Dwight Garner reviews Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager, which contains a series of interviews Keith Gessen, editor of n + 1, conducted with an anonymous hedge fund manager from New York City, referred to as HFM.

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.

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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." (emphasis added)
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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."
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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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