Confessions from a pimp...
Diary of a Financial Pornographer
Like everyone else, I wanted a piece of the action. Now it's the morning after.
By Nelson Schwartz
Like sex, drinking, and other vices, investing is an activity that's most enjoyable in the company of others. And whether you were boasting about big gains, bemoaning losses, or giving and receiving hot tips, the stock market in recent years came to resemble nothing so much as a giant orgy, with everyone getting in on the action--not to mention engaging in more than his share of high-risk behavior. Take me, for example. While the same can't be said for my sex life, I've always had plenty of company when it came to picking stocks. I'm a financial writer, you see, and for the past four years I've had the opportunity to share my investing wisdom with you--all four million of you, or whatever FORTUNE's readership was at last count.
Until recently, in fact, offering financial advice was pretty much a guilt-free pursuit. In my very first story for FORTUNE, in 1997, I recommended stocks like Intel, Cisco, and Lucent, and I had the satisfaction of seeing them move up almost inexorably in the years that followed. There was the occasional dip--like in the fall of 1998--but for the most part I could pick big companies and sleep easily in the knowledge that I was offering my readers sound advice. After all, you could never go wrong with a name like Lucent, right? Sure, I felt a twinge of guilt or doubt when my picks were labeled "Ten Safe-Harbor Stocks" (Dec. 21, 1998) or when I confidently predicted, "The Tech Boom Will Keep On Rocking" (Feb. 15, 1999). But for the most part, everything seemed to work out all right.
Then the market stopped going up last spring, and my favorite stocks started going down. By early 2001, with the Nasdaq imploding and Lucent trading at $12 and Cisco down more than 75% in 12 months, I felt my own culpability rising faster than the red ink. When I came across articles like last May's "Playing the Internet's Next Gold Rush," a B2B investing guide in which I praised companies like--gasp!--PMC-Sierra (then $175, now $37) and Kana (then $39, now $1.10), the guilt and shame were positively overwhelming. I was Fortune's very own Raskolnikov.
To be sure, I did my share of tough, skeptical reporting in 1999 and 2000, penning analyses of disasters like Dr. Koop.com and Amazon.com, alerting readers to the dangers of Internet mutual funds, and examining the forces behind the Nasdaq bubble. What's more, when I picked stocks for our annual retirement and investor's guides in 1998 and 1999, my portfolios always included diverse, nontech names like AIG, Pharmacia, Home Depot, Wells Fargo, Citigroup, and Wal-Mart. All are up nicely from where I recommended them.
Still, I'm not sure that will do much for readers who are suffering with stocks that I advised them to buy. All I can say is, "Look, I'm feeling the pain too." The tech issues in my own portfolio are way, way down, and I often find myself wondering why I ever sold the banks and oil companies I inherited from Grandma to buy chip stocks, networkers, and telecom upstarts. (As per FORTUNE regulations, I never wrote about stocks I owned.) And let's not even discuss what happens when my mom asks me about Cisco, Microsoft, and Intel--all stocks I told her to buy.
Although I was always careful to warn readers, as well as Mom, of the risks of investing--even saying that certain stocks could lose all of their value--I too believed in the promise of the new economy. I wanted a piece of the action. And as hard as it might be to remember now, it actually seemed as if the Internet were going to change everything. So if that meant selling blue chips to buy names that could double in weeks or months, well, that was a heck of a lot more exciting than sitting on dead money. Besides, the people behind these Silicon Valley companies were a lot more exciting, even sexier, than the old economy's gray suits. Wouldn't you rather have dinner with HP's Carly Fiorina than with Phil Condit of Boeing?
As it turned out, what I thought of as dead money wasn't so bad. At least those stocks, when they go down, don't drop 80% or more like PMC-Sierra or Kana. There's something to be said for boring old blue chips that actually pay dividends, earn real profits, and maybe rise only 5% or 10% a year. And keeping cash in a money-market account may not be just for wimps and nervous Nellies.
So now it's the morning after, and I'd rather not think about what happened last night. Next time, I'll use protection--and make sure my portfolio is diversified. |
