Hence, Loathed Melancholy
July 15, 2002
By WILLIAM SAFIRE
LONDON
The poet John Milton had a message applicable to the "new economy" enthusiasts who stampeded
world stock markets to unsustainable heights: "Hence, vain deluding Joys. . . ." (Hence is now
"Gedowdaheah.")
But Milton is the patron saint of contrarians. He has another, quite different message for the
mindless herd now divesting in despair. To pessimaniacs dumping stocks in a rising economy, the
contrarian suggests: "Hence, loathed Melancholy. . . ."
Europeans wish America would cheer up. Complaints about U.S. arrogance and unilateralism pale
when our market locomotive stops chugging. The Melancholy gripping investors, which has
knocked American industrials down by a third, has spooked investors on this side of le despond;
English, French and German indexes have been clobbered harder. Hegemony talks: Rarely have
Europeans antipathetic to America manifested such a sympathetic reaction.
If Communism were still in business, headlines would proclaim a "crisis in capitalism," with workers
exploited by corrupt bosses and a class revolt inevitable.
But the capitalist system is not in crisis. In recent months, it has been doing what it is supposed to
do in the wake of every speculative binge: correcting itself. After a bubble bursts, people who have
been deliriously blowing bubbles demand to know: How could "they" have done this to us? But we,
the investing people, have done it to ourselves - as we do in almost every generation.
Because nobody likes to admit to self-delusion, we are scaping every goat in sight.
We wuz robbed, say investors and employees of the Enrons - but outright crookedness, highly
publicized, is a relatively minor cause of the current furor. Show trials of the fraudulent few will deter
other executives from breaking existing law.
We wuz conned, say buyers of hot stocks of companies with inflated earnings - and so we were in
Andersengate. But the market is properly punishing a profession that followed Mel Brooks rules. By
selling stock in miscreant client companies, investors are casting out top executives who conspired
to rip off stockholders, lawyers who slashed corners and directors in conflicts of interest.
We wuz manipulated by analysts who were no more than touts, betraying their customers for a
piece of the banking action. With their character in question, investment banks and brokerages are
sheepishly trying to earn back their reputations "the hard way."
We wuz misinformed (from a tart Humphrey Bogart line in "Casablanca") by financial media that
failed to dig into rosy press releases or challenge the celebrity culture that made dot-com demigods
out of financial half-wits. The cautionary voices of Floyd Norris of The Times, Robert Samuelson of
The Washington Post and Allan Sloan of Newsweek and relatively few others were unheeded in the
cacophony. But yesterday's lapdogs have turned into a wolfpack, savaging reputations to satisfy
popular demand for vengeance.
We wuz too loosely self-regulated. The lax good-ol'-boy stock exchanges and lazy credit agencies with much to answer for - are scrambling to tighten standards to restore trust, which they belatedly
realize is their stock in trade.
All this self-correction is well underway. And after every period of excess, government correction is
added. Congress and the last few administrations left the S.E.C. understaffed and overconfident; it
is now running scared. New accounting rules will be imposed; sweetheart loans to executives will
be stopped and stock options treated by companies like other compensation. Perhaps, as long
urged in this space, the antitrust division of the Department of Justice, the F.C.C. and F.T.C. will
stop supinely okaying the megamergers that feed egos and starve competition while adding
mountains of dangerous debt.
But in all these blame-casting we-wuzzes, we fail to realize that the fault, dear Brutus, lies within
ourselves. Individual investors, even in an era of pension funds and expert money managers, have
a responsibility to assess their risks and to resist the roar of the crowd. Let's face it: too many of us
abandoned common sense and grabbed for that pie in the sky.
Now the crowd is swearing off even good pie on the table. Contrarians are therefore thinking: is the
time drawing nigh to begin a program of investment? Our adviser, who shouldst be living at this
hour, would say: Hence, loathed Melancholy . . .
Reference:
Safire, William (2002). “Hence, Loathed Melancholy”. The New York Times. Available at:
http://www.nytimes.com/2002/07/15/opinion/15SAFI.html?ex=1027748605&ei=1&en=baace6eb415979
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