Stock Club met every Thursday afternoon at 2:45pm in Room 144 of John Stevens High School. It generally wrapped up after an hour so students without cars could catch the 4pm school bus home. The room was stuffy, the heat blasting, and some windows had mercifully been opened.
Anish Vora and Nirav Patel stashed their backpacks in the corner and found seats up front. They were best friends. Nirav was co-treasurer of the club and Anish was the secretary. Stock Club regularly drew 40 or 50 students, and Nirav and Anish, even in the fuss of their teenage lives, rarely skipped a meeting.
The club was such a rush, the culmination of their shiny-eyed devotion to the market, even a market in flames. "Yo, how's the market?" a classmate asked Anish. "What do you think -- down," he said. His tone was bright.
PHOTO: NY TIMES
The market was so woeful it was laughable. This was the end of November, when the NASDAQ's unabating declines were already a monotonous echo. The NASDAQ stood at a feeble 2,598, nearly 50 percent below its peak set on March 10, 2000. The Dow was at 10,414, more than 10 percent below its own high."Oh, man, this is one wack market," Nirav said. "I look at it this way," Anish said. "I've got like 50 years until I retire. It might come back by then."
First things first. The meeting was saturated with talk of the never-ending presidential election. Suffice it to say that the crisis on everyone's minds was not the constitutional kind. Nirav and Anish interpreted politics largely in terms of its impact on business. Both considered themselves Republicans. Anish had originally liked Al Gore, but when market commentators speculated that stocks would sizzle if George W. Bush won, he hastily switched allegiance.
Nirav and Anish often sounded more like battle-scarred Wall Street honchos than 16-year-old juniors with math homework and a history project. Their almost anthropological curiosity about stocks testified to how deeply the booming market of the 1990s had bored into the American psyche. Interest in the market used to intensify with age and financial responsibility, but as the market had evolved into the great American participant sport, enthusiasm had also veered downward, into high schools, junior highs, grammar schools. Brokerage houses reported a notable rise in adolescent trading accounts, and all manner of Web sites, summer camps and online trading games for young investors had emerged.
CNBC, the financial cable network, conducted a national contest that enrolled teams of fourth- to 12th-graders from roughly 13,500 schools, students like Anish and Nirav, who saw the market lucre as even more appealing than slasher movies and possibly girls. Eager to sharpen their market instincts, both rabidly read The Wall Street Journal, and Nirav kept Barron's beside his bed. ("If I'm home Saturday night, I'll read it cover to cover.") They logged on daily to market research Web sites like Yahoo Finance and Red Herring.
Stock Club itself didn't even exist until two years ago, when five juniors started getting together to dissect the market with a math teacher named Charles Babich. Last year, membership grew to 88 and this year it surged to 192. Members ran the gamut of personality and market awareness, but only a sprinkling of girls belonged. Anish and Nirav weren't sure girls had the proper perspective. "Like I was talking stocks with my Spanish teacher, and these girls were talking about how they had eaten 2,000 calories for lunch and couldn't have anything for dinner," Nirav said. "They were talking about hair. They were so retarded."
Nirav looked at the clock. Time was flying. It always seemed that way in Stock Club. He got up, letting his teenage earnestness wash over him, and spoke about the Dogs of the Dow theory, a heralded investment strategy he had recently discovered. "The theory says you take the top 10 yielding stocks in the Dow, eliminate the first one and buy the other nine," he said. "It's beaten the market by 11 percent." Some street-savvy members nodded in understanding. Others stared clueless or consumed pizza and Cokes.
When Babich was in high school in the late '60s, he was beguiled by cars, sports, girls. Not until his parents gave him stocks as a graduation gift did the market cross his mind. Now he actively played the market, abiding by a long-term perspective. Sometimes he had to scold the students mildly against being too open about money. Some had online trading accounts, and they would grill him on his portfolio, rattle off their own movements: "I made 12 points on Juniper;" I'm down 8 on Oracle," "How'd you do on Intel?"
Volatile Stock picks
Now came the best part of the meeting: to buy or not to buy. Students had chipped in dues of US$5, which were pooled to buy stocks. Members pitched companies they liked and a vote was taken. At the end of the school year, the investments were liquidated and the proceeds carved up. Last year, members got back an unimpressive US$3.45. This year was looking rocky, too. The club had US$618, with US$230 in the market.
With meager funds and a compressed time horizon, the club favored cheap, volatile technology companies -- stocks like Antennas America and StemCells. Two fresh prospects were promoted: CNET, an Internet provider, and Ariad Pharmaceuticals. One member exclaimed, "After the election is settled, everyone's going to buy CNET, CNET, CNET." The club, in its frothy optimism, voted to buy five shares at US$21 a share. Members were confident the capricious market would soon go up again and go up big. A week later, CNET was US$15.50.
Nirav scrolled through his MarketPlayer portfolio. Stock Club ran a monthly virtual competition on the MarketPlayer Web site. A US$1 entry fee got US$1 million of imaginary money to invest, and the top three finishers received cash prizes. Nirav and Anish each won several competitions last year. These days, you could lose money for the month and win. "I'm in fourth place right now," Nirav said. He was also part of a team in the CNBC virtual tournament and in a Hedgehog competition on MarketPlayer. "I've got Dogs of the Dow in Hedgehog," he said. "The portfolio's down, and the contest ends in a week, so I'm looking wack."
Nirav and Anish are smart and companionable. Nirav is lankily built. He always wears a radiant smile, and likes to talk. For unknown reasons, his hands tremble slightly, so a friend began calling him Nerve, and he adopted NERVE19 as his log-on. Other friends he helps with math call him Jeeves, after the Ask Jeeves Internet site. Another nickname is NPS, for Nirav Positioning System, because he is superior at directions. "Friends of mine recently had just started driving, and they couldn't even find the mall," he said. "That's pretty sad, considering we go to the mall like every week."
Nirav clicked onto Yahoo Finance, checked a few stocks. "Look at Priceline," Anish said. "It peaked at close to 100. Now it's US$1.37. I bought about 200 shares of NetZero at US$4.25 about three or four months ago. It's just over 75 cents."
Nirav shook his head. He said: "Me and Anish, all our idle conversation is about stocks, that or girls. A lot of our friends crack on us, but I don't care."
Anish said, "They think it's for geeks."
Nirav said: "But we have fun with it. It's a big Monopoly game. I love Monopoly."
Anish said: "And the fact that it has to do with making money, no one can really call us geeks. They can try to call us a geek, but I'm 18 times richer than them."
Last year, Anish's father set him up with a US$7,000 online account. He sank it into Ariba, a volatile software company. He now knew it was foolish to bet everything on one company, but that was a year ago and, as he put it, "I was young then." It went from US$71 to US$49 and his father was ready to annihilate him. Then it shot to US$160, and his father was in awe. He cashed out at US$18,000.
Lately, Anish was feeling chastened. His father had entrusted him with a new US$32,000 account that Anish distributed among companies like Deutsche Telekom, Legato Systems, Oracle, Nortel and NetZero. It was wobbling in the market's downward drift. If Nirav and Anish were youthfully aggressive in their market strategy, they were hardly as audacious as some classmates.
A taste of success
Last year, two students with firm backbones used to duck into the library, go online and trade high-risk penny stocks. They got lucky with Shaman Pharmaceuticals, which made an herbal remedy for diarrhea in AIDS patients. Well before the company filed for bankruptcy protection, one student had converted US$5,000 into about US$90,000 and bought a Corvette. The other bought a Porsche. But that was in blissful 1999, when the NASDAQ was an undimmable wonder. Nirav didn't yet invest real money, though he assisted his father, who liked to buy and hold solid companies. Nirav was gutsier. "Last year, I told him about three biotech companies, and they went up 300 percent in one day," he said. "He didn't buy them. He was sitting there crying."
It was early January, the market still queasy though showing a few sparks. Being propelled down the hallway on the way to Stock Club, Anish and Nirav were summoned by a fresh-faced girl asking, "Is Cisco a buy?" They always got that, impossible questions about the market. "They think we're geniuses at stocks," Nirav said. "Most of our friends think we know way more than we do." One of the teachers had been pressing him for recommendations, too; he told her to look into Standard Commercial, a seller of tobacco leaves, and Lexent, a telecommunications company.
The market was not a passion Anish and Nirav had planned. Nor was it one they tended to trace back to some residual force of upbringing, like that upwardly mobile impulse so often attributed to immigrant families. It was just that today, as Anish put it, "The market is everyone."
In elementary school, Nirav had seen something on television about hostile takeovers. "I wasn't sure what they were, but it was something about destroying companies, and it looked cool," he said. "My friends wanted to be basketball players. I wanted to do hostile takeovers."
A couple of years ago, noticing his father watching Bloomberg on television, he started looking up stock information on the Internet and became hooked on the terror and joy of the market. Anish's hankering for the market began when he heard about Yahoo and the Internet craze. He was influenced by his father, an avid investor, and by Every Street Is Paved With Gold, the autobiography of Kim Woo-choong, founder of Daewoo conglomerate in Korea. "He became like a billionaire," Anish said. "That's so phat."
Their aspiration was to go to the Wharton School. Then Nirav wanted to become an investment banker, and Anish hoped to become an entrepreneur in international banking.
At this juncture, with the market still a somewhat impersonal amalgam of computers, symbols and sawtooth lines, the Stock Club members were tempted to take whatever edge they could. When they read about the case of Jonathan Lebed, the New Jersey teenager accused of making hundreds of thousands of dollars by hyping dicey stocks on the Internet, then "dumping" them at a profit, they thought he was "awesome" and "gutsy," and wheels rotated in their heads. That, Babich said, was why he had scrupulously avoided talking about the caper when it hit the news: He didn't want his condemnation drowned out.
Like the others, Anish and Nirav had theoretical discussions about imitating the scheme. "We were tempted," Nirav said. "We could do it a lot better. IP addresses is one way they trace you. We know how to mask out IPs, because a friend's dad has an Internet company. The way we thought about doing it, I would put messages on the message board. As the stock went up, Anish would be just another guy making money."
The Internet was a vast beckoning world, and they knew numerous tricks to squeeze money from it. Over the summer, Nirav learned about a site on which you played casino games and accumulated virtual coins. Amassing 50,000 coins won a US$1,000 gift certificate to Banana Republic. He found out how to hack into the site and add 500 coins a day. A player was awarded 50 coins for every new account the player brought in. So he set up dummy accounts. He estimated he was two weeks away from hitting 50,000 coins when the site rewrote the rules. "There are lots of things we could do if we wanted to," Nirav said.
But they couldn't convince themselves to manipulate the market. "You're taking money from other people," Anish explained. "Suddenly they can't pay for their house or something." Gossip was rife, though, that one classmate was regularly pumping and dumping, scratching out a few hundred dollars here and there. Murmurings were that another student planned a pump-and-dump operation over the summer. "That kid's pathetic," Nirav said.
They got to B&L Billiards a little before 8pm. It was pretty crowded for Sunday night. Anish and Nirav found a table and waited for their friend Karan Gulati, the Stock Club president.
They nodded at classmates at other tables, some athletes over there, a famously deviant kid over there. The social nexus of the school, Anish and Nirav said, divided into familiar segments: the jocks and cheerleaders; the TI-maniacs (these were geeks, named after Texas Instruments, maker of the favored calculator); the drug users; and the overachievers. They grouped themselves with the overachievers, immersed in a dense range of activities.
Other activities
Outside of Stock Club, Nirav played saxophone in the wind ensemble and belonged to International Club, Interact and Social Studies Forum. Anish was in Chemistry/Physics League, Model United Nations, Peer Mediation Club and Future Business Leaders. And naturally they had SAT-prep courses. Nirav and Anish were in Advanced Placement classes and maintained impressive averages, but they felt they were less devoutly competitive than many classmates, who worried about every fraction of their grade averages, calculated to three decimal places.
They finished a game of eight ball and began another. They were having fun, but they had a larger ambition. They were trolling for prospects, suckers to relieve of some money. Nirav was something of a pool shark. "I haven't paid for a game in a year and a half," he said. "One night I made US$110. Me and my friends will go to the pool hall, make our money and then go out."
At a pool hall in New York, Nirav once played for US$20 a ball and won US$200. Right now, he was rusty. He had been studying for SATs. He sized up players at adjacent tables. If he sensed himself being appraised, Nirav would deliberately muff an occasional shot. Nearby players drifted into familiar pool hall patter. At the next table, a guy said, "Check out that chick at the table against the wall. Wow."
Nirav sank the six ball and said, "It's a good time to look at beaten-up blue chips."
"Yeah, AT&T," Karan said.
Anish said, "I don't think telecommunication stocks are going to do too well."
With the election settled and the Federal Reserve cutting rates, the market averages were climbing. The NASDAQ was at 2,641 and the Dow at 10,609. The mood at Stock Club was upbeat. The club portfolio was up US$0.62 for the year. That was progress. Nirav said his father wanted him to check out Campbell Soup; he was in a buying mood.
Out of the corner of his eye, Nirav noticed some kids at a nearby table. One he knew he could whip. The others were unfamiliar. He approached them. They agreed to play. Two of them versus Nirav and Karan.
"How much do you want to bet?" Nirav asked.
"Bet?" one of the kids said, puzzled. Nirav suggested US$5, but all they would consent to was US$1 a game. Nirav and Karan took the first game. Their opponents said that was enough.
"What wimps," Nirav said. They resumed playing with Anish. They kept their eyes open. "We need to earn more money," Nirav said.
Anish said, "Most definitely."
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