Since 2008, Wall Street and Washington have fought against the tide of the fiercest financial crisis since the Great Depression. What have they wrought? In a special four-hour investigation, FRONTLINE tells the inside story of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.
Sara Blakely is one of the few women who has joined the Forbes Billionaires list without help from a spouse or an inheritance. She came up with the idea for Spanx and spent two years and $5000 developing it and the $1 billion company it would become.
Blakely, then 27, moved to Atlanta, set aside her entire $5,000 savings and spent the next two years meticulously planning the launch of her product while working nine to five at Danka. She spent seven nights straight at the Georgia Tech library researching every hosiery patent ever filed. She visited craft stores like Michaels to find the right fabrics. She sought out hosiery mills in the Yellow Pages and started cold calling, only to be told no repeatedly. Immune to rejection thanks to years selling door-to-door, she decided just to show up. At the Acme-McCrary hosiery factory in Asheboro, N.C., she was turned away, only to receive a call from the manager two weeks later. He had daughters, he told her, who wouldn't let him pass up her invention.
James Somers noticed that his equity derivative-trading roommate was the only one of his young professional friends who comes home from work "buoyant and satisfied", so he accompanied him to work one day to see what his job entailed. Turns out he basically plays video games all day.
A trader's job is to be smarter than the market. He converts a mess of analysis and intuition into simple bets. He makes moves. If his predictions are better than everyone else's, he wins money; if not, he loses it. At every moment he has a crystalline picture of his bottom line, the "P and L" (profit and loss) that determines how much of a bonus he'll get and, more importantly, where he stands among his peers. As my friend put it, traders are "very, very, very competitive." At the end of the day they ask each other "how did you do today?" Trading is one of the few jobs with an actual leaderboard, which, if you've ever been on one, or strived to get there, you'll recognize as being perhaps the single most powerful driver of a gamer's engagement.
That seems to be the core of it, but no doubt there are other game-like features in play here: the importance of timing and tactile dexterity; the clear presence of two abstract levels of attention and activity, one long-term and strategic, the other fiercely tactical, localized in bursts a minute or two long; the need for teams and ceaseless chatter; and so on.
Athleticism and competitiveness are often downplayed when we talk about white collar careers but are essential in many disciplines. Doctors (surgeons in particular) have both those traits, founding a startup company is definitely competitive and can be as physically demanding as running, teachers are standing or walking all day long, and even something like programming requires manual dexterity with the mouse & keyboard and the stamina to sit in a chair paying single-minded attention to a task for 10-12 hours a day. (via @tcarmody)
Lord Adair Turner, the chairman of Britain's top financial watchdog, the Financial Services Authority, has described much of what happens on Wall Street and in other financial centers as "socially useless activity" -- a comment that suggests it could be eliminated without doing any damage to the economy. In a recent article titled "What Do Banks Do?," which appeared in a collection of essays devoted to the future of finance, Turner pointed out that although certain financial activities were genuinely valuable, others generated revenues and profits without delivering anything of real worth -- payments that economists refer to as rents. "It is possible for financial activity to extract rents from the real economy rather than to deliver economic value," Turner wrote. "Financial innovation...may in some ways and under some circumstances foster economic value creation, but that needs to be illustrated at the level of specific effects: it cannot be asserted a priori."
Turner's viewpoint caused consternation in the City of London, the world's largest financial market. A clear implication of his argument is that many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits. If they retired to their beach houses en masse, the rest of the economy would be fine, or perhaps even healthier.
I particularly enjoyed the characterization of banking as a utility:
Most people on Wall Street, not surprisingly, believe that they earn their keep, but at least one influential financier vehemently disagrees: Paul Woolley, a seventy-one-year-old Englishman who has set up an institute at the London School of Economics called the Woolley Centre for the Study of Capital Market Dysfunctionality. "Why on earth should finance be the biggest and most highly paid industry when it's just a utility, like sewage or gas?" Woolley said to me when I met with him in London. "It is like a cancer that is growing to infinite size, until it takes over the entire body."
p.s. Thanks to Typekit, the New Yorker's web site now uses the same familiar typefaces that you find in the magazine. Looks great.
When we researched how notes are used we realized people tend to handle and deal with money vertically rather than horizontally. You tend to hold a wallet or purse vertically when searching for notes. The majority of people hand over notes vertically when making purchases. All machines accept notes vertically. Therefore a vertical note makes more sense.
The note imagery relates to the value of each note:
$1 - The first African American president $5 - The five biggest native American tribes $10 - The bill of rights, the first 10 amendments to the US Constitution $20 - 20th Century America $50 - The 50 States of America $100 - The first 100 days of President Franklin Roosevelt.
Needs more guilloche but other than that: fire up the presses.
David Graeber has been researching the history of money and debt for a book he's writing. This abbreviated version of his findings makes for really interesting reading.
However tawdry their origins, the creation of new media of exchange -- coinage appeared almost simultaneously in Greece, India, and China -- appears to have had profound intellectual effects. Some have even gone so far as to argue that Greek philosophy was itself made possible by conceptual innovations introduced by coinage. The most remarkable pattern, though, is the emergence, in almost the exact times and places where one also sees the early spread of coinage, of what were to become modern world religions: prophetic Judaism, Christianity, Buddhism, Jainism, Confucianism, Taoism, and eventually, Islam. While the precise links are yet to be fully explored, in certain ways, these religions appear to have arisen in direct reaction to the logic of the market. To put the matter somewhat crudely: if one relegates a certain social space simply to the selfish acquisition of material things, it is almost inevitable that soon someone else will come to set aside another domain in which to preach that, from the perspective of ultimate values, material things are unimportant, and selfishness -- or even the self -- illusory.
There are at least 2 crazy passages in this article about the amount of inflation in Zimbabwe over the past 30 years.
Hyperinflation in Zimbabwe, the former Rhodesia, was a quadrillion times worse than it was in Weimar Germany.
In grade school, quadrillion was always an exaggeration but not here:
The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.
Andromeda Galaxy! It's our nearest galactic neighbor but still 2,500,000 light-years away. (via daveg)
The five months of furious short-story writing in 1923-24 had left him with a stake of $7,000. In Great Neck, that would only cover two and a half months of expenses. How could he stretch the $7,000 to gain the time to finish Gatsby? Earlier, as he was struggling to save, a friend wrote from France to suggest that Fitz-gerald join the many Americans living well in Europe on the strong American dollar. The friend wrote that it cost one-tenth as much to live in Europe: he had just finished "a meal fit for a king, washed down with champagne, for the absurd sum of sixty-one cents." Fitzgerald thought, based on the friend's recommendation, living expenses on the off-season Riviera would be low enough to let him finish Gatsby without any short-story interruptions.
We catch back up with the people we met in 2008, to see how they've fared over the last 18 months. We talk to Clarence Nathan, who in 2008 received a half million dollar loan that he said he wouldn't have given himself; Jim Finkel, a Wall Street finance guy, who put together and managed complicated mortgage-based financial securities; Richard Campbell, the Marine who was facing foreclosure; and Glen Pizzolorusso, the mortgage company sales manager who led the life of a b-list celebrity.
I went to the lottery's website after finding the ticket and realized that I had won. I freaked out ran up to my apartment's door and locked all the locks. It was completely irrational.
"When I lived with money, I was always lacking," he writes. "Money represents lack. Money represents things in the past (debt) and things in the future (credit), but money never represents what is present."
The idea started to take shape when Suelo was on a Peace Corps mission to Ecuador. As he monitored the health of the population of the village he was staying in, he noticed that their health declined as they made more money -- "It looked like money was impoverishing them." You can find out more about Suelo's philosophy on his web site and follow his adventures on his blog, both of which he updates at the public library.
Almost all of us, for example, are "loss averse" -- it hurts more to lose £50 than it feels good to win £50. We also value money in relative rather than absolute terms -- we consider £10 irrelevant when buying a house but not when paying for a meal. Similarly, finding £100 will give many people more pleasure than having a heating bill cut from £950 to £835, even though this gains them more in real terms.
That was the biggest American financial lesson the Icelanders took to heart: the importance of buying as many assets as possible with borrowed money, as asset prices only rose. By 2007, Icelanders owned roughly 50 times more foreign assets than they had in 2002. They bought private jets and third homes in London and Copenhagen. They paid vast sums of money for services no one in Iceland had theretofore ever imagined wanting. "A guy had a birthday party, and he flew in Elton John for a million dollars to sing two songs," the head of the Left-Green Movement, Steingrimur Sigfusson, tells me with fresh incredulity. "And apparently not very well." They bought stakes in businesses they knew nothing about and told the people running them what to do -- just like real American investment bankers!
But it was all essentially make-believe.
A handful of guys in Iceland, who had no experience of finance, were taking out tens of billions of dollars in short-term loans from abroad. They were then re-lending this money to themselves and their friends to buy assets -- the banks, soccer teams, etc. Since the entire world's assets were rising -- thanks in part to people like these Icelandic lunatics paying crazy prices for them -- they appeared to be making money. Yet another hedge-fund manager explained Icelandic banking to me this way: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets. "They created fake capital by trading assets amongst themselves at inflated values," says a London hedge-fund manager. "This was how the banks and investment companies grew and grew. But they were lightweights in the international markets."
In Germany in the 1920s, towns, banks, and companies printed their own money called notgeld.
Notgeld was mainly issued in the form of (paper) banknotes. Sometimes other forms were used, as well: coins, leather, silk, linen, stamps, aluminium foil, coal, and porcelain; there are also reports of elemental sulfur being used, as well as all sorts of re-used paper and carton material.
Picture a pig trying to balance on a mouse's back and you'll get some idea of the scale of the problem. In a mere seven years since bank deregulation and privatisation, Iceland's financial institutions had managed to rack up $75bn of foreign debt. In his address to the nation, Haarde put the problem in perspective by referring to the $700bn financial rescue package in America: "The huge measures introduced by the US authorities to rescue their banking system represent just under 5 per cent of the US GDP. The total economic debt of the Icelandic banks, however, is many times the GDP of Iceland."
"We have a simple thesis," Eisman explained. "There is going to be a calamity, and whenever there is a calamity, Merrill is there." When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman's logic-the logic of Wall Street's pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.
It's a fantastic article, well worth reading to the end...the final dozen paragraphs are the best part of the whole thing. Who knew deviled eggs were so pregnant with metaphor?
As I was reading the article, Matt Bucher dropped a note into my inbox. As hoped for months ago, Lewis is writing a book about this whole mess.
MONEYBALL and THE BLIND SIDE author Michael Lewis's untitled behind-the-scenes story of a few men and women who foresaw the current economic disaster, tried to prevent it, but were overruled by the financial institutions with whom they worked, sold to Star Lawrence at Norton, by Al Zuckerman at Writers House (NA).
On the one hand, lack of slack tells us the poor must make higher quality decisions because they don't have slack to help buffer them with things. But even though they have to supply higher quality decisions, they're in a worse position to supply them because they're depleted. That is the ultimate irony of poverty. You're getting cut twice. You are in an environment where the decisions have to be better, but you're in an environment that by the very nature of that makes it harder for you apply better decisions.
This radio program made the rounds last week, but I finally got caught up this weekend so I'll add my voice to the chorus urging you to listen to This American Life's episode on the financial crisis, Another Frightening Show About the Economy. Paired with The Giant Pool of Money from back in May, this is an excellent overview of what's going on in the financial markets right now. The hosts of the two shows are also doing a daily blog/podcast thing at Planet Money In addition, the last half of this week's TAL concerns the political angle of the financial mess. I haven't had a chance to listen yet, but check it out if you're into that sort of thing.
Kevin: Imagine that I let you borrow $50, but in exchange for my generosity, you promise to pay me back the $50 with an extra $10 in interest. To make sure you pay me back, I take your Charizard Pokémon card as collateral.
Olivia: Kevin, I don't play Pokémon anymore.
Kevin: I'm getting to that. Let's say that the Charizard is worth $50, so in case you decide to not return my money, at least I'll have something that's worth what I loaned out.
Olivia: Okay.
Kevin: But one day, people realize that Pokémon is stupid and everyone decides that the cards are overvalued. That's right -- everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.
The only thing that's missing is the part of the explanation where the parents swoop in and pay Kevin full value for that Pokémon card, which allows him to keep lending money in exchange for cardboard rectangles.
"It's the coin of the realm," says Mark Bailey, who paid Mr. Levine in fish. Mr. Bailey was serving a two-year tax-fraud sentence in connection with a chain of strip clubs he owned. Mr. Levine was serving a nine-year term for drug dealing. Mr. Levine says he used his macks to get his beard trimmed, his clothes pressed and his shoes shined by other prisoners. "A haircut is two macks," he says, as an expected tip for inmates who work in the prison barber shop.
Their clients were coming to them for a mix of escape and encouragement. As Jean, a New Yorker and a 35-year-old former paralegal turned "corporate escort" (her description) told me, "I had about two dozen men who started doubling their visits with me. They couldn't face their wives, who were bitching about the fact they lost income. Men want to be men. All I did was make them feel like they could go back out there with their head up."
Michael Lewis rents a mansion in New Orleans and finds in the experience a parable about the thirst of Americans for better housing than they can afford, the subprime mortgage crisis, and the ensuing financial panic.
The real moral is that when a middle-class couple buys a house they can't afford, defaults on their mortgage, and then sits down to explain it to a reporter from the New York Times, they can be confident that he will overlook the reason for their financial distress: the peculiar willingness of Americans to risk it all for a house above their station. People who buy something they cannot afford usually hear a little voice warning them away or prodding them to feel guilty. But when the item in question is a house, all the signals in American life conspire to drown out the little voice. The tax code tells people like the Garcias that while their interest payments are now gargantuan relative to their income, they're deductible. Their friends tell them how impressed they are-and they mean it. Their family tells them that while theirs is indeed a big house, they have worked hard, and Americans who work hard deserve to own a dream house. Their kids love them for it.
When it comes to markets, the first deadly sin is greed. Michael Lewis is our jungle guide through five of the most violent and costly upheavals in recent financial history: the crash of '87, the Russian default (and the subsequent collapse of Long-Term Capital Management), the Asian currency crisis of 1999, the Internet bubble, and the current sub-prime mortgage disaster.
It's out in December so I imagine that it won't include the current Lehman/AIG/Merrill/bailout kerfuffle, but that's what "with new material" paperbacks are for. (thx, paul)
Our willingness to believe that we can hire some expert to tell us how to outperform markets is a big problem, with big consequences. It underpins Wall Street's brokerage operations, for instance, and leads to a lot more people giving out financial advice than should be giving out financial advice. Thanks to the current panic many Americans have learned that the experts who advise them what to do with their savings are, at best, fools.
God I hope he writes a book about all this someday, sort of a Liar's Poker 2. He can call it Fool's Roulette or something.
Banknote patterns fascinate me. I can get lost for hours in all the details, seeing how the patterns fit together, how the lettering works, the tiny security 'flaws' -- they're amazing. Central to banknote designs are Guilloche patterns, which can be created mechanically with a geometric lathe, or more likely these days, mathematically. The mathematical process attracted me immediately as I don't have a geometric lathe and nor do I have anywhere to put one. I do, however, have a computer, and at the point I first started playing with the designs (mid-2004) Illustrator and Photoshop had gained the ability to be scripted.
This is a stunning moment in economic history: At one time we worked hard so that someday we (or our children) wouldn't have to. Today, the more we earn, the more we work, since the opportunity cost of not working is all the greater (and since the higher we go, the more relatively deprived we feel).
In other words, when we get a raise, instead of using that hard-won money to buy "the good life," we feel even more pressure to work since the shadow costs of not working are all the greater.
The increasing income inequality in the US is partially to blame, says Conley. Those in the middle and upper middle classes are working harder and longer, trying to keep up with the Joneses who are growing more wealthy at an even faster pace. Conley's got a book coming out in January on the same topic called Elsewhere, USA. (via ah)
The monetary density of things...or what substances are worth their weight in gold, including $50 bills, LSD, and antimatter.
People have been saying that the new industrial grade swimsuits like the LZR Racer are worth their weight in gold. As you can see, this is clearly inaccurate. But such a suit is worth its weight in marijuana or industrial diamonds.
Using a FAQ at NASA, I calculated that a pound of aerogel is worth about $23,000...more if the aerogel has a particularly low density. One other note: printer ink is more than 50% more expensive by weight than silver is. (via mr)
Yesterday developer Armin Heinrich posted an iPhone app to the App Store called I Am Rich. The program displays a red gem, has no function but to display your wealth to others through ownership, and costs $1000. It has since been removed from the App Store, although no one knows whether Apple or Heinrich pulled it.
I Am Rich isn't the most clever piece of art, but it's not bad either. For some, the iPhone is already an obvious display of wealth and I Am Rich is commenting on that. Plus, buying more than you need as an indication of wealth is practically an American core value for a growing segment of the population. Is paying $5000 for a wristwatch or $50,000 for a car when much cheaper alternatives exist really all that different than paying $1000 for an iPhone app?
When news of the app got out onto the web, the outcry came swiftly. VentureBeat implored Apple to pull it from the App Store, as did several other humorless blogs. Blog commenters were even more harsh in their assessments. What I can't understand is: why should Apple pull I Am Rich from the App Store? They have to approve each app but presumably that's to guard against apps which crash iPhones, misrepresent their function, go against Apple's terms of service, or introduce malicious code to the iPhone.
Excluding I Am Rich would be excluding for taste...because some feel that it costs too much for what it does. (And this isn't the only example. There have been many cries of too many poor quality (but otherwise functional) apps in the store and that Apple should address the problem.) App Store shoppers should get to make the choice of whether or not to buy an iPhone app, not Apple, particularly since the App Store is the only way to legitimately purchase consumer iPhone apps. Imagine if Apple chose which music they stocked in the iTunes store based on the company's taste. No Kanye because Jay-Z is better. No Dylan because it's too whiney. Of course they don't do that; they stock a crapload of different music and let the buyer decide. We should deride Apple for that type of behavior, not cheer them on.
To explore the relative value of five dollars we are collecting examples from around the world by asking people to submit photos of objects or services that cost the equivalent of $5.
Physicists of the 20th Century on Banknotes (5 MB PDF), including Marie & Pierre Curie on a short-lived 500 franc note, Niels Bohr on a Danish 500 kroner note, and Nikola Tesla on several notes from Yugoslavia and Serbia. The author of the article is Steve Feller, physics professor at Coe College and my college advisor. Feller has a keen interest in numismatics and recently published a book about the money used in WWII camps.
It used to be that my patients were the children of the rich: inheritors, people who suffered from the neglect of jet-setting parents or from the fear that no matter what they did, they would never measure up to their father's accomplishments," he recalled. "Now I see so many young people -- people in their 30s and 40s -- who've made the money themselves.
Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to the active investor's equation. Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested.
A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.
The new UI still offers the Quick Cash feature, but in a much smarter way. Instead of one Quick Cash button, we introduced a whole column of shortcut buttons that behave somewhat like the History menu in a web browser. It is still possible to customize them through Set My ATM Preferences, but hardly necessary since they always reflect the most recent transactions.
Delegate. Name any task -- somewhere, a billionaire is outsourcing it. One well-known mogul favors shabby chic cashmere sweaters but doesn't have the patience to let them get slightly worn at the elbows, so he employs a man to wear them around for him first.
Gagosian attracts artists and collectors alike because he understands the intense coupling between art and money. In 2004 the top price for a painting by Takashi Murakami at auction was $624,000. Since then, Gagosian has sold Murakamis to Cohen and others, and in November one was auctioned for $2.4m. He has repeated that trick time after time. Not long after joining his stable in 2003, the painter John Currin made his auction record of $847,500; his highest price before joining Gagosian was a little over half that. Recently Adam Sender, the head of the hedge fund Exis Capital Management, reportedly sold a Currin painting through Gagosian for $1.4m. Before Glenn Brown began showing with Gagosian, in 2004, his top price at auction was $46,000; in June 2007, a painting of his made $969,000. In May, when Anselm Reyle was still represented by Gavin Brown, his work was fetching at most around $200,000 at auction. In October, after he had joined Gagosian's stable, a work of his made nearly four times that amount
The big tech/business news of the day is Yahoo's stock "plunge" following the withdrawl of Microsoft's takeover offer. I'm sure plunge headlines sell newspapers and all, but the more long-term story is more interesting.
On Jan 31, the day before Microsoft offered $31/share for Yahoo, YHOO was at $19.18/share (market cap: $26.4 billion) and MSFT was at $32.60/share (market cap: $303.6 billion). At the close of trading today, YHOO closed at $24.37/share (market cap: $33.5 billion) and MSFT was at $29.08/share (market cap: $270.8 billion). In other words, the Microsoft offer increased the value of Yahoo! Inc. by more than $7 billion and decreased the value of Microsoft Corporation by almost $33 billion. In still other words, in attempting to take Yahoo by force, they let an amount equal to Yahoo slip through their fingers. Why isn't anyone writing about Yahoo's amazing stock gains and Microsoft's plunge?
I am so rich. Goodness, gracious. My, my, my. I am so, very, very wealthy. How many dollars do I have? That's a question only my team of ten fat accountants can answer, because they have golden calculators which I bought for them with my money. And what is on those golden calculators? Numbers. And those numbers equal the dollars in my bank accounts, which are huge.
If you'd bought 3,298 shares of Apple stock in 1998, for $99,995, at $30.32 a share, it would now be worth $1,997,797. The stock has split twice, so you'd now have 13,192 shares at (as of last week) $151.44. Buy yourself an iPhone to celebrate!
** The first six posts will be published at some point in the future.
The bracket for Market Madness (aka the Fed 2008 Final Four Rate Cuts) pairs the biggest banks in the world against each other. Who'll be bailed out next? See also: Bracket Madness.
Yay! Today is sub-prime mortgage day on kottke.org, I guess. The collapse of the sub-prime mortgage market took everyone on Wall Street by surprise...except Goldman Sachs, which earned $11.6 billion in 2007 when everyone else lost money. How'd they do it? Michael Lewis says that Goldman went against the flow in shorting sub-prime mortgages by assuming that the entire rest of the industry, including their own expert and extremely well-paid traders, were, as Lewis puts it, "a bunch of idiots".
n+1 magazine has a fascinating Interview with a Hedge Fund Manager. Topics of conversation include the sub-prime mortgage crisis. I gotta admit that I didn't understand some of this, but most of it was pretty interesting. (via snarkmarket)
Hedge fund manager John Paulson and investor Jeff Greene both became insanely wealthy over the subprime mortgage crisis. But how? (Parsing the Wall Street Journal is hard!) So Paulson "had to think up a technical way to bet against the housing and mortgage markets." His guys bought up "collateralized debt obligation" slices, which are repackaged mortgage securities. (Kind of lost already!) His firm also bought up "credit-default swaps." Paulson then opened a hedge fund shop, taking $150-million in mostly European money to back his scheme. Then he hung on. Now "he tells investors 'it's still not too late' to bet on economic troubles." Neat! Paulson's ex-friend Greene did much the same thing, getting an investment bank's participation for assets for the swap. Then... something happened and he bought three jets and a 145-foot yacht. Finance for idiots explanations eagerly sought! (And is there any small-scale way to do such things? Or do the abilities of regular people to make money on a crisis stop at short-selling and investing in Halliburton?)
What if you traded Apple stock around Steve Jobs' January Macworld keynotes...would you make any money? Short answer is yes but buying Apple stock 10 years ago and holding would have been the better move. Also interesting is the market's reaction to OS X and Jobs' installment as CEO...Apple lost 7.3% of its market cap the day after the announcement.
The newly designed US$5 bill is the worst one yet...the phrase "typographic train wreck" comes to mind. The purple 5 in the lower right, while useful, is one of the most amateur design choices I've seen on something that's destined for such a wide market. (thx, tom)
The personal lives of CEOs have come under scrutiny lately because what a CEO does in his off-hours seems to have a bearing on how well his company's stock performs. "It found that on average, the stocks of companies run by leaders who buy or build megamansions sharply underperform the market. The researchers don't claim to know why. They theorize that some of these executives might be focused more on enjoying their wealth and less on working hard." (via mr)
Also, I loved that the WSJ published the nickname of "Frederick E. 'Shad' Rowe Jr." Shad Rowe!
This is interesting. The PGA offers a non-traditional pension plan for their players that depends on how they perform throughout their careers. Tiger Woods, who performs quite well, could be eligible for almost $1 billion for his retirement if he keeps playing and winning. Billion. Wow.
Out to dinner with friends: split the check evenly or not? "I find if you don't split it evenly, and everyone pays 'what they owe' many people will pay much less than they owe, forgetting tax and tip. Then they avert their eyes while the generous ones pony up the extra bucks."
James Simons, hedge fund manager, earned $1.7 billion last year. $1.7 fucking billion! His company charges fees of 5% of assets and 44% of profits while the fund grossed 84% this year. Can one person add $1.7 billion of value to the economy? Something is wrong here.
LeBron James' new house: 35,440 sq ft, 2200 sq ft master suite (with 2-story walk-in closet), theater, casino, barber shop, bowling alley, and a limestone bust of LeBron wearing a headband.
Ben Stein on "what's new and hot and exciting" in the world on money: "The most sought after jobs in the United States now are jobs in finance in which basically almost no money is raised for new steel mills or coal mines, but immense sums are raised to buy companies, recapitalize them -- which means pay the new owners immense special dividends and other payments for going to the trouble of taking over the company. This process results in fantastically well-paid investment bankers and private equity 'financial engineers' and has no measurably beneficial effect on the economy generally. It does facilitate the making of ever younger millionaires and an ever more leveraged American corporate structure."
An interview with Ootje Oxenaar, who designed a whole range of Dutch banknotes in the 60s, 70s, and 80s. "On the 1000 guilder note, it became a 'sport' for me to put things in the notes that nobody wanted there! I was very proud to have my fingerprint in this note - and it's my middle finger!"
A record-breaking year for Goldman Sachs; they're setting aside $16.5 billion for salaries, benefits, and bonuses. That's $622,000 (!!!!!!) for each employee. Instead of the typical business puff piece telling us about what these i-bankers are going to do with their money (cars, houses, expensive dinners!), how about investigating where all this money is coming from and what, exactly, Goldman does that's so beneficial to the economy to earn such incredible profits.
$2 bills are growing in popularity in the US...$1 bills just don't cut it for bartender's tips and lapdance gratuities anymore. Peter Morici, professor of business at some long-named school, says that the $1 coin is taking off as well, but when my wife tried to pay at a store using one of them the other day, the cashier looked at her like she was trying to use Monopoly money.
You know those spams you get touting penny stocks? It turns out they actually work. "The team found that a spammer who bought shares the day before starting an e-mail campaign and then sold them the day after could make a return on his or her investment of 4.9%. If he or she were to be a particularly effective spammer, returns to this strategy would be roughly 6%."
During the depths of the dot com bust, Julian Dibbell looked online for a job and found one as a commodities trader in the Ultima Online virtual world. During one particularly productive month, he made almost US$4000. Dibbell has a book coming out about the experience, Play Money: Or, How I Quit My Day Job and Made Millions Trading Virtual Loot. In addition to being available at bookstores in meatspace, Play Money will also be on sale in the virtual world of Second Life in the currency of that world (Linden dollars). From the press release:
In-game versions of Play Money designed by Second Life coder/publisher Falk Bergman are available for L$750. These copies can be signed by Dibbell at his in-Second Life interview with journalist Wagner James Au on July 27th. For the Second Life resident who needs something a bit more tactile, L$6250 buys a real-life copy of Play Money, shipped with care to the buyer's real life address, in addition to the standard in-game version.
(At the time of this press release, Linden dollars are trading at approximately L$300.00 to the US$1.00. Adjusted to US dollars, an online copy costs US$2.50, and the price of a real-life copy bought in-game is around US$20.85.)
Friends and finances in 21st century America: "More friends and acquaintances are now finding themselves at different points on the financial spectrum, scholars and sociologists say, thanks to broad social changes like meritocracy-based higher education, diversity in the workplace and a disparity of incomes among professions."
Do rich artists make bad art? "When you become as rich as [Warhol or Dali], being as rich as this becomes your story. If you don't make art about being a multimillionaire, you are being dishonest. If you do, you can hardly claim the universality of great art." (via rw)
Phil Greenspun on retiring young. "Retirement forces you to stop thinking that it is your job that holds you back. For most people the depressing truth is that they aren't that organized, disciplined, or motivated."
The Del Monte Note is a $20 bill with a Del Monte banana sticker that was affixed to it during the printing process so that the serial number and Treasury seal are partially printed on the sticker. "In the summer of 2004 a college student in Ohio received it as part of an ATM withdrawal and shortly there after posted it on eBay where it sold to the highest of 12 bids."
We've arrived safely in Vietnam. Saigon is by far the most European stop on our trip, which makes sense because Thailand was never colonized by a European power[1] and Hong Kong was British and therefore not European[2]. There are cafes, French restaurants, European architecture, public spaces like squares and parks, etc. It feels like Europe here.
And there are a lot of dongs here. The Vietnamese currency is the dong[3]. Our hotel is just off of Dong Khoi. I've seen several restaurants and shops with "Dong" in the name. Beavis and Butthead would love it here; I myself have been making culturally insensitive jokes pertaining to the currency and my pants pocket all afternoon.
[1] The only SE Asian country never to have been so colonized.
[2] Hello, angry Brits! Of course you're European, but you know what I mean. For starters, you've got your own breakfast, as opposed to the continental.
[3] The 50,000 & 100,000 dong notes are plastic and see-through in a couple spots. US currency is so not cool.
New feature from Bank of America: Keep the Change. When you use your bank card, you can have your charges rounded up to the nearest dollar and the difference automatically deposited into your savings account. I think this is the first neat thing I've ever seen a bank do. (via coudal)
Shareholder activists said Google's charitable commitment raises questions about whether this is an appropriate use of company cash or whether company founders Sergey Brin and Larry Page ought to make donations to their favorite causes personally. The foundation of Bill Gates, the founder and chairman of Microsoft Corp. and the nation's richest person according to Forbes, gave away more than a billion dollars last year to fight poverty, hunger and disease around the world. But Gates donates through a personal foundation, rather than through Microsoft itself.
"The board of directors should make it clear to the company's founders what should be personal and what should be corporate," said Patrick S. McGurn, special counsel to Institutional Shareholder Services Inc. "Google is spending shareholders' money, and it raises questions if there is not a valid corporate purpose."
Shareholder activists? You've got to be kidding me. You'd think that stock shareholders are a bunch of babies that need their noses wiped and hands held to go potty or something. If you don't want to support Google's philanthropic efforts and think that they're throwing your money away by doing so, there's an easy way to opt out: DON'T BUY GOOGLE STOCK. It's a free country and open market...vote with your money on what you think is a "valid corporate purpose". There are thousands of other companies to invest in that are doing other things, many of which operate exactly the same...nice and safe and by the book. The information on what these companies are doing with their shareholders' money is freely available...get informed about what you're buying. Given their P/E ratio, unique corporate approach, and incredible rate of growth, Google might just be the riskiest large-cap stock opportunity out there, but the potential upside (as well as the downside) is a lot greater than all of those companies playing it safe. As long as it's stated (and I believe Google certainly has made their views very clear), risk isn't something from which shareholders should be warned away.
Update on the Million Dollar Homepage...it's actually starting to fill up. He's sold almost $100,000 worth of space so far. This is beginning to look like an absolutely brilliant idea.
The shape of a mobile world. The main purpose of the Personal World Map is to give awareness of your actual position in the world in relation to other places by taking into account the "effort" you need to get to a certain destination.
Presentation: how to make a million dollars. "In America, starting a successful business is the surest, most controllable path available to you for making a million dollars".
Michael Lewis is one of my favorite authors. He's not the smartest or the most clever writer but he weaves deceptively simple stories into larger statements on society and humanity with a skill possessed by very few people doing creative work in any field. I haven't gotten around to reading Moneyball yet, but Liar's Poker is probably his strongest work. It's as hard to put down as any fiction. Great book.
