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The Dow Zero Insurgency

Early on, the readers of these blogs seemed to be a relatively small and disparate group—a smattering of day traders, academics, and people who worked in and around the edges of the financial industry. They were “gold bugs” and “dollar bears” united by their hostility to Wall Street and their conviction that the U.S. economy was heading off a cliff. When Bear Stearns blew up, the bearish view was validated and these blogs gained credibility with a larger audience. Amid the chaos on Wall Street, they found themselves with much greater influence than they’d ever imagined possible.

Such is their power today that the Treasury and Federal Reserve both circulate “blog watch” e-mails, which are sent to the White House every day. Aides on Capitol Hill solicit bloggers for advice and explanations on complex regulatory issues, according to government spokespeople and the bloggers themselves. When John Hempton, whose blog is called Bronte Capital, wrote a massive post on the Treasury Department’s banking-reform plan—meticulously noting the government’s poor judgment in assessing the solvency of banks—“I went from having ten readers in Washington to 700,” he says.

Out of this scrum, Zero Hedge would distinguish itself as one of the most enterprising and the most combative, although not right away. The site was launched in January of this year, a few days after Dan Ivandjiiski, who lives on the Upper East Side, lost his job at Wexford Capital, a Connecticut-based hedge fund run by a former Goldman trader.

Blogging may seem like an odd career shift for a well-paid hedge-fund analyst, but for Ivandjiiski, it marked something of a return to the family business: His father, Krassimir Ivandjiiski, is a writer and editor at Bulgaria Confidential, a tabloid known for its controversial investigative reporting. In 1996, the elder Ivandjiiski exposed what he said was political corruption and drug trafficking in, of all places, Montana, in a story republished in the U.S. in a shoestring periodical called Free Speech Newspaper.

The story prompted Montana’s governor at the time, Marc Racicot, to charge that “a number of libelous statements and defamatory untruths are included in the article, including statements that I have a history of drug abuse and that I am a recovering alcoholic.” (Free Speech’s editor responded with a lengthy rebuttal, and the matter faded away.)

Dan Ivandjiiski moved to the U.S. to study molecular biology at the University of Pennsylvania in preparation for medical school. After graduation, Ivandjiiski instead took a job as a junior investment banker at Jefferies & Company in Los Angeles, followed by a brief stint at Imperial Capital. In 2005, he moved to New York to work for the firm Miller Buckfire, where he was accused of personally buying shares in an airline company one day prior to the announcement of a major deal with his former firm Imperial. Though he made only $780 on the trade, an official probe was launched and Ivandjiiski was barred from working in the broker-dealer business. The ban forced him into the unregulated world of hedge funds, where he learned the inner workings of the kinds of high-stakes trading he’d soon be writing about.

When he started blogging, Ivandjiiski billed himself online as “Tyler Durden,” after the masochistic anarchist played by Brad Pitt in the film Fight Club, who blows up the headquarters of major credit-card companies. The early iteration of Zero Hedge used free online software to publish a generic white page with the name ZERO HEDGE in red at the top, along with a quote from Fight Club: “On a long enough timeline, the survival rate for everyone drops to zero.” The site’s first post appeared on January 9 at 4 p.m., and it set the tone: “One can follow the daily creation and destruction of wealth simply by looking at the constantly shifting landscape in New York,” Ivandjiiski wrote, predicting that an “upcoming wave of ‘Page 6’–worthy scandals” that would disgrace Wall Street.

At first, Ivandjiiski seemed intent on imitating the snarky, gossipy tone of Gawker and Dealbreaker, lampooning the financial disasters splashing across the papers, from Madoff to Citigroup. Zero Hedge posted several times a day, much of it toothless and not very interesting. Ivandjiiski seemed timid about revealing his own views. Nobody commented. The first post to elicit significant feedback was a “Risk-Free Profit Idea of the Day”: Buy barrels of oil and store them.

But after two weeks, the attempts at humor began to recede, replaced by dense market analysis with technical charts and graphs. It read like the work of a financial analyst gone AWOL. “Overview of Implied Default Rates and Probabilities” went one typically scintillating headline. In late January, when asked by a reader how long he’d been blogging, he replied in the comments: “two weeks now. not sure if that’s too long or too little.”