Panic on the Street

That thud you just heard was the sound of arrogance hitting the Street. Many of Wall Street's Masters of the Universe are being humbled.

In good times 80-to-1 leverage produces obscene profits. It also produces people who believe that they as good as their bonuses say they are. Trouble is: in bad times the same leverage will obliterate your firm in the blink of an eye.

Unfortunately, justice is imperfect. Some of those most responsible for the debacle are walking away with their fortunes intact. Many lesser lights in the financial firmament, people who did their jobs effectively and who trusted their superiors, have been wiped out.

Too many people thought that they had found a way to make enormous profits without putting in a commensurate amount of work. Like Icarus they flew too close to the sun and did not realize that their wings were made of wax.

Lest anyone looking at this from the outside start to gloat, the misfortune that is overtaking the financial services industry will eventually affect all of us.

As Wall Street goes, so go New York City and State. And that is just for starters.

Is everything coming apart? Probably not. Remember what Baron Rothschild said nearly two centuries ago: "Buy when there's blood in the street, even if the blood is yours."

Loss traumatizes, and a lot of people have lost a great deal, whether in their portfolios or their careers.

The standard psycho-therapeutic template does not seem to fit. Usually it promotes introspection as the best way to turn a trauma into a story. Mostly, this does not work. It will certainly not show you the way to deal with the disintegration of the financial system.

With my coaching clients I approach it differently.

I find that they first need to understand that trauma compromises judgment. What feels right after a trauma is usually the wrong course of action.

To overcome trauma you need someone whose judgment you trust. Hopefully you knew who you could call on before the blank hit the fan.

Keep in mind that trauma wants to maintain its influence. It will manipulate your emotions so that they will direct you toward doing exactly what you need to do in order to stay traumatized.

Trauma puts us in pain-avoidance mode. If something is truly painful we want to make sure it never happens again. Trauma will want us to believe that we need to withdraw from any and all situations that expose us to risk.

If we follow its lead, we give up, we freeze, we do nothing. Sometimes we even take the occasion to rummage through our psyches.

We might even engage in a form of therapy that encourages these bad tendencies. Like trauma, therapy wants you to lie on a couch and introspect while putting off major decisions.

The conclusion: when you have been traumatized, get out of your mind as quickly as you can. Take small steps to connect with people, professionally or personally.

Trauma threatens us. It makes us feel that we are alone and isolated, that the people we rely on to support and protect us have let us down.

It produces a rush of narcissism. It makes us feel that we can only rely on ourselves. Everyone else is a potential threat. We become thin-skinned and overly cautious, even withdrawn.

Trauma will tell you to puff up your self-esteem in defiance of the world that has betrayed you.

Trauma tells you that you are alone. It is lying to you. You cannot go it alone.

As everyone knows, when looking for a new job, the best resource is the contacts you have built up over the years.

Trauma also tells you that you are such a wonderful person, so full of goodness, that you did not deserve to lose what you lost. Some people imagine that since trauma is punishing them unjustly, the world owes them something.

Right away, without delay.

This makes them feel that they can and must trust their impaired judgment. They might begin to act impulsively. They think that the casino owes them. They become reckless. They double down on losing bets. They replicate the atmosphere that got Wall Street into the mess in the first place.

People act impulsively because they want to make back everything they lose... all at once.

Evidently, they only lose more.

Neither introspection nor self-puffery nor impulsive actions will cure the pain of trauma. What is left? How about... work.

If you seem to have lost everything, if the world is falling apart around you... you can get it back... but only through hard work.

Wouldn't it be nice if Wall Street went back to the motto on the old Smith Barney commercials: We make money the old-fashioned way; we earn it.

And this is true even for those of my clients who have worked very hard, and who are victims of someone else's errors.

Pondering the injustice of it all will not make it better.

I always advise my coaching clients to get back to work, whether this means starting immediately to look for a new job or putting extra time and effort into their personal financial plans.

When the world changes, you must change with it. Nostalgia is your enemy. Self-pity will not rectify your situation.

The danger every trauma victim faces is procrastination. Indulged, procrastination produces bad habits.

Wallow too long in the pain of your trauma and you will get good at introspecting or acting impulsively. Once such habits become ingrained, you will have far more difficulty breaking them.

If you don't know what to do, do something. Take a small step in the right direction. As the old saying goes: every journey begins with a single step.