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Finding emotional solace in a stock market bubble

American Sucker
by David Denby
Little, Brown, 337pp., $24.95

In 1999 New Yorker film critic David Denby experienced a midlife crisis. He was 56 when his wife left him and his world fell apart. Some men might have turned to drink, others to fast cars or fast women. Denby turned to the stock market.

The Internet rocket was just taking off and Denby grabbed on to it with both hands. He took most of the money he had in the world and invested hundreds of thousands of dollars in technology stocks. He was aware he was embarking on a dangerous ride, but as he put it, "To live dangerously is very much to live.''

"American Sucker'' is Denby's absorbing and usually entertaining first-person account of life on the stock market roller coaster of the past few years. Despite his limited financial background, Denby turns out to be a pretty good guide to have along on the trip. He is interested as much in psychology as money, which is appropriate since stock market bubbles are fed by emotion as well as dollars.

Denby's restlessness is another plus. Not content to sit in his living room and watch CNBC, he plunges into the world to see the revolution up close.

He goes to telecom conferences; he goes to biotechnology conferences. Much like Woody Allen's Zelig he winds up at the center of the action and, either through luck or instinct, befriends two of the key players of the bubble era, Henry Blodgett and Sam Waksal. Blodgett was the Merrill Lynch analyst who became a cheerleader for Internet stocks. Waksal ran ImClone, a biotechnology firm with a promising new treatment for cancer.

Denby loved the company, the optimism, and the energy of his new friends. But he was looking for more. "You were sure that if you could just grab hold of the flying coattails of the new economy investments you could get rich very quickly,'' he wrote.

For a brief time, Denby was rich - at least on paper. Then March 2000 came along. The Nasdaq Composite Index, made up mostly of tech stocks, hit 5,000, and began a long, painful descent that would take it to 1,100. Denby could have bailed out anywhere along the way. He didn't. Like so many others, he was sure that the market would come back.

Eventually even Denby had to let go of the illusion when his money disappeared and his heroes turned out to be goats. Blodgett left Merrill Lynch under a cloud. Waksal was arrested for insider trading.

In ``The Great Crash,'' his book about the stock market collapse in 1929, economist John Kenneth Galbraith points out that the reputation of business leaders always soars during boom times. When those same leaders are led off in handcuffs, it is a pretty good sign the boom has turned into a bust.

"American Sucker'' has its shortcomings. At times Denby's anguish comes too close to whining. There's a limit to how sorry we can feel for a man who, after losing a bundle, still owns a $1.5 million Manhattan apartment. Yet in the end, Denby's skill as an observer and his willingness to be brutally honest about himself make the book a worthwhile read.

For a potential tragedy, Denby's story has a surprisingly happy conclusion. By the end he is poorer but wiser. His obsession has given way to a healthy balance in both his personal life and his investment style. He doesn't give up on the stock market. He's even willing to chase the latest trends in technology. Yet like others before him, he has learned the value of patience and diversification. Maybe he isn't such a sucker after all.

Charles Stein can be reached at stein@globe.com.

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