Thursday, November 13, 2008

Fatigue Warp

The expression "fatigue warp" describes the state of mind of someone who has been working night and day on a very difficult mission and as a result has become deranged, at least to some degree. Fatigue warp is rampant on Wall Street.

Underneath the headlines about AIG and Fannie Mae, credit default swaps and the collapse of the entire investment banking industry, are tens of thousands of men and women who are doing everything they can, every single day, to try to save the institutions which employ them. They knew trouble was brewing in the summer of 2007 and they hoped that the worst was over with the collapse of Bear Stearns.

But all that was prologue. Since Labor Day of this year, they have lived through a disaster of epic proportions. $25 trillion in global equity, give or take, has been erased in a matter of months. Great companies, like Goldman Sachs and Citibank and Morgan Stanley, have been reduced to supplicants for public support. Masters of the Universe now line up at the Fed discount window and at the US Treasury for grotesque welfare checks. They say they need it to "save the system." But they really need it because they were reckless beyond belief.

The men and women who work for the Masters of the Universe have no choice, they have to keep working, try to make it work. They are otherwise unemployable, at least in the near term. So they go to work, every day, at 5am and get home late into the evening. Some of them drink five or eight vodkas, on the rocks, in thirty minutes, the moment they get home, just to take the edge off. They eat dinner, kiss the kids goodnight. They sleep fitfully, if they sleep at all.

They work on weekends. They read their Blackberrys obsessively. They tell their spouses that it might all come to an end; not just their job or their firm but the entire financial system might literally melt down to radioactive ash. As they sleep in fits and starts between midnight and 4:30am, they see gigantic waves crashing into their homes, over their cars, drowning their children. It's over-wrought and operatic, so they never talk about these fevered dreams -- not to anyone -- but they wonder if they're telling in some way. Part of their training is to look for "tells."

These men and women all suffer from a compounding case of fatigue warp. They are deranged, to varying degrees. The longer it goes on, the more deranged they become. And deranged people do.......weird things.

Yesterday, senior people at Citibank let it be known (to the Wall Street Journal) that the current Chairman of the Board would likely be replaced by the former Chairman and CEO of Time Warner, Dick Parsons. Of all the people in all the world who are responsible for Citi's dreadful state, perhaps the last person one would hold responsible is the recently-appointed Chairman of the Board. Of all the people in all the world who might be able to do the terrible things that are necessary to save Citi, perhaps the last person one might choose would be Dick Parsons. You don't hire a great diplomat to wage an ugly, brutal war.

Further down in the Journal article, these same senior people let it be known that having failed to acquire Wachovia, Citi had now set its sights on Chevy Chase Bank, a mid-Atlantic regional of no great import. But deposits are deposits, right? Apparently, the Citi execs thought that a double whammy of Parsons and Chevy Chase would rock the Street.

Not surprisingly, investors took in this news and decided that the only rational response was a mad dash for the exits. The stock sold off to the edge of an abyss, before management buying and a market upswing saved it from oblivion. At one o'clock this afternoon, there were more than a few people wondering what the impact of Citi's collapse would be on the global financial system. It was not the first time people had thought along these lines. But it was as close as anyone had ever come to feeling the raw fear of the world's largest bank collapsing like one of the World Trade Center Towers on the morning of September 11th.

Tomorrow, the same army of fatigue-warped men and women get to get up and do it all over again. No sleep, 430am alarm, scan the papers, double depth-charge coffee (two shots of espresso added to a regular coffee), answer thirty emails, off to work we go! Log on, check the Asian and Euro market sell-offs, examine all the new bad news, more coffee.

It's 6am. Do you know where your life went? If you put a sound-track to it, it would be Jimi Hendrix's cover of "All Along The Watchtower." There must be some kind of way out of here.