kottke.org posts about money
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.
(thx, kabir)
Ok, Michael Lewis *is* writing a book about the current financial situation. Sort of. It’s called Panic: The Story of Modern Financial Insanity.
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)
Michael Lewis looks on the bright side of the current financial crisis and finds five positive aspects.
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.
Experiments with Guilloche patterns, those fine geometric patterns you find on European banknotes.
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.
Social scientist Dalton Conley on how rich people are now working longer hours than poor people in America.
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.
A collection of photos of things from around the world that cost $5.
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.
(via clusterflock)
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.
This article about rich therapy patients was more interesting than I thought it would be. Here’s one doctor describing the patients he sees:
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.
Buffett to hedge fund managers: your customers would do better investing in a no-load index fund. To prove his point, Buffett has bet $1 million to that effect on Long Bets.
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.
Case study: a new interface for Wells Fargo’s ATMs.
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.
(via magnetbox)
Unlike the US government, Hasbro lets you print out your own Monopoly money. There are PDFs for 1,5,10,20,50,100, and 500 dollar bills.
W magazine has some advice for billionaires on Getting Things Done.
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.
I can’t tell if this list is a joke or not…
Longish but interesting profile of Larry Gagosian, the world’s foremost art dealer.
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?
Craigslist posting by Rich Bigdollars (not his real last name) looking for a lady to spend some time with.
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.
The 7th in a series of helpful posts for the time traveller**: here’s how to invest your money wisely in 1998.
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”.
Update: Here’s the WSJ article mentioned by Lewis in the above piece. (thx, andy)
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?)
Rich Kid Syndrome…how do you properly raise a kid who flies private jets everywhere and stands to inherit millions of dollars when he turns 25?
America’s burgeoning money culture is producing a record number of heirs — but handing down values is harder than handing down wealth.
(via andrea harner)
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.
Jay-Z as economic indicator? In his new video for Blue Magic, the rapper flashes Euros, not US dollars.
When I start seeing rap stars flashing euros instead of U.S. dollars, I know our economy is in trouble.
Relatedly, supermodel Gisele Bundchen wants to be paid for her modeling and sponsorship gigs in euros, not dollars. (Or maybe not.)
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)
NY Times columnist Paul Krugman writes, in the introduction to his new blog:
The story of modern America is, in large part, the story of the fall and rise of inequality.
Note that he says “fall” and then “rise”, not the other way around. A graph in the post illustrates his point nicely.
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!
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