Felix Salmon

In August 1999, JP Morgan released an expanded version of its EMBI+ emerging-market bond index. The new index, the EMBI Global, “was created in response to investor demand for a benchmark that includes a broader array of countries”, said the bank, which created a two-part test to see whether a country counted as an emerging market. First, it included all the countries that the World Bank considered to be “middle income” or lower. And then there was this:

Second, regardless of their World Bank- defined income level, countries that either have restructured their external or local debt during the past 10 years or currently have restructured external or local debt outstanding will also be considered for inclusion in the index.

The result was a list of something over 150 countries which were eligible for inclusion in the index; the next step was to see which specific bonds were eligible.

Of all the countries in the new EMBI Global, only one complained. Greece’s eurobonds were a (very small) part of the index, and the government was not at all happy about that: the government went to great lengths to try to persuade JP Morgan not to consider it an emerging market. But there it is, on page 5 of the PDF, with a “date of entry” of January 1997.

Today, Greece trades at spreads much wider than most of the highest-weighted countries in the EMBI Global, and is specifically targeting emerging-market investors with its new debt issue. I’m unclear on whether it’s still in the index*, but really that doesn’t matter: Greece is now to all intents and purposes an emerging market, as far as bond investors are concerned.

It’s always the ones who protest too much that you have to worry about.

*Update: It turns out that Greece is no longer in the EMBI Global. Just as they’re appealing to emerging-market investors, they’re going to have to be an out-of-benchmark bet.

John Gruber’s iPad review — Daring Fireball

Erin Geiger Smith Leaves Business Insider — Mediabistro

‘This might just be one of the most important communications by the ECB in its short existence’ — Alphaville

70% of everything people under 40 years old read online was created by someone they know — Publishing Trends

The Goldman letter to shareholders — GS

Financial Times on the Future of Cities — FT

There are lots of tools that investors use to try to outperform the stock market. Some use fundamental analysis, looking for stocks which are cheap. Others just want to buy high-quality qualities. And traders often want to buy stocks which are rising, playing the momentum.

In March, it seems, none of that worked, at least if you were using BarCap’s quant model:

Market Sentiment did not work, returning -4.37%. Quality did not work, as low Quality companies beat high Quality companies, thus underperforming by -2.83%. And Valuation didn’t work either, with expensive companies outperforming cheap companies, causing the theme to return -1.99%. None of the traditional styles for stock picking worked. One needed to be absolutely counter-intuitive buying expensive stocks of low quality that had recently underperformed to be successful.

I guess in retrospect the trick was to see the significant increase in risk appetite which happened in March, and then go long anything considered high-risk. Like expensive stocks of low quality that had recently underperformed. But I wouldn’t try that at home. And neither would I consider one-month stock performance to be an indicator of corporate or managerial quality.

More generally, this kind of thing gives lie to most market reporting, and the conceit that market moves happen for a reason. Insofar as they do, often that reason is so abstract — something like what Paul Murphy calls “the risk trade being put back on” — that it can never really be identified at the time. And even in retrospect, it looks more than a little random.

Duncan Wood has a great story about sleazy municipal finance today, with big investment banks helping a major city hide hundreds of millions of dollars in debt. The city is Riga, Latvia; the bank is Deutsche:

Riga itself is blunt about how it chose Deutsche Bank’s financing approach. “The city was looking at raising finance directly from banks, as well as covering a significant part of the costs from EU infrastructure funds,” says a spokesman for Riga’s city council “Regrettably, for different reasons, the central government did not approve Riga borrowing an adequate amount from banks and we could not access EU funds. In 2004, the city announced a tender to find a financing solution for the project.”

Deutsche’s solution was to lend the money to the construction company, rather than to the city – and for the construction company to pay Deutsche back, starting in 2010, using money from Riga. At a glance, it might have appeared that the construction company was arranging the financing for the bridge and Riga was simply paying for the completed bridge in instalments – and that’s what Deutsche Bank apparently argued.

But Riga had also sold Deutsche credit protection on the construction company, ensuring that if the company defaulted for any reason, the city will be on the hook for the full sum. It was this credit default swap which later made clear to Eurostat – the European Union’s statistics watchdog – and to Latvia’s state auditor, that Deutsche’s credit exposure was ultimately to Riga rather than the construction company.

When the CDS arrangement was uncovered and the scheme unravelled in September 2007, Latvia had to put out a big deficit and debt restatement, which helped precipitate its current fiscal woes; it’s now the subject of a criminal investigation, complete with 27 million lati ($14 $51 million) in unexplained expenses. None of this will come as any surprise to people who have read Matt Taibbi’s account of the shenanigans in Jefferson County, or the FT investigation into similar behavior in Italy.

Municipalities have incredibly high wealth-to-sophistication ratios, which makes them prime targets for banks such as Deutsche, which contrived to collect a whopping 46% of the total expense of the bridge in Riga as interest payments. All too often, as in for instance the rules about who is and isn’t allowed to invest in hedge funds, or count as a Qualified Institutional Buyer of fixed-income instruments, the main criterion is not sophistication but wealth. And while banks love rich clients, they love unsophisticated clients even more, and when they get both in one package, they are willing to do things like pay Goldman Sachs $3 million to stop competing for a certain client’s business.

Rick Bookstaber is quite right that we could yet see a devastating wave of municipal defaults, not just in the US but even around the world. I was worried about this last year, and I’m just as worried now, for reasons that Warren Buffett explicated very well in last year’s letter to shareholders: it’s all about the moral hazard of muni bond insurance, and the way in which municipal grandees are ultimately going to be happier to let the insurers take the hit rather than suffer serious fiscal pain themselves. Think of it as the municipal equivalent of walking away: it can flip very quickly from something which nobody does to something which a lot of people do, the minute that the cost of default turns negative.

Is there a broad CDS index for municipal bonds, or some other way of hedging muni exposure generally? If so, it’s definitely something to keep an eye on. And if it starts creeping up, that’s a good time to start worrying about the big sell-side banks with lots of municipal clients, especially JP Morgan, which inherited the large Bear Stearns muni business. Matt Taibbi won’t be the last person to blame JP Morgan for individual municipalities’ fiscal woes.

We saw yesterday that indiviuals across America seem to have learned nothing from the housing bust — and now Dana Rubinstein has a great piece in the NYO showing that exactly the same is true in the world of commercial real estate as well. That’s certainly what Newmark Knight Frank president Jimmy Kuhn thinks:

“There already seems to be a lot of capital out there that thinks that just because it cost $1,000 a foot a few years ago that $500 a foot is cheap,” said Mr. Kuhn, referring to office building prices, which, during the heady boom years, routinely exceeded $1,000 a square foot, even, and most egregiously, for a comparatively modest office building in Soho. “There are a lot of people starting again to underwrite office buildings with aggressive projections for growth in rents.”

In a sense, this is just a natural arbitrage: if risky junk bonds have been soaring in value, then risky real-estate loans have to be getting more attractive too: this is arguably a capital-markets phenomenon as much as it is a case of real-estate investors having the memory of a goldfish.

But it’s a lot easier to protect your downside in junk bonds: you can always buy some CDS, while the market in credit protection on commercial real estate loans is thin to nonexistent.

The biggest worry of all, of course, is not that these loans go bad but that they end up being highly profitable. That will then confirm in the lenders’ minds that they were right, and that they should double up their bets. And so the cycle begins anew. But we’re not there yet. There’s still an enormous amount of oversupply in the NYC office market, and I have no idea where these projected rent increases are meant to come from, especially when the Port Authority and Larry Silverstein are willing to pounce on any uptick in demand by building enormous new towers at the World Trade Center site. My expectation is that we’re much more likely to see a lot more of these loans going bad than we are to see them vindicated.

Shahien Nasiripour finds a nugget in the latest FOMC minutes: for the first time since 2002, they mention the Fed’s “supervisory staff” as part of the way that the Fed conducts monetary policy. The idea is that bank supervisors help to keep an eye on leverage and other risks in the financial sector, and that the FOMC uses that information when setting interest rates.

Shahien talks to former Fed governor Laurence Meyer, who reads this as a protective move by the Fed: the regional Fed banks, in particular, would have a much harder time justifying their existence as large institutions if they lost their supervisory role. And Meyer is surely right. Yes, information from bank supervisors can be used in FOMC meetings — but the Fed could have people supervising any sector of the economy and then use that information in its meetings. The point of supervising banks is to supervise banks, not to set monetary policy.

The Fed argues that bank supervisors can and should be used to help rein in banks during bubbles, thereby allowing their Fed funds lever to be used not for bubble-pricking but rather for its main purpose of keeping inflation low and employment high. This argument would carry a lot more weight if the Fed’s supervisors had ever actually done anything like that, or if they could credibly say that bank supervisors would be happy instructing banks to dial back their risk just because the economy was looking particularly healthy.

So consider this to be just another shot fired in the regulatory turf war — and quite a quiet and subtle one, at that. The question is whether FOMC minutes are really the right place from which to fire such shots.

The Financial Crisis Inquiry Commission is holding more hearings this week, and the prepared testimony of Richard Bowen, a former senior mortgage underwriter at Citigroup, is well worth reading.

He explains how between 2005 and 2007 Citi’s underwriting standards simply fell apart, as the securitization professionals in the investment bank would override or ignore Citi’s own underwriters:

In the third quarter of 2006 the Wall Street Chief Risk Officer started changing many of the underwriting decisions from “turn down” to “approve.” This was done either personally or by direction to the underwriters. This artificially increased the approval rate on the sample. This higher approval rate was then used as justification to purchase these pools.

In the sample on one $300+ million Merrill Lynch subprime pool the underwriters turned down 716 mortgages as not meeting Citi policy guidelines. The Wall Street Chief Risk Officer personally changed 260 of these “turn downs” to “approved.” The pool was purchased…

Still another $320 million Merrill Lynch pool was purchased with an approval rate of 72%. Citi policy required a minimum approval rate of 90%.

Bowen also explains the sneaky way in which a pool of mortgages which was 60% bad was reported to the Third Party Origination Committee (“TPO”), which had overall responsibility for managing the selling mortgage company relationships, as being 95% good:

I spent time with the QA management and underwriters to better understand the QA processes. I learned that there were actually two categories of “agree” decision, with only the total of the two agree decisions being reported to TPO committee.

There was the “agree” decision, meaning the Citi underwriter agrees with the selling mortgage company underwriter that the file meets Citi policy criteria.

And there was an “agree contingent” decision, meaning that the Citi underwriter agrees with the original underwriting decision. But the decision is contingent upon receiving documents that are missing from the file, and those documents confirm the conditions underwritten.

An an example, the selling mortgage company underwriter may have approved a mortgage file showing a 45% debt to income ratio, which was within Citi policy criteria for the product. However, the required proof of income documentation confirming the borrower income used in the underwriting decision might be missing from the file. In this instance the Citi underwriter would assign an “agree contingent” decision to the file. The agree decision would be contingent upon receiving the income documentation proving the income utilized in the originating underwriter decision.

The total of the “agree” and “agree contingent” decisions would be reflected as the overall “agree” rate when reported to TPO Committee. This overall agree rate was the only agree rate reported to TPO through June 2006. And it was believed by the underwriters I interviewed that over half of the files had “agree contingent” decisions, meaning over half of the files were missing policy-required documents.

The QA process was very manual and lacked any automated reporting. The manager relied upon manual tally sheets, manually added, to produce the aggregate reporting given to TPO committee.

After significant effort, it was determined that the 5% disagree, 95% agree originally reported to June TPO was incorrect. It should have been 5% disagree, 55% agree contingent, and 40% agree. In other words, 5% were not underwritten to Citi policy and another 55% were missing policy- required documents.

Bowen sent an email to Bob Rubin and other senior Citi executives in November 2007. It had the subject line “URGENT — READ IMMEDIATELY — FINANCIAL ISSUES”, and it explained that Citi had yet to recognize enormous mortgage-related losses. I’m looking forward to the commissioners asking Bowen for some tips on what questions they should put to Rubin tomorrow. That testimony is going to be very interesting indeed.

Atlantic Media decides to pay ALL its interns, even last year’s, in response to NYT story — Daily Finance

An Iraq veteran on the Collateral Murder video: Wikileaks might be guilty of being one-sided, but the US forces are guilty of much worse — AJ Martinez

Does Chase have any idea how to modify a mortgage? — HuffPo

Map of America’s Bike-Friendly Cities — Bicycling.com

Derivative-based ETFs – good or bad idea? — FT

Today’s love-to-read: Foster Kamer on Michael Wolff — Village Voice

Joshua Green has a virtuoso piece of Kremlinology at the Atlantic today, concluding, as his headline puts it, that “Yes, Larry Summers is Leaving.” But if it’s true, where is he leaving to?

Fed chairman is out of the question, and contra the periodic blogger hyperbole, Geithner seems ever more secure at Treasury. A university presidency isn’t going to happen. So a return to Harvard, Wall Street consulting and an FT column might be the likeliest option.

My feeling is that Harvard is likely, but the FT column is less so: it always seemed to me like a long-form job application aimed at whomever was going to win the Democratic nomination.

And “Wall Street consulting” is probably a polite way of saying “a return to DE Shaw”, which happily paid Larry $5 million for one year of one-day-a-week work, and would surely cough up much more if he gave them the opportunity and a greater time commitment. But there will be other bidders, too: John Paulson, fresh off of signing up Alan Greenspan, would surely be happy to pay millions to sit him down opposite Summers and see the two debate.

The Summers exit could well be the most lucrative use of the revolving door yet seen in the short history of the Obama administration: if he was willing to work full time, Summers could command significantly more than the $10 million a year Citigroup paid Bob Rubin when Rubin left Treasury.

As a result, Obama and his chief of staff are going to have to be very careful about exactly how they manage any Summers exit. If the announcement is made before the midterms, as Green suggests it should be, then they’re going to have to make sure than any subsequent announcements about where Summers is going are delayed until after them. Otherwise it’s going to be the easiest thing in the world for the Republicans to paint the Obama administration as the party of Wall Street fat cats.

What kind of interest rate do rich people pay when they borrow money? In the case of Annie Leibovitz, the answer is something over 44%. That’s the most interesting revelation from the latest court case to embroil the celebrity photographer, wherein a company called Brunswick Capital Partners says that it helped Leibovitz refinance her Art Capital Group debt with a $40 million loan from Colony Capital.

The refinancing happened in March of this year; the original loan from Art Capital, for $24 million, took place in September 2008. Which means that Leibovitz racked up at least $16 million in fees and interest payments over the course of 18 months — and that’s not including any payments that she did manage to make to Art Capital along the way. That’s a rate of something over $10 million per year on the initial loan, or 44%.

The depth of Leibovitz’s financial woes is evidenced by the fact that she paid Brunswick a $50,000 retainer plus $10,000 a month just to look for new lenders. And that’s before their $800,000 “success fee”. But obviously lending to somebody in such deep financial trouble can be highly profitable: just look at Art Capital’s profits on the deal. I wonder if the Center for Responsible Lending feels like getting involved here.

(I asked Art Capital if they had any comment about this; they said they didn’t, “because we’re bound by confidentiality provisions”.)

Airlines save money when their customers check bags rather than carry them on board the plane. How to encourage their customers to do just that? They don’t seem to be jumping at the idea of the negative bag-check fee. But how about charging money for carry-ons? Spirit Airlines has now announced it’s going to do just that: while a small carry-on which fits underneath the seat in front of you is fine, anything which requires stowing overhead is going to cost at least as much as that checked bag.

The point is that it makes no sense to penalize people for doing something — checking their luggage — which makes the flight more pleasant for their fellow passengers, and which saves money for the airline as well. Unless you have a baby, you don’t need more than a small bag’s worth of stuff on the flight itself. So if you insist on carrying that huge wheelie suitcase or duffel bag on board, then why should the airline let you do so for free if they’d otherwise charge you to check it?

And as Basili Alukos notes, we’re still talking here about sums of money significantly less than it would cost to ship the same bag. Maybe, if people start having to pay good money to travel with luggage, they might start traveling with less. Which would be a boon to everybody.

Well done to Adam Feuerstein and TheStreet.com for standing up to egregious bullying from Generex, a small and smelly Canadian biotechnology company which has just filed a ridiculous $250 million lawsuit against them for libel. (To put that number in context, it’s roughly twice Generex’s market cap.)

The story begins on March 19, when Feuerstein wrote a “Biotech Stock Mailbag” column in which he explains why Generex “is a total bust”. Generex wasn’t happy about that, and they were even less happy about his March 26 follow-up, where he goes into a lot more detail about why he thinks Generex’s product is never going to get approval in the US. But there’s no libel here, Generex’s desperate attempts to find some notwithstanding:

The March 26 Article actually states a false legal conclusion that Generex has committed securities fraud under the Federal Securities Laws, when Feuerstein states “Yet even here, Generex plays stupid games aimed at misleading investors, something that totally undermines the legitimacy of the study.” Using the word “misleading” is not an opinion in this context but a conclusion that an SEC standard of fraud has been violated.

I love the word “actually” there — it’s as if Generex can invent a libel out of whole cloth just by asserting it to “actually” exist. Stating in an opinion column that a company is playing stupid games aimed at misleading investors is something that columnists do all the time. It’s not stating “a false legal conclusion”.

In any case, Feuerstein and TheStreet.com responded to the lawsuit in the best possible way — not by writing about it at all, but by publishing yet another column on Generex, this time detailing the way in which India revoked its approval of Generex’s product, without the revocation showing up anywhere in Generex’s SEC filings. It’s good, smart, hard-hitting reporting, and they should be applauded for not being cowed by this silly suit. Meanwhile, any investors still left in Generex might wonder why it’s pursuing expensive libel suits instead of engaging in a public and open way with its critics. It certainly doesn’t make the company look very good at all.

John Hempton today lays out the short case for First Solar (and, parenthetically, Palm and Garmin as well), and in doing so says that, in this case at least, I am “not necessarily” harsh in describing such activity as “socially useless”:

If we are right (and we think we are) then we will make money from the demise of a company that has much improved the world. We like to think our business is noble. And it is sometimes – but in this case we can see why people dislike short-sellers. Their opinion however is not our business.

Even with Hempton admitting that there’s precious little social utility to his short position, however, there’s still people willing to defend him as being a force for good in the world. Aristid Breitkreuz, for instance, took to Twitter to defend the short:

Palm’s failure is totally fair. They formerly had a duopoly with Microsoft, both did not innovate at all, and now they are being crushed. Sounds fair to me. Short-selling prevents capital from flowing into these zombies which also helps socially. Capital should flow into the best technology, not the second-best. Or do you want a second-best iPad? Same for First Solar. Bill Gates did not short Kodak because he’s better at running Microsoft. John Hempton is not good at running Microsoft.

This doesn’t really stand up, I don’t think. For one thing, short selling really isn’t very good at preventing capital from flowing into companies. Insofar as it does so at all, it does so by reducing the share price, which at the margin might just make an equity investment look more attractive. And if you want to reduce the share price of a company by selling its stock, you’re going to have much more effect if you’re a long-term investor selling out of your position than if you have no position to begin with and you have to borrow your shares, thereby creating certain future demand for those shares when you have to buy them back.

What’s more, there’s good reason why capital should flow into second-best companies — not least that the best companies, like Apple, don’t need new capital at all. (Fact: Apple’s last stock issuance to outside investors was in 1981.) It’s the smaller, younger companies which need capital in order to compete with the big guys — and competition, as I’m sure Aristid would agree, is a good thing. Yes, I want Palm to come out with a second-best iPad: no good can come of Apple having a complete monopoly on such things.

And while Aristid is right that John Hempton would not be good at running Microsoft, the fact is that he’s smart enough that there is some kind of opportunity cost to his current profession, from a societal perspective. Sure, he could quit his job and become an arms dealer, and that would not make the world a better place. But equally he could quit his job and do something genuinely productive instead, and that would surely benefit society much more than he’s doing right now. In fact, Hempton’s part-time lifeguard gig is clearly better for society than his day job is.

Hempton says in his post that he “will write an article in the future on socially useful short selling”; I look forward to reading it. Here’s one question I hope he’ll answer in that article: is it possible for short selling to be useful insofar as it does not affect the stock price? If I’m a small investor shorting a large and liquid stock, is there any argument that what I’m doing can ever be socially useful? Or in order to be socially useful, does a short seller have to have a certain amount of size and firepower?

But the main reason I’ll be interested to read the article is to see how Hempton squares his argument with the much more common argument that it’s silly to blame short sellers for the collapse of Company X’s share price. It’s not easy to have it both ways — but it’ll definitely be fun to watch John try.

There’s a huge amount of information in Fannie Mae’s National Housing Survey; I’d recommend downloading the full 117-page presentation here. It confirms what I’ve been hearing anecdotally: that people still believe in housing as an investment, and that the enormous nationwide housing crash has done much less to alter Americans’ attitude towards homeownership than we might have hoped.

For instance, check out the huge majority of all segments of the population which believes that a high rate of homeownership is important to the economy; more than half of Americans believe it’s “very important”.

This is horribly misguided, and it’s particularly depressing that even 77% of renters share in the mass delusion. Homeownership is, if anything, a drag on the economy, since it funnels resources into unproductive overconsumption, and helps to impede labor mobility. There is absolutely no reason to believe that countries with high levels of homeownership, like the U.S., have better economies than those with low levels of homeownership, like Germany.

The survey just gets more depressing from there. Americans think now is a good time to buy a house, largely because they think it’s always a good time to buy a house. And they reckon — even now — that house prices are going up, or will at least stay stable.

I think what we’re seeing here is a mindset utterly conditioned by the massive, decades-long bull market in housing. Never mind that that bull market has come to an end; the syllogism is simple. House prices always go up; housing is a bargain right now because prices have ticked downwards; therefore now must be a great time to buy.

I see this mindset in New Yorkers who genuinely believe that $1 million is not a lot of money to pay for a 2-bedroom apartment, even when it comes with thousands of dollars a month in maintenance costs on top of that. Of course they never would have believed such a thing 10 years ago, but the anchoring effect of the housing bubble is astonishing to behold.

Just in the past week, two of the most financially literate people I know have told me in voices filled with regret that, after looking at a lot of apartments for sale, they finally just went ahead and rented somewhere new instead.

Of course I told them that they were doing exactly the right thing, but I know that they didn’t believe me.

Both of them understand the mechanics of the mortgage market, and are clearly capable of understanding that if you can make lots of money by buying a house when interest rates are high and falling, then you must be able to lose lots of money by buying a house when interest rates are low and rising, as they are right now. Both of them understand that there’s only one buyer of new mortgages in the U.S. right now, and that without such artificial government support, prices would be a lot lower than they are. Both of them understand that if it costs a lot more to buy than to rent, that’s a good sign we’re still in something of a bubble. Neither of them would be remotely surprised by this graph.

And yet. The psychological reasons for buying a home are so strong — the nesting instinct, the idea that you’re not at the mercy of a landlord, the feeling that paying rent is “throwing money away” in a way that paying mortgage interest or monthly maintenance fees is not — that people simply delude themselves into believing that homeownership in general is (a) an investment, when it isn’t; is (b) a good investment, when it isn’t; and is (c) a good idea even now, when rents are cheap and the downside in the housing market is huge.

It’s worth noting, in this context, that the top two reasons to buy a home are that “it means having a good place to raise children and provide them with a good education”; and “you have a physical structure where you and your family feel safe”. Reading between the lines here, I think that what we’re seeing is the effect of rental ghettoes, and the fact that neighborhoods with high levels of homeownership tend to be safer, and have better schools, than neighborhoods which are mostly owned by landlords. That’s a negative aspect of homeownership, in the grand scheme of things, but it’s clearly here to stay: no one’s anticipating a more sensible world where it’s commonplace to be able to rent a house in a good school district.

And so we reach the point at which more than 60% of Americans say that if they were to move they would buy rather than rent; and where more than 60% of the people who will rent still say that they intend to buy at some point in the future. Indeed, more than 50% of renters say they’re going to buy a place in the next three years.

There are signs of cognitive disconnect — there have to be. For instance, despite considering homeownership to be a safe and good investment, Americans often feel that they’re sacrificing financially in order to achieve it:

The safe-investment chart is particularly crazy: buying a home is considered just as safe as putting money into a savings account — and significantly safer than buying government bonds, despite the fact that it’s the single most leveraged investment that most people will ever make.

It’s not impossible to construct a world view which somehow makes all this consistent, but it’s pretty difficult. You have to have great faith in the power of a mortgage to force savings; you have to be very worried about inflation; and you have to believe that homes are a wonderful inflation hedge. And I don’t believe for a minute that most Americans actually have all those beliefs; they just act as though they have all those beliefs. In fact, I know that they don’t: 73% of Americans believe that it’s best to pay off one’s mortgage as soon as you can.

The most fascinating chart in the whole deck, for me, is this one, which comes just after a chart showing that more than 80% of Americans, and even more than 80% of Americans who are underwater on their mortgages, think it’s not OK to stop paying your mortgage.

How can it be that Americans have such a strong opinion about paying their mortgage, but then in such large numbers think that the main reason to do so is just their credit score? It seems extremely odd to me.

My feeling, after going through the survey, is that we’re in for a housing bear market which will last many years, just as the housing bull market did. There will be substantial demand for houses for the foreseeable future, and that — along with government support — is going to prevent further sharp lurches downwards. But ultimately economic fundamentals have to prevail. It’s just going to take a while.

Slideshows done right: NYMag’s hilarious “History of Obama Feigning Interest in Mundane Things” is now up to 3.7M pageviews — NYMag

Andrew Leonard’s fabulous takedown of Michael Wolff, 12 years in the making — with added bonus response from Wolff! — Salon

The Digital Economy Bill: Thinking about Banana Ice Cream — Confused of Calcutta

Wikileaks video shows Apache helicopter firing on an Iraqi market in 2007 and killing Reuters staff — Collateral Murder

Former NYT writer Zach Kouwe now blogging for Dealbreaker — DB

Kind of hearbreaking: How a Book Publisher Failed to Get J.D. Salinger’s Final Book — NYMag