When the Market and Hopes Go Bust

The Buffalo News
Sunday, January 11, 2004


American Sucker
By David Denby
Little Brown and Co.
320 pages, $24.95

On its surface, "American Sucker" is about as relevant now as a share of ImClone.

At the beginning of 2000, the marriage of David Denby, film critic for the New Yorker, was starting to dissolve. After a period of thorough self-examination (and a brief addiction to Internet pornography), he decides he must hold on to his cherished Upper West Side apartment, and needs $1 million to buy out his wife's share.

So, like millions of other Americans at the time, Denby became a first-time investor, throwing hundreds of thousands of dollars into technology stocks and trading in his nude body fixation for CNBC, the new info-porn. It's no mystery what will become of his savings, and though he ostensibly is trying to save a piece of family history, it might be hard for some readers to sympathize with his plight to save a seven-room flat near Columbia University.

But Denby's memoir is more than just the typical tale of irrational exuberance and its consequences, the one we've heard countless times from Wall Street types and told-you-so scribes. He lunged into the world of finance at full-tilt fervor, met a slew of its biggest boosters and luminaries and took copious notes on his whole adventure.

What he was able to capture was the human side of the surreal tech bubble carnival -- the instinctive desire not to be left out, the head-spinning stream of positive reinforcement, the endless self-delusion over a future that was just one fiber optic cable, one miraculous cancer treatment away. And he writes it all down like it's never been written before, with prose that sometimes sings and always tells the truth.

Denby, of course, didn't just throw his money into Nasdaq and hope for a windfall. Reading through "American Sucker" could serve as a mini-briefing to neophyte investors on what to read, who to talk to, and why such market frenzies have happened many times before. But even those who had read up on "tulip mania" in 17th century Holland could be forgiven for believing that this time it was different; this was the New Economy, the era of the Long Bull.

On Jan. 10, 2000, the day that AOL announced its purchase of Time Warner, the Dow had hit a record high of 11,572, Nasdaq continued to soar on its tech stocks, and Denby's gamble was paying great dividends. He wrote in his journal that day of the fervor that seemed to sweep up the financial world, as "play money -- America Online's seemingly inflated stock price -- buys real assets."

"Casting off doubt, the media and investors everywhere seem irradiated by a sense of boundless possibilities: Yes, there will be dips, corrections, jitters, shakeouts, but the movement will be up, and Alan Greenspan, like the Holy Ghost brooding with sweet wings over the earth, will protect us, measuring out the milk of liquidity, harmonizing our virtues and vices into an orderly progression towards salvation. Hallelujah!"

Denby used his journalist credentials and social connections to try to validate his own enthusiasm, getting next to people like Henry Blodget, the Merrill Lynch analyst whose tireless "buy" recommendations on all things Internet helped raise stock prices and fulfill his own prophecy, if only briefly, and Sam Waksal, the ImClone founder who promised a revolutionary cancer drug and drew enough buzz around himself to power his own Manhattan soirees.

In-between the market's leaps and stutters, Denby ruminates wistfully but effectively on the nature of his desire to succeed in the market, his desire to buy a sparkling, brand new Ming Blue Audi A6, and the inevitable tinge of regret all that desire brings about, when one is reminded of what's truly important to anybody's life. Then, suddenly, the bottom falls out of the market, and the tinge grows into a groundswell.

On Dec. 18, 2000, the enormous headline on the Wall Street Journal was "POOF! 'Smart' Investment Ideas Go Up in Smoke, as Market Tumbles," and Denby was well on his way to losing nearly $900,000 since the market peak in March.

By the time the tumble is nearly over, Waksal has been sent to jail, Blodget is disgraced and barred from Wall Street, and Denby's apartment is up for sale. Denby wasn't completely demolished by the crash, but he learned enough to develop a philosophy on the market and the nature of greed, which he admirably attempts to lay out in a straight-forward, if somewhat awkward, summary passage.

With Nasdaq creeping north of 2000 once again, and the clamor for an initial public offering of Google reaching fever pitch, one can only hope that enough people read Denby's account of the first-time investor to temper the next bubble, be it fueled by tulips or search engines.

Kevin Purdy is a News financial reporter.