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How Investing Became Cool Essay

1537 words - 6 pages

How Investing Became Cool

Bankers and stockbrokers are not generally viewed as the most exciting people in the world. Traditionally, they have been viewed as those guys who are always reading the Wall Street Journal or talking on their cell phones when they're out in public; they wear the same white shirt, red tie combination every day of the week, and there's no noticeable distinction between work and the rest of their lives. Not exactly the kind of people you'd want to invite to liven up a Christmas party. And if you do invite them, they usually end up standing before a group of bored and confused laymen talking about hedge funds or IPOs. This was a common perception in the past, but within the last decade this image has changed considerably. The field of finance and investments has seen a considerable increase in popularity, and these same bankers and stockbrokers might even be considered cool now.

The 1990s saw the climax of the longest bull market in recent history. As John Cassidy pointed out in an article for the New Yorker earlier this year, interest rates were low, unemployment was low, and thanks to the Internet bubble the Nasdaq was climbing at an unbelievable rate. To the average American, it started to become apparent that the stock market was a good place to turn to make a quick and easy profit, and the seemingly infinite growth made it seem like an almost risk-free investment. Soon everybody was talking about stocks like they were the newest and hottest fashion trend, and it was impossible not to notice. In a recent Money magazine article, Joseph Nocera says that in 1994, 34% of American households had some money in the market, up from just 10% in the 1950s, and this number climbed even further to more than 50% by 2001. Most of this money was invested in the form of stock and bond funds, primarily through 401(k) plans, in which Americans had invested over a hundred billion dollars by 1995. This number only got larger, and by the end of 2000 there was more money in mutual funds than there was in the entire banking system. By this time, there were actually more mutual funds than there were stocks listed on the New York Stock Exchange and the Nasdaq combined. Americans were pouring money into these investments with an almost religious fervor, under the assumption that they were all going to become filthy rich.

The Internet contributed largely to the frenzy, primarily because it was the emergence of new Internet companies that fueled the insane growth of the market and the illusion of easy money. started it all in 1995 when its initial public offering of stocks doubled the value of the company in the first day of trading. As Cassidy points out, this proved to be the best opening day for a stock in Wall Street history for an issue of that size. Over the next five years, more than 400 other Internet firms went public, making IPOs an almost everyday occurrence, and it wasn't long before Yahoo! and eBay...

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