The global banking crisis that began in 2007 has brought some good books into being, volumes historians will consult when reflecting on these hard times. It has also given us some wild cards, unexpected treats that belong on the shelf once labeled belles-lettres but now more commonly known (thanks to Dave Eggers’s annual paperback anthologies) as nonrequired reading.
DIARY OF A VERY BAD YEAR
Confessions of an Anonymous Hedge Fund Manager
260 pages. Harper Perennial. $14.99.
Excerpt: "?Diary of a Very Bad Year' (pdf)
Keith Gessen, interviewer.
Among the books that reside on this short, sunny shelf is “I.O.U.: Why Everyone Owes Everyone and No One Can Pay,” by the British novelist John Lanchester. Now there’s a new one: “Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager.” Both are angry enough to clear your sinuses. Both are also thoughtful, funny and unpretentious — dinner party guests you feel lucky to be seated next to.
Mr. Lanchester’s book, published early this year, was an outsider’s howling lament. “Diary of a Bad Year” is the view from a man clinging to a palm tree in a hurricane. It is not, in some ways, a proper book at all, but a series of interviews conducted by Keith Gessen, a novelist (“All the Sad Young Literary Men”) and editor at the literary magazine n + 1, with a New York hedge fund manager whose name is not disclosed.
These interviews, which first appeared on the n + 1 Web site, nplusonemag.com, began in 2007, when the subprime mortgage disaster become impossible to ignore, and continued through last year. They’re an urbane if frazzled chronicle of shock and despair.
Our interlocutor, Mr. Gessen, admits right up top that he knows almost nothing about economics or finance. Nor is he overly fond of the kind of people who are attracted to these fields. “I’d been to college with a great many people who later went into finance,” writes Mr. Gessen, who graduated from Harvard, “but this was mostly so they could keep working a lot and drinking beer and watching football afterward.”
This book’s hedge fund manager — Mr. Gessen refers to him throughout as HFM — is a man who ran the emerging markets desk at “a respected Midtown fund” and is not, we are told, like those football watchers at all. “Finance was not a social event,” Mr. Gessen writes, “but an intellectual vocation for him.”
Mr. Gessen makes the mistake, early on, of overpraising HFM, referring to his “tireless magnificence” and lamenting that a “mind so excellent, so generous, so curious, should spend all its time on relative value trading in foreign jurisdictions and yelling at people who refuse to pay him back.” Please. HFM is not an intellectual superhero the world cannot live without, a John Maynard Keynes with a bat suit and X-ray specs. Lightning does not strike on every page. But it is plenty enjoyable to watch his mind unfurl.
The conversations that fill “Diary of a Bad Year” range across many subjects, including, but far from limited to, computerized trading; Japan’s zombie banks; why the Securities and Exchange Commission is a hapless financial enforcer; the brutal fall of Lehman Brothers; China’s amusement at America’s money woes; the awesome stubbornness of Treasury Secretary Timothy F. Geithner, whom HFM knows a little; how the hippies in the Class of 1969 ruined Harvard’s endowment; why holiday staff parties are so awful; and why, when the subject turns to Bernard L. Madoff, it’s worth keeping in mind that “a lot of economics has the dynamic of a Ponzi scheme — it really only works when you’re expanding.”
HFM is conservative financially, and also, it seems, politically. He didn’t support Barack Obama, although he praises some of the Obama administration’s early appointments. HFM’s fund lost some $50 million in the subprime market, although it remains strong, and he has no immediate money worries of his own. His opinions are rarely blazingly counterintuitive. The pleasures of his talk are low-key and cumulative.
In financial markets, HFM says, bad things happen when you “divorce the people who take the risk from the people who understand the risk.” He describes some Treasury Department threats as the “criminalization of failure,” adding the fear of prison rape to a financier’s fear of poverty and disgrace.
He is lovely on the insanity of what has happened to the market. “This is not a crisis that was caused because there was a drought, or because a meteor hit London and obliterated it, or because there was a war that destroyed capacity,” he says. Later: “You know, it’s easy to understand how living standards would go down if somebody bombed all the factories in America. What’s kind of hard to get your head around is that those factories are still there!”
He is good, too, on the simple “animal spirits” that drive markets, perhaps in the wrong direction. The world’s financial situation remains precarious. “But after a while when you wake up each day,” HFM says, “and sun still rises, there’s still food, it’s not ‘Mad Max’ with Australian guys with mohawks driving up and down the roads killing you for gas ... and people start to feel better.”
His humor squirts in from odd directions. He’s only half joking when he says he hopes Martians exist: “We could start trading with them. Somebody finally would be uncorrelated enough, we could buy protection from them on the U.S. government and feel like they could actually pay it back. LGM Capital Management, Little Green Men Capital Management, a perfectly good counterparty.”
HFM does not, at the end of “Diary of a Bad Year,” feel very cheerful or humorous himself. He’s burned out, stressed out, bummed out and looking to get out of both finance and New York City. “The men in my family don’t have a long life expectancy,” he says with a sigh.
How bad can things still get? At one point HFM says about forthcoming bankruptcies: “You know what it’s like? It’s like somebody drops a depth charge onto a submarine, and you hear a big explosion, but you don’t know what’s happening. Like, a little while later bodies start to bob up? We’re waiting for the bodies to bob up.”
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