Origins of the Crash
Roger Lowenstein
8.10.2006
pp 103 goes over Amazon’s earnings… or to be specific the absolute lack thereof.
pp 117 he discusses a “virtuous circle” the semantic opposite of a vicious cycle.
pp 160 an awesome quote from an executive at Global Crossing who was cognizant of his firm’s duplicity: “The stock market can be fooled, but not forever.” – Leo Hindery Jr.
pp 167 in a chapter all about Enron, nothing is more damning than this: From 1996 to 2000, Enron’s net income rose from $1.08 per share to $1.12. Staggering.
A couple years ago I was able to hear an economist from Saloman Brothers speak. He was highly critical of the Internet Bubble, and how it unwound. He made some derogatory comments about Greenspan’s reign, and how he’d made unfavorable decisions with the FOMC to impact and deepen the Bubble “bursting” in 2000. After his remarks, we chatted, and he suggested the book When Genius Failed as a resource. I bought it and loved it- review coming one day soon.
Well, I loaned it to a friend of mine, who was impressed with the depth of knowledge and information about Hedge Funds it offered, so he rushed out (to Amazon, I imagine) and bought some of the author’s other works. He then loaned this one to me.
He literally builds a case suggesting that the Crash of the internet market was quite similar to the Crash in 1929. Irrational exuberance, rampant speculation and easy money are similarities between these two events. Further, in both instances, the government reacts. In reaction to the events of 1929, the SEC was created. In reaction to the accounting scandals of the late 1990’s and early 2000’s, the Sarbanes-Oxley Act was created.
I think most people would be cautious about removing all checks and balances in our marketplace, but I’m not sure that adding layer upon layer of insulation is any real protection either. Lowenstein shows that not only were investors deceived blatantly, they also let themselves be seduced by some of these equity prices. He doesn’t lay the blame solely at the feet of men like Lay and Ebbers, but also at the feet of the analysts who quieted their own fears, and even the average investor who in the heyday of the 90’s booming bull market perhaps forgot the one salient point that Keynes made:
“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes
Roger Lowenstein
8.10.2006
pp 103 goes over Amazon’s earnings… or to be specific the absolute lack thereof.
pp 117 he discusses a “virtuous circle” the semantic opposite of a vicious cycle.
pp 160 an awesome quote from an executive at Global Crossing who was cognizant of his firm’s duplicity: “The stock market can be fooled, but not forever.” – Leo Hindery Jr.
pp 167 in a chapter all about Enron, nothing is more damning than this: From 1996 to 2000, Enron’s net income rose from $1.08 per share to $1.12. Staggering.
A couple years ago I was able to hear an economist from Saloman Brothers speak. He was highly critical of the Internet Bubble, and how it unwound. He made some derogatory comments about Greenspan’s reign, and how he’d made unfavorable decisions with the FOMC to impact and deepen the Bubble “bursting” in 2000. After his remarks, we chatted, and he suggested the book When Genius Failed as a resource. I bought it and loved it- review coming one day soon.
Well, I loaned it to a friend of mine, who was impressed with the depth of knowledge and information about Hedge Funds it offered, so he rushed out (to Amazon, I imagine) and bought some of the author’s other works. He then loaned this one to me.
He literally builds a case suggesting that the Crash of the internet market was quite similar to the Crash in 1929. Irrational exuberance, rampant speculation and easy money are similarities between these two events. Further, in both instances, the government reacts. In reaction to the events of 1929, the SEC was created. In reaction to the accounting scandals of the late 1990’s and early 2000’s, the Sarbanes-Oxley Act was created.
I think most people would be cautious about removing all checks and balances in our marketplace, but I’m not sure that adding layer upon layer of insulation is any real protection either. Lowenstein shows that not only were investors deceived blatantly, they also let themselves be seduced by some of these equity prices. He doesn’t lay the blame solely at the feet of men like Lay and Ebbers, but also at the feet of the analysts who quieted their own fears, and even the average investor who in the heyday of the 90’s booming bull market perhaps forgot the one salient point that Keynes made:
“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes
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