Moneyball author Michael Lewis explains how Wall Street bleeped us all

Saying buyer beware in this case is like telling the person who ate contaminated meat because the FDA fell down on the job that they should have set up a meat inspection facility in their basement.

 

There was an item after Lewis's first story for Portfolio (I remember it was on Gawker but originated elsewhere) that he was being paid $12 a word for his stories, although I think that was refuted.

The other thing is, I thought he signed a deal with Vanity Fair that included him writing exclusively for them? Maybe that starts at the beginning of the year.

 

That sounds like a very, very, very, very, very good freelance deal.

 

The CEO's of the bond agencies all should be in jail for life. This crap makes Kenny Lay and Jeff Skilling look like A-ball players.

 

The lede alone hit home for me:

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

Sadly (for myself), I was not getting paid hundreds of thousands of dollars, but at 25 I was appearing frequently on cable business news shows as an "expert" on the Netscape-fueled IPO boom that was going on at the time, my qualification being that I was editing an IPO newsletter in New York. Six months off the turnip truck from the Johnson County (Ind.) Daily Journal, I had Wall Street veterans asking me on the air, as if I knew, how they could get into this boom. People nationwide called me from across the nation to ask how they could get in on the first day. My mom, for god's sake, wanted to know how to flip Yahoo. One reporter, I think from CNN, sat in my crappy cubicle to interview me to ask why these IPOs were popping. I gave her my standard, BS answer: "Because people think they're worth it." No, no, no, she said, there's got to be some technical, analytical reason for it. I was in a bit of a cold sweat, thinking maybe she was right, and I repeated: "Because people think they're worth it."

I didn't really know what I was talking about, but I did. The mid-90s IPO boom really fed the casino mentality on Wall Street. The underlying fundamentals didn't matter anymore. But eventually, they do. Heck, Netscape collapsed once people realized there was no way on this Earth it could financially be justified to have a higher market cap than American Airlines (even now). So it goes with the mortgage market (subject of another sleepy newsletter our group had at a time when MBS was new). Unfortunately, that has graver consequences because while we don't all have Netscape stock, the greater economy is fueled by credit and home-buying, especially the last few years.

The circle will probably continue. After all this shitpile gets cleaned up, everyone on Wall Street will talk soberly about underlying fundamentals, until the next out-of-nowhere fad comes up. Then, suddenly, coked-up 40-year-old managers will scream at 24-year-old coked-up analysts and traders to get their fucking shit moving before someone else takes off with all the money, and then here we go again.

 

Great story, Bob.

The IPO boom was PT Barnum writ large.

The only bigger pile of snake oil was the Y2K crap.

 

Is the underlying theme of that article ... "We're fucked, because this is still just the tip of the iceberg" ... or am I reading it wrong?

 

Ragu, I see what you're saying, but capitalism is built on trust. If you can't trust who you're dealing with -- say, you can't trust that the rating agency says the bonds are legit -- then it's hard to move money, because why would you hand it to anybody else? Caveat emptor works if you have a market where you have some good people and some shysters. But on Wall Street, you had almost nothing BUT shysters. If that's the case, then no wonder the investment banking industry is dead. If caveat emptor means there is NOBODY you can trust, you might as well put your money in your mattress. And that's toxic for a capitalistic system.

 

Two words: regulatory agencies.

http://www.ft.com/cms/s/0/2210d41c-b0f2-11dd-8915-0000779fd18c.html?nclick_check=1

Posted on another thread but worth posting here.

Financial Times column by Jim Flaherty, Canada's Minister of Finance.

 

I'd like to see NPR's Planet Money interview Steve Eisman.