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Oct 31, 2008

Speculator: looking back at looking forward

As IR magazine celebrates its 20th anniversary, a look back - and forward - at the successes of the Speculator column

When IR magazine approached me in 1995 to write the monthly Speculator column, the editors wanted provocative analysis with a sense of humor.

I soon discovered that IROs are forced to share my renaissance breadth of interests. They need some accounting, history, politics, geography, science and, of course, economics, to make sense of their companies – so they have to be broad-minded enough to appreciate the occasional scatological allusion or recipes for Kazakh equine-anus sausage that make Speculator's monthly dose of thought crime more palatable.

Over the years, Speculator's approach has paid rich dividends, at least in self-satisfaction. We have spearheaded the anti-bubble tendency and acted as air traffic control for all the chickens coming home to roost, guiding them in to crash-land along Wall Street.

At a time when tech IROs were blast-faxing one IPO an hour, we pointed out that neither eyeballs nor clicks show up in GAAP. My favorite spoof was, a start-up business that would fax pizzas to hungry yuppies working late – or, rather, take superfluous money from investors gullible enough to believe that any dotcom would make the dosh come.

We have marveled at the lighter-than-air finances of airlines, and suggested that if they persisted in herding their passengers like cattle, their gold would turn to hay. We called attention to Alan Greenspan’s feet of clay, and lo! He listened and abandoned all his gold-related dogma. More recently we anticipated oil at $100 a barrel, which we said would force energy efficiencies on Detroit’s Jurassic model range.

It can be tense being a perpetual Cassandra; prophesying doom is a sure bet, but the magic is in the timing. Speculator said the real estate bubble was certain to burst. It took some years longer than anticipated, but when it did – wow!

We also suggested that banks and brokers collectively operated a pump-and-dump system, where they each got their mark-up and added ‘shareholder value’ until the stock was in the hands of retail investors, when it would plummet.

As we reach the 20th anniversary of this magazine, the scale of this year’s market meltdown challenges the columnar capacity, even with verse, science fiction and a wild imagination. I had always assumed a rationality behind the greed – that the masters of the universe were aware the origami financial instruments they were crafting and selling were clunkers with paper tires, and their sole concern was to get them off the lot.

But it’s as if the emperor’s tailors started wearing their own new clothes. Banks held untold billions in incestuous figments of their own imagination, bonds of dubious value issued on the insane assumption that the housing bubble would grow forever. They churned fairy gold as if Wall Street was at the end of the rainbow.

Did these grifters come to believe their own con? Bad as it is, the only consolation is that it could have been worse: these people also wanted to privatize Social Security. But maybe someone, somewhere, was listening to Speculator on that, too.