Hindsight isn’t always 20-20
“Panic! The Story of Modern Financial Insanity” is the latest book by investor-foible specialist Michael Lewis, who might as well be looking through a rearview mirror at a car crash he just avoided, with the hindsight of a driver slightly amused at all the stupid mistakes that the unlucky motorists had blundered their ways into.
How thoughtless, how totally oblivious those drivers were, he muses.
In this case, those oblivious drivers are business journalists, but Lewis – whose book, a compilation of articles by himself and others, was published to great fanfare at the end of November – apparently spent too much time looking backwards instead of keeping his own eye on the road.
The problem for “Panic!” (W.W. Norton & Co., 352 pages) is that it ends just after the stock market first started its steepest plummet last year — another runaway panic attack similar to the ones before: the computer-assisted crash of 1987, the Asian depression a decade later, the dot-com bubble bursting at the end of the century and then the crazy mortgage mania that just seized the country.
But only months after the book was published, it’s clear that Lewis himself really couldn’t see how far the economy was falling, that this wasn’t just another swerve in the road, but a gaping recession, with – at this point – no end in sight.
This is not to say Lewis is not a good and insightful writer. Indeed, in this book of essays on economic mishaps during the 25 years, his writing usually stands out as the best of the lot. (Although, while I read them, I had the sneaky suspicion that he served up the others to make him look good by comparison.)
But what do you say about a book that approvingly quotes the wisdom of Bernard Madoff, published the same month he was arrested for running the biggest Ponzi scheme in history?
How can you not wince at his decision to include the opening statement of Connecticut Sen. Christopher Dodd at hearings looking at the “mortgage market turmoil,” after Dodd became involved in his own turmoil, allegedly helping Countrywide Financial – one of the biggest subprime culprits of them all – after the company allegedly provided him with below-market mortgages on his property?
How can you laugh with humorist David Barry at the silliness of the whole housing bubble, or Lewis’ own satiric diatribe against the poor, when millions of people are losing their homes because of the wild and zany antics of the wealthy?
For each of the financial crisis in the book, the essays are in the “You are there!” vein, the deadline journalism that we are all guilty of disguised as analysis.
How quaint, for instance, is Time magazine’s Stephen Koepp worried about wild gyrations in the Dow of 50 points or more. Then comes the calm analysis by economist and Washington Post contributor Robert Shiller: “Black Monday’s Biggest Lesson — Don’t Run Scared.”
Or, as Lewis himself writes, didn’t the previous crises prove that our worst fears did not materialize?
“If perhaps this is the nature of global capitalism – ever more complex, ever more opaque, ever faster booms and busts – and it’s not the markets that needs to change but our reaction to them,” he writes. “How many times does the end of the world as we know it need to arrive before we realize that’s it’s not the end of the world as we know it?”
It’s the foibles of the rich that are of interest to Lewis. Remember back in 2007, when the collapse of Bear Stearns seemed to be the biggest thing that was going to happen this time around?
Then look at the article by Kate Kelly of The Wall Street Journal, who seems to blame Bear’s chief executive Jimmy Coyle for playing too many rounds of bridge as opposed to the “hands-on” role of his peers, like Richard Fuld Jr. of Lehman Brothers Holdings.
Of course, the article was written before Lehman declared bankruptcy, making Bear’s fall trifling by comparison.
It’s fitting that Lewis ends with a Wall Street Journal article published back in January 2008.
Gregory Zuckerman is beside himself in admiration of Henry John Paulson (unrelated to the former U.S. Treasury secretary), who realized that the housing market was about to crash, and found a way to bet against the conventional wisdom, racking up $3 billion or $4 billion in profit. Now doesn’t that show that all is right in the world?
Bob Sanders is an NHBR staff writer.