Hey, did you hear? Wall Street's dead! WE know this because the cover of November's Portfolio magazine told us so, in a story headlined "Wall Street Requiem." The piece, by ex-Wall Street Journal staffer Jesse Eisinger, argues that the "independents" -- Goldman, Sachs & Co., Morgan Stanley, Lehman Brothers Inc., Merrill Lynch & Co., and Bear, Stearns & Co. -- are strikingly similar to low-credit borrowers who took on riskier mortgages than they could really afford. And now they're likely to default, or in the case of the investment banks, especially Bear, to be gobbled up by somebody else or just disappear entirely. "There is an end of the era feel to the whole thing," the story concludes. "After all those years of investment bankers being mistakenly lambasted as rogues, it will be ironic if the moment Wall Street finally embraced its reputation became its undoing."
So where do we start? First, let's note that the "death of Wall Street" story is a staple of end-of-a-boom reporting, mindlessly but regularly resurrected each time the cycle takes an ugly turn south. No matter that these pieces tend to be disproved shortly after their appearances.
Of course, that doesn't mean that some of Portfolio's predictions won't come true. After all, things are bleak; just ask Merrill and its $8.4 billion write-down. But we were struck by the utter simple-mindedness of the piece -- not to mention its brevity. A cover story, it weighed in at only 2,100 words, which is shorter than most features that run off the WSJ's front page. So much for Portfolio's much-ballyhooed commitment to long-form journalism.
But we digress. The story blithely declares that the five banks it's dealing with "define Wall Street today." Really? Do Citigroup Inc., J.P. Morgan Chase & Co., Credit Suisse Group, UBS and Deutsche Bank AG know about this? It argues that beginning in the late 1990s, when stock trading "was becoming commoditized" (Really? We thought that started back in 1975, when commissions were deregulated), the universal banks, namely Citi and J.P. Morgan, "languished" and Deutsche and Credit Suisse "remained Wall Street also-rans."
Again we ask: Really? Does Sandy Weill know about this?
Then, the story explains, after the dot-com crash, the "independents flowered" as they began to increasingly and roguishly trade for their own accounts. This is why they're in the mess they're in now, as they try to deal with risky assets on their balance sheets.
OK, true enough. But then comes the story's doomsday conclusion: "Bonus season this year will make Montgomery Burns look generous. Of the five banks, only Goldman is looking solid." It predicts that Bear won't stay independent, Lehman's success will depend on "whether this crisis has truly passed, and that bet has long odds," and that "takeover speculation" surrounding Morgan and Merrill will reheat.
Who would buy any of these firms, or why, it doesn't say, which is a pretty big hole. Also missing is any explanation of how Goldman, the most active and highly leveraged trader, "somehow managed to thrive." A snarky "we'll see if that lasts" is as deep as the story's Goldman discussion goes. On the whole, the piece reads like a decent-enough inside-the-book column that was pumped up by editors at deadline looking for something buzzworthy -- or more buzzworthy than "India's Trillionaire," one of the issue's lengthier features -- to put on the cover.
Interestingly, however, the piece has yet to generate much in the way of buzz. Its only mention in the blogosphere was by one of Portfolio's own bloggers, Felix Salmon, who disagreed with it, writing that he believes "that investment banking, as an industry, will survive." Meanwhile, we came across a blog post by Lois Kelly, author of Beyond Buzz: The Next Generation of Word-of-Mouth Marketing, explaining why she thinks Portfolio, despite its undeniable beauty, isn't likely to last. She compared the October issue of Portfolio to a recent issue of its rival, Fortune.
"While both run about the same number of personal stories and glitz and glam features, Portfolio, unlike Fortune, runs many articles that raise apprehension, fear, doubt and anxieties about different businesses or business trends," she wrote. "'Anxiety stories once had appeal, but have lost their juice because the media and politicians have over-played the anxiety angle."
Maybe Portfolio should have put that trillionaire on its cover after all.
Yvette Kantrow is executive editor of The Deal.