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Found this interesting,..incredible really,..thought others might enjoy as
well.
Regards, JIM Pilliod
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Sat, 17 Jun 2000, 11:02am EDT
Story of Barton Biggs and Plumber Has 4 Morals: Michael Lewis
By Michael Lewis
New York, May 16 (Bloomberg) -- It's always useful to see what Bloomberg
users find worth reading but rarely more so than last week. In a period that
included the news that New York Mayor Rudolph Giuliani will separate from his
wife and that a Chicago gym had created ``peekaboo'' showers, the most read
story on the Bloomberg concerned Morgan Stanley Dean Witter & Co.'s chief
equity strategist, Barton Biggs, and his plumber, Ron Valentine.
The curious relationship, detailed by Tom Cahill of Bloomberg News, began
almost three years ago when Valentine turned up to clear a drain during a
dinner party in Biggs' vacation house in Sun Valley, Idaho. This was more
than four years after Biggs famously declared that the U.S. stock market was
grotesquely overpriced and headed for a fall. ``I recognized him,'' said
Valentine of Biggs, ``because he's always on TV, bad- mouthing the market.''
Valentine told Biggs that he should buy the dips.
Biggs ignored the advice but seized on the device: A plumber who had the
nerve to offer stock tips to a Morgan Stanley strategist.
In the months and years that followed, the plumber became a fixture in Biggs'
research reports. These reports invariably described, as Biggs once put it,
``the biggest stock market bubble in the history of the world.'' As the
market continued to defy Biggs' logic, the plumber came to epitomize its
madness. He quit plumbing to pursue stock market speculation. ``I've got
$300,000 in the market on margin,'' Biggs quoted the pipe fitter saying at
one point.
Unreal Reports
The trouble with the relationship is that it didn't exist. After he fixed
Biggs' sink, Valentine never saw or heard from Biggs again. All those
picaresque quotes and descriptions offered by Biggs were sheer invention.
``Everything I own is paid for -- my home, my car,'' Valentine said when
reached by Bloomberg. ``I definitely didn't buy any stocks on margin and
never have. I guess (Biggs) decided he'd just make things interesting and
make it seem like these common people were taking these chances, which I
don't do.''
This is one of those Wall Street stories that serves as a parable. It offers
up so many morals to the reader that it is hard not to feel improved by it.
Moral No. 1: If you want to know what ordinary people are up to it is useful
to ask them. For the past eight years, Biggs has sought to convince others
that the typical American investor has been a mad speculator buying on
margin. If he had bothered to keep in touch with his plumber and find out
what he was actually doing he would have discovered evidence to the contrary,
and might even have been compelled to confront it. Maybe he would have gone
on believing what he wanted to believe all along. Or maybe he would have
developed more interesting and nuanced views of the market.
Projecting Views
Moral No. 2: The idea of being chummy with common folk is more alluring than
the reality. Biggs wanted to seem like the kind of guy who knew his plumber.
The truth is that he didn't think his plumber was worth the few minutes it
took to call and ask him what he thought of the stock market. In retrospect,
it is clear that what Biggs actually valued was not news of what his plumber
was up to in the market but his own stale ideas of what a plumber must be up
to.
Moral No. 3: If you have a talent for passing off invented quotes and scenes
as true, you'd better avoid using it for anyone except prestigious Wall
Street investment bankers. In the recent past a Wall Street Journal reporter
was fired for claiming that a subject had failed to return a phone call which
he had never placed; a Los Angeles Times photographer was suspended for
asking a subject to repeat some action, so he could get a clearer shot of it;
a New Republic writer became an unemployed laughingstock for inventing whole
stories.
The Consequences
Mere journalists get fired from their jobs for even slight fictions, and then
hounded in print for years by their least able and most self-righteous peers.
Yet Morgan Stanley's leading strategist offers fiction as fact and no one
dreams of suggesting that he should suffer anything but a bit of ridicule.
Moral No. 4: Professional financial expertise is in a weird free fall. It
used to be that the only risk posed by the hired help to financiers was
social risk. The butler tells New York magazine that you spent
two-hundred-grand on liposuction, the maid tells the New York Post that your
spouse shoplifts kitty litter, that sort of thing.
Today's help poses financial risk to financiers. At the same time he was
clearing Biggs' drainpipe, Valentine was cleaning Biggs' clock in the market.
For the eight years Biggs has been short the U.S. stock market, Valentine has
been long. No plumber could survive Biggs' folly.
How long can it be before we turn on the television and find delivering
market commentary not Barton Biggs but Ron Valentine? Come to think of it,
Bloomberg should offer him a column. It would be a delight finally to read
what Biggs' plumber actually thinks.
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