Felix Salmon

Citigroup’s horrible conference call

The Seeking Alpha transcript of this morning’s Citigroup conference call runs 12,000 words; it makes for incredibly boring reading, and I can fully understand John Carney’s pain in having to listen to the whole thing live.

Judging hedge funds

Dan Molinksi wades into the hedge-fund benchmarking waters:

Rutgers also stresses that the sharp losses by hedge funds in 2008 were not nearly as bad as the huge decline in U.S. stock markets. It’s an argument that’s also been used repeatedly by the hedge fund industry itself in recent months to put a positive spin on their losses.

The Detroit face-off

Bankers are never particularly popular at the best of time. Pyschologically speaking, if I borrow $100 from the bank, that $100 is now mine. Yet if I lend $100 to the bank — if I put $100 on deposit at the bank — then psychologically that money is mine as well. Logically, the money can’t belong to both depositors and borrowers at once. And the result is that people hate banks for both charging them fees on their own deposits and also being unreasonable when it comes to loans.

Can consumers shrink banks?

Reader Steve Santini emails to ask:

I am a big proponent of the idea that if something is to big to fail, it is too big to exist. I am also a big fan of the idea that the large banks need to be broken up, in addition to regulated further. However, I feel that the government is powerless to do this. Probably because they lack the ability and courage to do so. But what about the market. It occurred to me recently that in a theoretically free market the customer is the counterforce which acts against gross accumulation of power. If customers were to take their deposits from the large banking institutions and place them in cooperative banks and small regional banks, this would have the same affect of leveling the playing field. What are your thoughts on this matter? Big banks offer pitiful interest on money that they lend and they charge exorbitant fees which contribute significantly to their profit, so it does not even make sense to do business with them (although I understand the advantages – more ATM’s, theoretically more services, etc.)

Stress tests under stress

David Wessel has an interesting idea today: while the bank stress tests were a good idea at the time they were announced, in February, a lot has changed since then, and none of it in a good way. Most obviously, the tests’ worst-case scenario is now looking more like a base-case scenario, making the tests less credible. What’s more, the very announcement of the stress tests’ existence caused all manner of confusion and second-guessing in the markets, none of which was helpful. And most profoundly, Congress passed executive-compensation rules which mean that no banks have any interest in accepting government funds should they be found to have insufficient capital.

Taleb’s data dump

Back in March, Rick Bookstaber published a blog entry entitled “The Fat-Tailed Straw Man”, which seems to imply that Nassim Taleb attacks Wall Street practices on the grounds that its practitioners believe in normal distributions.

Data visualization of the day, unemployment edition

Chris Wilson has the best graph of the day: an interactive map of US job losses since the beginning of 2007. Play the whole thing through once, and then take a closer look at what happens from month to month — especially from April 2008 to February 2009. And pity poor Detroit.

When default rates spike

Many thanks to Jeffrey Benner of Moody’s, who responded to my blog entry yesterday with some very useful information about downgrades and default rates.

Ryan Avent lands at Market Movers

I’m very excited to see Ryan Avent off to a storming start at my old home; if you’re not sure who he is, he gives himself a pretty comprehensive introduction here. Ryan is one of the smartest and most perspicacious bloggers out there, and it’s great that he has thrown off the anonymity of Free Exchange: blogging does not generally work well with the kind of anonymous psuedo-omniscience that the Economist specializes in.