A public wine contest

Posted on June 16, 2009 by Felix

If you’ve been reading on this blog about the various wine contests I’ve held over the years, you might have wondered when you’d be invited to one. Well, that day has now come!

Michelle and I have organized a wine contest to be held in the beautiful tasting room at the lovely Pasanella and Son vintners, in the South Street Seaport where Michelle’s Sea Warriors public art exhibition is going to be held. The contest will double as a fundraiser for the art project, which will involve flying pirate flags from vintage lampposts; if you donate more than a certain amount, you get to keep one of the flags for yourself when the project comes down.

The wine shop is at 115 South Street, between Beekman Street and Peck Slip — come along at 6pm on Tuesday June 30. We’ll be tasting five different wines, all similar, but which have quite a wide range of prices. Your $40 entry fee will get you a ballot, where you will attempt to rank the five wines in order of price; you can buy as many additional ballots as you like for $20 each. The winner will get an original Michelle Vaughan pirate painting; second prize is a gift certificate to Jill Platner.

Bring as many people as you can — it’s all for a very good cause! Once again:

Wine Contest

Pasanella and Son Vintners

Tuesday June 30, 6pm

See you there!

Posted in Not economics | 42 Comments

Studio Sale

Posted on June 3, 2009 by Felix

My incredibly talented wife, Michelle Vaughan, is having a studio sale tomorrow — come pick up some bargains! The official announcement:

Flat file sale by the work of Michelle Vaughan… there will be drawings/paintings from past series, plus a few special pirate pieces. Reduced prices. Can arrange framing. Drinks served.

Studio Sale

Thursday, June 4th

5-8pm

10 Jay Street #609

Brooklyn, NY 11201

(F Train to York Street, or A/C Train to High Street)

Barbossadrwng.jpg

Posted in Not economics | 49 Comments

Pedestrianize Broadway! (Redux)

Posted on May 24, 2009 by Felix

Back in 2005, I put up a blog entry entitled “Pedestrianize Broadway!” in which I waxed rhapsodic about Broadway being made a pedestrian thoroughfare at least from Columbus Circle down to Union Square.

Now it seems there’s a non-zero chance that my dream will come true and that the current plan to close off small chunks of the Great White Way is only the beginning:

If the Broadway plan does succeed, the next step (though Sadik-Khan is not talking this way publicly) will likely be to close more sections of Broadway until one day in the near future the entire boulevard has been converted to pedestrianized open space. It’s hard to characterize how dramatic a change that would be. Imagine a Manhattan with two major parks: one built in the nineteenth century as a confined space of bucolic wonder; the other refashioned in the 21st century as a long, open boulevard slicing the island on the diagonal. This would be the most striking alteration of the city’s physical landscape since the days of Robert Moses.

Oh, to see it happen!

Update: This is what it looks like, now, when there’s a street fair on Seventh Avenue:

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Posted in Not economics | 37 Comments

Pig’s head

Posted on April 22, 2009 by Felix

pig's-head.jpg

A special guest post by Michelle Vaughan:

The butcher at Marlow & Daughters ran after us. “Wait. Are you sure you know what you’re doing?” Us: “No, not a clue.” Him: “Make sure to soak it in a brine overnight. Here’s a box of Kosher salt, dissolve it into hot water and brown sugar… throw in coriander, white wine, vinegar, pepper…” Us: “We might call you tomorrow if there’s an emergency.”

After grabbing some ingredients at the shop and shoving a pig’s head in my bicycle basket, Felix and I rode over the Williamsburg Bridge back to the East Village while the head wobbled behind me. I was given the choice: half a head with the skin on from Flying Pigs Farm, or a whole skinned pig’s head sans ears. I ordered the latter and prayed for the best. I also prayed I wouldn’t hit a bump while the head flew out and smacked some poor passerby walking over the bridge.

The following day, with it’s piggy snout and teeth sticking out of our too-small (massive) pot, we pulled the head out of the brine. Its nose had gone completely red and I tried not to flinch. After adding fresh water, wine, leeks, onions, garlic, carrots, celery and pepper, we dumped Sally (I had to give it a name, my god it was staring at us all day) back into the pot to simmer for 6 hours.

Meanwhile, we botched up the Bartolli beans which were supposed to go in the recipe – so I braved the rain, bought another batch and tried it again. All was well. Sally was ready to exit the pot, and the true moment had arrived. Was it globular? Gross? Would an eyeball go flying and hit the floor?

Felix dug a fork into Sally and started ripping through her head, collecting as much meaty-meat as possible. There was a lot of fat, about half the mass was fatty. We saved some of that and threw it back in. The eyeballs, teeth, and some of the snout stayed put. Anything else got tossed into the beans with reserved liquor, radishes, carrots, ramps and watercress for a light “wilting”.

It was, indeed, a Fergus Henderson evening. Not only does he put new meaning into “pork and beans”, we made his killer “Bread & Wine salad” (Boston lettuce, mint, spring onions, red wine vinegar, lemon juice and olive oil) which was light and airy. We also added the mushy courgettes as a delcious side dish. And for desert, I fused about 3 recipes to make a fresh ginger/apple/rum-infused prune cobbler which ended the menu FULL ON.

Without a doubt (and there were some doubts in the beginning) it was probably in the top 3 best dishes we’ve ever made. I don’t know how the pork and beans “emotionally bond”, but when they do – it’s magical. We sat around the table with 6 other guests and after the first few bites, everyone looked at each other with satisfaction. This was not a graphic display of Sally’s head on the table with an apple stuffed in her mouth, this was emotional bonding with beans and radishes. Poetry.

Thanks, yet again, to the insanely talented Mr. Henderson for bringing us closer to our pork deity. All hail the mighty pig. We even plucked 3 teeth to remember Sally and her excellent, lovely head.

Posted in Not economics | 59 Comments

Another Reason for Banks to be Small

Posted on March 31, 2009 by Felix

Mike at Rortybomb finds some empirical research on what happens to loan rates when banks get bigger and more consolidated. The results make intuitive sense: as competition falls, loan rates go up. The exception is loans which can be securitized, like auto loans: those rates can fall as economies of scale improve.

The lesson here is that we should keep banks small, while encouraging securitization — which of course itself helps in reducing the size of banks’ balance sheets. Bank competition is good for consumers; big banks are bad for consumers. It’s worth remembering that, as we construct a new regulatory regime.

Posted in banking | 68 Comments

GM’s Whining Bondholders

Posted on March 31, 2009 by Felix

Andrew Ross Sorkin takes aim at GM’s bondholders today:

Not three hours after the president spoke on Monday I received an e-mail message from a group representing G.M. bondholders — people who are likely to have an enormous influence over the future of the Detroit carmakers…

By the end of the e-mail message, they were complaining that they were “very disappointed that the government and company have had virtually no real dialogue with bondholders while designing the proposed restructuring plan.

The e-mail message came from the same group that two weeks ago grumbled that “G.M. bondholders have been asked to make deeper cuts than other stakeholders,” and threatened to send G.M. into bankruptcy…

I called Gabe Roth, the spokesman listed at the bottom of the message, and asked if I could speak with some of the bondholders the committee represents. The answer: “No. We’re not making them available.”

I followed up by asking which investors were members of this ad hoc committee. “We’re not making that public,” Mr. Roth said.

I reminded Mr. Roth that government money was at stake, and that we taxpayers might end up bailing out the bondholders. Doesn’t the public have a right to know whom they are negotiating with — or against? He demurred.

Sorkin does mention that Pimco is one of GM’s largest bondholders; what he doesn’t mention is that as recently as January, the head of Pimco, Bill Gross, was saying this, as he unilaterally withdrew from the GM negotiating committee:

"We have the interests of our clients more at heart than the interests of particular corporations or even the government, I guess, so it’s best that we simply look at the situation from afar as opposed to from inside."

When Pimco’s largest bondholders behave like that, is it any surprise that they haven’t had much in the way of "real dialogue" over the restructuring plan? After all, it’s not as though their demands would come as any surprise: they want more money. And if they want to, they can force GM into bankruptcy — which is a pretty likely outcome in any event. But so long as they’re moaning from behind a cloak of anonymity, there’s really no reason to give them any sympathy at all — they’re asking for a government bailout just as much as GM’s management is, but they have a much weaker case for getting one.

Posted in bailouts, bonds and loans | 47 Comments

Moving to Reuters

Posted on March 31, 2009 by Felix

As you might have heard, I’m moving my blog from Portfolio to Reuters. The new blog will be here, and the Reuters RSS feed will be here. But if you read my by subscribing to the felixsalmon.com “all posts” feed, then you should need to do nothing.

Posted in Announcements | 70 Comments

Extra Credit, Monday Edition

Posted on March 31, 2009 by Felix

Why size matters: Steve Waldman is a fan of banks getting smaller.

In Market Cap, Google Now Bigger Than GE

The Taiwanese war against tax evasion: Clever.

The Government Crackdown on Peer-to-Peer Lending: I think it should be regulated by someone. If not the SEC, then who?

Posted in remainders | 15 Comments

Whither This Year’s MBAs?

Posted on March 30, 2009 by Felix

One thing drilled into every MBA student is that sunk costs are irrelevant, while opportunity costs are paramount. Which is a lesson this year’s graduating class will put to good use. Let’s say that in any given year, there’s a graduating MBA who has the choice between creating a green-energy start-up, on the one hand, or joining Goldman Sachs, on the other. Normally, the start-up loses, because the opportunity cost of going that route — all that foregone Goldman remuneration — is enormous: it probably has a present value of a good $10 million.

Today, however, the opportunity cost of starting your own company is tiny: if no one on Wall Street is hiring, then you literally have nothing to lose. To be sure, it’s not pleasant trying to make your way in the world with no steady paycheck and hundreds of thousands of dollars of student-loan liabilities. But those loans are sunk costs: there’s nothing you can do about them, and so there’s no point stressing about them overmuch. The art of any career decision is to make the best possible choice given the decision set available, rather than to kvetch about not having graduated a few years earlier, when MBAs were hot commodities.

Paul Oyer puts it another way:

There is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation.

Never has this been truer than today: I’d wager that in any given MBA class, a very high proportion took the class with the intention of going into banking, and a much tinier proportion will actually do so.

The ones who don’t go into banking might be upset about their bad fortune, but I’m not sure they should be: there’s a case to be made that they actually dodged a bullet here. Given the choice, what would you rather be: a freshly-minted MBA with thousand of possible career paths ahead of you, or an MBA of vintage 2004 who got snapped up by a subprime mortgage origination desk and who now has an all-but-unemployable skillset?

For those of us who aren’t and never were in business school, however, the big question is what this all means for the economy. Will the best and the brightest now enter the real world, as opposed to the bizarre parallel reality of Wall Street, and put their skills to good and productive use? Or, conversely, will a cohort of finance MBAs infect the real world with their outdated and dangerous ideas about modern portfolio theory and whatnot, causing formerly well-run companies to follow the trajectory of Lehman Brothers or AIG?

To put it another way: what did this year’s MBAs really learn during their course? Was it much the same thing as their predecessors, or did the magnitude and severity of the financial and economic crash teach them a few home truths which will come in useful going forwards? I fear that the answer is largely the former: it’s hard enough just keeping up with your coursework, without trying hard at the same time to unlearn a large part of the compulsory curriculum. And certainly anybody I’ve ever talked to who’s taught a classroom full of would-be quants has told me that they tend to concentrate on formulas and algorithms to the point at which they can’t even perform a basic smell test on results, let alone look at those algorithms critically and decide to discard them.

But the optimist in me says that if there isn’t any demand for financial whizzbangery any more, then maybe the supply of it will wither quite quickly. And that today’s MBAs might yet add more value than you might think.

Posted in education | 13 Comments

Answers to Four Questions About Financial Journalism

Posted on March 30, 2009 by Felix

Will Ortel, a journalism student at the College of Idaho in Caldwell, Idaho, sent me a few questions about financial literacy for a project he’s doing. They’re good questions, so I’m blogging the answers:

Financial education for the layman is a shambles normally organized towards paying bills on time and managing credit cards. This prompts most Idahoans to think "who is this guy" when I explain what a CDS contract is or how short selling works. Is detailed financial knowledge something that most Americans should have? What is it about financial understanding that makes it distinct from engineering or psychological understanding?

I’m very happy that someone who knows what a CDS contract is or how short selling works is attending journalism school — the world of journalism desperately needs financially-literate reporters. On the other hand, there’s absolutely no need for most Americans to understand these things — any more than they need to understand what makes an airplane fly, or how beta blockers work.

Some people are interested in the world of finance, especially now, when troubles on Wall Street seem to be the proximate cause of the worst macroeconomic recession in living memory. So journalists who can clearly and accurately explain such things are to be treasured. But it’s no weakness not to understand how banks’ balance sheets are constructed, or even what a balance sheet is. People need a certain level of psychological understanding to perform their daily duties, which is why life with autism can be so very hard. And some basic personal-finance literacy is a good thing too. But beyond that, there’s no reason people should be expected to understand the mechanics of Wall Street unless they particularly want to. In that sense, yes, it’s much like engineering.

Coming from the standpoint of protecting small investors from hazy information that they might receive, could you support conceptually the establishment of a test to see who was capable of trading individual stocks and bonds (as distinct from vanilla mutual funds)? Can you think of anything that you would want to put on such a test?

It’s true that individual stocks are incredibly risky things which most people should avoid — much riskier than most hedge funds, which most individuals are not allowed to invest in. But I don’t think there’s much evidence that financially-sophisticated individuals make for better investors. If anything, they suffer from overconfidence bias, think that they have some kind of an edge, and make even bigger bets as a result. Giving people a financial-sophistication test might even be counterproductive in that sense: Americans would barge into the markets armed with their "qualification" to trade stocks, and then proceed to lose a fortune.

The much-heralded blog era has begotten the rise of personal financial journalism, perhaps typified by yourself. To what extent do you think that econobloggers parsing news for lay readers will catch on? Do you see yourself as parsing news for lay readers or providing insightful (and occasionally hilarious) commentary to moderately informed dorks (like me) around the country?

I like the idea of "personal financial journalism" meaning "financial journalism written with a personality" rather than "journalism about personal finance". Econoblogging is exploding right now: when I started the Economonitor blog at RGEmonitor.com in September 2006, one person could pretty much keep on top of most of it. Today, that’s unthinkable, I discover great new blogs constantly, and the best of them can become extremely popular and influential very quickly indeed.

That said, I don’t think that most of them are necessarily aiming at what you call "lay readers": a blog is naturally very conversational, and one tends to like to converse the most with people at more or less one’s own level. So you won’t find too many blogs spelling out what a basis point is, or explaining that bond prices move in the opposite direction to yields. So count most of us in with the "commentary for moderately informed dorks" crowd, I think. For lay readers, sites like The Big Money might be a better bet.

If the audience of a news organization with high overhead demands a Jim Cramer or Ben Stein figure, how can that organization deliver a more responsible figure instead and stay solvent? How would you characterize my optimism that the nature of financial journalism might improve?

Well, I’m on the record as liking Suze Orman: just because you’re a financial celebrity doesn’t mean you’re as idiotic as Ben Stein. And I’m not sure how hiring Ben Stein is likely to improve any news organization’s solvency — he doesn’t come cheap.

But one good thing about the internet is that people can become brands without having to be on the television. And since appearing on TV is a great way of becoming incredibly stupid, then with any luck the age of the internet will usher in a new generation of finance pundits who have made their name by the quality of their ideas rather than the recognizability of their faces.

The much-maligned Gawker Media, it’s worth noting, dispenses a pretty large amount of generally-excellent financial advice on such sites as Consumerist*, Lifehacker, and Jezebel. All of it is vastly more useful than anything you’ll get from Cramer or Stein. So the trend is in the right direction. Stein adds no value for the New York Times, so eventually he’ll be dropped. It’s just sad that it has taken so long.

*Update: As Gari points out in the comments, Consumerist is now part of Consumer Reports, not Gawker Media. I should know.

Posted in journalism | 9 Comments