Customer Reviews

Wall Street Meat: My Narrow Escape from the Stock Market Grinder

5 star:		(27)
4 star:		(5)
3 star:		(5)
2 star:		(1)
1 star:		(4)

 

 

I rarely rate a book with 5 stars but this book richly deserves it for in succinct breadth and witty storytelling. In his wild expose, WALL STREET MEAT, Andy Kessler gives the reader a behind-the-scenes view of the antics of some of Wall Street's giants. The subtitle tells it all: Grubman, Quattrone, Meeker and Blodgett and Andy Kessler's relationships and experiences with each. To those even somewhat familiar with the SEC action of April 28, 2003, these names will stand out. MEAT tells us more, much more.

Andy Kessler began his career as an electrical engineer designing microchips at Bell Labs. By some strange quirk of fate (or brainless move by a headhunter), he was thrown into the world of a Wall Street analyst. Kessler has seen more than most; his Wall Street career began before the infamous "Black Monday" crash (October 19, 1987) and spanned into the beginning of the Internet Bubble. During that time, Kessler met and worked with the individuals now being targeted for prosecution for their "exuberant" activities. Kessler went at it elbow-to-elbow with Jack Grubman while at PaineWebber (Grubman eventually moved on to Salomon Smith Barney); with Frank Quattrone (and Mary Meeker...truly a bit player here) while at Morgan Stanley (Quattrone eventually moved to Deutsche Bank and then to CSFB); and became well acquainted with Henry Blodgett AFTER Kessler turned in his analyst hat for that of a venture capitalist.

Kessler goes to great lengths to inform the reader of the trials and tribulations of the Wall Street analyst in the 80's and most of the 90's. The difficulties and reticence he would feel each time he would put a "Buy" or "Sell" recommendation on a company are richly described as gnashing of teeth and firestorms. In this age, an analyst had to defend each recommendation as the Street's skepticism "appeared" to demand it. Conversely, as the Internet phenomenon hit the scenes, the code of the analyst changed from one of cautious recommendation to one of mindless, obtuse "dartthrowing." Although he provides us with many gems, Kessler recounts one poignant conversation with Blogett wherin Blodgett posits: "You've got to understand. If I stop recommending a stock, and the shares keep going up, there is hell to pay. Brokers call you up and yell at you for missing more of the upside. Bankers yell at you for messing up their relationships. There is just too much risk in not recommending these stocks." A perfect example of the mindset and excesses bringing Wall Street to its knees. In another conversation, now considered germane and somewhat paradoxical (given the chronology of events), Kessler recounts Quattrone's tutelage of the invisible "Chinese Wall." This "Wall" is a conceptual separation of research and investment banking designed to prevent insider information passing from bankers to analysts. Ironically, the breaching of this "Wall" was one of the acts eventually bringing Quattrone down.

Kessler uses MEAT as part biography, part expose, and part satire...and does all three exceedingly well. To say this is just another "tell-all" book about Wall Street would be a great injustice. Kessler was there, Kessler is smart, Kessler was lucky. Above all, Kessler is hilarious. The combination makes this book an extremely enjoyable read, one most will appreciate and most importantly, learn from. A very good read, indeed.

"Wall Street Meat" is not just a snarky, sometimes caustic, generally shrewd, and combustively entertaining little over-educated guys in pinstripes getting themselves in trouble.

It's that, of course, but Andy Kessler is on to something more. Something not only interesting, but true: "Wall Street Meat" is very much about the passing of an Age, the end of an Era.

Paine Webber plucked Kessler from long-suffering geekdom (he had worked as an electrical engineer at Bell Labs, then fled after the AT&T breakup) to cover the brave new world of semiconductors; over the course of his eight-year tour of duty in the trenches on Wall Street---first as a semiconductor analyst for Paine Webber and then Morgan Stanley---Kessler relates how he learned his craft, navigated the perils of a novice analyst, and figured out just exactly how he would survive, and hopefully make some prescient calls for his institutional clients in the meantime.

That is to say: How to be an Axe in a stock. How not to be an Axe in a stock. And how to figure out whether the self-described Axe is sharp as a scythe or dull as a butter knife, and what you can do, O Rookie Analyst craving after a top ranking in Institutional Investor---to make maximum advantage out of that fact.

But let's back up a sec: you look confused. Axe? Clients? Institutional Investor? Huh?

No worries, Gentle Reader. Where other legendary Wall Street chronicles deal with bond trading (Liar's Poker, Bonfire of the Vanities), investment banking and M&A (Den of Thieves, Predator's Ball), "Wall Street Meat" has a considerably different---but incestuously related---emphasis: the secret life of the Wall Street analyst.

Or rather, the transformation---the mutation!---of the analyst in the boom years of the nineties, from scholar to scalliwag, from magus to miscreant, from Jekyll to Hyde.

That's what is so delicious about Kessler's little gem of a tell-all, aside from the fact that it's feverishly paced and delightfully wicked: it cuts to the core, to the meaty viscera, of a sea-change that radically altered the role of the analyst on Wall Street---with relation to the companies covered, to the clients served, and to the investment bankers who, increasingly, wielded the lash---and year-end bonus, an even more terrifying tool for instilling yelping obedience and cringing terror.

The analyst formerly inhabited a nerdy, nebbishy corner of the Wall Street galaxy,and was, in ancient times (before 1987) a scholarly, otherworldly, bookish creature paid a pittance to keep up on a vast hoard of facts and figures relating to the companies they covered, analyze those numbers, and spit back learned---and, one hoped, astute---opinions to the clients of the investment bank they served.

In the 1990's, this all changed.

Analysts had originally served the buy-side---the buyers of gazillions of shares of stocks hawked by the investment banks and their traders. But for a number of reasons, as margins on proprietary trading shrank, the real emphasis went to the white-hot money centers of the big banks: their investment banking arms, underwriting stock offerings for capital-hungry companies.

The formerly nerdpack-equipped analyst, in other words, transformed---nearly overnight---into a promoter. Into something almost cool, white hot, actually. A Rock n' Roll star.

Or something close: and that's what is at the juicy bloody rare center of Kessler's book, which goes into sufficient---but never deadly dull---detail on this curious Revolution, on the new Gods it made---Gods and Goddesses like Frank Quattrone, Jack Grubman, Henry Blodgett, and Mary Meeker, among others---and how Andy hung out with 'em! Traded barbs with 'em!

Marvelled as Meeker pounded the table on a double-bagger for Amazon, and Henry Blodgett, in December of 2000, prophecying that Yahoo (then at 100 bucks a pop) would soar to $200 a share (reality check: it cratered, and is now trading at 38 bucks a share)!

And got out before the Street broke out the guillotines! Timing *really* is everything!

Bookended by two limousines---black and white---chock full of wealthy Saudis and their gun-toting goons ready to wire half a billion in capital tomorrow morning to Kessler's new hedge fund, "Wall Street Meat" is a wild, juicy, timely ride of a truly Gilded Age, and of the crazy-eyed young prophets anointed in a time of Revolution. And like any age of turmoil, the Revolution inevitably ate its own.

Raw.

JSG

Andy Kessler writes a nice book. I mean he's a professional writer and he spent a lot of time on Wall Street before and during the bubble years, up close and personal. And he wasn't a stock broker and he wasn't a trader. He was an analyst in technology stocks during a time when technology stocks mushroomed up like tulips under the windmills. A stock analyst studies the industry and the individual companies. He knows revenues and profits and cash flow and debts and bottom lines. He's a fundamentalist. He makes recommendations. Buy, hold, sell--well, they never actually recommended "sell" in those days. Presumably he knows when the price of a stock is out of step with what it's worth.

But the bubble years were tough times for fundamentalists since the ducks were quacking and when the ducks quack they say, "We don't need no stinkin' fundamentals. We just buy the dips."

At some point Kessler discovered that there's something wrong with this picture. If a stock analyst knows so much why is he working for Goldman Sacks or Morgan Stanley? If he knows which stocks are going to go up and which are going to go down, why hasn't he mortgaged the ranch and milked all his relatives for funds and invested in the stocks himself?

Here's the answer. Hold on to your sweet petunias. As Kessler notes in the very first chapter he's only supposed to get it right 51% of the time, and with a little hedging and ex-post facto double-talk, he can fudge that. In other words, it's crystal ball time, and rational people don't raid the cookie jar to bet on flips of the coin.

Let me tell you what an "analyst" is called in Las Vegas. An analyst is a "tout." That's a "Gold Sheet" or a "Green Sheet" sold in liquor stores and bars with a phone number and some stars and exclamation points advertising their monster "**Superlock of the Week!!!**" That is, you pay them some money and they tell you which sports team to bet on. Needless to say, if they really knew who was going to cover the spread that week, they would mortgage the ranch...etc.

By the way, one of the problems with Andy's strict fundamentalist approach is that the markets are not entirely rational, which is why there is such a thing as technical analysis, which basically says the trend is your friend, or forget the fundamentals, buy the chart--or more deeply understood, buy the irrational exuberance of the public, which is what most of the people who made money in the go-go nineties did. A nice little book that explains some of this is Joel Kurtzman's How the Markets Really Work (2002) where he gives his conviction that, "Markets may move to the beat of their dumbest members," adding, "In my view...markets are not rational."

Anyway, at some point (it is clear to me) Andy Kessler realized that although he wasn't the kind of analyst that touts only those stocks that his firm owns or does business with, he was still a Wall Street strawberry. We can tell he figured this out because somewhere about three-quarters of the way into this very readable and engaging tome, he ups and leaves the comfy confines of Morgan Stanley and a six-figure plus income and begins to do his own investing. That is, he actually bets on his own picks. Wow. Now understand that even here of course he hedges. He forms his own capital management company; that is to say, he gets people to send him money which become chips that he shoves into the pot on their behalf. If he wins, hurrah, and if the stocks he likes tank, well, he still gets paid.

Kessler's is the latest in a long line of "confessional" books written by Wall Street people, almost always ex-Wall Street people--e.g., Where Are the Customers' Yachts? (1940) by Fred Schwed Jr.; License to Steal: the Secret World of Wall Street and the Systematic Plundering of the American Investor (1999) by Anonymous and Timothy Harper...etc. Kessler's book stands out because he was an analyst, not a salesman (i.e., a "broker"), and because he worked with and knew many of the top people on the street and was well-regarded, but was not a top executive. This is also an interesting personal story of a somewhat geek tech guy (but personable) who was smart enough and eventually hip enough to wow 'em in the presentations, who worked hard enough to be (I'm guessing) right more than half the time.

Where his book is not among the best is in what he leaves out. For some reason Kessler doesn't actually reveal how much he was paid (again I guessed at the six figures plus) or how well the stocks he touted performed, nor is he specific about how well he did with his own portfolio. We realize when he gets to trading and discovers the market-maker's spread (Where did THAT come from?) that he really had little idea what life was like for the "retail people" who had to not only buck the spread but, before the rise of Internet trading, pay rather hefty commissions as well--which is why the customers never had any yachts. But Kessler's reticence is probably just as well since everybody knows that there are two things people consistently lie about: sex and money. Kessler doesn't mention the former and is vague about the latter. I tend to respect that.

Bottom line: unless you are Jack Grubman, Frank Quattrone, Henry Blodget and some of the other pieces of Wall Street Meat that Kessler writes about who went down with the ship, you will find this an amusing book, a nice diversion from a long, long time ago on which to reflect. Kessler knows all the buzz words; he knows the players and (somewhat inadvertently) he lets us know him.

This is an excellent book to lift the curtain and see what really goes on working as an analyst on the street. This book is short, 200 pages,in big print, and makes a point of not taking itself too seriously as it describes a humorous, hard-working and deceptive Wall Street.

Kessler was an engineer plucked from obscurity to become a stock analyst. With simple but great advice from his boss, Kessler flies by the seat of his pants learning the business from 1985 to the mid 90s. But what makes this book perfect is while he describes life on Wall Street and the many conflicts of interest as he learns the business, his Wall Street years were spent working along side many famous analyst who moved the market in the late 90s to the biggest stock market rally in history. Jack Grubman is the most prominent and is described as a good friend, fun-loving guy of incredible talent who later in life controlled the telecom market possibly with questionable tactics. Later he works with Frank Quattrone, known as the banker for the Internet. As an analyst, Quattrone and Kessler were many times on opposite sides of client debates. Kessler humorously describes their battles and debates while giving credit to Frank's unique talents and giving hints of how he might have helped in his downfall. Mary Meeker and Henry Blodgett are also mentioned from a perspective few investors would see from just reading about them in magazines or newspapers.

I can't over-emphasize how much fun this book is. Many times authors try to tell you everything they know. Kessler, possibly from experience writing concise research reports, does a great job of saying a lot without using many words wasting your time. While this book will be good for anyone wanting to learn of the conflicts reseach analysts must face, it is a must read for novice or hobby stockpickers. If nothing else but to show you the system you are working against. I strongly recommend this book for all readers with interest in finance or the stock market.

This book is to the nineties what Michael Lewis's Liars' Poker was to the eighties-a whirling, candid look at Wall Street. I agree with Lewis's blurb: I gulped this book, too. He and Kessler both have a great comic sense. Both came to the financial world in a roundabout way. (Lewis was an art history major who became a bond salesman; Kessler was a Bell labs researcher who became a research analyst.) But there are differences, too, and they go beyond the simple fact that Lewis wrote about the character of Salomon Brothers and the mortgage-backed security business, whereas Kessler's story more broadly concerns the technology bubble of the late nineties, and Wall Street's part in it. Kessler is more sharp-edged and critical, yet idealistic, too, ending with a few pages of ideas on what caused the tech bubble and what might be done differently to prevent this sort of thing from happening again. Kessler writes from the vantage point of more than fifteen years in the securities business, and you sense he really cares about many of the people he works with. (Even if he frequently shows it by verbally skewering them.) Lewis's time on Wall Street was much shorter, and his tone is more one of bemused detachment. Kessler is very anecdotal, even more than Lewis, one- and two-pagers, but the chronology is solid and the whole thing works perfectly. The two books are close cousins, lots of hilarious stories and witty detail, and a sprinkling of memorable supporting characters, including a vivid yet balanced portrayal of fallen superstar Jack Grubman, through the years, by Kessler.

The author, an ex-analyst of Morgan Stanley, talked of his personal encounters with some of the fallen angels of Wall Street (Mary Meeker is still there), the change in the role of analysts from research/brokerage support to investment banking/IPO tool that effectively broke the firewall/Long Wall between the two functions within the same company at investors' expense, and the interference of regulatory bodies that did more harm than good.

To me, this is the second most interesting book of its kind, after Fiasco and better than Liar's Poker. It wont help your trading or investment, if you already know the uselessness (or how intoxicating in the author's term) of "recommendations" of those analysts who are paid in proportion to the qty and quality of suckers. The many bits and pieces are so interesting. If you wanna read for fun, this must be it.

p.s. In case the term "Morgan Stanley" still means something to you, listen to Barton Biggs only, and neglect all else, especially Bryon Wien and Mary Meeker, in the author's opinion.

This is one fo the MBA's books that can actually shed some light on Wall Street. Think of it as counter-balancing the "shows" which the I-Bankers put on the US campuses.

Having taken a company public in 1995, surviving several liquidity crises (common for advanced medical technology companies trying to negotiate the FDA with innovative therapies), then getting crunched in the `Mother of All Liquidity Crises' in 2001, I found Andy Kessler's book a great read. He accurately captures the personalities, the behaviors, and the ethos of Wall Street from 1990 to the bust. The most unfortunate thing about this period, which Kessler does not mention, is that some great innovations and good young companies had their fates sealed by those who were (mis)guided by greed and fame. All of us were the losers as this was not a zero sum game.

I urge Kessler to write again, this time on the subject of hedge funds and short positions. While hedge funds and short positions can serve a positive purpose in correcting stocks that are overpriced, they can also be a real challenge for young, fragile companies. Short positions are taken with the HOPE that the value of the company will decline significantly. Today, as in the late 90's, some of those with short positions will do whatever it takes to drive a stock price down, including the spreading of lies. Young companies need to focus on execution. They do not have the time nor resources to fend off the swirl of lies that go hand in hand with large short positions. There is no transparency here as with other investment instruments. As such, there is room for plenty of mischief.

This is a must read for any development stage CEO or CFO. For those who do not study history are doomed to repeat it. Despite the attempts by Spitzer and others, the pattern of the late 90's will again emerge, albeit in a different form.

Andy Kessler's "Wall Street Meat" is a breeze of a read: an often funny (sometimes hilarious) series of anecdotes that combine to provide an insightful, critical look at the workings of Wall Street and the technology capital markets of the 1990s.

Kessler recounts his days on Wall Street, starting as fresh-scrubbed engineer who stumbles onto the Street almost by accident, to his departure and subsequent career investing in and writing about technology from Silicon Valley. He had the good fortune to learn the ropes from an old school traditionalist, which allowed him both to be successful in the old fashioned sense (achieving a top analyst ranking, as determined by clients) and to understand the transition that happened in the 1990s, as analysts became more involved in investment banking and, in many cases, lost their bearings in the telecom/Internet boom and bust markets (Jack Grubman being the penultimate example).

What makes Kessler's book so powerful is that he calls it as he sees it, from his objective, fundamentally grounded insider's viewpoint. He's made enough money, he's happy in his career, and he cares deeply about the future of Wall Street, so he's not out to perform character assassination; he truly wants to point out what went wrong (and does so in a very entertaining fashion) and make suggestions for reform. He doesn't put much weight in additional regulations and prosecutions, believing that reputation is a more effective mechanism for ensuring proper behavior over the long term. Rather, Kessler pushes structural economic reforms such as a "synthetic Goldman Sachs" in which stock research could be performed by truly independent, stand-alone entities (TheStreet.com isn't there yet, according to Kessler), and ending IPO lockups, to eliminate the huge post-IPO pops that happened during the boom and which led to such a frenzy of deal making. The Dutch auction method for allocating and pricing IPO shares, which Google is using during its upcoming IPO, could also eliminate this problem.

WSM is a must read for Wall Streeters, and people involved in the financing of technology companies. Individual investors (especially tech stock investors) would benefit greatly from reading WSM, to learn Kessler's cautionary tale of how the Street really worked during the boom, and what perversions remain.

This is the story of Andy Kessler's days on Wall Street from 1985 till the bust of the technology bubble. It follows Kessler's career through Paine Webber and Morgan Stanley as an equity analyst, and ends with Kessler running his own investment fund.

At Paine Webber, Kessler is introduced to being an equity analyst. He has no clue what he's doing, but eventually learns and is helped by a colorful character - Jack Grubman, who would later move to Salomon Brothers and become a star through the rise of the technology stocks, only to crash and fade afterwards (and to be banned from the securities industry for life). At Paine Webber, Kessler is more or less "allowed" to have his own opinions on stocks - and he likes that independence.

At Morgan Stanley, by contrast, he fights against becoming a piece of ¨Wall Street meat¨ - someone who recommends companies because the investment banking side of the firm wants him to, for better client relations and business. He is constantly pressured by Frank Quattrone, who built up Morgan Stanley's technology investment banking business. Quattrone would later move to Deutsche Bank and finally to Credit Suisse First Boston, running an autonomous division that Kessler calls a ¨boutique within a bulge bracket.¨

In addition to discussing Grubman and Quattrone, Kessler also talks about Mary Meeker, an equity analyst at Morgan Stanley who did become a piece of Quattrone's ¨Wall Street meat,¨ and Henry Blodget, an analyst from Merrill Lynch. I found the Grubman and Quattrone stories most interesting, however.

At the end of the book, Kessler shares some interesting views on the technology bubble and its collapse. He doesn't think so much blame should be placed on the analysts who recommended the stocks with their ¨buy¨ recommendations. Instead, there are many people to blame, including the greedy investors who wanted to ride the wave up, knowing the fundamentals just weren't there. Other problems that led to the bubble included creative accounting (and Kessler makes the point that analysts have no choice but to trust management's numbers), excessive stock options, and various structural problems on Wall Street - including the all-too-frequent straddling of the Chinese Wall (which separates investment banking from activities like trading and research), as exemplified by Quattrone.

Kessler is disgusted with Eliot Spitzer, who focused his vengeance on Grubman, Quattrone, and Blodget - and, for some reason, skipped Meeker. Spitzer, claims Kessler, was unable to see all the other issues involved, as they were perhaps too complex for him. As a result, Kessler feels a lot of unnecessary regulation will be introduced in the future. For example, the government loves to think it is helping the ¨common man¨ or the personal investor - but, most of the time, it ends up hurting him/her. Kessler gives the example of firm announcements required to be issued to everyone (not just stock analysts or firms) - which, in theory, equals the playing field, but actually creates a situation in which companies talk to analysts and the public very infrequently (basically during earnings announcements), which leads to more volatility in the markets, hurting everyone.

Kessler's ideas are interesting, and his prose is easy to read and humorous. The book makes for a quick read, but somehow I didn't feel entirely satisfied at the end. I wanted more technical details on some of the deals and stories. Additionally, Kessler seems to use a lot of slang that he never really defines (axe, ducks, etc.) - which can be difficult for someone not familiar with all the terminology.

In conclusion, I recommend this book for the financial history within it about the major characters involved in equity research and investment banking. Do not expect to learn a lot about the business, the technology bubble, and the various issues surrounding it. Do, however, expect to enjoy the writing and finish it quickly.

Pros:
+ easy to read, down to earth and funny
+ lots of great detail on the main characters, especially Jack Grubman
+ interesting (albeit brief) insights into the technology bubble
+ a neat look at how equity analysts approached their job in the 80's and 90's

Cons:
- some undefined slang and terminology
- could use more technical details