Pages

Oct 14, 2010

Incumbents Beware

FRED Graph
Percent of Labor Force Unemployed for 27 weeks or more

This November will be an especially challenging time to be an incumbent with long-term unemployment at a post-war high. With those unemployed for more than 27 weeks representing 4% of the workforce, we are in uncharted territory when it comes to voter dissatisfaction with the status quo. There will be lots of commentary about Democrats vs. Republicans vs. Tea Party extremists, but the overriding theme will be "throw the bums out."

It's well-known that recessions are generally not kind to incumbents; and according to the NBER, the recession officially ended in  July 2009.  But a quick glance at the chart above shows that rising levels of the long-term unemployed were associated with the incumbent party losing the White House in 1960, 1980 and 1992.

Incumbents can take some comfort from the slight tick down in the long-term unemployment rate over the past few months, but with the absolute level nearly double the '80 - '81 peak,  November 2 promises to be a bitter night for incumbents from both parties.


Source: St Louis Federal Reserve

Apr 29, 2010

AXA's Asteroid

Gizmodo has published a wonderful photo of asteroid P/2010-A2 taken by the Hubble telescope that shows a striking similarity to AXA's corporate logo.


Maybe readers can help here. Didn't AXA previously use a logo of a stylized archer that looked even more like asteroid P/2010-A2?

Or am I remembering someone else's logo?

Google Image Search has been of no use identifying the logo I seem to recall.


Mar 19, 2010

Keeping up with the News Cycle


More than a week has passed since the release of the "Report of the Examiner in the Chapter 11 proceedings of Lehman Brothers Holdings Inc" so naturally coverage of the report is moving beyond reaction to reflection.

I have a few thoughts on the report -- and the reporting on the report -- that I'll write up in separate posts as they're of interest to different audiences. This post offers my thoughts on the "reporting of the report" and the changing media landscape.

It remains popular within the mainstream media to dismiss the blogging community as mostly commentators rather than reporters. What's more, according to the MSM types, most of the fodder for the blogosphere's ruminations comes from reporting in the mainstream media.

The clear implication is that without the mainstream media to painstakingly investigate, write, edit and publish the news in the first place, the blogosphere would be reduced to self-indulgent opinionating and bloviating, like, for example the content you'd expect to find on MySpace.

Even worse, according to the extreme form of the argument, the lack of professional standards and good editing in the blogosphere can lead to reckless "reporting" with potentially costly consequences.

So I was puzzled last weekend when the NYT's editorial page asserted that Lehman Brothers, in the last quarters prior to its September 2008 bankruptcy filing, engaged in repo transactions that removed "troubled assets" from its balance sheet.

My surprise arose not from Lehman's conduct (although the Times professed to being "dumbstruck" and "blindsided") but from the fact that I quite specifically recalled the report, right on page 796 saying:
...the vast majority of securities Lehman utilized in Repo 105 transactions were investment grade, with all but a few of the securities falling within the A to AAA range.
Curious how the Times editors were so perfectly misled on this point, I went back to the paper's original story on the Lehman report, only to find the following correction.
Correction: March 13, 2010

An article on Friday about an examiner’s report detailing accounting maneuvers used by Lehman Brothers to conceal its perilous finances described incorrectly in some editions the assets that were temporarily shuffled off its books. They were mostly high-quality securities that could be easily accepted by other banks, according to the examiner’s report; they were not “troubled” and “mostly illiquid real estate holdings...”

So here we have a Times story, written under deadline, that gets a key fact exactly wrong, followed by a correction. Okay, stuff happens. But what must be especially embarassing to the Times is that the newsroom appears to have noticed and corrected its error before the editorial page went to bed with the wrong fact 24 hours later... kinda like a blogger spouting off his opinion about something he read online, without checking the veracity of the story.

Even worse, a week later (March 17) the New York Post, which apparently gets its facts from old copies of the Times, publishes this:

Among Valukas' findings is that Lehman used an esoteric accounting practice known as 'Repo 105,' which allowed the firm to move toxic mortgage assets off its books in order to make it seem healthier. (emphasis mine)
Update, March 22:

And Wiliam D. Cohan, who apparently has annotated the Examiner's Report, asserts in a March 18 NYT column:
...we now know that one executive after another at the firm signed off on the now infamous “Repo 105” trick in order to move some $50 billion of squirrelly assets off Lehman’s balance sheet at key moments. (emphasis mine)

Don't these guys have time to read the financial blogs?

No doubt the authors of these stories are bright and industrious and take pride in their work. Which makes me think the underlying issue is structural. When it comes to reporting complex news stories, the mainstream media's reporting conventions may leave it competitively disadvantaged versus the blogosphere.

For example, the "inverted pyramid" approach to a traditional news article gives short shrift to second- and third-level details, which may be summarily discarded if the 'news hole' that day is too small. At the margin, this may act as a disincentive to fully vet details that may not get printed.

The need to present both sides of the story "objectively" requires time-consuming phone and email contacts for "On the one hand... on the other hand..." quotes from so-called expert sources who likely possess less knowledge about fast-breaking news than the reporter himself. (Michael Kinsley has written and Kara Swisher has spoken (a little past the 10:00 minute mark) far more eloquently about this issue, so I'll refer you to them.)

Finally, for print journalists, the need for a "static" version of a story to meet the circadian publishing cycle creates constraints that a living story on a blog doesn't face.


Not so long ago, a "Report of the Examiner in the Chapter 11 proceedings of Lehman Brothers Holdings Inc" would have been released in a small press conference in New York City, where a smattering of lawyers and business journalists would lug their 2200-page copies back to the office to research potential lawsuits or the news angle. But the public at large would not have had convenient access to the source materials until they arrived at the local library, if at all. So journalists of yesteryear enjoyed quasi-monopolistic access to much of the source material for the important stories of the day.

A recent Pew Research Center study of news dissemination in Baltimore found that 63% of news stories originated with government entities. News organizations originated 14% and the remainder were largely from interest groups. This suggests that 86% of the "news" is originated (that is to say, "published") by government and private non-journalistic organizations. Increasingly, these stories are being published online, where they're immediately available to all interested readers. And for a story of any complexity, the party most qualified to comment may in fact be some guy (a former Lehman repo trader, perhaps) posting in his pajamas from his basement office.

If you've read this far, you deserve a reward, so I'll give the last word on the subject to the writing team on NBC's hit comedy,"30 Rock," who nail the topic with brutally efficient satire. Currently, No longer, Once again available, on Hulu (4:30 into the show).




In the scene, Avery Jessup a fictional, on-air reporter for CNBC (played by the adorable Elizabeth Banks) calls her lover, Jack Donaghy (played by Alec Baldwin) a senior executive at NBC, about a rumored takeover of NBC.

Phone rings in Donaghy's office.

Jack Donaghy: "Hello?"

Avery Jessup: "Answering your own phone on the first ring... It's all hands on deck over there, huh?"

Jack Donaghy: "Whaddya mean?"

Avery Jessup: "C'mon the NBC buyout... what's happening today?"

Jack Donaghy: (Increduously) "I'm sorry... You're calling me as a source? How are you going to explain your unnamed executive to your producer."

Avery Jessup: "I'll tell him it's a guy I'm having sex with... It's a 24-hour news cycle here, Jack. We really don't have time to do it right any more."

Mar 18, 2010

Anton R. Valukas, Speed Reader


Anton Valukas is not only the Chairman of Jenner & Block and author of the recently released report on the failure of Lehman Brothers, but he may be the world's fastest reader.

According to the New York Times, in preparing his Lehman report, Mr. Valukas " ...reviewed by his own estimate about 34 million pages of email."

Since the the appointment of Mr. Valukas was mandated on January 16, 2009 and the report itself is dated March 11, 2010, it appears Mr. Valukas had exactly 419 days to prepare his report.

419 days
x 24 hours per day
x 60 minutes per hour
x 60 seconds per minute

= 36,201,600 seconds, or about 1.065 seconds per page.

I don't question Mr Valukas' stamina or work ethic, but I assume he must've taken some time to sleep and eat and run his law firm during the past year, so we're using the word "review" pretty liberally when we're discussing 34 million pages.

It's unlikely that Mr. Valukas had any time to chuckle at the occasional joke, admire a well-turned phrase or marvel at some prescient prediction that he uncovered in his reading.

Sadly, the Times article fails to reveal whether the 34 million pages were delivered to Mr. Valukas electronically or on paper. If it was on 20 pound paper, Mr. Valukas's pile of "evening reading" would've been 3,060 meters high, roughly seven times taller than the Sears Tower in Mr. Valukas's hometown of Chicago, and it would've weighed about 170 tons.

If he carried it home in equal parts each night, his briefcase would've weighed 800 pounds.


Addendum: The Lehman report is exceedingly well-researched and written. Give Mr. Valukas's team credit for reading the mountain of emails more thoroughly than a number of journalists read the final report. See my related post.

(The first version of this post missed a decimal point and claimed Mr. Valukas reading assignment would've been merely 306 meters high. The math is 9 cm per 1000 pages x 34,000 / 100 = 3,060 meters. And I know the Sears Tower has been renamed the Willis Tower, but call me old-fashioned. I still call the MetLife building in NYC the "Pan Am Building" and nobody is confused.)

Jan 21, 2010

Are Newstands Hazardous to Newspapers?

International Business Times reports on an Outsell study with the headline, "Nearly half of Google News users just skim headlines.

According to the IBT article, "The findings give further ammunition to publishers who insist that Google and other news aggregators are linking to their stories without paying any advertising revenue."

I'm not entirely sure why publishers need "further ammunition" to establish a stipulated fact. Yes, Google links to news stories. And no, Google generally does not pay for linking to news stories, just as it does not pay me to link to this blog. But the conclusion above is a non sequitur teetering on a counter-factual.

What would indeed be interesting and relevant is understanding whether Google is generating significant ad revenue from the 44% of users who scan headlines without clicking through to the underlying stories.

Here's an "above the fold" screenshot I just took of Google News (click to enlarge). If I come to this page to skim the news, it's hard to imagine there's much revenue associated with my visit. In fact, I'm at a loss to find a revenue-generating ad element on this page at all.


"But wait," claim the publishers, "If Google wasn't aggregating these links, then headline-skimming readers would come directly to our websites, where we'd make money by loading our landing page with display ads that these readers rarely notice." Well, maybe... but that's an easy experiment for any publisher to conduct; and if it were demonstrably true, publishers would be opting out of Google's indexing service in droves.

There's an alternative experiment that anyone can conduct. Stand next to a newsstand in a busy office building or subway station. Count the number of passers-by who glance at the papers ("stealing the headlines" as it were) as they pass. Exclude paying customers. At the end of the day, calculate the ratio of headline-glancers to newspaper buyers. Is it higher than 44%?

Extra credit: Calculate the revenue from the non-paying commuters who skim the headlines as they pass using two different methodologies:

(1) How much did they actually pay?

(2) How much additional revenue would you make if every one of them bought a newspaper?

If your answer to question (2) is greater than your answer to question (1) do you believe you can sell more newspapers by putting them in brown wrappers that hide the front page?

Alternatively, do you believe newspaper circulation would increase if newstands were abolished?

Jan 14, 2010

Was Wall Street Deriving While Impaired?

In the aftermath of the 2008 global financial crisis (at least I hope we're in the aftermath) observers of the financial markets continue to debate its underlying causes. Some point to executive compensation, which supposedly encouraged excessive risk-taking. Others blame excessive leverage (the most basic form of risk-taking) and finger the Federal Reserve for maintaining artificially low interest rates from 2002 to 2005. Other critics believe that a surge in esoteric and poorly-modeled derivatives allowed banks to pretend that a substantial increase in risk and systemic co-dependence was safely hedged.

But an article in "Science Translational Medicine" offers a simpler hypothesis consistent with lowered inhibitions, excessive risk-taking and impaired judgment: Wall Street was three (spread)sheets to the wind.

Now I'm not suggesting that investment bankers were drinking at work... at least not more than usual. But 100-hour workweeks are not uncommon on Wall Street, and as Bloomberg quotes the study, "Staying awake for 24 hours straight equals having a blood alcohol concentration of 0.10 percent, beyond the 0.08 percent legal limit for driving in the U.S."

You wouldn't give your car keys to a sleep-deprived, cognitively-impaired twenty-two year old, but bet a billion dollars (levered 10:1) on the AAA-rated tranche of a 30-layer, collateralized debt security that he modeled at four in the morning? No problem.