A month later, Lehman Brothers collapsed, and his business, his net worth, and his reputation were teetering. Many people saw it the way the Chinese wanted them to, as an assertion of capability and might, but to him it was a heedless farewell binge-the great eruption that marked the end of a prodigal age.
The final one, the big wheel felt, was the opening ceremony at the summer Olympics in Beijing: an estimated three hundred million dollars spent in a single night on a propaganda extravaganza. He and his partners continued to gorge on highly leveraged assets. Still, he failed to convert this intimation into discipline or conviction being a billionaire is distracting. He didn’t doubt that he was talented, even exceptional-if you harnessed the self-regard in that room, you could light up Los Angeles-but he perceived, in a way that he hadn’t before, the inequity of it all, and how corrosive and unsustainable it had become. It was the first time in a long while that he had questioned his own intelligence, or whether there was a limit to what it was worth. Here were eighty guys who all happened to live in the same part of the world and ply the same trade, and who could not possibly be as smart as their rapid accumulation of dynastic wealth had led them to believe. There were eighty or so people there, almost all of them men, and he calculated that their average income in 2006 had been more than a hundred million dollars. His epiphany came in the spring of 2007, at a Goldman Sachs hedge-fund conference at the Museum of Modern Art. One evening, I visited a big-wheel hedge-fund manager in his corner office overlooking Central Park. To many, this would have been proof that America is a land of opportunity, but to him it signalled a fatal imbalance between obligation and means. They cleared sixty-five thousand dollars on the deal, in a matter of months. She drove down with her husband every weekend from New York, six hours each way, to fix it up for resale. A private-equity executive I talked to said that he sensed the jig was up when his cleaning woman-“from Nicaragua or El Salvador or wherever the fuck she’s from”-took out a subprime loan to buy a house in Virginia. Some will tell a maid tale, the latter-day equivalent of the stock tip from the shoeshine boy (which, according to lore, persuaded Bernard Baruch and Joseph Kennedy to pull out of the market before the 1929 crash). A pulse of common sense suggests, This can’t last. vestibule: a two-hundred-dollar dinner, a traffic jam in bathroom fixtures, fees on top of fees on top of fees. In the early days, intimations of economic imbalance could come to you in a fancy restaurant, or a Home Depot, or an A.T.M. As a broker said to me, “If it’s the end of the world, you only get to bet on it once.”įor many, the awakening came while they were driving through some over-built exurb in Florida or California, or watching a commercial for a subprime lender (“Mortgage consultants are standing by!”), or studying a graph depicting the ratio of total debt to the gross domestic product. It concluded that the world needed a “do-over.” “Can I have a do-over, please?” the cynic wrote. One day in March, as the Dow fell to its lowest level in a dozen years, he e-mailed me an investment letter, in which a hedge-fund manager surveyed the world’s insolvent banks and unstable sovereigns and anticipated a possible collapse of the global financial and monetary systems-the end of fiat currencies and the beginning of Lord knows what. The markets turned, and the hedge fund went under. He bought a house and went to work for a hedge fund-the latecomer playing catch-up, eager for a piece. Meanwhile, life and the general mood conspired to compound his long position. He foresaw a grisly end to the credit boom, if not a collapse in the markets for stocks, real estate, art, mediocrity, and foolishness, and yet, like most people, he lacked the conviction and, perhaps, the macroeconomic purview to translate his misgivings into financial gain. I met a Wall Street cynic who had grumbled for years about the overextended consumer, the negative savings rate, and a profligate government that some day would be unable to make good on its promises.
Most of the mechanisms in place for the implementation of pessimism are known only to members of the guild. The sad fact is that betting against the global financial system requires more than pluck you need to be a participant. The majority didn’t expect it to be so bad, and wouldn’t have been able to profit from or guard against it anyway. Maybe it came too late or went unheeded, so that now it nettles. Maybe it helped a guy make money, or at least lose less. Most people by now may recall a moment of clarity, an inkling of doom.
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