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Origins of the Crash: The Great Bubble and Its Undoing
With his singular gift for turning complex financial events into eminently readable stories, Roger Lowenstein lays bare the labyrinthine events of the manic and tumultuous 1990s. In an enthralling narrative, he ties together all of the characters of the dot-com bubble and offers a unique portrait of the culture of the era. Just as John Kenneth Galbraith’s The Great Crash was a defining text of the Great Depression, Lowenstein’s Origins of the Crash is destined to be the book that will frame our understanding of the 1990s.
272 pages, Paperback
First published January 26, 2004
13 people are currently reading
971 people want to read
About the author
Roger Lowenstein
40 books498 followersRoger Lowenstein is an American financial journalist and writer. He graduated from Cornell University and reported for The Wall Street Journal for more than a decade, including two years writing its Heard on the Street column, 1989 to 1991. Born in 1954, he is the son of Helen and Louis Lowenstein of Larchmont, New York. Lowenstein is married to Judith Slovin.
He is also a director of Sequoia Fund. In 2016, he joined the board of trustees of Lesley University. His father, the late Louis Lowenstein, was an attorney and Columbia University law professor who wrote books and articles critical of the American financial industry.
Roger Lowenstein's latest book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War, was released on March 8, 2022, and won the 2022 Harold Holzer Lincoln Forum Book Prize.
He is also a director of Sequoia Fund. In 2016, he joined the board of trustees of Lesley University. His father, the late Louis Lowenstein, was an attorney and Columbia University law professor who wrote books and articles critical of the American financial industry.
Roger Lowenstein's latest book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War, was released on March 8, 2022, and won the 2022 Harold Holzer Lincoln Forum Book Prize.
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Displaying 1 - 29 of 29 reviews
March 6, 2021
I found it interesting, although loosely related to the internet. The time period was dot com era but I felt as if the context was more closely related to WallStreet scandals of the time. Admittedly, the author’s business and accounting jargon were a bit above my pay grade and I think someone more learned in those areas would glean much more from the book.
October 7, 2018
Almost 10 years on the crash subsequent to the one Lowenstein writes about in Origins of the Crash, is this book still relevant? What, if anything can it still teach us? As Twain allegedly said: "History doesn't repeat itself but it often rhymes." Howard Marks has stressed the constant cyclicality of the market. The fact this shines through in Lowenstein's account, means that anyone with an interest in financial history will find this book invaluable.
Origins of the Crash is a concise anatomy of bubble of the 90s. Lowenstein's central thesis is that the zeitgeist of the period, belief in unchecked free markets to solve the worlds problems, ultimately seeded the disasters of the decade. There are more detailed accounts of each of the episodes described (Den of Theives for the LBO boom, The Smartest Guys in the Room for the Enron scandle), however Lowenstein excels in weaving them together to paint his general thesis that unchecked free markets will tend to find work arounds for any obstacles in their course.
A rough sketch: the LBO excesses lead to caps in CEO pay by the Clinton administration, but unperturbed, the use of stock options that did not need to be expensed became a mainstay of CEO pay. Perversely this encouraged focus not on the company, but rather stock price. This led to behaviour exemplified at Enron that focused on away from its core strengths, but rather towards branding it as a new-economy company to increase P/E ratios and thus higher share prices on the same earnings: “Quite simply, over the four years that followed Skilling’s 1996 elevation to president, Enron’s net income, as reported by the company, rose from $1.08 a share to precisely $1.12. That is growth of less than 1 percent per annum. ...the Enron bubble was as much a public relations phenomenon as it was an accounting phenomenon.” To sustain this, executives required sycophantic auditor, analysts, lawyers and politicians (all eager for fees and political contributions) - how else would it get the smooth constantly increasing earnings, favourable recommendations and light regulatory touch required to perpetuate this? And once they delivered this investors would lap up the shares, causing prices to rise. The CEOs would exercise their options, be granted more, thus trapping the everyone in an endless cycle (the Raptor SPVs at Enron best typified this - they hedged Enron against an decrease in its stock price, with Enron stock as collateral...). But as Lowenstein states: “The main components of the scandal - the unvarnished greed, the conspiratorial neglect by gatekeepers, the hysterical attention to share price - were simply too common to think that Enron as unique.”
In many ways, the Epilogue is almost cathartic - Lowenstein is looks at the after math and attempts to sum up what he sees. He laments the gradual loosening of standards - the 1929 crash he argues was "mostly confined to a handful of brokers, bankers, and stock pool operators. In the '90s, despite the greater burden of regulatory supervision, the abuse spread beyond Wall Street to Main Street corporations...". Lowenstein (almost prophetically) seems resigned to the fact "yes, there will be more bubbles and more crashes. And given the nature of the beast, Wall Street may be incapable of genuine reform." I would hazard a guess and say what was probably a bit depressing for Lowenstein is that less than a decade on, a similar dance had spread from Main Street corporations straight into the neighbourhood street of every day America, leading to the 2008 crash.
Ultimately, there was probably more elucidating observation than: "And it is the chief lesson of the scandals that the culture of a community, more than any laws, provides the moral determinant for its behaviour." More than anything, this is the key takeaway for me. But also touches on one of the key things that I think is missing from the account - despite the bad apples, there were many other people out there genuinely trying to do good. Although Lowenstein briefly touches on a few - Arthur Levitt at the SEC, the few analysts who gave frank assessments - I feel that their brief cameos could have been further extended. Further, despite the frauds like Enron and Worldcom; over the same period there have been genuinely innovative companies like Amazon and Google. Perhaps this isn't the right book for that, and including them would only have muddled the concise and punchy message that Lowenstein was seeking to deliver. Nevertheless, that is worth keeping in mind as one reads the account of the 90s. With that caveat in mind, definitely recommended as must-read for anyone interested in financial history.
Origins of the Crash is a concise anatomy of bubble of the 90s. Lowenstein's central thesis is that the zeitgeist of the period, belief in unchecked free markets to solve the worlds problems, ultimately seeded the disasters of the decade. There are more detailed accounts of each of the episodes described (Den of Theives for the LBO boom, The Smartest Guys in the Room for the Enron scandle), however Lowenstein excels in weaving them together to paint his general thesis that unchecked free markets will tend to find work arounds for any obstacles in their course.
A rough sketch: the LBO excesses lead to caps in CEO pay by the Clinton administration, but unperturbed, the use of stock options that did not need to be expensed became a mainstay of CEO pay. Perversely this encouraged focus not on the company, but rather stock price. This led to behaviour exemplified at Enron that focused on away from its core strengths, but rather towards branding it as a new-economy company to increase P/E ratios and thus higher share prices on the same earnings: “Quite simply, over the four years that followed Skilling’s 1996 elevation to president, Enron’s net income, as reported by the company, rose from $1.08 a share to precisely $1.12. That is growth of less than 1 percent per annum. ...the Enron bubble was as much a public relations phenomenon as it was an accounting phenomenon.” To sustain this, executives required sycophantic auditor, analysts, lawyers and politicians (all eager for fees and political contributions) - how else would it get the smooth constantly increasing earnings, favourable recommendations and light regulatory touch required to perpetuate this? And once they delivered this investors would lap up the shares, causing prices to rise. The CEOs would exercise their options, be granted more, thus trapping the everyone in an endless cycle (the Raptor SPVs at Enron best typified this - they hedged Enron against an decrease in its stock price, with Enron stock as collateral...). But as Lowenstein states: “The main components of the scandal - the unvarnished greed, the conspiratorial neglect by gatekeepers, the hysterical attention to share price - were simply too common to think that Enron as unique.”
In many ways, the Epilogue is almost cathartic - Lowenstein is looks at the after math and attempts to sum up what he sees. He laments the gradual loosening of standards - the 1929 crash he argues was "mostly confined to a handful of brokers, bankers, and stock pool operators. In the '90s, despite the greater burden of regulatory supervision, the abuse spread beyond Wall Street to Main Street corporations...". Lowenstein (almost prophetically) seems resigned to the fact "yes, there will be more bubbles and more crashes. And given the nature of the beast, Wall Street may be incapable of genuine reform." I would hazard a guess and say what was probably a bit depressing for Lowenstein is that less than a decade on, a similar dance had spread from Main Street corporations straight into the neighbourhood street of every day America, leading to the 2008 crash.
Ultimately, there was probably more elucidating observation than: "And it is the chief lesson of the scandals that the culture of a community, more than any laws, provides the moral determinant for its behaviour." More than anything, this is the key takeaway for me. But also touches on one of the key things that I think is missing from the account - despite the bad apples, there were many other people out there genuinely trying to do good. Although Lowenstein briefly touches on a few - Arthur Levitt at the SEC, the few analysts who gave frank assessments - I feel that their brief cameos could have been further extended. Further, despite the frauds like Enron and Worldcom; over the same period there have been genuinely innovative companies like Amazon and Google. Perhaps this isn't the right book for that, and including them would only have muddled the concise and punchy message that Lowenstein was seeking to deliver. Nevertheless, that is worth keeping in mind as one reads the account of the 90s. With that caveat in mind, definitely recommended as must-read for anyone interested in financial history.
August 27, 2019
Roger Lowenstein is one of the great financial journalists of our era. In the tradition of John Kenneth Galbraith (The Great Crash), the author reflects on the collapse of the technological bubble of 2000. Tracing the origin of the crisis since the popularity of stock markets in the ‘80s, the author brings to light the deficiencies in governance and regulation, as well as stock-option compensation, which lead corporate executives straight to short-termism and accounting manipulations (let's remember Enron and WorldCom). These factors, compounded with the attractiveness of innovation, allowed the bubble to take such gigantic proportions.
Although many of the issues raised by the author have since been addressed by better governance practices and increased regulatory oversight (notably, Sarbanes-Oxley), the book is still relevant for its many timeless observations. Referring to telecoms, the author reminds us of the illusion of the first-mover advantage:
“The first-to-market cliché was accepted on faith; it had to be, for the historical evidence did not support it. Many early innovators in the past – the first manufacturers of automobiles, the first personal computer companies; and so on – had long since disappeared.”
Lowenstein also disputes the low-cost advantage:
“innovations that cut costs inevitably lead to lower prices, thinner margins, and commodity like returns. Just as airlines, poised to bleed each other to the last drop of their equity.”
These anecdotes, known to all but often forgotten every time innovation has a new name, remind us that: “The problem of the modern economy is not a failure of a knowledge of economics; it's a failure of a knowledge of history.” (Galbraith 13)
Reading Origins of the Crash, 13 years after its publication, one wonders what issues Roger Lowenstein will critique when he examines the current cycle.
Although many of the issues raised by the author have since been addressed by better governance practices and increased regulatory oversight (notably, Sarbanes-Oxley), the book is still relevant for its many timeless observations. Referring to telecoms, the author reminds us of the illusion of the first-mover advantage:
“The first-to-market cliché was accepted on faith; it had to be, for the historical evidence did not support it. Many early innovators in the past – the first manufacturers of automobiles, the first personal computer companies; and so on – had long since disappeared.”
Lowenstein also disputes the low-cost advantage:
“innovations that cut costs inevitably lead to lower prices, thinner margins, and commodity like returns. Just as airlines, poised to bleed each other to the last drop of their equity.”
These anecdotes, known to all but often forgotten every time innovation has a new name, remind us that: “The problem of the modern economy is not a failure of a knowledge of economics; it's a failure of a knowledge of history.” (Galbraith 13)
Reading Origins of the Crash, 13 years after its publication, one wonders what issues Roger Lowenstein will critique when he examines the current cycle.
July 20, 2025
An interesting account of the dotcom bubble and what likely led to it.
The layout of this edition of the book was poor and made the reading experience very dense and without much “air.” However, one should not hold that against the author or the book itself. If different versions exist, I suggest you try another.
Lowenstein’s account of the buildup to the bursting of the bubble is well written. However, contrasted with, for example, Galbraith, there is much more volume of text, much more storytelling, and far less effective synthesis of the root causes of the crash and the forces that drove it. There is also much more of Lowenstein’s own subjective interpretation of motivations and his passing of moral judgment. The latter we could have done without, and it would have been more effective if left to the reader.
One can learn a lot from this book about the human condition, the madness of crowds, greed, and how the latter two can cause and feed off each other. As such, it is an important account of modern history. For the budding investor, it serves as a crucial reminder of the inherent volatility of secondary markets, and applying the principle of inversion will add to your list of “don’ts” and improve your investment checklist—particularly regarding incentive alignment between management and shareholders. Therefore, the book is well worth reading.
However, it is far more voluminous than it needs to be and at times seems more concerned with passing moral judgment than with explaining what happened—and, most importantly, why. I cannot help but suspect that the author’s moral stance led to a lack of deeper examination and missed the opportunity to gain insight into the human perspectives that drove many people toward this collective exuberance. Lowenstein seems more concerned with labeling actions morally than with exploring their very existence and underlying causes. That is a missed opportunity.
The layout of this edition of the book was poor and made the reading experience very dense and without much “air.” However, one should not hold that against the author or the book itself. If different versions exist, I suggest you try another.
Lowenstein’s account of the buildup to the bursting of the bubble is well written. However, contrasted with, for example, Galbraith, there is much more volume of text, much more storytelling, and far less effective synthesis of the root causes of the crash and the forces that drove it. There is also much more of Lowenstein’s own subjective interpretation of motivations and his passing of moral judgment. The latter we could have done without, and it would have been more effective if left to the reader.
One can learn a lot from this book about the human condition, the madness of crowds, greed, and how the latter two can cause and feed off each other. As such, it is an important account of modern history. For the budding investor, it serves as a crucial reminder of the inherent volatility of secondary markets, and applying the principle of inversion will add to your list of “don’ts” and improve your investment checklist—particularly regarding incentive alignment between management and shareholders. Therefore, the book is well worth reading.
However, it is far more voluminous than it needs to be and at times seems more concerned with passing moral judgment than with explaining what happened—and, most importantly, why. I cannot help but suspect that the author’s moral stance led to a lack of deeper examination and missed the opportunity to gain insight into the human perspectives that drove many people toward this collective exuberance. Lowenstein seems more concerned with labeling actions morally than with exploring their very existence and underlying causes. That is a missed opportunity.
August 12, 2021
Brilliantly written, Roger Lowenstein gives a succinct recap of why the market soared to as high as it did in the 90s and the reasons for its crash.
I am honestly blown away at all the information that Lowenstein was able to collect. This gives the reader a full understanding of the situation in the 90s. His specific examples of companies that were corrupt as well as specific details really gives the reader a clear understanding of the degree to which corruption was rampant.
The book is also structured in a very intelligent way. It mixes a chronological order with a “summary-to-examples” order. This makes it easy for the reader to follow and understand.
I think the biggest strength the book has is its writing. The expressions that Lowenstein uses are truly mind blowing. I can find so many memorable quotes in the book.
But his writing can I guess sometimes be difficult to follow, especially if you lose focus for a bit. It might be due to his long sentences or the convoluted nature of financial history.
Another con is that the book repeats several points, a lot. Such as that of shareholder value or stock options. Which is good if you’re reading the book in periods. But, for a reading of one seating it gets kind of draggy.
I am honestly blown away at all the information that Lowenstein was able to collect. This gives the reader a full understanding of the situation in the 90s. His specific examples of companies that were corrupt as well as specific details really gives the reader a clear understanding of the degree to which corruption was rampant.
The book is also structured in a very intelligent way. It mixes a chronological order with a “summary-to-examples” order. This makes it easy for the reader to follow and understand.
I think the biggest strength the book has is its writing. The expressions that Lowenstein uses are truly mind blowing. I can find so many memorable quotes in the book.
But his writing can I guess sometimes be difficult to follow, especially if you lose focus for a bit. It might be due to his long sentences or the convoluted nature of financial history.
Another con is that the book repeats several points, a lot. Such as that of shareholder value or stock options. Which is good if you’re reading the book in periods. But, for a reading of one seating it gets kind of draggy.
July 7, 2019
Great overview of the dot com bubble and creative accounting issues of the early 2000's. Overzealous speculation and greed led to these. Very similar parallels to the 2008-9 recession as well, but this book was published in 2004. Most of the issues were set up in the 1980's when many of the regulations were dismantled to allow for absurd salaries, and even more importantly stock options. CEO's and the board were able to tie options and bonuses to stock performance, so they did whatever they could to make the stock go up, even if it was very bad for the company/employees long term. Sarbanes Oxley came out after this crash, but is already being dismantled. Our society sucks and is right back on track to be much worse than this. Talked about how shareholder value has overtaken everything and how that hurts companies, employees, and the public.
March 11, 2020
Phenomenal brief history of US Markets from late 70s to 2002. Covers: rise of stock options, making the quarterly earnings “number” (short term thinking), boom/bust, principle agent problem, bias of sell side analysts, accounting issues, and subsequent regulation.
Lowenstein does a great job of pulling many specific examples throughout history concisely (<1 page). He did an in-depth look at WorldCom & Enron, as those were the poster child examples of bad actors at the time of the book.
Lowenstein is the man, would recommend all his books but this one was especially good.
Lowenstein does a great job of pulling many specific examples throughout history concisely (<1 page). He did an in-depth look at WorldCom & Enron, as those were the poster child examples of bad actors at the time of the book.
Lowenstein is the man, would recommend all his books but this one was especially good.
June 9, 2025
A brilliant summary of the events that led to the DotCom bubble and then crash. This book is different from other books that dwell more on the stock market experience during the DotCom bubble, like Maggie Maher's Bull!.
This book highlights the less talked about aspects of the 1990s, like auditing rules, corporate greed, LBOs and Wall Street excesses.
The book also covers the lesser known Telecom boom and bust - companies like Tyco, WorldCom and Global Crossing.
Short, easy to read and well researched. Highly recommended.
This book highlights the less talked about aspects of the 1990s, like auditing rules, corporate greed, LBOs and Wall Street excesses.
The book also covers the lesser known Telecom boom and bust - companies like Tyco, WorldCom and Global Crossing.
Short, easy to read and well researched. Highly recommended.
September 11, 2017
Can be dry at times, but a good overall history of the beginnings and end of the dot com bubble. I would say this is one of the better books you could read to get a sense of the rise of the shareholder value culture in Fortune 500s and the unintended consequences associated with it (i.e. Enron, Tyco, etc.)
December 12, 2022
Yet another good tome by Lowenstein. He has a knack for 90s financial shenanigans, with the first being LTCM and now a combination of the dot com bubble and the corporate governance controversies. A quick but thrilling read, it certainly offers a lot of further readings and companies whose "downfall books" would soon be in my to-buy list.
August 18, 2019
I thought this would focus more on the dot com piece of the crash but it mainly focuses on Enron and WorldCom. I thought his book on long term capital management was better.
November 15, 2020
Decent read. Unique insight into the tech bubble boom. Not to take away from the story, but the 2008 crash made this seem like a drop in the bucket. A bit over-dramatized perhaps.
June 25, 2022
The author managed to make insane stories of shameless greed and criminal behavior during the dot-com bubble boring and dry. The writing style was stuporific; I found myself frequently needing to reread a paragraph, having nodded off in the middle of it. Stocks, derivatives, etc. are complicated to understand! There didn't seem to be a strong structure in place. It felt like just a list of things that happened, laundry-list style.
December 28, 2022
This was really good, and I appreciate that it dives deeper than the “internet sticks were just overvalued” and looks at some of the roots, which are still affecting things today.
December 27, 2023
Educational. I learned a lot about the context for how our current financial regulations and norms formed around the Dot Com bubble. Really interesting to read about Enron or extravagant stock options through a more (then) contemporary lens.
Also, it’s funny what the author was outraged by then - Imagine how he would feel about financial practices today.
Docking the book slightly because the author felt preachy at times. Some issues I think he presented unfairly. There were instances where I disagreed and wanted to say “there’s additional context you’re missing here!”
Also, it’s funny what the author was outraged by then - Imagine how he would feel about financial practices today.
Docking the book slightly because the author felt preachy at times. Some issues I think he presented unfairly. There were instances where I disagreed and wanted to say “there’s additional context you’re missing here!”
December 28, 2010
Through the 1970s, the American stock market was slowly declining; when in 1976 Presidential candidate Reagan suggested that social security funds be invested in it, he was derided as being crazy; in 1979 Business Week magazine announced "The Death of Equities". Everything changed in 1980, when Congress added obscure paragraph k to section 401 of the Internal Revenue Code. A benefits consultant from Pennsylvania realized that this paragraph allows companies to switch from a guaranteed-monthly-sum pension plan for its employees to a fixed-monthly-contribution plan that could be invested in stocks. This started a 20-year stock market rally. In the 1990s the old Silicon Valley practice of paying executives in stock options spread through the country. According to the accounting rules current at the time, issue of stock options was not reflected as a cost in the earning statements of companies; when a board of accountants and the SEC recommended that this change, many politicians lobbied against it, including Senator Joseph Lieberman, who claimed that workers would suffer. This was incorrect: only 2% of American workers, 3 million people, got stock options; among them, the top 5 executives of companies got 75% of options, the next top 50 15%, and everybody else made do with 10%; nevertheless, the recommendation was not put in place. This gave the top executives an incentive to run their companies into the ground, concealing the true state of things from the shareholders, exercise options and sell the stocks, enriching themselves, most spectacularly in the case of Enron. In theory, the executives report to the board of directors of the corporation; in practice, the board is usually packed with the CEO's cronies and often the CEO is also the chairman of the board and thus reports to himself (which the book says is a peculiarly American practice that doesn't take place in Great Britain). In the late 1990s two bubbles happened: the Internet bubble and the less well-known but, according to the book, much bigger telecommunications bubble. After the bubbles burst in 2000-2002, the stock market dropped as much as it did in late 1929. After the 1929 stock market crash, there was further decline accompanied by a decrease in production and an increase of unemployment; this didn't happen in the early 2000s, possibly because of the safeguards put in place after the crash of 1929, such as restrictions on speculating on margin. The book has a happy end - the passage of the Sarbanes-Oxley Act of 2002; we now know that farther on there was a real estate bubble, and perhaps more bubbles are coming.
March 25, 2007
pp 103 goes over Amazon’s earnings… or to be specific the absolute lack thereof.
pp 117 he discusses a “virtuous circle” the semantic opposite of a vicious cycle.
pp 160 an awesome quote from an executive at Global Crossing who was cognizant of his firm’s duplicity: “The stock market can be fooled, but not forever.” – Leo Hindery Jr.
pp 167 in a chapter all about Enron, nothing is more damning than this: From 1996 to 2000, Enron’s net income rose from $1.08 per share to $1.12. Staggering.
A couple years ago I was able to hear an economist from Saloman Brothers speak. He was highly critical of the Internet Bubble, and how it unwound. He made some derogatory comments about Greenspan’s reign, and how he’d made unfavorable decisions with the FOMC to impact and deepen the Bubble “bursting” in 2000. After his remarks, we chatted, and he suggested the book When Genius Failed as a resource. I bought it and loved it- review coming one day soon.
Well, I loaned it to a friend of mine, who was impressed with the depth of knowledge and information about Hedge Funds it offered, so he rushed out (to Amazon, I imagine) and bought some of the author’s other works. He then loaned this one to me.
He literally builds a case suggesting that the Crash of the internet market was quite similar to the Crash in 1929. Irrational exuberance, rampant speculation and easy money are similarities between these two events. Further, in both instances, the government reacts. In reaction to the events of 1929, the SEC was created. In reaction to the accounting scandals of the late 1990’s and early 2000’s, the Sarbanes-Oxley Act was created.
I think most people would be cautious about removing all checks and balances in our marketplace, but I’m not sure that adding layer upon layer of insulation is any real protection either. Lowenstein shows that not only were investors deceived blatantly, they also let themselves be seduced by some of these equity prices. He doesn’t lay the blame solely at the feet of men like Lay and Ebbers, but also at the feet of the analysts who quieted their own fears, and even the average investor who in the heyday of the 90’s booming bull market perhaps forgot the one salient point that Keynes made:
“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes
pp 117 he discusses a “virtuous circle” the semantic opposite of a vicious cycle.
pp 160 an awesome quote from an executive at Global Crossing who was cognizant of his firm’s duplicity: “The stock market can be fooled, but not forever.” – Leo Hindery Jr.
pp 167 in a chapter all about Enron, nothing is more damning than this: From 1996 to 2000, Enron’s net income rose from $1.08 per share to $1.12. Staggering.
A couple years ago I was able to hear an economist from Saloman Brothers speak. He was highly critical of the Internet Bubble, and how it unwound. He made some derogatory comments about Greenspan’s reign, and how he’d made unfavorable decisions with the FOMC to impact and deepen the Bubble “bursting” in 2000. After his remarks, we chatted, and he suggested the book When Genius Failed as a resource. I bought it and loved it- review coming one day soon.
Well, I loaned it to a friend of mine, who was impressed with the depth of knowledge and information about Hedge Funds it offered, so he rushed out (to Amazon, I imagine) and bought some of the author’s other works. He then loaned this one to me.
He literally builds a case suggesting that the Crash of the internet market was quite similar to the Crash in 1929. Irrational exuberance, rampant speculation and easy money are similarities between these two events. Further, in both instances, the government reacts. In reaction to the events of 1929, the SEC was created. In reaction to the accounting scandals of the late 1990’s and early 2000’s, the Sarbanes-Oxley Act was created.
I think most people would be cautious about removing all checks and balances in our marketplace, but I’m not sure that adding layer upon layer of insulation is any real protection either. Lowenstein shows that not only were investors deceived blatantly, they also let themselves be seduced by some of these equity prices. He doesn’t lay the blame solely at the feet of men like Lay and Ebbers, but also at the feet of the analysts who quieted their own fears, and even the average investor who in the heyday of the 90’s booming bull market perhaps forgot the one salient point that Keynes made:
“Markets can remain irrational longer than you can remain solvent.” – John Maynard Keynes
May 12, 2010
Well-known financial journalist Lowenstein (Buffett; When Genius Failed) sets out to explain the stock market crash of 2000 and the ensuing corporate scandals. The ingredients are familiar: executive overcompensation and stock options, irrationally exuberant shareholders, friendly auditors, short-term focus by financial professionals and overemphasis on shareholder value.
The author puts his unique stamp on these factors by juxtaposing them so brilliantly that the 20-year history that inflated the bubble seems not just understandable, but inevitable. The story is traced from the doldrums of the 1970s through the raiders and junk bonds of the 1980s to the financial brave new world of the 1990s. In self-conscious parallel to John Kenneth Galbraith's The Great Crash, Lowenstein explains that it is the boom that needs to be explained; the crash is simply the natural consequence. Lowenstein's low-key ease with the most complex financial reporting makes this book both accurate and easy to read, just as his earlier Buffett revealed a fascinating character where other writers saw only dullness, and his Where Genius Failed was a very comprehensible account of the 1998 Long-Term Capital Management blowup.
Lowenstein traces the origins of the trend that fueled the great stock market boom of the 1990s, which ultimately led to the dot-com bubble, the collapse of Enron and Worldcom, and the exposure of corruption that followed in its wake. Back in the 1970s, stocks were in such disfavor that one columnist was moved to write a piece called "The Death of Equities."
At that time, no one expected history to repeat itself, but the dire conditions gave rise to the largest financial boom-and-bust cycle in history. The takeovers and leveraged buyouts of the 1980s played a role in the resurgence of the stock market, but the granting of stock options to CEOs as incentive for growth played a bigger part in what was to come. Finally, corporations wishing to transfer control of pensions to individual employees through 401(k) programs pegged the performance of millions of ordinary workers' investments to the stock market and created a cult of equities on a massive scale. Lowenstein creates intriguing portraits of the players in this larger-than-life culture.
The author puts his unique stamp on these factors by juxtaposing them so brilliantly that the 20-year history that inflated the bubble seems not just understandable, but inevitable. The story is traced from the doldrums of the 1970s through the raiders and junk bonds of the 1980s to the financial brave new world of the 1990s. In self-conscious parallel to John Kenneth Galbraith's The Great Crash, Lowenstein explains that it is the boom that needs to be explained; the crash is simply the natural consequence. Lowenstein's low-key ease with the most complex financial reporting makes this book both accurate and easy to read, just as his earlier Buffett revealed a fascinating character where other writers saw only dullness, and his Where Genius Failed was a very comprehensible account of the 1998 Long-Term Capital Management blowup.
Lowenstein traces the origins of the trend that fueled the great stock market boom of the 1990s, which ultimately led to the dot-com bubble, the collapse of Enron and Worldcom, and the exposure of corruption that followed in its wake. Back in the 1970s, stocks were in such disfavor that one columnist was moved to write a piece called "The Death of Equities."
At that time, no one expected history to repeat itself, but the dire conditions gave rise to the largest financial boom-and-bust cycle in history. The takeovers and leveraged buyouts of the 1980s played a role in the resurgence of the stock market, but the granting of stock options to CEOs as incentive for growth played a bigger part in what was to come. Finally, corporations wishing to transfer control of pensions to individual employees through 401(k) programs pegged the performance of millions of ordinary workers' investments to the stock market and created a cult of equities on a massive scale. Lowenstein creates intriguing portraits of the players in this larger-than-life culture.
September 13, 2011
The run-up to the dot-com crash is laid out briefly and sickeningly. The crash was caused by many confluent trends under the over-arching pursuit of 'shareholder value'. At least that's Loewenstein's thesis and he argues it well. Enron, Lucent, GE, Tyco aong others variously cooked the books, created fraudulent off-balance-sheet Special Purpose Vehicles, colluded with consulting accountants etc. In the process, many insiders reaped huge rewards while the small investors lost all (Enron) or almost all.
Regarding the off balance sheet entities, he describes "... only Enron had a meaningful economic stake. In essence it was selling assets to, or buying protection from, itself." One wonders if similar accusations could be made of the Federal Reserve buying all those bonds from the Treasury?
Regarding the off balance sheet entities, he describes "... only Enron had a meaningful economic stake. In essence it was selling assets to, or buying protection from, itself." One wonders if similar accusations could be made of the Federal Reserve buying all those bonds from the Treasury?
October 6, 2016
Great book. Easy read. It details the 1990s tech bubble. More importantly, Lowenstein points out that the telecom bubble was much bigger than the tech bubble. So there you have it. Why was the 1990s so great? We had four bubbles that sent the economy sky high. One person could have stopped at least one of those bubbles; Bill Clinton. Had he not signed the Telecommunications Act that bubble would never have occurred. Had Clinton decided to sign legislation regulating derivatives, the tech and housing bubbles probably wouldn't have happened. So we had a tech bubble, a bigger telecom bubble, a housing bubble, a stock market bubble fueling the 1990s economy, and we've been in hangover mode ever since.
June 18, 2008
99年から2000年にかけての絶頂期、あの時は熱病に冒されていたかのような空気が充満していました。“New Economy”という言葉に象徴される、永遠に続くと信じられていた経済成長、そういった何か宗教めいたものに国民がとりつかれていたような雰囲気がありました。かく言う自分自身も New Economy を謳歌するアメリカの強さに尊敬の念を抱いていました。しかしその舞台裏で起きていたことは、本当に醜く悲惨な人間の行為だったということが、この一冊を通じて描かれています。
アメリカ国民にとっては、ここにある一連の事件史はひとつの大きなトラウマであり、教訓となっていると思います。必ずしもそれが大きな振り子となって完全な軌道修正を果たしているわけでもなく、まだまだその途上であることは確かで��。しかしながら、これだけ焼け野原状態になった上でなお、自浄作用を働かせながら徐々に正しい方向にもっていこうと努力し、そして短期間である程度修復したことを鑑みても、なおかつ日本の失われた十数年と比較してみても、アメリカのポテンシャルの高さを感じます。
アメリカ国民にとっては、ここにある一連の事件史はひとつの大きなトラウマであり、教訓となっていると思います。必ずしもそれが大きな振り子となって完全な軌道修正を果たしているわけでもなく、まだまだその途上であることは確かで��。しかしながら、これだけ焼け野原状態になった上でなお、自浄作用を働かせながら徐々に正しい方向にもっていこうと努力し、そして短期間である程度修復したことを鑑みても、なおかつ日本の失われた十数年と比較してみても、アメリカのポテンシャルの高さを感じます。
April 7, 2007
I found his research to be amazing. He went into detail on business examples used in the book.
It's amazing at what goes on in corporate America and this book certainly makes you want to never invest another dollar in the market but rather invest it in your own business--at least you can trust yourself.
It's amazing at what goes on in corporate America and this book certainly makes you want to never invest another dollar in the market but rather invest it in your own business--at least you can trust yourself.
March 14, 2016
The title wasn't very clear which "crash" it referred to but it was a blessing in disguise. It succinctly summarized all the events throughout the 90's and early 00's. It's a great book for someone who's looking into what happened in that era but to get detailed information you definitely have to look elsewhere.
September 6, 2008
The problem with reading books about what's gone wrong with the economy is that by the time the book's been published and gotten its way into my grubby hands even more has happened and much of the book may no longer be relevant.
December 15, 2014
80년대부터 2000년대 초반에 닷컴 버블이 붕괴될 때까지 거품이 형성되던 시기의 역사적 정황을 자세히 그려놓았다. 금융시장 붕괴가 있기 전에 나타나는 장기 호황, 기업과 경영인에 대한 무한 신뢰, 그리고 그로 인해 분식이 재무적으로 혹은 경영 전반에 나타나고 결국 계속 될 수 없는 거짓말이 밝혀지면서 붕괴가 오는 것을 자세히 기술하고 있다. CEO들의 지나친 보상, 주주가치 증대라는 근거없는 믿음과 풍조를 비판하고 있다. GE, 엔론 등의 기업들의 실적 조작에 대해서 자세히 알 수 있었다.
February 7, 2008
focuses on wall street and what led to the internet stock bubble...
July 22, 2008
this is a long, informative newspaper article about how Wall Street abetted the tech boom.
January 11, 2011
Annoyingly tendentious.
December 12, 2014
Financial history. Good read. Interesting insight into the business trickery that lead to Wall Street problems of the.late 90s.
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