Wall Street Meat: Jack Grubman, Frank Quattrone, Mary Meeker, Henry Blodget and Me [Englisch] [Gebundene Ausgabe]

I rarely rate a book with 5 stars but this book richly deserves it for in succinct breadth and witty storytelling. In his wild expose, WALL STREET MEAT, Andy Kessler gives the reader a behind-the-scenes view of the antics of some of Wall Street's giants. The subtitle tells it all: Grubman, Quattrone, Meeker and Blodgett and Andy Kessler's relationships and experiences with each. To those even somewhat familiar with the SEC action of April 28, 2003, these names will stand out. MEAT tells us more, much more.

Andy Kessler began his career as an electrical engineer designing microchips at Bell Labs. By some strange quirk of fate (or brainless move by a headhunter), he was thrown into the world of a Wall Street analyst. Kessler has seen more than most; his Wall Street career began before the infamous "Black Monday" crash (October 19, 1987) and spanned into the beginning of the Internet Bubble. During that time, Kessler met and worked with the individuals now being targeted for prosecution for their "exuberant" activities. Kessler went at it elbow-to-elbow with Jack Grubman while at PaineWebber (Grubman eventually moved on to Salomon Smith Barney); with Frank Quattrone (and Mary Meeker...truly a bit player here) while at Morgan Stanley (Quattrone eventually moved to Deutsche Bank and then to CSFB); and became well acquainted with Henry Blodgett AFTER Kessler turned in his analyst hat for that of a venture capitalist.

Kessler goes to great lengths to inform the reader of the trials and tribulations of the Wall Street analyst in the 80's and most of the 90's. The difficulties and reticence he would feel each time he would put a "Buy" or "Sell" recommendation on a company are richly described as gnashing of teeth and firestorms. In this age, an analyst had to defend each recommendation as the Street's skepticism "appeared" to demand it. Conversely, as the Internet phenomenon hit the scenes, the code of the analyst changed from one of cautious recommendation to one of mindless, obtuse "dartthrowing." Although he provides us with many gems, Kessler recounts one poignant conversation with Blogett wherin Blodgett posits: "You've got to understand. If I stop recommending a stock, and the shares keep going up, there is hell to pay. Brokers call you up and yell at you for missing more of the upside. Bankers yell at you for messing up their relationships. There is just too much risk in not recommending these stocks." A perfect example of the mindset and excesses bringing Wall Street to its knees. In another conversation, now considered germane and somewhat paradoxical (given the chronology of events), Kessler recounts Quattrone's tutelage of the invisible "Chinese Wall." This "Wall" is a conceptual separation of research and investment banking designed to prevent insider information passing from bankers to analysts. Ironically, the breaching of this "Wall" was one of the acts eventually bringing Quattrone down.

Kessler uses MEAT as part biography, part expose, and part satire...and does all three exceedingly well. To say this is just another "tell-all" book about Wall Street would be a great injustice. Kessler was there, Kessler is smart, Kessler was lucky. Above all, Kessler is hilarious. The combination makes this book an extremely enjoyable read, one most will appreciate and most importantly, learn from. A very good read, indeed.

"Wall Street Meat" is not just a snarky, sometimes caustic, generally shrewd, and combustively entertaining little over-educated guys in pinstripes getting themselves in trouble.

It's that, of course, but Andy Kessler is on to something more. Something not only interesting, but true: "Wall Street Meat" is very much about the passing of an Age, the end of an Era.

Paine Webber plucked Kessler from long-suffering geekdom (he had worked as an electrical engineer at Bell Labs, then fled after the AT&T breakup) to cover the brave new world of semiconductors; over the course of his eight-year tour of duty in the trenches on Wall Street---first as a semiconductor analyst for Paine Webber and then Morgan Stanley---Kessler relates how he learned his craft, navigated the perils of a novice analyst, and figured out just exactly how he would survive, and hopefully make some prescient calls for his institutional clients in the meantime.

That is to say: How to be an Axe in a stock. How not to be an Axe in a stock. And how to figure out whether the self-described Axe is sharp as a scythe or dull as a butter knife, and what you can do, O Rookie Analyst craving after a top ranking in Institutional Investor---to make maximum advantage out of that fact.

But let's back up a sec: you look confused. Axe? Clients? Institutional Investor? Huh?

No worries, Gentle Reader. Where other legendary Wall Street chronicles deal with bond trading (Liar's Poker, Bonfire of the Vanities), investment banking and M&A (Den of Thieves, Predator's Ball), "Wall Street Meat" has a considerably different---but incestuously related---emphasis: the secret life of the Wall Street analyst.

Or rather, the transformation---the mutation!---of the analyst in the boom years of the nineties, from scholar to scalliwag, from magus to miscreant, from Jekyll to Hyde.

That's what is so delicious about Kessler's little gem of a tell-all, aside from the fact that it's feverishly paced and delightfully wicked: it cuts to the core, to the meaty viscera, of a sea-change that radically altered the role of the analyst on Wall Street---with relation to the companies covered, to the clients served, and to the investment bankers who, increasingly, wielded the lash---and year-end bonus, an even more terrifying tool for instilling yelping obedience and cringing terror.

The analyst formerly inhabited a nerdy, nebbishy corner of the Wall Street galaxy,and was, in ancient times (before 1987) a scholarly, otherworldly, bookish creature paid a pittance to keep up on a vast hoard of facts and figures relating to the companies they covered, analyze those numbers, and spit back learned---and, one hoped, astute---opinions to the clients of the investment bank they served.

In the 1990's, this all changed.

Analysts had originally served the buy-side---the buyers of gazillions of shares of stocks hawked by the investment banks and their traders. But for a number of reasons, as margins on proprietary trading shrank, the real emphasis went to the white-hot money centers of the big banks: their investment banking arms, underwriting stock offerings for capital-hungry companies.

The formerly nerdpack-equipped analyst, in other words, transformed---nearly overnight---into a promoter. Into something almost cool, white hot, actually. A Rock n' Roll star.

Or something close: and that's what is at the juicy bloody rare center of Kessler's book, which goes into sufficient---but never deadly dull---detail on this curious Revolution, on the new Gods it made---Gods and Goddesses like Frank Quattrone, Jack Grubman, Henry Blodgett, and Mary Meeker, among others---and how Andy hung out with 'em! Traded barbs with 'em!

Marvelled as Meeker pounded the table on a double-bagger for Amazon, and Henry Blodgett, in December of 2000, prophecying that Yahoo (then at 100 bucks a pop) would soar to $200 a share (reality check: it cratered, and is now trading at 38 bucks a share)!

And got out before the Street broke out the guillotines! Timing *really* is everything!

Bookended by two limousines---black and white---chock full of wealthy Saudis and their gun-toting goons ready to wire half a billion in capital tomorrow morning to Kessler's new hedge fund, "Wall Street Meat" is a wild, juicy, timely ride of a truly Gilded Age, and of the crazy-eyed young prophets anointed in a time of Revolution. And like any age of turmoil, the Revolution inevitably ate its own.

Raw.

JSG

Andy Kessler writes a nice book. I mean he's a professional writer and he spent a lot of time on Wall Street before and during the bubble years, up close and personal. And he wasn't a stock broker and he wasn't a trader. He was an analyst in technology stocks during a time when technology stocks mushroomed up like tulips under the windmills. A stock analyst studies the industry and the individual companies. He knows revenues and profits and cash flow and debts and bottom lines. He's a fundamentalist. He makes recommendations. Buy, hold, sell--well, they never actually recommended "sell" in those days. Presumably he knows when the price of a stock is out of step with what it's worth.

But the bubble years were tough times for fundamentalists since the ducks were quacking and when the ducks quack they say, "We don't need no stinkin' fundamentals. We just buy the dips."

At some point Kessler discovered that there's something wrong with this picture. If a stock analyst knows so much why is he working for Goldman Sacks or Morgan Stanley? If he knows which stocks are going to go up and which are going to go down, why hasn't he mortgaged the ranch and milked all his relatives for funds and invested in the stocks himself?

Here's the answer. Hold on to your sweet petunias. As Kessler notes in the very first chapter he's only supposed to get it right 51% of the time, and with a little hedging and ex-post facto double-talk, he can fudge that. In other words, it's crystal ball time, and rational people don't raid the cookie jar to bet on flips of the coin.

Let me tell you what an "analyst" is called in Las Vegas. An analyst is a "tout." That's a "Gold Sheet" or a "Green Sheet" sold in liquor stores and bars with a phone number and some stars and exclamation points advertising their monster "**Superlock of the Week!!!**" That is, you pay them some money and they tell you which sports team to bet on. Needless to say, if they really knew who was going to cover the spread that week, they would mortgage the ranch...etc.

By the way, one of the problems with Andy's strict fundamentalist approach is that the markets are not entirely rational, which is why there is such a thing as technical analysis, which basically says the trend is your friend, or forget the fundamentals, buy the chart--or more deeply understood, buy the irrational exuberance of the public, which is what most of the people who made money in the go-go nineties did. A nice little book that explains some of this is Joel Kurtzman's How the Markets Really Work (2002) where he gives his conviction that, "Markets may move to the beat of their dumbest members," adding, "In my view...markets are not rational."

Anyway, at some point (it is clear to me) Andy Kessler realized that although he wasn't the kind of analyst that touts only those stocks that his firm owns or does business with, he was still a Wall Street strawberry. We can tell he figured this out because somewhere about three-quarters of the way into this very readable and engaging tome, he ups and leaves the comfy confines of Morgan Stanley and a six-figure plus income and begins to do his own investing. That is, he actually bets on his own picks. Wow. Now understand that even here of course he hedges. He forms his own capital management company; that is to say, he gets people to send him money which become chips that he shoves into the pot on their behalf. If he wins, hurrah, and if the stocks he likes tank, well, he still gets paid.

Kessler's is the latest in a long line of "confessional" books written by Wall Street people, almost always ex-Wall Street people--e.g., Where Are the Customers' Yachts? (1940) by Fred Schwed Jr.; License to Steal: the Secret World of Wall Street and the Systematic Plundering of the American Investor (1999) by Anonymous and Timothy Harper...etc. Kessler's book stands out because he was an analyst, not a salesman (i.e., a "broker"), and because he worked with and knew many of the top people on the street and was well-regarded, but was not a top executive. This is also an interesting personal story of a somewhat geek tech guy (but personable) who was smart enough and eventually hip enough to wow 'em in the presentations, who worked hard enough to be (I'm guessing) right more than half the time.

Where his book is not among the best is in what he leaves out. For some reason Kessler doesn't actually reveal how much he was paid (again I guessed at the six figures plus) or how well the stocks he touted performed, nor is he specific about how well he did with his own portfolio. We realize when he gets to trading and discovers the market-maker's spread (Where did THAT come from?) that he really had little idea what life was like for the "retail people" who had to not only buck the spread but, before the rise of Internet trading, pay rather hefty commissions as well--which is why the customers never had any yachts. But Kessler's reticence is probably just as well since everybody knows that there are two things people consistently lie about: sex and money. Kessler doesn't mention the former and is vague about the latter. I tend to respect that.

Bottom line: unless you are Jack Grubman, Frank Quattrone, Henry Blodget and some of the other pieces of Wall Street Meat that Kessler writes about who went down with the ship, you will find this an amusing book, a nice diversion from a long, long time ago on which to reflect. Kessler knows all the buzz words; he knows the players and (somewhat inadvertently) he lets us know him.