Analyst given bodyguard after bear switch

PUBLISHED : Sunday, 21 December, 2003, 12:00am
UPDATED : Sunday, 21 December, 2003, 12:00am

When star Wall Street stock analyst Ralph Acampora, a self-described 'raging bull', decided in August 1998 that soaring US stock prices could no longer be supported by the 'story', and that he was switching into the bear camp, his employer, Prudential, pledged to support his views - and then they hired a bodyguard.

Mr Acampora feared for his own safety after publicly proclaiming investors should comb through their portfolios and sell down vulnerable stocks. It was clear that ringing an end to the great US bull market that began in 1982 was akin to treason.

In hindsight, it turned out that Mr Acampora was slightly ahead in his timing, but the mini bear market that took place that summer - otherwise known as a cyclical bear within a secular bull market - marked an important turning point that could be read as a prelude to the financial disaster that lay just around the corner.

The anecdote is just one of the dozens of insightful glances into the culture that dominated Wall Street as recorded by Maggie Mahar in her exhaustive account of the era in Bull! A History of the Boom, 1982-1999 (2003: Harper Collins). If there is any question of the magnitude of the collapse that ensued following the topping of the market, just flip the pages of this 384-page text. Between the spring of 2002 and February 2002, individual investors lost US$5 trillion in the stock market. Those loses, writes Ms Mahar, continue to haunt 100 million American investors who pumped their savings into equities in the late 1990s, not to mention thousands more overseas who were sold on the appearance on a bullet-proof stock market.

Just how did it happen and who was to blame? Much of the focus in recent times has been on the technology stocks and Internet concepts that dominated the final euphoric phase of the bull market, but Ms Mahar is careful to turn the clock back to a time when Ronald Reagan was president and the Dow traded below 900. For much of the two decades preceding the 1980s, the Dow had fought unsuccessfully to climb above 1,000, but a few market watchers were beginning to sense the distant snort of the bull.

Ms Mahar makes a compelling case that an important change was about to take place on Wall Street. Many of the rising high fliers were from a generation which had never known the hard knocks of a bear market..

As the market gained momentum a wide array of players, individual regulators, bankers and media figures would fall under the bull's mystique. By the end, mass delusion had replaced logic and common sense.

A former Yale English professor and financial writer, Ms Mahar has the skills to twist a yarn that is both informative and entertaining. Her attempts to pan pearls of investing wisdom with tomorrow's winning themes make this a good holiday read.