Felix Salmon

Bonuses are Large Because They’re Unpredictable

Mike at Rortybomb explains that the whole reason why Wall Street bonuses are so big is that there’s a non-zero chance that they won’t be paid:

Ben Stein Watch: March 29, 2009

Ben Stein counts Jim Cramer as a friend. And millions of people watched the showdown between Jon Stewart and Jim Cramer on The Daily Show. But judging by his column this week, Cramer’s friend Mr Stein wasn’t one of them:

Who’s Gaining from the AIG Unwinds?

Tyler Durden has a scary post up, connecting banks’ profitability in January and February to the fact that those were the months when AIG Financial Products was unwinding an enormous number of its contracts en masse. These trades, initiated by AIGFP, were allegedly enormously profitable for the biggest banks in the CDS market:

Newsweek’s Fearful Krugman Profile

Evan Thomas has a profile of Paul Krugman on the cover of Newsweek. The 2,825-word article has six on-the-record quotes about Krugman; none of them — not even the one from his mother — are particularly flattering. No one is quoted saying a single nice thing about Krugman’s economics or his opinions.

What they Used to Teach You at Stanford Business School

Chris Wyser-Pratte, who got his MBA from Stanford in 1972 and then spent the next 23 years as an investment banker, sent me the following note last night. I’m reprinting it here with his permission:

Whining Executive of the Day, AIG Financial Products Edition

Executives at AIG Financial Products are not happy bunnies these days, and they’re starting to make their views public. Jake DeSantis, for instance, published his resignation letter as a NYT op-ed. But Paul Harriman and his wife, Jan Ellen Harriman, clearly don’t have that kind of access. So they’re blogging at Livejournal instead.

Long-Term Stock Market Volatility Datapoint of the Day

Warren Buffett, take note:

Although mean reversion makes a strong negative contribution to long-horizon variance, it is more than offset by the other components. Using a predictive system, we estimate annualized 30-year variance to be nearly 1.5 times the 1-year variance.

CDS: The No-Natural-Seller Meme

I was on a panel last night with Simon Constable of Dow Jones Newswires, and I’m sure that to our lay audience a peculiar exchange in the middle of the conversation must have sounded a bit like dolphin squeaks. He was trying to demonize credit default swaps, and said with great finality and self-assuredness that if you wanted proof positive that they were the spawn of the devil, all you needed to do was examine them objectively, as he had done, and you’d see that they had no natural seller.

Miami Beach Datapoint of the Day

Josh Giersch finds a Zillow map of the SoFi district of Miami Beach – a five-by-five block are south of Fifth Street which has 317 properties for sale, including 21 in just one building.