The Thrill Comes From the Chase, Not Big Profits
It would be easy to dismiss Ivan F. Boesky and his fall from grace with the old canard that greed knows no bounds and every fat cat cheated his way to the top. But that would be too simple.
Besides, I don’t believe it. Boesky, the arbitrageur who agreed to pay a record $100 million to settle his insider trading case with the Securities and Exchange Commission, already was a heavy hitter by the time Dennis Levine, the Drexel Burnham Lambert investment banker, offered him tips on pending takeover bids.
Ultimately, I don’t think either of them did it for the money. For that matter, neither did I. Sure, I was broke, unlike the other guys. I wasn’t a financial professional.
Instead of millions, I earned $30,000 a year as a stock market columnist for the Wall Street Journal. And, unlike the other guys, I refused to plead guilty because I don’t think what I did was a crime, although I freely admit that it was wrong and I am sorry.
But there is a common element to these uniquely American tragedies and it has everything to do with the thrill of the chase.
It had to in Boesky’s case since the guy already was worth a hundred million bucks or more. And Levine was pulling down about a million bucks a year. In my case, I needed money to pay some bills but it was small beer, about $10,000, and I could have found a less risky solution.
I told the stockbroker with whom I made my unholy alliance: “I don’t want to know if we make a bundle on my tips. I might get lazy.”
When it was over, I had received $30,000 of the total profits of $700,000. Not what you’d call a get-rich-quick scheme, at least not for me.
I was having too much fun chasing the latest takeover rumors to care about getting rich. There were lots of hot tips for an ambitious reporter to chase in 1982, 1983 and 1984, when I covered the bull market.
That is the essence of daily journalism, jumping on a hot story and flushing out the details before the competition.
That also is the essence of investing, at least the way active traders such as Boesky and Levine played the game.
The only reason to invest is because you think you know something that the rest of the stock market hasn’t yet learned or figured out.
Most of the time, it’s innocent enough. I remember meeting a stock analyst who’d made a bundle in shares of video game makers.
His research began one day when he realized that his kids were constantly pestering him for quarters and then disappearing for hours in arcades like seasoned slot-machine players. The rest is history.
But a red-hot trader like Boesky can’t wait six months or a year for a new trend to catch the market’s fancy and send stock prices higher.
It has less to do with relative profitability and more to do with excitement. It’d be an easier and less demanding life picking some good, solid stocks and going fishing. But it also would be dull as hell.
Part of the high of my job was feeling I was on top of the action almost as it was happening. One of my sources, an active trader who owned his own firm, tipped me off to some six takeover bids before they were announced.
Nothing made my blood run faster than such rumors. And nothing made me feel prouder than when they proved to be true.
False Assumptions
Until last May, when Levine was arrested, I would have sworn that my source on these deals was not trading on inside information.
And I’ll bet he would have said the same thing. Now, I’m not so sure, and I wonder if maybe the entire stock market was operating on a false set of assumptions, at least as far the exchange of information is concerned.
This was part of the game, to flush out deals before they became public. Arbitrageurs such as Boesky were said to hire private detectives and pay off employees at airports to report the takeoffs and landings of corporate jets bearing high-level executives who might be negotiating big deals.
Could it be that Boesky grew so full of this game and so numb to the moral questions that he never noticed when he crossed the line into foul territory? How else do you explain why a hugely successful guy risks it all? It was certainly an element in my disaster.
My arrangement with the stockbroker, while I knew it could get me fired from the Journal, otherwise seemed innocuous. It never occurred to me that anyone would find out. No one’s pocket was being picked. And the deal got me one step closer to the action and provided me with a window into the inner gyrations of the market.
In a perverse way, my arrangement with the stockbroker made me a better columnist.
The stock market, whether you invest in it or write about it, is a performance game. For the players, success comes to those who produce the biggest numbers.
But that success almost guarantees failure. Because once you reach the top, the hardest struggle of all begins--staying there. And that is an impossible task, as Boesky and Levine discovered.
“The pressure to outperform your neighbor becomes intense in a greedy, upward market,” notes John Spooner in his book, “Sex and Money.” “In many ways it is a time of unhappiness, producing the kind of mental exhaustion that tells you that, sooner or later, you are doomed to fail.”
