Felix Salmon

Giving cash or gift cards

Felix Salmon
Dec 23, 2009 15:39 UTC

Go read Barry Ritholtz’s attack on gift cards, and then read Andrew Leonard’s response. Actually, don’t do either: you should instead take advantage of the fact that absolutely nothing seems to be going on today to go out and buy a proper present or two instead.

At heart, the debate over gift cards isn’t really about gift cards at all: it’s about individual attitudes towards the fungibility of money. Barry’s a great believer in giving cash, or, failing that, giving something which is “practically cash”, like a prepaid credit card. Andrew, by contrast, fears that giving cash is a waste:

Cash, like it or not, carries with it some assumption of responsibility. You don’t want to waste your cash frivolously, or you might feel compelled to save it for some greater goal…

If you gave me cash for Christmas, I’d probably save it to pay for groceries. But if you gave me a gift card redeemable at my local bike shop — I’d be utterly delighted to splurge on new gloves.

I’m surprised that Barry Ritholtz, hard-charging econowonk and hedge-fund manager, seems to believe that money stops being fungible when it’s gifted, while Andrew Leonard, bearded west-coast pinko, is the kind of person who deposits gifted cash into a bank account, where it dissolves into the pool of money needed to buy toilet paper and pay the rent.

I’m more like Andrew than Barry: if you tuck a check into my birthday card I’ll be very grateful, but I won’t mentally ring-fence that money and feel permissioned to splurge it. But I’m also very close to people on Barry’s side of the debate, who feel morally compelled to buy something they don’t really need if they get cash as a present.

So I’ll come down in the middle on this one: cash generally becomes more of a present the more likely the recipient is to treat it like a present. Gift cards, by contrast, might be a better bet for someone like me. Yes, there’s a deadweight loss to them — but as Joel Waldfogel demonstrates, there’s a deadweight loss to nearly all gifts. In a way, it’s the deadweight loss which makes them gifts.

One thing I’m unclear about, though: do gift cards generally cost more or less than the present which would otherwise have been bought? Do people have a mental budget for gifts, which they can easily spend in full on a gift card? That would imply that gift cards cost more than presents. Or do people mentally take account of the increased utility and cash-like characteristics of gift cards and scale back their spending accordingly? Has anybody done any studies on this?


I agree, if you give me cash I will likely spend it on gas and Redbull. A gift card forces me in some ways to spend money on something I wouldn’t normally buy for myself. As for the comments about lost gift cards, I think everyone would benefit from checking out eGift cards. If you should misplace one, you can always re-print it. Also, you can pull it up on your PDA, so there isn’t really any excuse for leaving it at home. Each year, 75 million lbs of PVC is dumped into landfills due to plastic gift card waste– eGift cards do not generate that kind of harmful waste. For a directory of retailers that offer eGift cards, check out http://www.giftzip.com .. it’s the most extensive directory I’ve found.

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Felix Salmon
Dec 23, 2009 07:02 UTC

So you’ve caught a pirate. Now what? — Miller-McCune

Me, on financial journalism — BNN

Darth Vader rings the opening bell at the NYSE. Avoids cackling — Clusterstock

Google’s $20m holiday gift — Google

Gay marriage passes the legislature, 39 to 20, in Mexico City! — Mexfiles

Brauchli takes chat question: “Why has WP chosen not to compete as a national newspaper?” — WaPo

Natasha Chart’s critique of Naomi Klein’s self-indulgent climate politics — Open Left

Did Greek debt tighten after the downgrade, or did it widen sharply? — Reuters, FT

If Wall Street Ran the Airlines — Baseline Scenario

Berkshire’s repellent shareholders

Felix Salmon
Dec 23, 2009 06:04 UTC

Warren Buffett probably won’t be particularly happy with Mattathias Schwartz’s cover story in the latest Harper’s, behind a subscription firewall here. It’s another pilgrimage-to-Omaha story, but this one has a twist: Schwartz finds that Buffett’s folksy wisdom really isn’t the slightest bit contagious.

Among the pilgrims are RJ Meurer Jr, a senior vice president at Morgan Stanley who storms into Buffett’s barber with his entourage, telling the Brazilian man getting a shave that “You got to get out. We got this barbershop booked.” Or there’s Matt Kelley, a Chicago public-school teacher, who failed at trading in and out of a single Berkshire B share at the same time as conspiring to lose $200,000 of his $150,000 net worth trading on margin; he eventually maxed out his credit card to continue to make leveraged bets.

But Schwartz saves the worst for last, when he finds Talia Eisenberg, along with her father’s girlfriend, getting thrown out of an Omaha bar for being drunk. Talia is the daughter of Robert Eisenberg, who himself is the son of an early investor in Berkshire. With her unearned riches she has opened an art gallery on the Lower East Side; she also receives glowing press from NYC society blogs, complete with comments extolling “her generous heart”.

She’s not going to be happy about this:

“Do you even know who we are?” Talia asked. She thrust her hand into her purse. Out came a grip of shareholder credentials.

“I don’t care,” said the manager. “You’re getting out of this restaurant. Now.”

The women strutted out to a black Mercedes-Benz. As Talia drove, she enumerated a few of her present frustrations. She hated the tacky nowhereness of Omaha. She hated the gawking shareholders who think they own it for a weekend. Most of all, she hated Gorat’s for unjustly ejecting her from the premises. “They thought I was a whore because I’m good-looking and rich!” she exclaimed. “What can I do?”

“They never see the likes of us around Omaha,” replied Tanya.

“We have more shares than all those fuckers,” Talia said…

“Where were you at the cocktail events?” Talia asked me. “We were there with all the ballers. The real deal. You didn’t go to Borsheim’s, did you? That’s where all the suckers go, with one baby B share. The big parties are up at the houses.”

This is what happens to the millions of dollars that Buffett earns for his earliest and most loyal investors: they end up fueling the very snobbery and condescension that Buffett himself could never abide.

Talia’s young, and she was drunk (and she was driving drunk, to boot), but maybe it’s only the young and drunk shareholders who will ever come out and say — to a journalist, no less — what most of the people “up at the houses” are thinking.

All of which only confirms me in my view that once Buffett has gone, Berkshire Hathaway will not remain long in its present form. Look at its owners, ex Buffett and Munger, and you see people who simply don’t have the constitution to patiently make careful, idiosyncratic, multi-billion-dollar bets with century-long time horizons. The ghost of Buffett might hang around for a while, but eventually the new CEO will start talking about “shareholder value”, and that will be the end of that. Not that it’ll make any real difference either way to the likes of Talia Eisenberg.


Eisenberg did not inherit his stock. He purchased it himself.

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How to choose a hedge fund manager

Felix Salmon
Dec 22, 2009 21:19 UTC

You’ve heard by now about Steve Cohen’s appearance on a UK daytime talk show in 1992. The Post seems to think that the story is that he was sleeping with both of his wives at the same time; the first reaction from the rest of us was sheer astonishment that he went on a talk show at all.

But buried in the story is another interesting nugget: 1992 was the year that Cohen launched SAC Capital, and began a hedge-fund career that would rank among the greatest of all time.

Now, if you had the opportunity to invest with Cohen in 1992, then clearly, with hindsight, you should have put every last penny into his fund. But at the time he was being excoriated by his wife on a show called “Cristina”, after its eponymous bleach-blonde host. The obvious thing to do would be to run very far in the opposite direction. Which just goes to show the advantages of being contrarian — and the difficulties of picking a fund manager.

That said, I’m pretty sure that at this point a strategy of “invest with any hedge fund manager who appears on a daytime talk show while raising money for his first fund” has performed extremely well. Maybe other hopefuls should try to go down the same route, to see if they can capitalize on the momentum trade.

Update: It was an English-language talk show, not an English talk show. It broadcast in the US, not the UK.

The ontological status of gold

Felix Salmon
Dec 22, 2009 20:22 UTC

I was pleasantly surprised by the volume of email response I got to a passing reference to Kripkenstein on this blog — clearly quite a lot of you enjoy a bit of analytical philosophy! I went out to lunch today with a couple of philosophically-inclined finance types as a result, and, since I’m still high on Sichuan peppercorns and it seems to be something of a slow news day, I thought I’d put up a poll.

Remember this wonderful graph, from Paul Kedrosky, showing the price of gold in gold? Pay attention, there will be a quiz.

So here’s the question, for those of you who remember the analytic-synthetic distinction:

Or to put it another way: Can an analytic a priori statement be funny?

Update: With 125 votes cast, a clear majority of you (59%) are voting for the first option, analytic a priori. But you’re wrong, as dsquared explained to me in an email this morning — what happens to the graph if the price of gold goes to zero?

The assertion that the price of gold, in gold, is 1, is not analytic because it depends on the truth of at least one other proposition (that gold has a nonzero price) and is not a priori because there are possible worlds in which gold does not have a nonzero price.

Which just goes to prove, if nothing else, that philosophy is probably not best conducted by polling blog readers.

Update 2: Natecha defends the analytic-a-priori crew against dsquared, saying that the statement “x/x=1″ isn’t false when x=0, just undefined. He adds for good measure that “Daniel’s comment flies in the face of philosophical orthodoxy about analyticity and apriority”. Which is a statement I daresay Daniel would agree with.


The price of gold is the price of gold. Positive, negative or otherwise. The analytic is the logic.

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Authentic art by telephone

Felix Salmon
Dec 22, 2009 17:21 UTC

John Quiggin reminds me of Richard Dorment’s wonderful NYBR essay on Andy Warhol and the authenticity of his 1965 Red Self Portraits. While my blog entry on the essay was basically about non-profit politics and the art market, the essay itself was largely about the way in which Warhol reinvented authenticity:

By the 1970s Warhol no longer had any sustained involvement in the mass production of his paintings. In his book about Warhol, Holy Terror, Bob Colacello quotes Warhol’s longtime printer Rupert Smith:

We had so much work that even Augusto [the security man] was doing the painting. We were so busy, Andy and I did everything over the phone. We called it “art by telephone.”

The question is when Warhol started doing this, and Dorment makes a very strong case that he started in 1965, with the Red Self Portraits.

Warhol told Ekstract to send the acetates to a commercial printer for silk-screening. Morrissey further says that Warhol spoke to the printer over the phone to give him specific, detailed instructions regarding the colors he wanted the printer to use. Both Warhol and Morrissey communicated with the printer, but Morrissey is clear that neither was present during the silk-screening process.[5] After the printing, Ekstract returned the acetates to Warhol…

Few artists in the twentieth century were as restlessly experimental as Warhol. This ruling by the board represents a complete misunderstanding of the very nature of what he achieved, and how his approach to making his work changed Western art. Innovation has to start somewhere, and it is precisely because the 1965 Red Self Portraits were made without Warhol’s on-the-spot supervision that they are so critically important.

All of which came back to me when I visited MoMA’s wonderful Bauhaus show a few days ago, and saw László Moholy-Nagy’s beautiful EM 2 and EM 3, which date from 1922-3:

Moholy–Nagy’s Telephone Pictures were made in Berlin via the processes of modern technology: Moholy–Nagy dictated the paintings’ specifications by telephone (a relatively new invention at the time) to the foreman of a sign factory. Three paintings were made, each with identical images, but in different sizes. The telephone was a new studio tool that allowed Moholy–Nagy to produce work independent not just of his own hand but of his presence. The fact that the paintings were made by ordinary laborers demonstrates his commitment to a non–elitist approach to creative work.

Maybe then it’s the very debate over the Red Self Portraits which makes them important. When Moholy-Nagy was doing something functionally identical more than 40 years earlier, no one denied that he had authentic authorship — it was all part of the iconoclastic culture of the times.

In the case of the Warhols, however, there’s a huge fight with the Andy Warhol Foundation over their authenticity — and as a result you’re not going to see any of them exhibited at MoMA or any other museum any time soon.

Quiggin says that all this obsessing over authenticity is really only important in “the market for collectibles, a class that happens to include paintings”, and I think he’s right — although clearly he’s also right that we’d see a lot less of certain Shakespeare plays (or Mozart operas, for that matter) if they were found to be written by someone else. I’m beginning to think that the only thing that really matters is when there’s a fight over authenticity. That’s always when things get interesting, after all. Maybe someone should set up a museum devoted only to disputed works!


Richard Dorment’s admirably and concisely written analysis of Warhol’s art and his artistic and conceptual techniques [NYR, October 22, 2009] was much more brilliant and got closer to the essence of Warhol’s radical reinvention of image-making than anything I have read in many years.

However, I was shocked and appalled to learn how the Andy Warhol Foundation for the Visual Arts (est. 1987) and the Andy Warhol Art Authentication Board, Inc. (est. 1995) are operating blatantly for their own self-interested purposes, ignoring by doing so Warhol’s artistic innovations, which are unique in the history of Western art since the Renaissance.

As the author of Warhol’s catalogue raisonné and a Professor of Art History at Ludwig Maximilian University in Munich—previously I taught at Yale University; the University of California, Berkeley; Columbia University; and New York University—I have followed in detail the activities of the two institutions concerned with Warhol’s work. I have known several members of the Warhol authentication board, including Professor Robert Rosenblum, David Whitney, and others since its foundation in May 1995.

From 1968 on, I worked closely with Andy Warhol. Under his supervision, I had access to his archives and was able to make a complete inventory of his work in his studio on Union Square. I collaborated with him until his death in February 1987.

Between June 1968 and July 1970, as a Ph.D. candidate at the University of Hamburg, in my mid-twenties, I produced and wrote the very first catalogue raisonné of his paintings, films, and works on paper, published in 1970 by Hatje Verlag, Stuttgart (in German); Praeger, New York; and Thames & Hudson, London. My original research was funded by a generous two-year doctoral grant from the German government and intentionally did not include any commercial backing or financial support from any gallery or individuals (like collectors, art advisers, etc.).

In January 1970, before the publication of my catalogue raisonné, Warhol and I met in his Factory on Union Square to discuss which image should be used for the cover of the raisonné of his work. To demonstrate his unique reproduction technique using silk screens, Warhol showed me two paintings, identical in color and outline, of the same image, from the series Red Self Portrait. He suggested that we use one of these two paintings for the cover to illustrate his repetitive and multiple reproductions of the same image—in this case, his self-portrait. We chose the Red Self Portrait, which had been recently acquired by Warhol’s Swiss dealer and Interview magazine co-owner Bruno Bischofberger and signed and dedicated to “Bruno B.” My 1970 catalog, as well as the revised editions of 1972 (Milan: Mazotta Editore), which included an additional 406 works approved by Warhol, and 1976 (Berlin: Wasmuth), listed this Red Self Portrait as entry #169, but the work was omitted from the Zurich-based gallery Ammann’s 2004 catalogue raisonné (without any notification or query to me)—as if this painting never existed or had been destroyed.

This painting was a perfect example of Warhol’s technique of making multiple silk screens of the same image (for different colors, etc.) and was produced using the more “hands off” approach he continued with in the 1970s and 1980s. Since he often conveyed the artistic design by telephoning details to the silk screen factory, it is appropriate to compare this approach to the historically first “art by telephone” technique, developed in 1922 by the eminent Bauhaus artist Laszlo Moholy-Nagy, with whom Warhol was familiar through his studies at Carnegie Tech. (See my book The Pictorial Oeuvre of Andy Warhol, a revised catalogue raisonné with about 350 additional entries, that served in 1974 as my Ph.D. thesis and was published by Wasmuth in 1976.)

The artist had chosen at that time the unique and more modern production technique of silk screen over the traditional hand-painted ones; this new technique was a result of Warhol’s new concept of art-making and his rejection of the centuries-old theory of the artist as auteur, the unique artistic originator.

ow aware the artist was of the theoretical as well as philosophical implications of his mechanical technique of art-making, using silk screening and other simple reproduction processes (rubber stamp, “blotted line”), became evident in the single published interview Warhol gave that, so far as I know, deserves to be classified as accurate:

“…No one would know whether my picture was mine or somebody else’s.”
“It would turn art history upside down?”
This concept, arrived at by Warhol in 1962—following progressive experimentation in his commercial art work of the early 1950s with rubber stamp and mono print techniques—can be declared as one of Warhol’s most significant and important contributions to Western art. Intentional and purposefully conceived, it involves a progressive sequence of mechanical image creations: from hand painting to mono prints, lino cuts, rubber stamps, stencils, single and multiple silk screens in the years 1963-1964.

This use of multiple silk screens began in 1962 with the silk screen painting Baseball and continued into 1965; it demonstrated Warhol’s mechanical process, in which the artist’s hand was removed from the execution of the work. This approach can be read as Warhol’s understanding of Duchamp’s way and method of presenting art works. Warhol’s interest lies in conceptual properties and production methods, not in the actual act of making the painting. His unique production method was in the end a fusion of photography and painting.

From 1974 to 1976 I collaborated with Andy Warhol on another book on his drawings and works on paper from 1947 to 1976, that was published in 1976 by Hatje Cantz, Stuttgart, and served as a catalog for a retrospective exhibition of Warhol’s early works on paper traveling through Western Europe.

Ever since I published the 1970 catalog in close cooperation with Warhol, I have been guided by the idea that a catalogue raisonné should be produced in close consultation with the artist. This principle, which I followed scrupulously as a young art historian, was perfectly defined by Michael Findlay in a book published in 2004:

The production of a catalogue raisonné of a living artist’s work has become a venture of a major magnitude as it has been realized in the last four decades that such a project, if conducted not by an interest-conflicted party, like a commercial gallery (owning works by the artist at hand) or the Estate not governed by a scholar, but instead by an absolutely independent scholar-historian with a profound knowledge of the artist’s work and the arts of the past century, has merits far beyond one’s immediate imagination and benefits not only the fair and balanced estimates in the market, with the galleries, auction houses and the like, but also the more detached institutions of exhibitions, museums and collectors.
Beyond these secondary benefits such an enterprise with carefully, systematically conducted research allows the artist himself to review his genealogy of stylistic developments from the very early beginnings up to the present day. A published catalogue raisonné may assume a regulatory function in the artist’s relationship to the gallerist, the auction houses and the collector. In the end, the catalogue raisonné represents a public consciousness of an individual’s oeuvre in a detached non-promoting manner and allows a fair and reasoned comparison with the ever increasing and globalized art production of our days. It also guarantees and fortifies in a much fairer way the parameters of intellectual property.[2]
While researching the 1970 catalogue raisonné, I inspected the original records and personally consulted individual collections belonging to galleries and collectors suggested by Warhol. These included the Leo Castelli Gallery, which exclusively represented the artist worldwide and in New York City after 1964, and the Ileana Sonnabend Gallery (run by Castelli’s former wife) in Paris. Other galleries and collectors (such as Elena Ward of the Stable Gallery, Emile de Antonio, et al.) are listed in my book, Andy Warhol (1970). They offered records concerning Warhol’s works that I could draw on for my books. This information was approved by Andy Warhol before publication.

ndeed, Warhol’s technique of mechanical reproduction is one of the most important advancements in artistic techniques of the entire twentieth century, comparable to the invention of the mimetic painting style with its central perspective by artists of the Renaissance in the fourteenth and fifteenth centuries. And this achievement gives him—until this day—an exceptional position in modern art, marked by the uninterrupted inflation of prices for his paintings in the commercial market. In consequence, it is, of course, crucial to acknowledge Warhol’s unique contribution to the development of contemporary art and filmmaking—the rejection of authorship as an essential feature of authenticity and originality.

Subsequently, Warhol and I had a debate over two weeks on the merits and importance of his early hand-painted works on canvas (1960 to 1962), which the artist had hidden away in his attic and nobody had seen before I discovered a tiny photograph of one of them in a fashion magazine. Finally, one day, Warhol came with Polaroid photographs that he had taken of these paintings in his attic and handed them over to me for publication in my catalogue raisonné.

Warhol expressed his wish to have these photographs of his so-called “early works” published in my book, to contrast with the later, more mechanically produced, silk-screened works he created after 1962. No photographic documentation existed of the “early” paintings until I published them, with Warhol’s authorization. All such details, included in the catalog at his request, were significant to Warhol, since he intended to clarify the evolution of his artistic position and his avant-garde concept of questioning the six-hundred-year-old tradition (since Giotto) of the imperative notion of authorship.

As a scholar of art and film history, I believe that my close and exclusive cooperation with Warhol gives me the authority and the right to make official and public statements about the authenticity of the artist’s conceptual intentions and his technique of art-making and—last but not least, his important avant-garde films as cinéma d’auteur, produced between 1963 and 1968 (before the almost fatal shooting accident in his studio).

In 1987, Rizzoli published A Picture Show by the Artist, the last project I collaborated with Warhol on before his untimely death in February of that year. Not only had Warhol granted me the copyright for the images used in the 1970 raisonné and its revised 1972 version, but for all of the books which we worked on together.

inally, I should make a personal statement about the confusing and dubious incident caused by the Andy Warhol Authentication Board, Inc.: its denial of the painting the Red Self Portrait, dedicated to Bruno B, which Warhol and I chose together for the cover of his first major scholarly book publication with the catalogue raisonné in 1970, in which it was listed as entry #169. (In my catalog it was dated 1964, the year Warhol first used the image, but the Red Self Portrait inscribed “to Bruno B” was actually created in 1965.) This appalling decision certainly does not demonstrate any scholarly rigor on the part of the Andy Warhol Authentication Board.

Today one of the two paintings with this title listed in my catalogue raisonné, the Red Self Portrait, was intended to be a gift to the Tate Modern in London, but is not yet included in the museum’s collection. Irritating—how history can be distorted by pure and plain commercial interests! I had both of those paintings in my hands in early 1970: this painting, which Warhol signed and dedicated to Bruno B, and a second Red Self Portrait from the same series.

When, in 1986, Warhol came to London for his show at Anthony d’Offay’s gallery, he signed in d’Offay’s presence one copy of my 1970 book in two places: one signature was across the dust jacket, which reproduces the “Bruno B” Red Self Portrait eight times. The other was on the book’s half-title page. It is important to realize that Warhol and myself—as I described above—together chose the “Bruno B” Red Self Portrait for the cover of the book. Warhol’s signature across the “Bruno B” image on the dust jacket gives further unequivocal evidence that Warhol still in 1986 not only was authenticating the work itself, but remained proud of the painting, as well as of my early catalogue raisonné (then sixteen years in print), which had proved so many times before to be a very reliable source.

It is hard to believe that Warhol would have signed my book and the image of the “Bruno B” Red Self Portrait if there had been the slightest doubt in his mind that it was not “his work.” The combination of the dedication on the back of the painting with the choice of that image for the cover of the catalogue raisonné, together with his endorsement sixteen years later of the image by signing across it, leave no room whatever for any doubt as to the authenticity of the work and the artist’s intention.

To deny a painting chosen by the artist for the cover of his first scholarly publication when that work is signed and inscribed to the artist’s longtime dealer is an act of folly and gross misjudgment. Art scholarship does not consist of the theories constructed after the artist’s death by those who never knew him. Its bedrock is the body of work that the artist authenticated—beyond a shadow of doubt—in his lifetime.

Rainer Crone
University Professor of Art History
Ludwig Maximilian University
Munich and New York

[1]Gene Swenson’s interview with Warhol, “What is Pop Art?,” Artnews, November 1963.

[2]Michael Findlay, “The Catalogue raisonné” in The Expert versus the Object: Judging Fakes and False Attributions in the Visual Arts, edited by Ronald D. Spencer, Oxford University Press, 2004.

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The PhD in financial journalism

Felix Salmon
Dec 22, 2009 15:04 UTC

Did you know that it’s possible to get a PhD in financial journalism? Lennie Fuller does — he’s a former Lehman executive who’s now thinking of doing exactly that at Stirling University. He asked me if I had any ideas about possible thesis topics, and I thought in my bloggy way that throwing the question open might be interesting. So what do you think the big open questions in or about financial journalism are?

Fuller is a qualified Scottish Chartered Accountant, and wonders whether something similar to the CFA might not be implemented in financial journalism: should journalists be regulated or qualified before going to work? If you don’t really understand something like structured finance, is it possible to write sensibly about it?

My feeling on this one is that the arguments against such a scheme are so overwhelming as to render any thesis on the subject pretty moot. Freedom-of-speech principles alone would more than suffice, as would the simple fact that the public would not be well served by any scheme which served to further perpetuate the degree to which journalists have been captured by the financial institutions they cover.

That said, one interesting thesis topic might be an empirical look at the expertise of the people who produced the best journalism of the crisis. Certainly the trade press, where one finds a great deal of narrow expertise, failed utterly to grasp the bigger picture. What kind of qualifications or knowledge, if any, did the best journalists of the crisis have in common? My feeling is that the main qualification that journalists needed was a strong and healthy skepticism of authority figures, including senior bankers, central bankers, and regulators. And that’s not a trait one learns by studying overcollateralization waterfalls in detail.

Fuller also wonders whether financial journalism “should only be investigatory as all other information is freely available in the market” — which seems to me to ignore the mechanism (journalism) by which an enormous amount of information enters the market. (There’s a reason why all those trading floors are surrounded by screens tuned to CNBC, while the trading screens themselves invariably have full feeds from Reuters and Bloomberg.) More generally, I think that people like Fuller, who are looking at financial journalism largely from the perspective of a financial-market professional, have to be careful to remember the crucial public role played by journalism. Just because information is “in the market” doesn’t mean that it’s known by the general public. And it’s the job of journalists to intermediate between the two.

More generally, it’s the job of journalists to interpret what financial-market professionals are doing and to explain it to a generalist audience. Yes, market activity can be complex, and as a result some of the subtleties will be missed. The professionals might not like that, but if they already know everything that the article is talking about, then it’s not aimed at them anyway. One of the biggest lessons that financial journalists have learned over this crisis is that we collectively spent much too much time writing about deals for bankers and lawyers, and much too little time writing big-picture articles for the general public which would require broad, rather than narrow, understanding of what was going on.

Finally, Fuller asks when sources become insider trading: the simple answer is never, if you don’t trade, and there’s really no reason for journalists to engage in such activities. More generally, the only insider information that journalists ever really have is the inside information of what is going to appear in tomorrow’s paper. If you trade in advance of a market-moving story appearing, that’s very bad. In other cases, you’re not an insider, so you can’t be guilty of insider trading.

But that’s just Fuller’s ideas. What other ones are there? I’d be interested in looking at the difference between the trade press and the consumer press, for starters, and how they can learn from each other. I’d also be interested in asking whether there’s a fundamental conflict of interest in the financial-press business model: how can we financial journalists be expected to hold the industry to account if we’re ultimately being paid by that very industry?

And does anybody know of any other PhD programs in financial journalism? What have the results been to date?


“Certainly the trade press, where one finds a great deal of narrow expertise, failed utterly to grasp the bigger picture.”

Hear, hear!!

There are extraordinary topics at hand. We are presently witnessing the rise and fall of civilizations, with stunning handoffs from nations of the past to nations of the future, with policy choices that help determine which group we are a part of.

If you are a good financial journalist, you can help deliver play-by-play coverage of national and civilizational trends. These are buffetting us like crazy and if someone helps us figure out what is going on, we eat that stuff up!

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Felix Salmon
Dec 22, 2009 03:34 UTC

Alicia Keys and Stephen Colbert. Oh yes — Hulu

There are 4.22 Citi shares for every person in the world — BIG

The bizarre story of CommuterOutrage.com – complete with Pentagon connection! — Streetsblog

How much is a blog worth? The once popular but now rarely updated PVRblog.com just sold for $12k — eBay

Iceland Levies Europe’s Highest (25.5%) VAT to Help Finance Budget Gap — Bloomberg

The problem with contingent debt: it brings shareholder risk down while increasing systemic risk — SSRN

Fall Internship Pays Off With Coveted Winter Internship — The Onion

Time’s Justin Fox has a new job “identifying leading-edge content in key topic areas across all of HBR’s publishing platforms” — Businesswire

Please to explain, Ben Stein, why Obama is “people who don’t pay their grocery bills” — Fortune

How MBAs killed GM — TNR

“Anarchic rockers Rage Against the Machine have pulled off one of the biggest shocks in UK chart history” — BBC

Did Cravath’s first-year-associate bonus fall from $7,500 (WSJ, Nov 2) to $5,000 (Bloomberg, today)? — WSJ, Bloomberg

Will @TheEconomist reach 750k followers in 6 months? I’ll bet no — FT

Feynman on Rubber Bands — YouTube

Woman survives 120-foot suicide jump from Brooklyn Bridge into the icy East River, plus 5-10 mins in the water — NYDN

AIG, Show Us the E-Mail — NYT

Carmen Herrera = rockstar — NYT

I.D. magazine “had the exact same web template as that of sister publication Deer & Deer Hunting” — Fast Company

Roa in London — Unurth


Dear Felix

If it might be of interest to you.

Here is the link to the interview which has been kindly given to me (for my BLOG) as of today by Mr. Satyajit Das, risk consultant and the author of the book “Traders, Guns & Money”.

http://acemaxx-analytics-dispinar.blogsp ot.com/2009/12/interview-satyajit-das-ri sk-consultant.html

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Reducing the shame of default

Felix Salmon
Dec 21, 2009 21:34 UTC

Steve Waldman has been doing a spectacularly good job of teasing out the moral and financial implications of homeowners walking away from their mortgage obligations, and delivers another great post today:

I think that underwater homeowners ought to walk away from their loans for the very same reason McArdle want us to consider them jerks for doing so. We both want to see norms we consider valuable enforced. I think that banks violated a great many norms of prudence and fair dealing in their practices during the credit bubble, and that they violate the fundamental norm of reciprocity by fully exploiting their own legal rights while insisting that borrowers have a moral obligation not to exercise a contractual option. In order to strengthen norms I consider crucial, I hope transgressors face legal and social consequences (strategic default and reduced shame attached to default) that will alter their behavior going forward…

McArdle favors a world with both easy credit and easy bankruptcy. I favor the easy bankruptcy, but not the easy credit. I think that debt arrangements are hazardous and should be entered into only with great care. I don’t consider increasingly leveraged homeownership and aggressively accessible consumer credit to have been positive developments. As a practical matter, I think we must rely on creditors rather than potential debtors to differentiate between wise and unwise loans. So I consider it a feature rather than a bug that holding creditors accountable will encourage them to think twice before sending out convenience checks.

While you’re chez Steve, you should also check out the letter he got from a soldier on the same issue. The basic insight here is that if a large number of morally serious individuals refuse to walk away from their debts, then we as a society are essentially letting banks off the hook for systemically-dangerous atrocious underwriting. Meanwhile, the banksters are grinning from ear to ear: to the extent that they haven’t been bailed out by the government, they can happily get bailed out by individuals who will end up paying hundreds of thousands of dollars just so they don’t need to worry about being considered to be “jerks”.

If there’s less shame attached to default, we will end up with exactly what we want — less badly-underwritten credit, a more solvent society, and much less tail risk. We went far too many years believing without really analyzing the proposition that credit is nearly always a Good Thing. Now that we’ve learned just how harmful it can be, it makes sense to reorient our aspirations and norms in the direction of a world where credit is both rarer and safer than it is right now.


It seems what we need to be doing is shaming bankers who misled people into borrowing so they find a way to renegotiate with them. We shouldn’t be reducing shame of default from the borrowers. That only makes things worse. What would happen to the financial system once everyone no longer has shame of default? And not paying debts because banks didn’t do their jobs properly could be just one step away from not paying taxes because the government isn’t spending your tax money correctly. Is that next?

Posted by rogueecon | Report as abusive