Serious skeptic

Every week, financial journalist Christopher Byron analyzes a different public company in his column for The New York Observer. And week after week he comes to the same conclusion: Sell.

Every week, financial journalist Christopher Byron analyzes a different public company in his column for The New York Observer. And week after week he comes to the same conclusion: Sell.

By Hal Lux
December 2000
Institutional Investor Magazine

A clever, funny and sometimes nasty writer, Byron goes much further than most financial journalists will venture these days in challenging conventional wisdom. Even when they’re writing negative pieces, many investment writers feel obliged to balance their critiques with the proverbial “on the other hand” prose. Not Byron. Generally, he just grabs hold of the knife he’s plunged into his latest corporate victim and gives it a final twist.

His columns occasionally go too far, and they’re too often short on reporting, beyond a reading of public financial filings. But investors need to hear Byron’s consistent reminders that even the most troubled companies can, in the short run, generate positive publicity and soaring stock prices. Byron, for example, notes that Internet e-commerce stock Value America, a company without earnings, was able to reach a $2.5 billion market cap in the spring of 1999, despite the fact that the company was headed by “a man whose last previous achievement in business had been to preside over the Chapter 11 bankruptcy of an earlier public company he had led.”

At first glance, deleteyourbroker.com: Using the Internet to Beat the Pros on Wall Street seems like a strange book for Byron to write. A how-to guide for investing online, it walks readers through the basics of investing - from technical analysis to short-selling - while pointing out useful Web sites that offer related information and services. In recent years publishers have flooded the market with these books, which mostly encourage the kind of frantic trading that almost always results in losses for individual investors. Byron says the Internet’s dramatic impact on his own financial reporting motivated him to write the book, but a skeptic, like Chris Byron, might also speculate that some agent or editor convinced him that this genre still sells.

Whatever his motivation, Byron thankfully brings his own idiosyncratic style to tutoring investors. The author is no online investing evangelist. Whether he’s writing simple but useful explanations of day trading or Nasdaq bulletin board stocks, he infuses his lessons with plenty of cautionary tales. Investors who want to trade speculative microcap stocks can discover where to obtain online information about this dubious market. But not many people will have the appetite for this type of trading after reading his blunt description of the market.

“Think of this whole world as Wall Street’s answer to Manhattan in Escape from New York and you’ll have the basic idea of what’s going on here - a market that abounds with charlatans, con artists, liars, thieves, Mafia torpedoes, drug dealers and on and on,” he writes. For investors looking to learn the basics of reading a balance sheet and analyzing earnings statements, deleteyourbroker.com offers useful summaries that anyone can understand.

The author includes amusing, if quirky, examples to highlight different areas of investing. Byron is almost certainly the first investment writer to use the personal finances of former Salomon Brothers chairman John Gutfreund to illustrate asset allocation. But readers hoping to discover some special insight about online investment resources will be disappointed. The many financial online services have already been thoroughly catalogued and critiqued by online and paper guides. In truth, there’s not much left to pick over.

Byron’s advice, however, is invaluable for helping investors decipher the abstract theories and marketing bunk that bombards them these days. Ph.D.s in finance can explain the intricacies of the efficient markets theory - the theory arguing that most investors will be unable to beat the market. Byron’s description, however, will resonate more with the average American: “Given the fact that every other technical analyst and trader in the world is looking at basically the same charts and trend data that you’re looking at, what confidence can you possibly have that you’ll be seeing what’s in that data before anyone else sees it? Are you really the smartest person on earth?”

With Nasdaq down almost 30 percent for the year through late November, investors have undoubtedly grown more skeptical about the false promise of instant riches to be made via online trading. Byron’s tome is a guidebook for investing during good and bad times. With any luck, the rest of the online-investing guidebook genre, a by-product of bull market excess, will soon find itself deleted. Or at least marked down.

Related