The Five Dumbest Things on Wall Street This Week

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The Five Dumbest Things on Wall Street in the Last Year or So

George Mannes

Like the PAX TV network -- which telecasts an hour's worth of "America's Funniest Home Videos" reruns each weeknight -- we at the Five Dumbest Things Research Lab are obsessed with dumb things past.

We know we should forget about them, but we just can't let them go.

So this week, we decided to revisit some of our favorite dumb things over the past year. We call it our "Whatever happened to...?" edition.

1. Amazon's Three-Ring Circles

Back in April we dubbed "first rate" some research published by Merrill Lynch tech strategist Steven Milunovich.

We're still amused.

Milunovich, you may recall, closely studied what Amazon.com (AMZN Quote) calls its "purchase circles" -- semiscientific lists of items that are especially popular purchases among people at a particular organization, or in a particular geographic area.

One of Milunovich's more interesting findings: At software companies such as Oracle (ORCL Quote), Siebel Systems (SEBL Quote) and Veritas (VRTS Quote), people were reading -- or at least buying -- technology books.

Microsoft Management How-To

But at Network Associates (NET Quote), what they were buying was Harry Potter and the Goblet of Fire and Body for Life: 12 Weeks to Mental and Physical Strength. All play and no work.

When we returned to Amazon's purchase circles in December, we found that Network Associates had simply been ahead of the curve: These days, nearly all the companies we checked had the latest Harry Potter volume at the tops of their list.

But there were enlightening outliers nonetheless.

Over at Microsoft (MSFT Quote), No. 3 in popularity is The 12 Simple Secrets of Microsoft Management: How to Think and Act Like a Microsoft Manager and Take Your Company to the Top.

That's scary. If Microsoft managers feel compelled to buy a book to learn how to think and act like Microsoft managers, they must be one tightly wound bunch of Microsoft managers.

Meanwhile, over at Siebel, one wonders whether employees think the software firm is a rewarding and fulfilling place to spend their careers. No. 2 on their list (behind, of course, Harry Potter and the Order of the Phoenix) is Flipping Properties: Generate Instant Cash Profits in Real Estate.

2. Oh, Kagan You See, by the Dawn's Early Light

Meanwhile, the hardest-working telecom commentator in America is still going strong. But not as strong as we predicted.

Back in February, to refresh your memory, we marveled at the astounding ubiquity of Jeff Kagan, a telecommunications industry analyst with a remarkable talent for getting himself quoted in stories about phone companies.

Kagan, we wrote, "has that rare and beautiful quality reporters treasure: He returns your call promptly, and he gives you a quotable comment you can drop in your story when you're minutes away from deadline. He's what we like to call the quote-a-matic of telecom reporting."

Given the rate at which Kagan's comments were showing up in print publications, we forecast in February that Kagan would finish 2003 with, for him, what would be a record number of press mentions: 698, up 8% from the prior year's record tally of 638.

Unfortunately, it's not to be so. When we counted Kagan's press mentions in late December, we calculated he was on track for 584 mentions in 2003, down 9% from our freshest 2002 tally.

Ringing In the New Year

*Figure for 2003 is as of Dec. 29, 2003. Source: Factiva

But you try telling Kagan he's off his pace. "It's busier than ever," he says. "My phone rings more, not less, than it did a year ago. And that's the way it has been every year since the middle '80s."

As for what he's talking about to all these reporters, Kagan says the theme he's hammering home is that the industry isn't as bad off as some folks would have you believe. "The future of telecom is as bright as ever and as competitive as ever," he says. Pessimists who fixate on declining long-distance revenue and access lines are ignoring the huge opportunity in voice over IP. And they're forgetting that entrenched companies can indeed adapt. "IBM (IBM Quote) went from typewriters to computers," says Kagan. "They changed."

Separately in February, we pointed out that while most telecom reporters seemed friendly with Kagan, the hardworking scribes at USA Today seemed especially close, having quoted him seven times in the prior two months.

After our piece, however, their relationship seemed to cool off, with Kagan banished from the paper for nearly six months. "I think they looked at that and decided they needed to diversify a little bit," says Kagan. "You probably had a good point there."

3. Nanotech It to the Limit One More Time

In March and in May, we warned investors not to get sucked in by the hype of nanotechnology.

Not that anybody listened to us.

Yes, the nanotech bandwagon has proved unstoppable, gaining momentum despite its occasional alarming resemblance to the dot-com bubble that's quickly receding from our collective memory.

Nanotech's greatest day -- or its worst, depending on your outlook -- was most definitely Dec. 3. That's the day that President Bush signed into law the 21st Century Nanotechnology Research and Development Act, which budgets $3.7 billion of funding over the next four years for nanotech, roughly defined as manufacturing on a molecular scale.

That same day, a San Diego-based company called Nanogen (NGEN Quote) issued a press release announcing it had been awarded a "key nanotechnology patent," bringing its U.S. portfolio to 56 patents. (The patent, according to the U.S. Patent Office, had actually been awarded Nov. 25, but perhaps someone at Nanogen thought Dec. 3 was a propitious day for getting the word out.)

Nanogen's stock jumped 51% on massive volume, raising the company's market capitalization from $92 million to $140 million in a single day. Nanogen, for you valuation-obsessed folks, reported $5 million of revenue for the first three quarters of 2003, and a net loss of $24 million. Not that it matters.

You've got to watch out for the hype in nanotech investing, warns Josh Wolfe, managing partner of the nanotech-focused venture capital firm Lux Capital and editor of the Forbes/Wolfe Nanotech Report -- a newsletter, by the way, whose promotional materials the research lab cited for nano-hypology back in March. Wolfe wasn't too impressed by Nanogen's release; that week, he happened to be more impressed by a DuPont (DD Quote) patent announced a day earlier. As far as nanotech investing is concerned, says Wolfe, "People are going to get burned."

That being said, Wolfe thinks it's good for America that the government will be pouring money into nanotech research. "Other countries are doing it as well," he says. "If we [the U.S.] do not create new knowledge, new innovations, we become a net importer rather than an exporter," he says. Plus, he says, the government is doing what private industry can't or won't, because there's no evidence private industry would get any return from funding basic scientific research in nanotech.

But we're not the only skeptics. "Government or politics can never appropriately make selections among different research programs," says Wayne Crews, director of technology policy for the Cato Institute. Rather than place bets by funding research for specific new technology, he says, the government should lessen the tax and regulatory burden on private industry to make conditions more conducive to basic research.

So why are people, especially in D.C., so obsessed with nanotech? "Partly it's a response to the technology downturn," says Crews. "There's a lot of interest in wondering what the next big thing is, what the next big technology is. And nanotech has been waiting in the wings."

4. Marcus Goodwin, Lose or Draw

The Psychic Investor doesn't belong in this roundup. When last we wrote about him, it was 2000, not 2003. The research lab hadn't even been founded yet.

But if we don't write about him now, we never will. So we must.

We met the Psychic Investor, formally known as Marcus Goodwin, back in the waning days of the Great Bull Market. He'd written a book called The Psychic Investor. At a meeting sponsored by the venerable New York Society of Securities Analysts, Goodwin was advising a group of investment professionals how they might use psychic powers to invest in the stock market.

Crazy, right? Illogical, no? But try to remember: Those were crazy, illogical times. As one attendee put it at the time, "Can you explain these Internet stocks? One thousand times earnings? Is that logical?"

Nowadays, Goodwin isn't so involved in stocks, though he does have some opinions about them. ("I think it's going to be a flat market over the next two, three years," he says. "I think the new formula for the market is trading. Everyone should do it. Not so much hold anything.")

Marcus Goodwin Forecasting your financial future

Instead, Goodwin is focusing on his music. He recently released a CD called "Buttcracker," an album that, among other songs, includes one about Lisa Marie Presley and Michael Jackson's sex life. This being a family publication, we can't say much more than that.

Is the music good? No, in our opinion. Is it memorable? Yes.

Which, appropriately enough, is exactly what we thought of Goodwin's stock picks.

5. Oh, What's the Tipping Point of It All?

Though Jeff Kagan's fame may be bumping up against resistance levels, other Wall Street phenomena are poised to break out.

And we've got the charts to prove it.

First up: The chief restructuring officer. As we pointed out a year ago in a study of various executives with the word "chief" on their business cards, once-fashionable job titles such as "chief knowledge officer" and "chief privacy officer" appear to be passing fads.

On the other hand, we noticed, the hard-times harbinger known as the "chief restructuring officer" appeared to be on the upswing. So one year later, how did the CRO fare?

Just as we thought. Mentions of a chief restructuring officer in 2003 press releases more than doubled from official statements issued the prior year.

Once we verified that trend, it was on to another one: the "tipping point," the expression -- popularized by Malcolm Gladwell in his book The Tipping Point -- that's competing with "perfect storm" as the most alarmingly overused business-writing metaphor of 2003.

Hail to the Chief Restructuring Officer

Source: Factiva *Figure for 2003 is as of Dec. 29, 2003

Back in June, we forecast that people searching for an impressive-sounding synonym for "a big change" would increasingly choose "tipping point," vaulting that term well ahead of the old standby "inflection point" and even threatening the perennial champion "paradigm shift."

A Painful Inflection

Source: Factiva * 2003 figures are as of Dec. 29, 2003 ** articles mentioning "tipping point" but not Malcolm Gladwell, author of The Tipping Point

Again, the research lab was correct. Non-Malcolm Gladwell-related uses of "tipping point" more than tripled from 2002 to 2003, making the term 89% as popular as "paradigm shift."

The big surprise, however, was that "inflection point" still has a lot of upside. Usage grew 52% over 2002, well ahead of the 14% growth we predicted in June, which indicates that the urge to write about big changes is, um, inflectious.