Monday, September 15, 2008

Sometimes you eat the bear...

Once again, events in the US financial markets bring Dinah shuffling out of her Wall Street retirement cave to opine about the events of the day. I don't usually talk about these things on this blog, but bear with me as I reminisce about the good old days. Market crashes always tend to make me sentimental. Heh.

My retirement from Salomon Brothers centered around a sad event, my brother and best friend was dying of AIDS, he had no insurance and being a private kind of person, he didn't want strangers in the house when he was ill. Once a nurse, always a nurse, so I resigned and went down to San Diego to live with him. It was time for me to leave Salomon anyways, I had arrived on Wall Street after eight years putting myself through college working nights as an ICU nurse and had put in 12 hard charging years on the Street. After all that pressure/stress/crazy, I was burnt to a crisp but not admitting it. I'd started having seizures (stress related, or so they thought, and get this - my first one was in the World Trade Center, of all places. Wack, huh?)

Anyways, my brother eventually passed away and it was the greatest privilege and honor of my life to be able to spend time with him and take care of him before he died. I still miss him to this day. I was pretty emotionally drained by that point, so the L&M and I decided to just say phuk it, sell everything and "do a 60's in the 90's" thing and go on an extended road trip. For one whole year. We ended up criss-crossing America more times than I can remember, traveling hither and yon, soaking up the beauty of this great country and moving on when it came time to see something else. Our trip lasted almost two years...

It was phenomenal.

But there is a financial point to my tale, possums. There's even a link to Lehman and Merrill...

All good things come to an end and Dinah was sitting in a Palm Springs bungalow watching the OJ Simpson trial (funny, here he is - on trial again.) and wondering whether she should try to get back in the game. Out of the blue, I got a call from a Lehman recruiter asking if I'd like to talk to them about an opportunity. I would be doing the same thing, in the same office building, in the same elevator bank only located three floors below my old office, working with different people for MORE money. I said, "Sure. I'll come in and talk to you" and by the end of the week I was at the interview. Not to toot my own horn or anything - but they LOVED me. So much so, that they canceled the rest of the recruiting schedule and started making arrangements to fly me back to NY to meet with the trading floor brass.

Before the interview, I had to scramble to get my references in line and had contacted my old boss, who by this time was CEO of one of the most successful, profitable and esteemed investment advisors in the world. He agreed to be my reference, but was irate and wanted to know why I didn't come see him first when it came to finding employment.

My other big reference, who was working at Merrill in New York, gave me a hard time and wanted to know the same thing.

So in the course of three days, I ended up with three excellent opportunities and appointments to interview for all of them while I was back in New York. I was open with all parties involved about my interview schedule and was excited about my prospects.

Merrill at the World Financial Center was up first. (Remember how it looked after 9/11?) It was great renewing old acquaintances and talking about old times, but Merrill always felt too big for me and it just didn't seem like a good fit. My old boss's firm was a shoo-in. The job would have been great and was located at a fabulous office in southern Cali, but the memories of the time spent there with my bro were still pretty fresh. It would have been hard to go back. So by the end of the second day it was looking like either SoCal or the Lehman gig. I love my old boss but I was really liking the bunch of guys that I would be working with at Lehman and it just had a good vibe.

I was pretty much headed down the primrose path with Lehman. The interviews went well and I was rolling into the last one with the BIG GUY feeling pretty darn good about the job and about me. We shook hands and made small talk for a while, but after about 15 minutes I could tell this guy was no more interested in me than flying to the moon. Who knows? Maybe I reminded him of his ex-wife or something. He wanted to know what I'd been up to since last gainfully employed so I gave him the Readers Digest version of events. He was not impressed until I laughingly brought up the fact that in the process of lining up my references for the Lehman opportunity I had bagged two other interviews.

Then everything changed. The guy went OFF! I mean he went ballistic on me! Accused me in so many words of being a low down, lying, double dealer. That got me seeing red. Big time. You've heard me say before, that when it comes to the broker dealer business you're word is your bond and I was HOT that he was making it sound like I was hondling him. I explained that everyone knew about the interviews and that I was being completely open and above board about my situation. If he didn't like it, I couldn't help him. It was clear he wasn't buying any of it. It was the most bizarre interview experience I ever had in my life.

After about five minutes of back and forth, I'm looking at him (steam had to have been coming out of my ears), he's looking at me and then he slammed his hand on his desk and said "Either you accept this offer this very minute or it disappears!"

I stood up, thanked him for his time, turned on my heel and walked out.

It was very empowering.

It was then that I realized a little freedom was a dangerous thing. My days on the Street were over. I haven't looked back since and only follow it on the periphery of my attention span.

Except when days like today happen.

Dinah dates herself when she recounts her Wall Street war stories. She's weathered
the Savings and Loan Debacle, the Treasury Auction scandal and the Crash of 1987, she's had a passing exposure to the Long Term Capital Management blow up. And watched the bursting of the bio/tech/dot com bubble back in 2000. (when the L&M was trying to get a Biotech IPO out. It turned out successfully, but the process of getting it to market was like a dog-shi$$ing razor blades.) She even had an interesting window on the events of Enron as one of the bright, young women she hired went on to become an energy trader at Enron and we all know how THAT turned out.

After all, Dinah does put the Dinah in dinosaur.

Could it be possible that because of all this she views today's henny penny media coverage and Obama's absurd and irresponsible claim that this was the biggest financial crisis since the depression with a somewhat jaundiced eye?


Well, to try and put things in perspective, realize that the market only fell 4% today. In 1987, it fell 20%.

Lessons were learned in 1987 and the capital markets are much better positioned to absorb these kind of volatile shocks. That's the good news. The bad news is that some people never learn. They continue to make the same mistakes. They get greedy, become too clever by half in the derivatives market, become over-leveraged and end up unable to comprehend the extent of their asset valuation problem. A form of denial sets in. And more greed. There's no hiding the stink, though, balance sheet problems start wafting up and pretty soon rumors begin floating. If the rumors get loud enough, the customers leave, your capital stream dries up and you are in big trouble.

Your word is your bond, after all.

The cycle seems to happen over and over, the only thing that changes are the people and the sector. It's like some cosmic rock of Sisyphus that financial markets keep trying to roll up that hill.

But what goes up always comes down, possums.

I will admit that when I turned on the radio in the possum mobile and heard that the market was down 500 points I did have a dizzying deja vu moment like it was 1987, all over again. That feeling quickly passed though.

To have bailed Lehman out would have been the height of fiscal irresponsiblity. Excesses resulting from the home loan crisis have to be wrung out of the system and that is what you saw happen today. The BofA-Merrill merger is prudent. I just hope it was in time.

Back in March I told you to fasten your seatbelts. Let me remind you that the sign is still illuminated and you should not be moving around the cabin.
WaMu and Wachovia are still dicey propositions and I can't help you with AIG. Dinah doesn't do insurance. It's above her pay grade. Kidding. The insurance side is okay. It's the investment side of the house that's in trouble. It's also important to remember that 747 S&L's failed during the Savings and Loan fiasco and the one day crash in 1987 was a more severe correction than all of the 1929 crash combined.

I feel bad for the employees left in the lurch by Lehman's bankruptcy and the Merrill employees that will lose their jobs as a result of the merger.

But that is the risk you take when you play with the bears on the Street.

Sometimes you eat the bear, sometimes the bear eats you.

If you're interested in reading more, some related posts can be found here.