I just finished reading The Great Wall Street Scandal, by Leonard Gross and Raymond L. Dirks. This was another book I mentioned in one of my two Mother Lode posts back in August.
This is an account of the scandal at Equity Funding in the early 1970’s, which was one of the largest frauds until recent ones this decade eclipsed it. There was one passage he wrote that made an impression on me:
“Equity Funding stands as an indictment of an investment system that deceives and mocks the individual. As that system exists today, the individual cannot operate on a rational theory of value unless he is willing to brave the crowd. His only choice is to follow. Don’t bother about what a company does; care only about what it shows. Don’t think of a stock purchase as an investment; think of it as a trading unit someone will buy after you do. Your buyer will operate that way, because everyone operates that way. As long as you get in at the right price, it doesn’t matter what the values are, because no one pays attention to them.”
This was written in 1974, but it occurred to me that this attitude and culture is more prevalent today than back then. We have learned nothing.
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