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New Year's revolutions

Maybe we just got the timing wrong.

Maybe we just got the timing wrong.

By Michael Carroll, Editor
January 2001
Institutional Investor Magazine

Maybe we just got the timing wrong.

Coming into 2000 the world agonized about Y2K, the technological implosion that would not only set the clock back to 1900 but lead to a global recession. The meltdown came, all right, but in the form of the Nasdaq bear market; already books warning of the coming Internet Depression are on their way. Instead of hoarding water, erstwhile millionaires now calculate how many more years they must work before they can afford to retire.

Certainly, the damage done by the Internet crash is extraordinary. In compiling a list of dot-com lowlights for our annual Deals of the Year feature, Staff Writer Jenny Anderson notes (page 90) that the total market capitalization of Internet-related companies fell from $881 billion on February 29, 2000, to just $208 billion last month. That's a lot of years to make up for in the workforce.

Amid the wreckage it's worth remembering those who really urged caution when it was out of style. Prominent among them: Arthur Levitt Jr., who steps down next month after a record seven-and-a-half-year tenure as Securities and Exchange Commission chairman.

Levitt embraced the Internet revolution and change as much as any stock-option-rich dot-comer. Under Levitt the SEC has been an advocate of electronic trading, and the agency's reforms of Nasdaq opened the way for the upstart electronic communications networks that have facilitated online trading.

But the chairman was decidedly old school when it came to reining in excesses, insisting that the fundamental rules of investing would eventually have their way. As Nasdaq soared, he urged investors to consider the hidden risks and jawboned brokerages about come-on advertising. An activist throughout, he ended the practice of "pay-for-play" in the municipal bond market; ordered public companies to stop leaking material information to favored analysts; and insisted that mutual fund companies use a little "plain English" in their unreadable prospectuses.

"It's not easy being the industry scold when everyone's getting rich," says Senior Editor Hal Lux, who along with Staff Writer Justin Schack interviewed the chairman in December. "But Levitt stuck by his old-fashioned values."

Levitt will be leaving, but his his wisdom may hold true for 2001. Out with the new. In with the old.