Analysis and Reactions to Blood on the Street

Analysis and Reactions:

Blood on the Street

My mother and father divorced when I was 8 years old and my mother decided to raise my sister and I on her own. Because of this arrangement, she had to become a sort of "jack of all trades", yet like the saying, she was a "master of none". As evidenced in previous papers I have turned in, she did make a big impression on my life and seemed to always be ready for any situation with a saying or quote that stuck in my mind and upon recall gave guidance at crucial times in my life. For this I will be forever grateful. Although she did not know the first thing about investing, finance, or saving for retirement, a couple of sayings she expressed to me often enough that I stored it somewhere amongst my brain cells were "your money is 'your money', and nobody will look after it like you will", and "the safest way to double your money is to fold it over and put it in your pocket". Attention all "moms" in this country, over the past decade your children have blindly trusted strangers to take care of their life savings. Most of the time your little "investors" have performed absolutely no research, or "due diligence" whatsoever. That is crazy to me, and perhaps the most disturbing issue in this book.

First I would like to look back at all of our required readings and explore how they relate to one another. The choices you as instructors made for our education were interesting and a microcosm of the "evil corporate world" (I say that only half kidding). The Enron story (Power Failure) detailed a rising firm that sought to attract young, bright, and hip employees through royal treatment and rewards. The lavish lifestyle was addicting, and when continual growth was not possible, the employees created growth on paper to "let the good times roll" so to speak. This book taught us that corporations, like individuals in today's American society, can be impatient and seek immediate gratification at any cost. It also taught us that the lines of legality are very blurry, and that there is little shame in walking that line. The Arthur Anderson (Final Accounting) story, on the other hand taught us that tradition must sometimes be re-evaluated and that core competencies are extremely important to identify and cultivate over the years. We learned that conflicts of interest at best lead to illegal behavior and at worst can cause the destruction of a firm. Shawn Fanning (All the Rave) taught us that the grey or blurry line of legality is overlooked not only by large corporations attempting to make earnings predictions, but also by hackers, college students, and everyday people like us, who have learned to rationalize that it is okay to download songs from our computer because it is now community property. This book taught us that new technology in the future will continue to blur the lines of not only copyright law, but other types of law as well. Speaking of new technology, the latest book (Blood on the Street) was based on the dot com craze and also dealt with conflicts of interest, however the conflicts in this book directly affected individual investors instead of targeting other businesses (like they did in Final Accounting). These conflicts were much more bold and capitalized on an American society that had grown lazy at a time when instant wealth was created on a daily basis.

Money is a pretty powerful "drug" in this world, and each of these readings highlighted different ways the power of money enticed both individuals and corporations to push their ethics aside in an effort to become more wealthy. What is even more interesting to me from a psychological point of view is the way each individual involved in ethically suspect behavior learned to rationalize in their mind over time that they had done nothing really that wrong. It would seem that we, as human beings, still have a conscious, but we have evolved intricate ways of interpreting definitions in more suitable ways (ask your local preacher, priest, or rabbi and I am sure he will agree).

Blood on the Street opened my eyes to the fact that there was a recipe for disaster brewing long before the events of 911. The growth of the internet opened the door for several startup businesses with sound foundations that created instant wealth for their investors. Online trading also made it easy for individuals to invest their money in stocks or mutual funds from the privacy of their own homes. These two factors, combined with the overall upward slope of the markets for the past few years, enticed more investors to invest their money in the markets than ever before. Unemployment and inflation were down, we were the lone superpower in the world, our economy was booming, people were becoming millionaires over night, and the internet made it simple for even a novice to invest money online. Every night news reports covered stories involving middle class "Joe Shmoes" who invested a few thousand dollars in a dot com company and became wealthy as a result. Everybody wanted a piece of the action and the money literally poured into Wall Street. For investment firms it was now "game on".

It did not take long for investment firms to realize that the "real money" was in consulting services and underwriting Initial Public Offerings. Start up companies could benefit tremendously from large respected firms issuing "buy" ratings. This caused investors to throw more cash at the company, which caused the stock price to increase as well. The investment firm, in turn, benefited in this relationship by securing most or all of the underwriting fees.