I love books about Wall Street written by insiders. Blood on the Street, written by Charles Gasparino, wasn't written by an insider but it certainly had the feel of one.
The role of Wall Street analysts during the time of The Bubble - in particular Mary Meeker, Henry Blodget and Jack Grubman - is the focus of the book. The book details the role of how analysts stopped being analysts and became investment bankers/analysts, as outsized compensation and internal pressure skewered the role of analysts away from being so-called objective providers of unbiased research to shrills for investment banking.
The conflicts between research and investment banking have always been known. Or at least they have to investment professionals. The fact that you can read a 100 page report on a company and find nary a criticism makes it fairly obvious most analysts aren't in the business of being critical of most companies they cover, at least in print. But that isn't obvious to the layman or laywoman who is sold investment products based on analyst recommendations.
Blood on the Street received a fair amount of coverage when it was first released a few years ago, and anecdotes about Jack Grubman's (non-denial of) cocaine usage became well known from the reviews of Gasparino's book. But two other items struck me as more interesting.
First, Gasparino writes that Henry Blodgett, with just a few years of experience as an analyst, became a trusted financial adviser to Merrill Lynch CEO Dave Kamansky. Perhaps Blodgett's role in Kamansky's personal portfolio is exaggerated, I don't know, but it is astonishing to read how even a man of Kamansky's stature was swept up in the Internet Bubble. It now seems generations away, but it was a mere seven years ago when the investment community lost its collective marbles and bid up garbage Talking Sock Puppet Companies to idiotic valuations. Kamansky taking advice from someone like Blodgett illustrates the power and pervasiveness of the investment mania that was in full bore at the time.
The other item of interest to me was the sympathetic desrciption of former SEC Chairman, Harvey Pitt. As a non-insider in both Washington and Wall Street, my perception of Pitt - despite his credentials - was that of a Nero fiddling while Wall Street burned. Not so, writes Gasparino. Pitt was far more effective than given credit - more so than Arthur Levitt - and his sins were more political than operational at the SEC. Pitt may have been Pollyanish in his view of Wall Street self-regulation, but he did more to implement structural changes in the investment business than given credit, while Levitt did less.
The one criticism I have is Gasparino's assertion that analysts may have been the most important reason for The Bubble. That, in my opinion, is incorrect. Though analysts certainly played a part in hyping stocks, the forces that create and deflate investment bubbles - excessive monetary creation, rapid technological innovation, level of interest rates, etc. - are far beyond the purview of research Wall Street analysts, who often dance to the strings of other forces, such as investment banking and the corporations they cover.
However, this is a well written book. I highly recommend it for anyone, especially to those who invest solely though a broker.
Blood on the Street goes on my investment book recommendation list. Out of five, I rate it