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The Dow Zero Insurgency

But he slogged away, e-mailing his links to established bloggers, like the San Diego–based investor and doom enthusiast Paul Kedrosky, who blogs at Infectious Greed. If Zero Hedge got four comments, it was a great day. His early readers were day traders, many running their own private message boards and invite-only blogs. Commenters tended to be confrontational, poking holes in his lengthy arguments about the inevitable implosion of New York’s pension funds or how Citigroup’s stock was a bear-market bellwether: “You’re kind of a moron,” said one anonymous reader.

But as his posts got more detailed, a theme began to emerge: Wall Street was a vast conspiracy. Nothing could be trusted. All markets were corrupt. The darker his vision the more popular he became. Ivandjiiski grew emboldened, confident that there was an audience, maybe even a big one, for his radical notions. Commenters voiced their approval. He scored with a post on the bank bailouts called “Bailoutspotting (Or the Search for the Great Financial Methadone Clinic),” which argued that the government’s Temporary Liquidity Guarantee Program was the heroin of bank-bailout programs, destined to break the backs of taxpayers. “Using pretexts, subterfuge, and lies, the administration’s charade triage will only end once there are no more gullible taxpayers to provide their cash, no more demagogue senators and congressmen who will bend reality to make it seem that their actions benefiting a select few are for the benefit of all, and no more naïve investors who buy into the promises that U.S. debt is the ‘safest investment,’ ” he wrote. It drew wild cheers from the peanut gallery. A commenter named Stockhustler wrote, “This is by far the greatest blog on the Internet.”

By March, Zero Hedge was getting up to 40 comments a post. The blog’s inscrutability was part of its appeal. It had the feel of a financial insider leaking forbidden information. Some of it actually was proprietary. In May, Zero Hedge made several posts based on the research of David Rosenberg, who was then the chief economist for Merrill Lynch. Rosenberg’s views on the market were extremely bearish; he predicted a slow, protracted recovery and dismissed his bullish peers as pom-pom wavers. Merrill Lynch was peeved to see research that its clients paid handsomely for made available for nothing on a blog. Lawyers were dispatched, and the material was removed from the site.

Unversed in copyright law, Ivandjiiski pitched this as a case of censorship, feeding into the image of Zero Hedge as a guerrilla force battling the big firms. In late March, when the White House invited more-mainstream bloggers, like the authors of Clusterstock, to an online discussion of the TALF program (the Term Asset-Backed Securities Loan Facility, a temporary lending arm of the Federal Reserve), Ivandjiiski savored his outsider status: “Not surprisingly, Zero Hedge was not invited, but we will participate anyway and provide our readers with as much info from this ‘public medium’ as we can.”

Zero Hedge’s popularity metastasized with its increasingly paranoid focus. “The greatest bait and switch of this generation in all its visual splendor,” he announced under the headline “The Amazing talf Bait and Switch,” describing how the government’s lending program could easily be gamed by banks and hedge funds. Other bloggers, as well as some of his own readers, evinced skepticism at his analyses, but a growing number felt he was expressing something they all felt. “The whole thing smells of rank conspiracy and blackmail,” said one reader.

As the stock markets surged back to life in the spring, Ivandjiiski’s economic predictions only became bleaker. On April 11, Zero Hedge wrote “The Imminent Disinformation Schism,” a 3,000-word opus on the split between the “naïve, easily-manipulated, small-time mom-and-pop investors” and a rising new group of tea-party-style skeptics, “the forward-looking taxpayers, who see the upcoming budget-deficit fiasco, the Social Security Ponzi scheme, the Medicare/Medicaid debacle, the ridiculous underfunding in public and corporate pension funds, the rising city and state taxes, the shuttering factories, the rising unemployment, the plummeting American production base, the ‘seasonally’ upward-adjusted economic data coupled with consistently downward revised prior economic releases, the increasing savings rate and the multi-trillion discrepancy in consumer purchasing power.

“The cold facts,” he continued. “ ‘When you stare at the abyss, the abyss stares back at you.’ Why is everyone so afraid to stare at the proverbial abyss? Readers of Zero Hedge know all too well about my fascination with the economic fundamentals, and my desire to expose the real abyss in all its deep glory.”

It was around this time that Federal Reserve chairman Ben Bernanke mentioned “green shoots,” the first tiny signs of economic recovery. The financial blogosphere savagely mocked Bernanke’s rhetoric, even as the stock market endorsed it by rallying. It was a sham, Zero Hedge maintained; the market was clearly being manipulated. But how?