Felix Salmon

There are serious ethical questions surrounding whether or not investors should own stock in BP. But is it also unethical for art galleries and museums to accept money from BP? Time’s Frances Perraudin gives the people who think so a lot of sympathetic space:

The cozy relationship between the arts and major corporations has often proved a controversial issue. But now, thanks to the Gulf of Mexico oil spill, protesters — already angered by oil’s role in climate change and human rights abuses — are focusing their crosshairs on BP…

“It’s so galling to see every single cultural attraction in London that I care about stained with this horrible, horrible sponsorship,” says Liberate Tate member Tom Costello…

Critics accuse BP of using blockbuster exhibitions and arts awards (the highlight of the National Portrait Gallery’s year is the “BP Portrait Award”) to direct attention away from their environmental and ethical crimes. “These sponsorship deals give companies like BP the social license to operate,” says Dan Gretton, co-founder of Platform, an arts and research charity that puts pressure on arts organizations to dump their oil partners. “Having these links with cultural organizations is a way for them to launder their image.”

I’ve always thought of arts sponsorship from the likes of Phillip Morris and BP as the silver lining to their unpleasant activities. Yes, the sponsorship is a form of image laundering — but hey, if image laundering results in millions of dollars being spent on worthy arts organizations, what’s not to like?

I’m sad to see entities like the Tate being vilified for accepting money from BP. The job of the Tate is to present great art to the public, not to adjudicate on questions of corporate worthiness. There’s no inherent conflict between accepting BP’s money and exhibiting art. So if BP wants to assuage its guilty conscience by sponsoring a slew of arts organizations, let it do so. The alternative is to simply let that money flow directly to BP’s shareholders, which I don’t think would be much of an improvement.

Carl Richards has a cute graph:

The basic idea here is right. And in fact Richards understates, in his graph, just how bad things are when it comes to market forecasts: his graph curves the wrong way.

Let’s say there’s a 10% chance of any given forecast being right, and let’s say (for the sake of argument) that all forecasts are independent of each other. Then what’s the chance of at least one forecast being right? Here’s the actual graph:

By the time you get to 20 forecasters, there’s an 88% chance that at least one of them will be right. At 40 forecasters, there’s a 99% chance.

In the real world, forecasters aren’t all independent of each other — but at the same time, there’s a hell of a lot more than 40 of them. (And given the squishiness involved in what counts as “being right”, the chances of being able to say that you were right are probably closer to 50% than 10%.)

If you add together the fund managers and the economists and the TV pundits and everybody else telling you where the economy and the markets are going, you’ll get a number somewhere in the tens of thousands. The question isn’t whether one of them will turn out to be right, it’s just how many of them will turn out to have been right.

In fact, given the thousands of people in the market, it’s a statistical certainty that many of them won’t just be right once, but will be right time and time again. Such people are generally lauded as being fabulously smart and prescient, and lots of money gets thrown at them. As a general rule, it’s a good idea to make sure that money isn’t yours.

Todd Henderson’s whine about how he’s only scraping by on $450,000 a year in his million-dollar Chicago house is causing quite a stir in the blogosphere. (Tyler Cowen says that “this number seems not to be true”, but Henderson isn’t clarifying things, and it’s very hard to come up with a substantially lower number which would result in his family still paying “nearly $100,000 in federal and state taxes”.)

Tyler says that the rich have just as much right to whine as the poor, which is a fair point. But it’s also reasonable to examine this particular law professor’s argument closely. For instance:

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total.

Here’s Brad DeLong’s fantastic response:

The big expenses in the Henderson family budget–their $60,000 a year in contributions to tax-favored retirement savings vehicles, their $25,000 a year savings building home equity, their $55,000 for housing, their $60,000 in private school costs, even their $10,000 a year for new cars–are simply out of reach for the overwhelming majority of Americans…

By any standard, they are really rich.

But they don’t feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone–and they feel that they have to scrimp…

Professor Henderson’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot buy you all of that.

But if he values the high-end consumption so much, why doesn’t he rearrange his budget? Why not stop the retirement savings contributions, why not rent rather than buy, why not send the kids to public school? Then the disposable cash at the end of the month would flow like water. His problem is that some of these decisions would strike him as imprudent. And all of them would strike him as degradations–doctor-law professor couples ought to send their kids to private schools, and live in big houses, and contribute to their 401(k)s, and also still have lots of cash for splurges. That is the way things should be.

The first thing to note here are Henderson’s priorities: for him, it seems, it’s more important to spend $60,000 a year on retirement savings, and to send his kids to private school, than it is to have a cellphone. That alone marks him out as very unusual among Americans, most of whom will spend money on a cellphone long before they send their kids to private school or put that fifty-thousandth dollar into their retirement savings.

And in reality, I doubt that a four-point increase in the tax that he pays on any income over $250,000 is going to stop him from hiring someone to mow his lawn. And it’s certainly not going to make him give up his cellphone.

But what’s very clear here is that Henderson doesn’t feel rich. As DeLong says, he’s not comparing himself to the hundreds of millions of people who earn less than him: instead he’s comparing himself to the handful of people who earn vastly more than he does. People who don’t seem to worry about money at all. Who have multiple houses. Who charter jets. He looks at those people and thinks that they are rich, and that therefore he, with his monthly budget, isn’t.

There’s no doubt that people earning $250,000 or more are rich. The simple ability to dismiss a whole class of expenses as “only a few hundred dollars per month in total” makes you rich.

But by the same token, many rich people don’t feel rich, and so describing them that way gets their backs up. And in fact it’s good that the rich don’t feel rich: it means they have more incentive to keep on earning and producing and adding value.

So maybe we shouldn’t be so rude about the likes of Todd Henderson: without rich people constantly striving for extra dollars, America would be in an even worse position than it is. But equally, we shouldn’t take their pleas seriously.

For most people, “rich” starts at roughly double whatever their own household income is. It’s the hedonic treadmill: you race towards it, but you never achieve it — even when you’re living in a million-dollar home and pulling down something north of $400,000 a year. Or, I daresay, when you’re living in a $4 million home and making $1 million a year. It’s just that above a certain income, people (Ben Stein, of course, always excepted) tend to have the good sense not to whine in public about how hard their life is.

Update: Henderson has now taken down his post, saying that an “electronic lynch mob” has “caused untold damage to me personally”.

Here’s a great way of making money in the market. At the end of every month, look to see whether stocks went up or whether they went down. If they went up, then buy stocks at the average price for the month. And if they went down, then sell stocks at the average price for the month. Follow that strategy for 130 years, and you can turn $1 into $50,000!

Of course, it’s impossible to go back in time, armed with your 20-20 hindsight, and buy stocks in retrospect. So the strategy is not exactly a very useful one. But it turns out that it’s exactly the strategy that Andrew Haldane used in his value vs momentum chart.

Michael Stokes has run the numbers, and shows what Haldane’s momentum strategy would look like if you buy and sell at month-end prices, rather than retrospectively at the average price for the month:

Given that the momentum strategy wasn’t very good at outperforming a simple buy-and-hold strategy in the first place, this latest insight I think does a great job of burying it completely.

Here’s Ben Stein in August 2008, when we were at the depths of the longest recession in postwar history:

The unhappy fact is that it’s necessary to raise my taxes and the taxes of all upper-income Americans…

If we don’t raise taxes, if we keep doing what we’re doing, the immense deficits and debt will not go away — and will probably grow.

The question is simply this: Do we want to step up to the plate like responsible people — I hate to say this, but the last responsible people who actually did this were named Bill and Bob (Clinton and Rubin) — and shoulder our responsibilities? Or do we just kick the can down the road a bit and leave the mess for our children and their children?

And if we do raise taxes, should people who are barely getting by pay them or should people who are getting by very nicely pay them?

I don’t like taxing rich people or anyone I like. But our government — run by the people we elected — needs the revenue. Do we pay it or do we make our children pay it? Dwight D. Eisenhower — and Bill Clinton — knew the answer: You behave responsibly and balance the budget except in rare circumstances.

And here’s Ben Stein in September 2010, 15 months after the recession ended:

In the midst of a severe recession, I am to have my taxes raised dramatically.

I am not quite sure what my sin is…

What I don’t get is this: There is no known economic theory under which raising my taxes in the midst of a severe recession will help the economy recover. It isn’t part of any well known monetarist or Keynesian theory. So if it does no good to raise our taxes, I assume we are being punished.

But for what? I don’t own slaves.

Good point, Ben. Let’s just raise taxes on slaveowners. That’ll do the trick.

Tyler Cowen thinks that the Fed should adopt a 3% inflation target; Jim Surowiecki is inclined to agree. What’s more, they also agree that it’s not going to happen. Tyler has an interesting theory, on this front:

Maybe we are in a new political economy equilibrium where each government agency is given “one shot” at a problem. Treasury had its one shot with the stimulus plan. The Fed had its exotic monetary policy operations and deal-making during the crisis. Maybe in bad times voters aren’t happy no matter what, and no one is allowed to try twice. We have not yet thought through the political economy of this scenario.

In general, both of them talk a lot about the politics of inflation: Tyler points out that conservatives are in denial about the inflation which accompanied the Reagan boom, while Surowiecki talks about the way in which voters hate inflation, even more than unemployment.

Which leads me to the conclusion that a lot of what we’re seeing is a lack of genuine independence at the Fed, which became indistinguishable from Treasury during the crisis, and which has yet to break free from Treasury’s grasp.

I think it’s pretty clear that some kind of rise in the price level would be a great thing for the economy. Steady 3% inflation is one way of achieving that; I also very much like Daniel Davies’s idea:

What is needed is a step-change shift in the price level. These are two distinct concepts – we want a change in P with constant dP/dT, not a change in dP/dT. This has the effect of a one-off windfall redistribution from nominal creditors to nominal debtors, a one-off increase in the ratio of collateral to credit. If anticipated, it would encourage an investment boom, as owners of nominal assets attempted to exchange them for real assets…

Several of the world’s most important central banks have it written into their constitutions that they need to control inflation or target price stability. I think a good lawyer could make a case that a decision to target stability, but stability at a higher level would be consistent with the letter if not the spirit of these laws.

The problem, of course, is how do we get there from here: as the Bank of Japan knows only too well, creating inflation can be very hard indeed. And if you say that you’re going to create inflation and you fail, then you lose precious credibility.

Bond investors like Marshall Auerback will scream loudly every time this subject comes up, saying that “we should be targeting policies needed to generate full employment” (yes) and that such policies by their nature have to be fiscal rather than monetary (no). But I do think that the Fed’s full-employment mandate is all that it needs to pursue inflationary policies: it doesn’t really need an inflation target on top of that.

My feeling about an inflation target is that its mere existence is not going to convince anybody that inflation is on the way. So unless and until the Fed can credibly explain how it’s going to create 3% inflation, it shouldn’t even think about unveiling a target. And if it can credibly explain how it’s going to create 3% inflation, then it doesn’t need the target at all.

So. Inflation? Yes please. Inflation target? I’m not so sure.

Chart of the day comes from Kyle Stock:

This is very bad indeed: women are leaving the financial-services industry even as men are joining it; and the trend is most pronounced among the youngest cohorts of the population, who will be running the industry in the future.

The losses are steepest for the youngest women, including those just out of college. The number of women entering finance-industry jobs at age 20 to 24 fell 21.8% over the past decade. For jobs across all industries, the overall number of women in the work force was unchanged over the same period.

This is not — or not only — a crisis phenomenon: the number of women on Wall Street was falling even from 2001 to 2006.

So what’s going on? Stock wheels out a couple of theories:

Across the economy, computers have replaced junior, back-office workers, jobs that were largely filled by women…

Given recent volatile markets and much scrutiny on compensation, there are fewer incentives to stay in the business for those women who have already chosen finance-industry careers, said Grace Tsiang, an economics professor at the University of Chicago.

Ms. Tsiang theorized that these women are having and raising children rather than staying on the job.

“Women have this higher alternative value of how to spend their time,” Ms. Tsiang said. “They’re always perched on this edge, and if the value of staying in a high-pressure job goes down just a bit, then that might make a big difference in the number that jump.”

I don’t find either of these theories particularly convincing. For one thing, have Wall Street back offices really thinned out since 2000? And were they particularly female-dominated back then?

And as for the idea that women would rather quit to have babies rather than cope with volatility, frankly it’s downright offensive. And doesn’t square with those job losses between 2001 and 2006, when volatility was declining and compensation was rising.

I’m also unimpressed at the part of Stock’s article which veers into anecdote. He manages to find two women who left Wall Street; one of them started a firm called ChickRx, and the other founded a company “which makes protective covers for high-heel shoes.”

The most depressing part of Stock’s story, however, is probably the reaction of the Wall Street boy’s club:

Wall Street isn’t keen to talk about these gender shifts. A number of firms, including J.P. Morgan Chase and Lazard Ltd., declined to answer questions for this article, and some of those that responded declined to detail the male-to-female ratios of their staffs.

Unless you’re open about your gender-balance problems, you’re never going to fix them. And we’ll end up further away than ever from a world where more than one in five executives in the financial-services industry is a woman.

“If you pledge to not drive on campus, Stanford will actually pay you! $250!” — Paddy Hirsch

NYT photog captures a bike salmon in his natural habitat, for a post on The Cyclist-Pedestrian Wars — Spokes

Why exercise won’t make you thin — Guardian

Park Slope Food Coop grosses $6,500/sqft/year: “so much money that it deposits its cash every 2 hrs for security reasons” — Fortune

In which Paul Jackson moves one step closer to Total World Domination: HousingWire to Acquire REO Insider — PR Newswire

Divilians vs Tradebots — Reformed Broker

I’m late to this chart, but it’s fantastic — Economix

Many thanks to Joe Nocera for raising the issue of One World Trade Center’s finances. It’s by far the tallest and most expensive building that New York has ever seen, and it’s no thing of beauty, either. Plus, there’s not nearly enough demand for new top-grade office space to justify building so much of it at this location and at this time. So what exactly is the Port Authority thinking?

All that said, the issue is much more complicated than Nocera makes out. For one thing, the 1,776-foot tower is really the last vestige of the once-lauded Daniel Libeskind master plan for the World Trade Center site; for another, the deal that gave it to the Port Authority was a highly complex one, done with developer Larry Silverstein, and so it’s a little bit simplistic to try to view One World Trade in a vacuum, as Nocera does.

Plus, Nocera’s very vague about sourcing his numbers: he says only that “my real estate sources say they believe that the Port Authority will need to charge $130 a square foot to break even on the building”, and then adds a pro-forma Port Authority denial.

It would be very useful to learn where that number comes from. Looking at the figures in the piece, the cost of the building is $3.3 billion, with $1 billion of that coming from insurance proceeds. I’m not sure exactly what Nocera means by “break even”, but he does talk earlier on in the piece about “any shortfall between the building’s annual rental income and its carrying costs”, so let’s think about it that way.

The building will end up with 2.6 million square feet; if the breakeven rate is $130 a square foot, then that implies its carrying costs will be $338 million a year. But it doesn’t cost anything like that for the Port Authority to borrow $2.3 billion. After all, the last time the Port Authority issued bonds, it paid an average interest rate of less than 4.5%. And 4.5% of $2.3 billion is barely more than $100 million a year — less than a third of the number implied by Nocera.

Or think about it in terms of a standard residential mortgage. Let’s say you wanted to take out a 30-year fixed-rate loan on a $3.3 billion home, putting $1 billion down. Right now, mortgage rates are 4.5%, which implies a monthly repayment of $11.65 million per month, or $140 million a year. OK, you’re not going to be able to borrow that kind of money from your local credit union, and I’m pretty sure that the note would be non-conforming in the eyes of Fannie and Freddie. But still, if you want to get $140 million a year from renting out a 2.6 million square foot building, then you only need to charge $54 a square foot: a far cry from Nocera’s $130 figure.

Yes, there will be high maintenance costs, especially given all the extra security. But at the same time, the Port Authority owns the land underneath the building outright, so there are no costs associated with that. And in the early years of the project, when the building isn’t fully rented out, the Port Authority will have to carry some of the costs of the empty space.

On the other hand, there are less quantifiable costs to having empty space in that part of the New York skyline which used to be home to the Twin Towers. One World Trade Center might never be as iconic as they were, but it will still be an instant landmark, and a vast improvement on the gaping hole that we’ve been living with these past nine years. If Nocera wants to make the case that its costs will end up being borne by commuters crossing the George Washington Bridge, he’s going to have to be a lot more specific about exactly how he’s calculating them.

Elizabeth Warren had a conference call with left-wing bloggers this afternoon, just after being introduced to the public by Barack Obama in the White House Rose Garden. She said that she first started talking to Barack Obama about a consumer financial protection agency in December 2006 — before even her Democracy article came out.

As of Monday, when she moves in to her new office and already has lunch scheduled with Tim Geithner, Warren is going to be a fully-fledged member of the White House economic team, meeting with the president and the rest of his economic advisors on a regular basis. Yes, her portfolio will specifically be consumer protection, but she’ll be able to advise in any area where she feels she can add value.

She was also clear that she has the authority to get the Consumer Financial Protection Bureau up and running as quickly as she can — to hire people, set the budget, and so forth. She wouldn’t be drawn on the question of appointing a director, or whether she has any desire to return to Harvard. But she was clear that she was excited “to make this shift from being on the outside to being on the inside”.

She also talked a lot about being “willing to fight back on behalf middle-class families”. Her vision for the CFPB is very focused on the middle class: there was no mention, for instance, of the unbanked or of yesterday’s poverty numbers. You can be sure they would have featured much more prominently had Michael Barr got the nod.

So the message was clear: The CFPB is Warren’s baby, she’s in control, and she has the explicit support of Obama to get cracking at full speed. I reckon she’ll start off with a lot of momentum, and that it’s going to be pretty much impossible to stop her once she gets started. For the time being, it seems, the question of who will be appointed director and when is a moot one. It’s going to have to be addressed at some point before the end of Obama’s first term in office, but I’m not holding my breath: it could be a long while yet.

Every six months or so, The Audit, CJR’s financial-journalism blog, holds a breakfast to update interested parties on how the blog is doing. Each breakfast has an invited speaker, and so it was that I found myself at 7:45 this morning in a very posh Upper East Side club, being offered an array of ties to choose from before being allowed upstairs to take my seat between Nicholas Lemann and Victor Navasky.

The main thrust of my speech, which rapidly became a spirited and high-level discussion, was that journalistic entities — newspapers, magazines, websites, and, yes, Columbia J-school itself — have to start putting much more emphasis on reading, as opposed to writing.

The reason, fundamentally, is that journalism is becoming much more conversational. It started with the rise of the blogs, and if blogs are now slowly dying out, that’s only because the conversation has overtaken them. It’s moved to Twitter, and Facebook, and many mainstream websites, too: the web is social now. You no longer need a blog to be part of the conversation; you don’t even need a Tumblr. Everybody is a publisher now, and all these new networks have helped to create a new vibrancy in public discourse.

This thesis was a good one to bring to an Audit breakfast, I think, because it runs directly counter to the ideas of the Audit’s Dean Starkman, who has written a long piece about what he calls the “hamster wheel” of contemporary journalism. (It’s ultimately going to become part of a book he’s writing on financial journalism and the financial crisis.)

Where Dean sees vast amounts of “completely unimportant” dross, I see journalists simply engaging more with their readers, which is a good thing. Here’s Dean, turning the snark dial to 11:

Put it this way, given limited resources, not all readers would think to assign seven (!) staffers to live blog the opening ceremonies of the Winter Olympics, as The Wall Street Journal did in February:

The preceremony starts, with instructions to the audience. As always in Canada, all explanations are in English and French.

But again, that’s just me. Perhaps there was nothing else to look into that night—in the whole world.

But these were WSJ reporters in Canada to cover the Olympics. There’s only one Olympic event going on during the opening ceremony, and such ceremonies always have lots of reporters at them. The only difference now is that the reporters are transparent about being there, and are trying to provide at least a little bit of value for their readers at the same time. Does Dean really think that if they weren’t live-blogging the ceremonies, they would instead be shouting into their cellphones over the noise, trying to track down some securities fraudster?

Dean has a very old-fashioned view of what journalism is and should be: “the corest of core” values, he says, at any news organization, are investigations. Now I have nothing against good investigative journalism, but it’s hardly a defining feature of most journalism, and in fact Dean’s attitude is extremely elitist, germane only for a handful of big daily newspapers. Most copy in all newspapers, and all copy in most newspapers, is simple stuff, and always has been. People read it because it’s relevant to them, because they can talk about it, and because they might as well read the stories after they’ve bought the paper for the supermarket coupons.

Dean, for instance, doesn’t think this is real journalism:

For the first time in many years, the Howard County Sheriff Department is planning not to purchase any new patrol cars, saving the county $185,000.

I disagree. I think people in Howard County care about this kind of thing — they talk about this kind of thing. If you were walking down the street and saw cinema screens being built, you’d stop to take a look. The New Haven Register allows you to do that from your home computer? Great!

Meanwhile, what does Dean think is being lost?

Do you fly to Chicago to talk to that guy about that thing? Do you read that bankruptcy examiner’s report? Or do you do three things that are easier?

What if you don’t need to fly to Chicago to talk to that guy about that thing, because he’s already put up a detailed explanation of what he thinks online? And if Dean means the bankruptcy examiner’s report I think he means, I’d point him here. Really good journalism is being written about such things every day — it’s just that a lot of it isn’t coming from old-school media outlets. Vanity Fair’s Bethany McLean was also at the breakfast, and she confirmed that the blogosphere is a goldmine for people like her who want to understand the crisis, both in hindsight and as a way of working out what people were thinking and saying contemporaneously.

And of course there are new sources of pure investigative journalism online, too.

What’s more, even in those halcyon days when investigative reporters could spend years on an investigation, the number of readers that investigation reached was tiny: you needed to fortuitously be a reader of the right newspaper on the right day when it appeared, and you needed to be interested in the subject. Today, investigations are much more likely to reach a broad and influential audience, because they are easily available, in perpetuity, no matter where you are in the world.

But Dean doesn’t see it, because he’s concentrating only on old-fashioned media. He complains (without linking) that “the news business has lost an estimated 15,000 journalists since 2000″ — but I don’t think that’s true at all. Mike Mandel is excellent on this, and in fact is a prime example of what’s going on: he might no longer be working for an old-school publication like Businessweek, but he’s still very much a journalist, and is even employing journalists as well:

Overall the number of employed journalists, based on the Current Population Survey, has increased by 19% over the past three year. Meanwhile, the number of employed college graduates has risen by only 3%, and overall employment, as measured by the CPS, has dropped by almost 5%…

Yahoo, for example, hired Jane Sasseen, BW’s very good Washington Bureau chief, to help beef up politics coverage. That job likely shows up in the industry “internet publishing and broadcasting and web search portals”, which has grown by 22% over the past three years. Or take my business, Visible Economy LLC. We’ve hired three young journalists, but it’s tough to say whether these jobs would show up in educational services or in journalism.

Financial journalists know better than most how tight the journalism job market really is: in my field, demand for good journalists vastly exceeds supply*. I get asked on a weekly basis if I can recommend someone for this or that job. And normally the answer is that no, I can’t: pretty much everybody’s taken already. The result is that journalists are getting poached on a regular basis, and salaries are rising impressively: we live in a world where Dennis Kneale has reportedly been pulling down $500,000 a year.

The fact is that a huge universe of great material is being published every day, by old media and new media alike. And increasingly, tools like Twitter are doing a good job of helping the public find the really good stuff. It might be a smaller percentage of the whole than we’re used to, and there might even be less of it on an absolute basis than there was in the past. But there’s much more great journalism available to the average member of the population than there ever used to be. In the olden days, if you didn’t get the NYT or the WaPo, you didn’t read their journalism.* Nowadays, when they publish something great, you read it. Just like when Gawker publishes something great. Or Yahoo blogs. Or some guy in Australia with a blogspot account who can move a stock 20% overnight by sheer force of argument alone.

Still, the biggest thing that’s missing in the journalistic establishment is people who are good at finding all that great material, and collating it, curating it, adding value to it, linking to it, presenting it to their readers. It’s a function which has historically been pushed into a blog ghetto, and which newspapers and old media generally have been pretty bad at. And of course old media doesn’t understand blogs in the first place, let alone have the confidence or the ability to incorporate such thinking into everything they do.

Think about it this way: reading is to writing as listening is to talking — and someone who talks without listening is both a boor and a bore. If you can’t read, I don’t want you in my newsroom. Because you aren’t taking part in the conversation which is all around you.

When journalists apply for jobs today, they’re usually given some kind of writing test. Certainly the people hiring them will look at their clips. Everybody cares about how good a writer you are. So long as you write well, it seems, that’s all that matters.

But if I were hiring, the first thing I’d look at would be the prospective employee’s Twitter feed. What are they linking to? What are they reading? If they’re linking to great stuff from a disparate range of sources, if they’re following smart people on Twitter, if they’re engaged in the conversation — that’s hugely valuable. More valuable, in fact, than being able to put together an artfully-constructed lede.

One of the best new media properties to come along in recent years is the Atlantic Wire. It’s run on a shoestring budget, and staffed by young, smart, hardworking kids with fantastic reading skills. Many of them can write, too — but they write short and punchy. Which is something else Old Media needs to learn how to do: it’s always much more fun reading a Gawker pickup of a Washington Post story than reading the original piece.

The biggest shortage in journalism right now isn’t good writers, or even enlightened proprietors willing to fund investigations. It’s critical readers – journalists who can see when they’re being snowed, who can read between the lines, who can pick up information from across the blogosphere and the twittersphere and be able to judge it on its own merits rather than simply trusting the publisher.

We need much more critical reading, and we also, desperately, need much more linking from Old Media to outside sources. Links aren’t something cute to relegate to a blog ghetto — they’re an intrinsic part of what journalism has to be in the 21st Century. And most journalists are very, very, bad at linking.

Linking and reading, of course, are close cousins: you can’t do the former unless you do the latter.

But once we achieve a world where reading and linking are taught and valued as much as writing, then suddenly the prospects for journalism start looking bright again. The best material will get found and disseminated broadly, through links, and that in turn will encourage publishers to invest in producing such material. Look, again, at Gawker Media, which gets the majority of its traffic through original reporting, much of it of extremely high quality. (And, I’d add, which pays good six-figure salaries to its top bloggers.)

We’ll have much less pointless redundancy, the idiotic syndrome whereby hundreds of journalists from loads of different publications all descend on the same press conference or event, and all file virtually-identical copy. That’s commodity news, and it’s low-hanging fruit in terms of journalistic effort which can and should be eliminated.

And we’ll have much more valuable insight, as experts become disintermediated and journalists start linking to them rather than quoting them. It’s much less work for the journalist, and it’s more valuable and transparent for the reader.

The Audit, and especially its lead writer Ryan Chittum, is a great exemplar of what good critical reading can be, and of how to take part in the debate and the conversation. They’re a harbinger of what everybody will be doing, sooner or later.

But it’s going to take a while to get there: when I expressed these thoughts at the breakfast, I got pushback from the likes of Jonathan Dahl, the editor in chief of Smart Money. He has a substantial staff dedicated to Smart Money’s website, and every day his Google Alert shows him all of the great inbound links that the website is generating. These are people who don’t just like the material so much that they read it: they like it enough to link to it, too. It’s a great validation of the work that Smart Money is doing.

Yet Dahl, for all that he’s grateful for the links, actually dislikes what he’s seeing. He reckons that all those bloggers are just parasitical on his staff’s original reporting and work, and reckons that he has the tough and thankless task of producing the original material, with everybody else outsourcing that work to him without paying him.

Lemann, too, said something similar, comparing the online journalistic ecosystem to a lemon meringue pie with a whisper-thin layer of lemon at the bottom and lots of frothy meringue layered on top. (The lemon, of course, is “reporting”, while the meringue is “commentary”.)

That kind of view says to me that most senior journalists still don’t appreciate the real value being added by the blogosphere — and nor do they appreciate just how much original reporting is done by blogs and other online outlets these days. You can’t become popular just by linking and aggregating, any more: you need good original content.

Still, Lemann’s moving in the right direction: he appreciates that Columbia’s J-school graduates often have to do a lot of critical reading and curating the minute they leave university, and therefore is looking at ways of teaching that. He and I are both optimistic that Emily Bell will be able to help on that front. I’d just love it if things could speed up a bit. Because right now a lot of old-school publications are getting left far behind. And that’s not helping their financial prospects one bit.

*Update: To clarify, the journalism jobs market in general isn’t tight. Look at Demand Media, and the way in which they seem to have no problem hiring people to write for a pittance. But the financial-journalism jobs market is very tight. And in the olden days, NYT and WaPo journalism appeared across the country, in many regional newspapers, thanks to their respective newswires. So you could find NYT journalism without buying the NYT, you just needed to buy a paper which carried NYT stories.

Some Unsolicited Advice for Regulators — Economics of Contempt

There are 43.6 million Americans living in poverty — Reuters

The Bloomberg terminal wedding cake — YouTube

The stupidity of Comic Sans, it’s contagious! — The Atlantic

Flavorwire on author photos: “Who wouldn’t trust someone who likes a good couch sitting now and then?” — Flavorwire

Of 294 terror attacks in Europe in 2009, 1 was Islamist (vs 237 separatist, 40 leftist, 4 rightist) — Geographic Travels

Assessing the TARP on the Eve of Its Expiration: The COP‘s last report — COP (Update: Not the last report, it turns out: they’ll continue through April 2011.)

It’s weirdly depressing watching everybody scramble around trying to work out what on earth the kindasorta appointment of Elizabeth Warren to create the Consumer Financial Protection Bureau actually means. As Ryan Chittum notes, the WSJ certainly can’t make up its mind: David Weidner says that Warren is being sidelined and that “someone else will make the final decisions”; the paper’s news story, by contrast, says that she will have broad powers.

She will recruit staff for the agency, set the policy mission and serve as the recognizable public face for a new agency the administration wants to promote.

The big outstanding question is whether the White House intends to nominate Warren to lead the CFPB at some point in the future, before Obama’s first term is out. Jim Pethokoukis explains today that she’s probably here to stay:

There is an old management rule: Never hire someone you can’t fire. Obama violated this rule by picking Hillary Clinton for secretary of state. And he just did it again.

But weirdly, in exactly the same post, Jim says “it now seems unlikely that either Warren or Michael Barr will end up running this new agency”. It’s very hard indeed to reconcile the two positions: once the director is named, Warren’s job disappears. So either Warren is fired, or else she becomes the director. I can’t see any other outcome.

Ezra Klein, too, is trying desperately to hold two contradictory thoughts at the same time: this appointment “in no way prevents a permanent nomination from occurring at some later date”, he says, while at the same time “there’s no way Senate Republicans will ever let her have the permanent spot”.

My feeling is that once Warren has had this job for a while, and proven that she isn’t the devil incarnate, it might be possible to ratify her in the director’s position on a permanent basis. I certainly hope that’s what ends up happening. Probably both she and the White House want to keep their options open for the time being. But the communication around all this has been very messy, and there’s no sign that anything is going to get cleared up any time soon.

Remember Fannie Mae’s National Housing Survey? Well, Fannie has repeated the exercise, just six months later, and chief economist Doug Duncan tells me it might even become more frequent than that, in future.

The general upshot is that Americans might still be delusional when it comes to housing, but they’re less delusional than they were six months ago, which is a good sign.

Although 67% of Americans think buying a house is a safe investment, this is down 3 points from January 2010 and 16 points from 2003 – the largest declines among all tracked alternatives over both timeframes.

It’s also good news that 80% of renters think they would have to make a financial sacrifice in order to own a home, and that fully 90% of owners think that they’re making a financial sacrifice to own their home. Given that expectations for house-price appreciation are realistically modest, one can conclude that people buying houses today are doing so for pretty good reasons.

There are weirdnesses in the survey: 91% of underwater borrowers, for instance, say they’re satisfied with their current mortgage.

And in the Fannie Mae survey, underwater homeowners are significantly less tolerant of the idea of walking away from a mortgage than their more solvent peers: just 6% of them say it’s OK to stop paying their mortgage, compared to 10% of the population as a whole. That’s in contrast to the latest Pew survey, in which 18% of underwater borrowers — and 19% of the general population — say that walking away is acceptable.

That said, half of the population think that mortgage lenders are likely to pursue other assets, rather than just the home in question, if the borrower walks away. Americans think they’re living in a recourse world, and they’re wrong about that: statistically speaking, lenders almost never chase personal assets in such situations. This attitude is good news for lenders, since it gives borrowers more of a reason to keep on making their mortgage payments. But if borrowers ever waken up to reality, the consequences for banks could be brutal.

There are also interesting divergences between buyers and renters. The proportion of buyers who think that homeownership is important to the overall economy, for instance, rose two points to 82% in this survey, while the proportion of renters thinking the same thing fell a full five points to 72%. And more generally, says Duncan, there’s a divide between renters and delinquent homeowners, on the one hand — who are more pessimistic than the general population, and becoming more pessimistic still — and owners who not delinquent. They are not only optimistic, but becoming more so.

Duncan reckons, after spending a lot of time with the survey results, that a lot of people are putting off buying a home because they’re worried about the future direction of the economy. It’s not so much that they think house prices are going to fall, but rather that they don’t want to take on the huge commitment of making mortgage payments every month for the next 30 years, given the uncertainty surrounding their own personal financial situation.

That bespeaks a lot more financial common sense and responsibility than we saw during the housing market. And so while America is by no means a nation of would-be renters, it’s moving in the right direction.

I had a fun time last night sparring with Cathleen Rittereiser, who brought along a couple of copies of her new book, “Top Hedge Fund Investors.” (Wiley, $60, but only $37.80 at Amazon.) Her elevator pitch was a good one: a lot of books have been written about top hedge fund managers, but this is the first to be written about the people who actually invest in hedge funds.

It turns out, however, that fund-of-funds managers and their ilk are even more secretive than hedgies. Even Rittereiser, who wrote this book in between stints working for various hedge funds herself, didn’t manage to extract any quantitative information about their performance: her criterion for being considered a Top Hedge Fund Investor is simply having been around a long time, or being responsible for lots of money. Or, I suspect, just being willing to talk at all.

This is my biggest problem with alternative investments in general, and hedge funds in particular. Think about the situation with mutual funds: people don’t feel qualified to pick stocks, which is reasonable, and so they get a mutual fund manager to pick stocks for them. Except there are just as many mutual funds as there are stocks, and it’s actually harder to pick a good mutual fund than it is to pick a good stock.

The problem is even worse with hedge funds, because they’re so secretive. If you want to invest in hedge funds, how can you get a good impression of what your options are and which is best? It’s very, very difficult. And so you turn to a fund-of-funds manager. But how do you pick them? It’s even harder.

As far as I can tell, the main way that people end up investing in hedge funds is that their private bank is also a prime broker for various funds. And so the two arms shake hands, as it were: the private-bank clients get introduced to the prime-brokerage clients, and money ends up flowing from the former to the latter.

That’s all well and good, but in an era when prime brokerages compete for hedge funds by extolling the depth and wealth of their private-banking client base, said client base might want a bit more objective advice as to who they should be investing with. Including, of course, unaffiliated funds.

It’s easy to go wrong in hedge-fund investing, either by putting money into a fund which blows up, or by diversifying into so many different funds and strategies that you end up diversifying away all your alpha as well. And paying a management fee to a fund-of-funds investor only makes it even harder to get any financial benefit out of investing in hedge funds.

My feeling is that most individuals who have done very well out of investing in hedge funds have done so mainly by luck: by knowing the right person at the right time. A few top endowment heads and the like know the lay of the land quite well, and have access to just about any fund they want. But unless you’re running a multi-billion-dollar endowment, and being paid a lot of money to do so, it’s hard for me to see how you can successfully invest in hedge funds through anything other than luck.