s fine was in the millions – but unethical behavior sure as hell does. I’m looking forward to reading a Times op/ed from Marc Rich on the benefits of the presidential pardon system.
What did he do? He – and many others – helped make the general public feel as though investing in anything with a in the name was a lucrative choice. That it was a safe investment because the bankers at Merrill Lynch said so. And Blodget and all the other bankers knew it. Now, contempt on the part of stock traders and analysts for their customers is nothing new. And while that was a small, closed world, it was a fine way to view things. But things changed during the Bubble. The Internet opened up the stock market to the general public. They profited. But they paid.
Now, let’s put aside the fact that most Americans don’t know the difference between a commercial bank (where you have your savings account) and an investment bank (where stock deals are financed). They were all just bankers to the nice folks clamoring for Netscape and Infoseek and and FogDog and who can remember what elseā€¦..The banker and traders’ public’s support and enthusiasm for the market encouraged investments by folks like the young lady I talked to yesterday who didn’t know that “equity” is another word for “stock” This young woman, by the way, had invested a considerable sum of money – about $20,000 – in an equity fund but said she wasn’t interested in buying stocks.

Now, don’t get me wrong. There’s no law against ignorance. And yes, this young woman is going to learn a few nasty lessons. She should. And yes, the Bubble wasn’t as deliberate a process as many like to think; not at the time, anyway. But we have hindsight on our side now. And dammit, it’s high time someone starting using it to do something besides burnish his or her reputation, get PR for their new company and sweep a few inconvenient facts under the rug.
The Internet Stock Bubble was a glorious accident of timing and technology and on that Blodget is absolutely correct. The very atmosphere it created gave birth to the enthusiasm it generated. He’s right about that, too. And it was also somewhat inevitable. Again, Henry gets it right.
But unlike the hard-drive boom of the 1980s to which he compares it, the Internet Bubble was helped along, deliberately and cynically by two things. One, there was no oversight to speak of. The Securities and Exchange Commission – the one working under President Bill Clinton – took a nap during the Bubble. They’re still trying to wake up. And so did the business press. The very folks who could – who should – have explained what was going on were too busy writing about boy millionaires and waxing rhapsodic about the way the Internet changes everything. Posing as “experts” or insiders able to explain the marvelous miracles of technology, too many people got to do exactly what Blodget has done in this op/ed: Use the mainstream press to tout – without context, without response, without any sort of critical read – their point of view and only their point of view.
This atmosphere helped the Bubble along. The hard drive boom Blodget cites for his “all’s well that ends well” thesis was an all-tech event, pretty much unnoticed outside Silicon Valley. Insiders invested, insiders profited, insiders lost. The Internet Bubble was something very different. Insiders profited at the expense of the very outsiders they needed as customers at a time when those customers were first entering the stock market. When they lost, they had to listen to profit-taking insiders blame “the market.” And, as we all know, no one can harness the market.
Yeah, well, lots of people tried. And for a while they did OK. More than OK. Beginning in early 1997 – with – Internet companies were marketed from their creation with an eye on selling products and selling stock; Silicon Valley produces both, remember?
Initial offerings were underpriced so they would pop on opening day; generating headlines about a stock’s worth. Those “pops” became, themselves, marketing events for the next stock to be issued for those who missed out on the last pop. It was a lovely and lucrative shell game and it worked very, very well. Although Frank Quattrone – who, unlike Blodget will probably go to jail – was one of the main architects of this system. He did not work alone. This is the game that everyone in Silicon Valley played and played well. And Henry Blodget was in on it.
So, by its oversight and omissions, was the New York Times. The Times didn’t write about Quattrone until his trial and while Andrew Ross Sorkin has done a great job of covering what’s happened since it’s worth pointing out that he covers banking. In New York.
So, as I said, it’s hard not to get pissed off when the so-called paper of record decides to start correcting the record using one of the very people its editorial writers should treat with – at a minimum – a lack of credulity. Blodget may think it was an accident that his email was read by the SEC. He may think he did no wrong. He may think his journalism career is back on track along with his investment advisory firm. And they may well be. You can, in fact, teach an old dog a new trick or two. It’s just that sometimes they don’t forget the old ones.

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