Felix Salmon

The art book of the decade

Felix Salmon
Dec 15, 2009 21:28 UTC

I recently took possession of one of the most beautiful art objects I own. It’s a book — an absolutely stunning one — and it’s just been published by Yale University Press. It’s the New Complete Edition of Interaction of Color, the legendary book by Bauhaus master Josef Albers. And if you know anybody who loves color, or art, or ever took a color class at art school, or just has bibliophilic tendencies, they will remember you fondly forever if you give it to them.

At $200, it’s not cheap — but for a work of art of this caliber that’s very little indeed, and beside, the book’s only $126 at Amazon. It’s clearly popular: MoMA reportedly sold out their first installment of six copies on the day they got them, while Amazon is already saying that it won’t be able to deliver the book before Christmas. What’s more, the book is subsidized: the Josef and Anni Albers Foundation provided a publication subvention which allowed Yale to make the project work.

It’s worth noting that the original edition of the work also cost $200 — in 1963. That edition used silkscreen prints in dedicated folios, and rapidly became so sought-after that it was never used as intended, as a teaching aid in art schools. Instead, it got collected by museums and libraries, where devotees would put on white gloves and handle it tenderly.

Since then, a paperback, which originally came out in 1971 and which was revised and extended in 2006, has become something of a cult object, selling over 200,000 copies. But even though the revised edition had many more color plates (30, as opposed to the original 5), it was never a patch on the original, which had 145. This new edition has them all, in an easy-to-page-through and gorgeously-bound book; the only writing on each page is some small typography at the bottom which makes it very easy to cross-reference to the accompanying text book (itself a masterpiece of typography). The text on its own can be dense and difficult, but when accompanied by the illustrations, it comes to life immediately, and everything becomes clear. Meanwhile, the illustrations breathe easily on the heavy paper stock, never competing for attention with words.

We’re in a glorious renaissance when it comes to art books right now, thanks largely to the combination of spectacular new printing technology and the efforts of Benedikt Taschen. Interaction of Color achieves things with offset color lithography that Josef Albers could only dream of; it even uses a technique known as stochastic printing to improve the printing quality and to make sure the individual dots are arranged randomly. That means there are never any inadvertent moiré patterns or other eye-tricks. (Of course, there are some optical illusions in the book, but those are deliberate.)

I’m hoping that as printing technology continues to improve, books like this will become increasingly within the reach of consumers and publishers. Art books are much higher quality and much cheaper now than they ever used to be, and that has to be a good thing. This particular book is at the top of the high end, but I’m happy that YUP isn’t doing anything silly with limited editions and whatnot: Michelle Komie, the press’s art and architecture editor, told me she expects it to be in print for at least 6-8 years. (My guess is that it’ll be in print much longer than that.) It’s still a collector’s item, of course: it just that Yale University Press doesn’t feel the need to inject some ersatz scarcity into the market.

This book phase 2 of a three-part project proposed by Komie: the first part was the reissue of the paperback, and the second part is an electronic version (I sincerely hope it’ll be a free website) which will bring Albers’s book truly to everyone. (As well as acting as fantastic marketing for the book.) “These exercises work so well online,” says Komie, who still has a copy of a now-outdated 1993 CD-Rom. It could be the best example yet of synergy, in the art-book world, between websites and physical books. Well done to YUP on this achievement, and may the website come soon!

Update: I should add that one of the things which makes this book so great is that the plates aren’t reproductions of something else: you’re seeing exactly what you’re meant to see, without having to imagine “what it looks like in real life”. That’s rare, but not unprecedented, in art books.


Hi Felix,

Thought you might be interested in this interview with Nicholas Fox Weber about the book: http://www.artforum.com/words/#entry2442 5


Posted by laurenob | Report as abusive

The risk-averse rich

Felix Salmon
Dec 15, 2009 18:36 UTC

What’s the correlation between wealth and risk appetite? I suspect that it’s somewhat bell-shaped: when you’re very poor you can’t afford to take any risks, while if you’re entering the middle classes you often feel that you have to take risks, especially with your retirement assets, if you’re going to have a chance of maintaining your standard of living once you stop working. If you already have more money than you’ll ever spend, however, then you don’t need to take those kind of risks any more, and you start becoming much more conservative again — see for instance the way in which Suze Orman is invested only in wrapped munis.

This big picture can be blurred by the fact that many of the riskiest investments, like venture-capital funds or leveraged hedge funds, are invested in only by the wealthy. But look a bit closer and you’ll invariably find that the investors in those funds are careful to make sure they’re set for life before taking a small percentage of their wealth and investing it in high-risk assets.

But thanks to a new law, we can now see how senior executives invest their money. And it turns out that even diversified stock-market investments are too risky for them:

Top executives at Bank of New York Mellon Corp. could invest their savings in a fixed-income fund that had a 6.6% return in 2008; thanks to electing this fund, Steven Elliott, senior vice chairman, had earnings of $1.3 million on his account, according to filings.

Executives at Cummins Inc. could choose among three options: the return on the S&P 500, “the Lehman Bond Index, or 10 year Treasury Bill + 2%,” according to filings. The executives at the engine maker had a total of $1.4 million in gains on their accounts, suggesting that none of them elected the stock index.

Executives at Illinois Tool Works Inc., a maker of fasteners and adhesives, received returns of 6.1% to 8.4% in 2008, while investments in the employees’ 401(k) lost 25%. A spokeswoman says that so far this year, the average return of employees’ 401(k) plans has been 23%, while the interest credited to the executives’ deferred-compensation plan is just 5.6%.

The WSJ implies, and Ryan Chittum makes explicit, the concept that any executives seeing gains in their retirement accounts were somehow getting special treatment, compared to ordinary employees whose 401(k)s got destroyed. But the bigger point here is that the rich executives are simply availing themselves of the luxury of being able to afford very low risk, modest-return investments. (As ever, Comcast is the outlying villain, guaranteeing senior executives a 12% return on their savings. Yuck.)

I’d also be interested in finding out how much company-specific credit risk is involved in these schemes. A giveaway is the word “notional”:

These deferred-compensation plans generally provide notional investment elections that mirror the returns on mutual funds available in the employee 401(k) plan.

In other words, we’re not talking about actual returns on actual money, here, we’re talking about notional returns on notional money which is really just an unsecured liability of the company to the executive. If the company goes bust, the money disappears — and even if it doesn’t, the money might not ever arrive. Just ask Fred Goodwin and Dick Grasso whether promised retirement funds are certain to become real cash.

There’s something to like about the fact that senior executives have an enormous amount of their retirement assets tied up in unsecured obligations of their employer: it gives them a strong incentive to avoid the kind of fat-tailed risks which could really wipe them out. So I’m not as shocked by the WSJ story as Chittum is. Except for that Comcast factoid, of course.


Then again one has to consider the ‘absolute’ sophistication on the investor and the ‘understanding’ of risk.

Russian Oligarchs – and mini-Oligarchs – who leveraged their assets with borrowed money to invest in yet more risky assets, that were highly correlated with their underlying loan collateral, did well while markets were rising, but got punished hard during the 75-percent decline. Both in terms of margin calls, and being forceably closed-out of those leveraged bets as the price of the underlying collateral declined relative to the value of the debt they needed to repay, and losses in the value of their underlying assets.

They got killed by leverage because they misunderstood the risk they were taking and how soon market sentiment in a real crisis could turn against them. Billionaires became millionaires. Some millionaires lost ‘almost’ all their ‘financial’ assets.

Posted by MrBill | Report as abusive

Decode your fund brochure

Felix Salmon
Dec 15, 2009 17:20 UTC


Joshua Brown has a very handy cut-out-and-keep mutual-fund-brochure decoder. Now, if only he could do the same thing for Morningstar ratings!


As a Morningstar subscriber, I’m looking forward to Chart #2.

Posted by Mega | Report as abusive

The loan dilemma

Felix Salmon
Dec 15, 2009 15:26 UTC

Barack Obama wants the banks to start lending again:

This is something I hear about from business owners and entrepreneurs across America — that despite their best efforts, they’re unable to get loans.

I would love to see some empirical data on this, because I suspect that insofar as lending volumes have dropped, it’s more a function of reduced demand than newly-recalcitrant bankers.

Tom Lindmark points to a Deutsche Bank survey of small businesses which puts availability of credit way down the list of problems, and “poor sales” easily at the top. During the credit boom, maybe small businesses, facing a drop-off in sales, would try in the first instance to cover the gap by taking out a bank loan. But nowadays people are much more aware of the dangers involved in taking out a loan you can’t afford to repay: if your business is losing money, borrowing more only makes matters worse. Borrowing for productive investment makes sense; borrowing to cover an operating shortfall does not.

What’s more, I’m still convinced that overall there’s too much credit rather than too little, and that over the long term we want to see a less levered economy, with less debt and more equity. Releveraging now is not helpful in terms of achieving that end, even if it does provide a short-term boost to GDP.

At the same time, there’s been an interesting shift in the leveraged loan market, with its $431 billion of loans coming due before 2014. The banks haven’t done much to address the problem — but the borrowers have, by refinancing into longer-term high-yield bonds. Vipal Monga reports:

Among the most popular avenues for balance sheet restructuring is the high-yield bond market, where companies such as Apollo Management LP- and TPG Capital-backed Harrah’s Entertainment Inc. have been issuing longer-dated bonds to pay off loans. Standard & Poor’s Leveraged Commentary & Data unit notes that so far this year about $20 billion of loans have been refinanced in this manner.

All in all, LCD estimates that this year’s work on the 2012 through 2014 maturities (which includes debt pay-downs, high-yield takeouts, defaults and the amend-and-extend activity that has allowed some issuers to push out maturities) has lowered by 17.2% the total amount of loans due by 2014.

This doesn’t solve the problem, of course, but it does make it slightly more manageable. And when debt is being held by real-money investors rather than by leveraged banks, the systemic consequences of a big wave of defaults are seriously reduced.

None of which means there aren’t huge problems with banks’ loan books. Mike Phillips notes that £14 billion (about $23 billion) of highly-structured RBS commercial-property debt is coming due in 2010, with RBS declaring that it has no intention of refinancing those loans when they come due:

It is a fair assumption that a lot of the borrowers within that £14bn will next year be asking other banks to refinance large, complicated loans that are probably under water.

Even if the current market recovery continues, that is not a likely prospect. This could be one of the first places where we find out what happens when the unstopable force meets the immovable object.

I think it’s pretty obvious what’s going to happen: an entirely predictable, and predicted, wave of commercial-property defaults. The question is whether RBS has deep enough pockets to cope with them. And given that the UK government now owns 84% of the bank, the answer has to be yes.

Insofar as there are creditworthy small businesses out there desperate for funding, then, the banks should extend them credit: that will help create much-needed jobs and growth. But I’m not sure just how much demand there is for small-business loans with a high likelihood of being repaid. And more generally, I’m not sure that banks’ loan books shouldn’t be shrinking rather than growing.

Update: Ryan Avent adds some smart thoughts.


“CurtD59″ has nailed it. There is still near ZERO credit for float to small businesses right now – even profitable ones.

Your looking at this through reports and math reminds me very much of exactly what you just said about Tishman Speyer and Stuy town. Go out into the real world. The small business credit crunch is a MESS still.

Posted by RIckWebb | Report as abusive

Putting source documents online, cont.

Felix Salmon
Dec 15, 2009 14:06 UTC

I’m glad that Reuters, along with the Guardian, the FT, the Independent, and the Times, has won its case at the European Court of Human Rights over the protection of journalistic sources.

The facts of the case are quite simple: in November 2001 (yes, the wheels of justice move very slowly indeed), Reuters, the FT, the Guardian, and the Times all received, anonymously, a fake presentation saying that Interbrew was ready to launch an imminent bid for rival SAB, at between 500p and 650p per share. Most of the presentation was real (and confidential), but the share price had been boosted, and a timetable inserted.

When the media reported the contents of the presentation, SAB’s share price naturally rose sharply on very high volume; one can only suppose that the leaker of the fake document made substantial profits as a result. Interbrew, seeing its SAB bid plans sabotaged, naturally wanted to identify the leaker, and believed that doing so would be made easier if it had a copy of the fake presentation.

At that point, unhappily, the eight-year court case began. Interbrew sued the media outlets to force them to give up a copy of the presentation; they refused, saying that complying with such an order would have a chilling effect on their ability to promise confidentiality to sources; and eventually the ECHR agreed with them.

The news organizations were right to fight the court case. If you can be forced to turn over fake documents received anonymously, you can be forced to turn over real documents received from known sources, or even be forced to reveal the names of those sources.

At the same time, however, none of these media outlets had ever promised confidentiality to the leaker, or even knew who the leaker was. Quite the opposite, in fact: the whole purpose of the leaker’s exercise was to make the fake document public. Eight years on, Interbrew would probably never need to go to court in the first place: a good editor, after making the decision to run with the story, would naturally and automatically make the document freely available online. Especially if doing so distinguished that media outlet from others who only reported the contents, rather than publishing them.

News organizations are getting pretty good, these days, at putting primary documentation on their websites — although the New York Times, in particular, which has an otherwise excellent website, is surprisingly bad on that front. It’s one of the most profound ways in which the web is changing journalism: readers are no longer satisfied with trusting a journalist’s account of what a document says, and want to read the document itself. Most of the time, so long as you’re not breaking a promise to a source, journalists should allow them to do just that: it was, after all, readers, not journalists, who worked out that the Killian documents were forgeries.


Felix Salmon
Dec 15, 2009 04:26 UTC

The problems of getting an artist’s visa to travel in the US — WSJ

McArdle says homeowners should pay non-recourse loans even if it doesn’t make financial sense to do so — Atlantic

Ozimek’s latest on homes-as-investments — Modeled Behavior

Fraudulent Italian wine — Decanter

Daniel Lippman is a star. One question the article doesn’t answer: how come he knows so much about wine? — Politico

The very first Felix the Cat cartoon, 90 years ago today! — Daily Motion


Shorter McMegan (Christmas edition): “are there no prisons? are there no workhouses?”

Posted by Dollared | Report as abusive

Stuy-Town capitulates

Felix Salmon
Dec 14, 2009 20:35 UTC

Call it the final death knell for arguably the frothiest deal that the US residential real-estate market has ever seen — the sale of Stuyvesant Town and Peter Cooper village in Manhattan for $5.4 billion in 2006. The driving force behind the deal was the expectation that the new owners could and would be much more aggressive than the old owners (Met Life) in converting rent-stabilized apartments to market rate. Now, however, all the apartments they did manage to convert to market rate are being converted back:

Lawyers for the Stuy Town tenants as well as for landlord Tishman Speyer have just announced an interim agreement while the bigger issues (like refunds on years of rent overcharges) get sorted out. Apartments will return to rent-stabilized levels in January, and each affected tenant will be granted benefits—lease renewals under stabilized rates, succession rights—under the Rent Stabilization Law.

To put this news in context, rental income from the complex was $112 million in 2006, when the deal was done; the new owners expected that number to rise to $336 million by 2011. Instead, far from rising, rental income actually fell, despite the new owners’ best efforts to convert as many apartments as possible to market rate. That income is now sure to fall further.

With hindsight, the biggest conceptual mistake the buyers (and the lenders to the buyers) made — and we’re talking some very smart people at Tishman Speyer and BlackRock here — is that they forgot about the whole living-in-a-democracy thing. Landlords, in general, are good at asserting their legal rights. But when you’re trying to make life significantly more expensive for 11,000 families all living in the same place, you have to expect that those people will organize and fight back — and that they’ll have local lawmakers on their side.

Political and legal risks are hard to price or to hedge, of course, but it really seems in this case as if none of the investors in the deal even tried. If you’re betting billions of dollars on your ability to navigate the legal system, you have a fiduciary obligation to at least think about the possibilities that (a) you’ll lose, despite your best efforts; or that (b) the law itself might change. But that’s the problem with the whole credit bubble, in a nutshell: people just stopped thinking.


We have been relying on experts, who in turn rely on their (very sophisticated) spreadsheets, mathematical models, computer programs based on complicated models, when making real life decisions. While these modern tools are great and can be very useful, let’s not forget they are just tools, they are not real life, and they aren’t full representations of real life.

These experts are usually frighteningly bright people … in their narrow specialty, outside of which they may turn out to be fish out of water. This begs questioning into the way we have been churning out college graduates. Have we been focusing too much on specialization, while ignoring the importance of a more balanced education? Are we doing that to the detriment of our own future?

Posted by jian1312 | Report as abusive

Private-jet divas miss their meeting with Obama

Felix Salmon
Dec 14, 2009 16:49 UTC

How incompetent is Citigroup? Incompetent enough that even today, when the bank is announcing a major agreement with the government to pay back its TARP money, neither its chairman nor its CEO was able to turn up to a meeting with the president of the United States of America.

The bailout repayment news kept Citigroup CEO Vikram Pandit from attending Monday’s meeting, Citi spokeswoman Molly Millerwise Meiners said. She said chairman Richard Parsons planned to attend but bad weather kept him from reaching Washington in time.

A couple of quick points here:

  1. Why on earth should repaying TARP prevent Pandit from showing up to the meeting?
  2. Is DIck Parsons really such a diva that he won’t show up to a meeting with POTUS unless he can travel there in a private jet? (Update: no, see below.)

The other winners of the Diva Award, incidentally, are Lloyd Blankfein and John Mack, both of whom are joining Parsons on the phone. They should rightly be excoriated for this: it’s one thing using shareholder money to fly around the world on a private jet if that makes getting to your meetings easier. It’s quite another thing to miss meetings entirely on the grounds that if you can’t get there by private jet, you’re not going to get there at all.

I’m reminded of the bankers who turned up very late to the emergency meetings at the Fed in September 2008 because they insisted on trying to inch down the FDR Drive in bad weather rather than taking the 4/5 train like any sensible person. And I’m reminded too, of course, of the Detroit executives who took private jets to Washington to beg for a bailout. The minders at Citi, Goldman, and Morgan Stanley surely know that anything which reminds the public of that debacle is not going to be good for optics.

(HT: Chia, who got to DC on the Acela without any problems this morning.)

Update: Citigroup calls to say that Parsons was flying commercial, and got caught in fog.

Update 2: More information emerges! Apparently both John Mack and Lloyd Blankfein, like Dick Parsons, failed to get to DC because they were flying commercial; Jamie Dimon got there because he took his jet. Maybe he should have offered his fellow CEOs a ride down.


Quite aside from the needless sarcasm of this piece, I really take issue with the underlying assumption that because you have been summoned by the mighty Barack Obama, you must move heaven and earth to be there. These guys have banks to run and taxpayer money to pay back. Why should they humour Nobama with a couple of photo-ops so he can burnish his populist, anti-Wall Street credentials? Not surprisingly, Nobama dumped on the banks yesterday. They should have told him to blow it out his ear.

Posted by Gotthardbahn | Report as abusive

Annals of public-private dysfunction, Traffic.com edition

Felix Salmon
Dec 14, 2009 16:17 UTC

Eric Lipton has an excellent summary of a scathing government audit of a scheme to improve the quality of the information that states and cities have about traffic congestion. (The report isn’t meant to be online until later this afternoon, but I downloaded it from the inspector general’s website with no problem, and have put it here.)

What seems to have happened is that a small group of lawmakers, all of whom received campaign contributions from a financially-troubled company called Traffic.com (a subsidiary of Navteq), pressured the Federal Highway Administration to give sweetheart deals to the company which involved less money for the public and much less benefit for people stuck in traffic.

Traffic congestion is estimated to cost Americans $78 billion a year, and a good way of bringing that number down is to be able to inform drivers in real time where bottlenecks are. To that end, the government paid Traffic.com the full cost of installing sensors along highways in 27 cities. But then, astonishingly, the cities in question weren’t allowed to share that information with the public:

The Massachusetts Highway Department, the report says, was formally prohibited from using the data to offer highway message board estimates to Boston-area commuters on traffic delays. Local and state governments were also prohibited from posting the traffic information on government Internet sites or traffic information telephone hotlines, unless they paid Traffic.com a fee for the data.

The inspector-general doesn’t attempt to calculate the amount of money lost to congestion which might have been saved had Traffic.com’s information been more freely available. But it does show how Traffic.com managed to get around the requirements to share its revenues with the states:

Although the Federal task orders specified that the public partners would share TTID revenue, FHWA allowed the service provider to reserve the public partners’ shares for system operations or capital improvements related to the service provider’s assets. The certified public accounting firm’s 2002 report quotes the service provider’s financial statements that said, “[the shared revenue] will be reinvested in the Company for upgrades to the digital traffic systems.”

In English, Traffic.com was basically saying “yes, we owe you this money, but we’ll just plough it back into our own privately-owned company instead, I’m sure you’ll be OK with that”.

Was the highways administration indeed OK with such shenanigans? The general message from the report is that the bureaucrats knew that the deal was a bad one, but that they didn’t want to pick fights with powerful lawmakers.

The FHWA Deputy Executive Director’s April 2001 memo stated, “. . . there may be less expensive ways of acquiring the data. We believe that competition will allow the marketplace to sort this out and result in the greatest return on the public investment in these data.” However, FHWA referred us to at least nine letters from members of Congress that generally directed the Department and FHWA to use the ITOP accelerated procurement process, rather than full and open competition, to select a service provider.

Members of Congress might not be authorized to direct the Federal Highways Administration on such matters, but that doesn’t stop them from trying — or the FHWA from complying. This is one reason why all public-private partnerships should be negotiated through an arm’s-length agency which is insulated as much as possible from Congress.

The FHWA, in its response to the report, is a little sheepish, but also proves its mastery of the art of producing incomprehensible gobbledygook:

We do appreciate the OIG’s recognition that FHWA’s implementation of TTID necessarily balanced statutory requirements in order to achieve the legislative objective of providing private technology commercialization initiatives to generate revenues.

Insofar as this means anything at all, it’s wrong. The primary legislative objective here wasn’t to generate revenues for Traffic.com or anybody else: it was to reduce congestion. It would be great if both the FHWA and the OIG kept their eyes more on that particular prize. Although I suspect that this whole scheme is becoming increasingly outdated, and that over time aggregated information from GPS-enabled phones and other devices is going to provide much better real-time congestion data than expensively-embedded road sensors.


Could be worse. In 2005, Rick Santorum and some other Congressmen were pressing for a similar arrangement with the National Weather Service. At the time, the NWS prepared forecasts and advisories, and a number of private companies handled distribution. It was becoming clear, however, that it would soon be possible for the NWS to put the forecasts on a web site and cut out the middleman, and Santorum’s legislation would have made this illegal. So, after the public paid the NWS to make the forecasts, it would have to pay the private companies again to see the results.

Posted by KenInIL | Report as abusive