Opinion

Ben Walsh

from Counterparties:

Griffindor

Ben Walsh
Feb 20, 2014 22:30 UTC

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Harvard, a $33 billion hedge fund with a university attached, has received the largest donation in its history. Citadel founder Ken Griffin has pledged to give the university $150 million.

The donation will support 800 eponymous scholarships, and a new business professor. The office of financial aid, along with its director, will also be renamed in his honor. Harvard already employs need-blind admissions, and has made no indications that it is under any financial pressure to end that policy. 60% of its students receive financial aid.

Matt Yglesias thinks the fact the money will be spent on financial aid means that “in the scheme of misguided donations to Harvard this one seems not-so-awful... But really it's child's play to think of a better use of $150 million than to give it to the richest university on the planet”.

Griffin seems to have had his mind set on giving to Harvard. Griffin says he’s been talking to Harvard President Drew Faust, and her predecessor, Larry Summers, for 15 years about a gift, and that talking to Lloyd Blankfein pushed him towards financial aid. Giving to African universities apparently wasn’t considered.

from Counterparties:

$10.10 wins

Ben Walsh
Feb 19, 2014 23:33 UTC

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President Obama has made increasing the minimum wage a centerpiece of his push to address income inequality. The Congressional Budget Office has now weighed in on the economic consequences of that proposal.

The CBO estimates that raising the federal minimum wage to $10.10 (a level the President reportedly supports) would increase wages for 16 million Americans, lift 900,000 people out of poverty -- and cost the economy 500,000 jobs.

from Counterparties:

The disturbing rash of finance suicides

Ben Walsh
Feb 18, 2014 19:41 UTC

There's been a spate of suicides among current and former finance workers recently. Earlier today, a 33 year-old committed suicide by jumping from the roof of JP Morgan's Asia headquarters in Hong Kong.

    January 26: William Broeksmit, a former Deutsche Bank executive, was found hanging in his London home. Broeksmit joined Deutsche from Merrill Lynch in the 1990's and helped start the German firm's investment banking business. After the financial crisis, he worked to shrink the company's balance sheet and reduce risk. January 28: Gabriel Magee fell to his death from JP Morgan's London Canary Wharf offices. Magee was a vice president in the banks corporate and investment bank technology group. Magee's death is being treated by London law enforcement as non-suspicious. January 31: Mike Dueker, the chief economist at Russell Investments, was found dead of an apparent suicide next to a Washington State highway. He had been reported missing by his family two days earlier. Dueker worked at the Saint Louis Fed from 1991 to 2008. February 4: Richard Talley, the founder and CEO of American Title Services killed himself in his Colorado home, reportedly shooting himself seven to eight times with a nail gun. American Title Services was under investigation by Colorado's insurance regulator.

In September, Steven Stack, a West Virginia University professor who studies suicide, told the International Business Times that "we know very little about the degree of suicide risk for this small occupational group". Cause of death is recorded by at the state level; states, Stack said, don't necessarily record the occupation of the deceased. The result is haphazard, incomplete, and unreliable data.

Occupational stress, the trigger so often associated with banker suicides, is only one of four main risk suicide factors, according to Stack. The other three major risk factor Stack identifies are: demographics (the white, the middle-aged, and men have higher a higher risk of killing themselves); "pre-existing psychiatric morbidity"; and ease of access to a means of death. The latter may explain why what data is available shows healthcare workers with ready access to lethal drugs have higher suicide rates.

from Counterparties:

German Constitutional Congestion

Ben Walsh
Feb 10, 2014 23:24 UTC

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Is the European Central Bank behaving in a constitutional manner? On Friday, the German Constitutional Court said no -- but declared that the European Court of Justice should have the final say in the matter. At issue is a key weapon in the ECB’s crisis-fighting arsenal.

In the midst of the European sovereign-debt crisis, the ECB announced it would buy unlimited amounts of member states’ bonds, if needed. ECB chief Mario Draghi famously said he would do “whatever it takes”, and that promise has, so far, been enough: the ECB hasn’t needed to actually use the bond-buying program, called Outright Monetary Transactions.

from Counterparties:

Turkey’s underwhelming shock-and-awe

Ben Walsh
Jan 29, 2014 23:35 UTC

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After an emergency midnight meeting yesterday, Turkey's central bank acted in defiance of the country's prime minister and raised its overnight lending rate to 12% from 7.75%. The move came in the context of declines in the lira and other emerging market currencies. In the last year, the lira has fallen more than 20% against the dollar, and is down 4.25% in the last month.

The lira strengthened against the dollar after the announcement, but the gains proved transient and were gone just 16 hours after the announcement. The lira ended Wednesday essentially flat, down 0.22% against the dollar.

from Counterparties:

The Berkshire range

Ben Walsh
Jan 27, 2014 22:45 UTC

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Warren Buffett’s Berkshire Hathaway, no stranger to exotic insurance risks, is insuring Quicken’s $1 billion prize for picking a perfect NCAA tournament bracket. The odds of picking the winner of all 63 basketball games are absurdly low: somewhere in the realm of 1 in 128 billion to 1 in 772 billion. Those odds raise the question of why Quicken is even looking for insurance in the first place. Maybe, as David Merkel points out, “those seeking insurance on unlikely events think the events are more likely than they actually are”.

Warren Buffett is very good at both the insurance business and the publicity business. A combination of those talents is presumably why Quicken is probably paying more than the $0.01 fair value (the payout multiplied by the odds, or $1 billion times 1/128 billion) for the policy. How much more Quicken is paying, however, isn’t clear, and there just may not be enough data to accurately price the policy.

from Data Dive:

The state of America’s unions

Ben Walsh
Jan 24, 2014 19:16 UTC

The percentage of American workers in unions was constant at 11.3% from 2012 to 2013, new data from the Bureau of Labor Statistics show. In 1983, the first year the BLS started collecting this data,  that number was 20.1%.

The rate of unionization among public-sector workers is five times higher than for private-sector workers, at 35.3% and 6.7%, respectively. In terms of occupations, education, training, library, and law-enforcement/first-reponse workers have the highest unionzation rate at 35.3%. Farming, fishing, and forestry workers have the lowest unionization rates at just 2.1%. There's also a very strong geographical split in unionization:

Here's the BLS:

30 states and the District of Columbia had union membership rates below that of the U.S. average, 11.3 percent, while 20 states had higher rates. All states in the Middle Atlantic and Pacific divisions reported union membership rates above the national average, and all states in the East South Central and West South Central divisions had rates below it.

from Data Dive:

Economic mobility in America: relatively constant, but more consequential than ever

Ben Walsh
Jan 23, 2014 18:05 UTC

U.S. economic mobility -- the chances of moving up or down the income scale -- has been relatively unchanged over last 20 years. That's the conclusion of a new study by a team of economists led by Harvard's Raj Chetty, who find that "intergenerational mobility [has] remained extremely stable" for Americans born between 1971 and 1993. The NYT's David Leonhardt explains:

The study found, for instance, that about 8 percent of children born in the early 1980s who grew up in families in the bottom fifth of the income distribution managed to reach the top fifth for their age group today. The rate was nearly identical for children born a decade earlier.

Combining these findings with earlier research on Americans born between 1950 and 1971, the economists conclude that "rank-based measures of social mobility have remained stable over the second half of the twentieth century in the United States". The researchers chart that stability, along with a map showing how economic mobility varies across the United States:

from Counterparties:

Overworked and overpaid

Ben Walsh
Jan 21, 2014 22:35 UTC

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“Overwork has become a credential of prosperity”, writes James Surowiecki on the growing cult of overwork among knowledge workers. It’s not just the beleaguered and well-compensated junior investment bankers who are putting in long hours:

Thirty years ago, the best-paid workers in the U.S. were much less likely to work long days than low-paid workers were. By 2006, the best paid were twice as likely to work long hours as the poorly paid, and the trend seems to be accelerating. A 2008 Harvard Business School survey of a thousand professionals found that ninety-four per cent worked fifty hours or more a week, and almost half worked in excess of sixty-five hours a week.

from Counterparties:

Fluid regulation

Ben Walsh
Jan 15, 2014 23:26 UTC

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On Thursday, 7,500 gallons of a toxic chemical, 4-methylcyclohexane methanol (MCHM), spilled from the tank where it was waiting to be used to clean coal into the Elk River in West Virginia.

The spill has highlighted the odd, overlapping, and somehow porous regulation of industrial chemicals, the infrastructure that holds them, and the companies that sell them. MCHM is one of the more than 60,000 chemicals exempt from the Toxic Substances Control Act (TSCA), on the grounds that they were in in use when the law was passed in 1976. As a result, its safety and safe use isn’t regulated by the Environmental Protection Agency.

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